10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2005

or

o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number: 1-13115

EQUITY OFFICE PROPERTIES TRUST

(Exact name of registrant as specified in its charter)

Maryland	36-4151656
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
Two North Riverside Plaza, Suite 2100, Chicago, Illinois (Address of principal executive offices)	60606 (Zip Code)

Registrant’s telephone number, including area code (312) 466-3300

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Shares of Beneficial Interest, $.01 par value per share	New York Stock Exchange
5.25% Series B Convertible, Cumulative Redeemable Preferred Shares	New York Stock Exchange
7.75% Series G Cumulative Redeemable Preferred Shares	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

(None)

      Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes x          No o

      Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes o          No x

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

      Indicate 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 amendment to this Form 10-K.     o

      Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  x Accelerated filer  o Non-accelerated filer o

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

      The aggregate market value of the Common Shares held by non-affiliates of the registrant as of June 30, 2005 (the last business day of the registrant’s most recently completed second fiscal quarter) was $12.9 billion based on the reported closing sale price per Common Share on the New York Stock Exchange of $33.10.

      On February 28, 2006, 371,313,013 Common Shares were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the registrant’s proxy statement for the annual shareholders’ meeting to be held in 2006 are incorporated by reference into Part III. We expect to file our proxy statement within 120 days after December 31, 2005.

EQUITY OFFICE PROPERTIES TRUST

TABLE OF CONTENTS

		Page
PART I.
Item 1.	Business		3
Item 1A.	Risk Factors		10
Item 1B.	Unresolved Staff Comments		24
Item 2.	Properties		25
Item 3.	Legal Proceedings		30
Item 4.	Submission of Matters to a Vote of Security Holders		30
PART II.
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of  Equity Securities		31
Item 6.	Selected Financial Data		32
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		34
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		67
Item 8.	Financial Statements and Supplementary Data		68
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		131
Item 9A.	Controls and Procedures		131
Item 9B.	Other Information		131
PART III.
Item 10.	Directors and Executive Officers of the Registrant		132
Item 11.	Executive Compensation		132
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder  Matters		132
Item 13.	Certain Relationships and Related Transactions		132
Item 14.	Principal Accounting Fees and Services		132
PART IV.
Item 15.	Exhibits and Financial Statement Schedules		133
Form of Non-Qualified Share Option Agreement for Employees
Form of Particpant Summary and Restricted Share Agreement for Employees
Statement of Earnings to Fixed Charges
Consent of Independent Registered Public Accounting Firm
Certifications of CEO Pursuant to Rule 13a-14(a)/15d-14(a)
Certifications of CFO Pursuant to Rule 13a-14(a)/15d-14(a)
Certifications of CEO and CFO Pursuant to Section 906
1997 Non-Qualified Employee Share Purchase Plan Financial Statements

2

PART I

Item 1. Business.

EQUITY OFFICE

      Equity Office Properties Trust (“Equity Office”) is the largest publicly traded owner and manager of office properties in the United States. The use of the word “we”, “us”, or “our” in this Form 10-K refers to Equity Office and its subsidiaries, including EOP Operating Limited Partnership (“EOP Partnership”), except where the context otherwise requires. We own, manage, lease and develop office properties. At December 31, 2005, we had a national office portfolio comprised of whole or partial interests in 622 office buildings located in 16 states and the District of Columbia. We own premium quality office buildings. Based on our Effective Office Portfolio (as defined below), which consists of 101.7 million square feet, 39.4% and 60.6% of our properties are located in central business districts and suburban locations, respectively. At December 31, 2005, we owned buildings in 22 markets and 101 submarkets, including our 17 core markets which are:

Atlanta

Austin

Boston

Chicago

Denver

Los Angeles

New York

Oakland/East Bay

Orange County

Portland

Sacramento

San Diego

San Francisco

San Jose

Seattle

Stamford

Washington, D.C.

      We believe our core markets generally offer the following: a strong opportunity for us to be a market leader; an ability to leverage our operating platform; sufficient market size for us to achieve scale and grow; an intellectual and cultural infrastructure; and a highly educated workforce.

      We operate our properties using a portfolio-based model as compared to many real estate owners who operate on a property-by-property basis. We believe this approach allows us to operate efficiently while providing a high level of service to our tenants. Our market concentrations enable us to provide a wide range of office solutions to tenants who have local, regional and national office space needs.

      Equity Office is a Maryland real estate investment trust (“REIT”) and the sole general partner of EOP Partnership, a Delaware limited partnership. We were organized in 1996 and began operations in 1997. We own substantially all of our assets and conduct substantially all of our operations through EOP Partnership and its subsidiary entities. As of December 31, 2005, Equity Office owned 89.7% of EOP Partnership through our ownership of partnership units in EOP Partnership (“Units”). The remaining Units in EOP Partnership are held by various limited partners who have the right to require redemption of their Units at any time from Equity Office.

      Our internet website is www.equityoffice.com. Our filings with the SEC are provided to the public on this website, free of charge, as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Our corporate governance guidelines, codes of business conduct and ethics and charters for our various board committees are available on our website and in print to any shareholder who requests such documentation. In addition, the SEC maintains an internet website that contains reports, proxy and information statements, and other information regarding issuers, including Equity Office, that file electronically with the SEC at www.sec.gov.

Office Properties

      As of December 31, 2005, we owned whole or partial interests in 622 office properties comprising 111.5 million square feet in 16 states and the District of Columbia (“Total Office Portfolio”). After excluding the partial interests owned by our joint venture partners, our share of the Total Office Portfolio is 101.7 million square feet and is referred to as our “Effective Office Portfolio.” Our Effective Office Portfolio represents our economic interest in the office properties from which we derive the net income we recognize in accordance with GAAP. The Effective Office Portfolio square feet of 101.7 million has not been reduced to reflect our

3

minority interest partners’ share of EOP Partnership. Properties that have been taken out of service and properties under development are not included in these property statistics. Throughout this Form 10-K we disclose information for both the Total Office Portfolio and the Effective Office Portfolio. The table below shows, in summary, the property statistics for each portfolio as of December 31, 2005.

				Total Office Portfolio					Effective Office Portfolio
		Number of		Occupied					Occupied
		Buildings		Square Feet			Square Feet		Square Feet			Square Feet
Wholly-Owned Properties			562		77,309,801			85,927,640		77,309,801			85,927,640
Consolidated Joint Ventures			22		10,585,857			11,143,588		9,529,373			9,983,557
Unconsolidated Joint Ventures			38		12,990,416			14,437,825		5,146,371			5,797,094
	Total		622		100,886,074			111,509,053		91,985,545			101,708,291
Percent Occupied					90.5	%				90.4	%
Percent Leased					91.8	%				91.9	%

BUSINESS STRATEGY

      Our primary business objective is to maximize shareholder value. We seek to achieve sustainable long-term growth in cash flow and portfolio value by owning and operating premium quality office buildings and providing a superior level of service to our customers.

      Our business strategy includes:

•  concentrating capital in our core markets where we believe we can best position ourselves to maximize value and generate long-term attractive returns;

•  increasing occupancy by leasing vacant space and retaining tenants on economically attractive terms; and

•  achieving economies of scale over time.

ACQUISITION, DISPOSITION AND DEVELOPMENT ACTIVITY

      Over the past five years, we have acquired whole or partial interests in $10.0 billion (calculated on a cost basis) and have disposed of whole or partial interests in $6.0 billion (calculated based on the sales price) of premium quality office properties, industrial properties, parking facilities and vacant land parcels throughout the United States.

		Effective Office Portfolio
Year		Acquisitions		Dispositions
		(Dollars in millions)
2005		$	1,442.2	$	2,736.5
2004			952.0		684.2
2003			227.8		1,529.6
2002			171.1		508.3
2001			7,237.7		541.2
	Total	$	10,030.8	$	5,999.8

      Over the last two years, we took steps to reposition our portfolio for long-term growth. We took advantage of a favorable asset-sale environment and during 2005 sold on an Effective Office Portfolio basis $2.7 billion of assets comprising 17.8 million square feet and several vacant land parcels. Our portfolio is comprised of

4

premium quality office buildings in diverse geographic markets. More than 96% of our assets (based on square feet) are currently located in our 17 core markets.

Acquisitions

      As part of our business strategy, we intend to acquire additional office properties assuming that capital and acquisition opportunities are available to us on terms we deem satisfactory. Properties may be acquired separately or as part of a portfolio and may be acquired for cash, in exchange for our debt or equity securities, or in exchange for our properties. These acquisitions may be single property transactions, joint ventures, mergers or other business combinations.

      Management considers various factors when evaluating property acquisitions. These factors include but are not limited to:

•  an attractive going-in yield, as well as the potential to increase operating income over time by increasing revenues and occupancy;

•  the property’s location in one of our core markets;

•  the attractiveness of the property to existing and potential tenants;

•  the likelihood and relative attractiveness of competitive supply;

•  the anticipated demand for space in the local market;

•  the creditworthiness and diversity of risk of the tenants occupying the property;

•  the physical condition of the property, including the amount of funds required for maintenance and physical upgrades needed in order to establish or sustain market competitiveness; and

•  the cost structure of the property.

Dispositions

      It is also part of our business strategy to strategically dispose of office properties, from time to time, especially in our non-core markets, assuming that such opportunities are available to us on terms we deem satisfactory. Properties may be sold separately or as part of a portfolio for cash or in a tax-deferred exchange.

      Management considers various factors when evaluating potential property dispositions. These factors include but are not limited to:

•  our estimate of the future returns on the asset being sold;

•  whether the property is strategically located within a market or whether the market is one of our core markets;

•  our ability to sell the property at an attractive price;

•  our ability to recycle capital into core markets and other activities consistent with our business strategy;

•  the tax consequences of the disposition and whether it can be structured as a tax-deferred exchange;

•  tenant composition and lease rollover for the property;

•  general economic conditions and outlook, including job growth in the local market; and

•  the general quality of the asset, including its physical condition and the amount of capital required to maintain its competitiveness.

Developments

      Our policy is to prudently pursue development and redevelopment projects where a customer need is evident and market conditions warrant. We own various undeveloped land parcels on which office space could

5

be built, assuming our receipt of necessary permits, licenses and approvals. Although we may develop some properties ourselves, a portion of this activity may also be conducted with joint venture partners. If we develop a property with a joint venture partner, we may not have the same degree of control over the property as if we owned it ourselves. In addition, if we develop a property with a joint venture partner, we will be required to share a portion of the economic benefits from such property with our joint venture partner.

      In determining whether to enter into a new development, the acquisition criteria listed above are considered as well as the additional risks of development, including the following:

•  our assessment of the returns from such development;

•  the extent of lease-up risk in the context of the demand/supply characteristics of the local market;

•  the ability to minimize construction risks; and

•  the quality of local development partners, if applicable.

FINANCING POLICIES

      A primary objective of our financing policy has been to manage our financial position to allow us to raise capital from a variety of sources at competitive rates. EOP Partnership’s partnership agreement and our bylaws do not limit the amount or percentage of indebtedness that we may incur. We conduct substantially all of our debt-financing activities through EOP Partnership using a combination of secured and unsecured debt issued by EOP Partnership or its affiliates but in many cases guaranteed by us. An important source of liquidity for us is our $1.25 billion line of credit, which matures in August 2009 as well as other bank facilities which may be available to us from time to time. The terms of EOP Partnership’s line of credit and unsecured notes contain various financial covenants and other limitations.

      To the extent we seek capital in addition to debt financing we may elect to issue equity or convertible securities, cause EOP Partnership to issue additional Units, retain our earnings (subject to the provisions of the Internal Revenue Code requiring distributions of taxable income to maintain REIT status), dispose of our properties, enter into joint ventures or a combination of these methods. Under the terms of EOP Partnership’s partnership agreement, the proceeds of all equity capital we raise must be contributed to EOP Partnership in exchange for additional interests in EOP Partnership.

DIVIDEND POLICY

      In order to qualify as a REIT for federal income tax purposes, we must distribute an amount equal to at least 90% of our taxable income (excluding capital gains) to our shareholders. We currently distribute amounts attributable to capital gains to our shareholders; however, these amounts can be retained by us and taxed at the corporate tax rate. Accordingly, we currently intend, although we are not legally obligated, to continue to make regular quarterly distributions to holders of our common and preferred shares, at least at the level required to maintain REIT status. The declaration of dividends on capital shares is at the discretion of the Board of Trustees, which decision is made quarterly by the Board of Trustees based on then prevailing circumstances. We anticipate that our 2006 annual Common Share dividend will be $1.32 per share, down from the 2005 annual dividend of $2.00 per share. This reduction began to take effect with the first quarter 2006 dividend, which was announced in March.

SEGMENTS

      Information related to our operating segment is set forth in Item 8 — Note 19.

COMPETITION

      The real estate industry is highly competitive. We compete with a considerable number of other companies in the ownership, management and leasing of real estate. We compete for tenants in our markets

6

primarily on the basis of property location, rent charged, services provided and the design and condition of our properties. We also experience intense competition when attempting to acquire or divest ownership of real estate, building sites or redevelopment opportunities, including competition from domestic and foreign financial institutions, other REITs, life insurance companies, pension trusts, trust funds, partnerships and individual investors.

ENVIRONMENTAL EXPOSURE

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

FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS

      Although there are no restrictions on our ability to expand into foreign markets, we currently operate solely within the United States.

EMPLOYEES AND EXECUTIVE OFFICERS

      As of December 31, 2005, we had approximately 2,300 employees who provide real estate management, leasing, legal, financial and accounting, acquisition, disposition and marketing expertise throughout the country.

Executive Officers of the Registrant

      Our eight executive officers have an average tenure of ten years with us or our affiliates or predecessors and an average of 20 years experience in the real estate industry.

      As of February 28, 2006, the following executive officers held the offices indicated:

Name	Age		Offices Held
Richard D. Kincaid		44	President and Chief Executive Officer
Debra L. Ferruzzi		45	Executive Vice President — Corporate Strategy
Jeffrey L. Johnson		46	Executive Vice President and Chief Investment Officer
Lawrence J. Krema		45	Executive Vice President — Human Resources and Communications
Peyton H. Owen, Jr.		48	Executive Vice President and Chief Operating Officer
Stanley M. Stevens		57	Executive Vice President, Chief Legal Counsel and Secretary
Marsha C. Williams		54	Executive Vice President and Chief Financial Officer
Robert J. Winter, Jr.		60	Executive Vice President — Development and Joint Venture Management

7

      Set forth below is biographical information for each of our executive officers:

      Richard D. Kincaid has been a trustee and President since November 2002 and Chief Executive Officer since April 2003. Mr. Kincaid also has held the following positions:

•  Executive Vice President from March 1997 until November 2002;

•  Chief Operating Officer from September 2001 until November 2002;

•  Chief Financial Officer from March 1997 until August 2002;

•  Senior Vice President from October 1996 until March 1997;

•  Senior Vice President and Chief Financial Officer of Equity Office Holdings, L.L.C., a predecessor of ours, from July 1995 until October 1997;

•  Senior Vice President of Equity Group Investments, Inc., an owner and financier of real estate and corporate investments, from February 1995 until July 1995;

•  Senior Vice President of The Yarmouth Group, a real estate investment company in New York, New York, from August 1994 until February 1995; and

•  Senior Vice President — Finance of Equity Group Investments, Inc. from December 1993 until July 1994.

      Debra L. Ferruzzi has been Executive Vice President — Corporate Strategy since September 2005. Ms. Ferruzzi also has held the following positions:

•  Senior Vice President — Corporate Strategy from June 2003 until September 2005;

•  Senior Vice President and Executive Advisor from June 1998 until May 2003; and

•  Senior Vice President, Capital Markets Group, of Equity Group Investments, Inc., a private investment company, until May 1998 (in this capacity, Ms. Ferruzzi was responsible for securing financing for Equity Group Investment’s private real estate holdings, including office, retail and residential assets, and was responsible for securing lines of credit for Manufactured Home Communities, Inc. and Equity Residential Properties Trust, real estate investment trusts), as well as other positions beginning in June 1982.

      Jeffrey L. Johnson has been Executive Vice President and Chief Investment Officer since May 2003. Mr. Johnson also has held the following positions:

•  Managing Partner and owner of Lakeshore Holdings, LLC, a private equity firm focusing on real estate investment founded by Mr. Johnson in conjunction with Lehman Brothers Holdings Inc., a global financial services firm, from December 2002 until May 2003 (in this capacity, Mr. Johnson was responsible for all aspects of the business);

8

•  Managing Director of Lehman Brothers Holdings Inc. from March 2000 until November 2002 (in this capacity, Mr. Johnson was a founding partner and co-head of domestic investments for Lehman Brothers’ first real estate private equity group and was instrumental in helping raise the company’s $1.6 billion fund and developing the investment strategy for the fund, built the investment team and implemented its investment process);

•  Chief Investment Officer of Equity Office from March 1998 until June 1999; and

•  Senior Vice President — Investments of Equity Office from March 1997 until June 1999.

      Lawrence J. Krema has been Executive Vice President — Human Resources and Communications since November 2002. Mr. Krema also has held the following positions:

•  Senior Vice President — Human Resources from March 2001 until November 2002; and

•  Vice President of NEC Technologies, Inc., a supplier of presentation systems, computing and related technologies for the North American market, from April 1995 until October 2000 (in this capacity, Mr. Krema managed the human resources division of the company in North America and was responsible for corporate services, which included real estate, travel and office services).

      Peyton H. Owen, Jr. has been Executive Vice President and Chief Operating Officer since October 2003. Mr. Owen also has held the following positions:

•  Chief Operating Officer — Americas Region of Jones Lang LaSalle, a global provider of integrated real estate and investment management services, from April 1999 until October 2003 (in this capacity, Mr. Owen oversaw 5,500 people in 100 markets in the United States, Canada and Mexico; Investor Services, which included leasing and property management; Corporate Solutions, which included tenant representation, facility management and project management; and Capital Markets; and implemented standardized processes, new technologies and compliance measurements, and consolidated the organizational structure); and

•  Executive Vice President and Chief Operating Officer — Leasing and Management of LaSalle Partners, predecessor of Jones Lang LaSalle, from January 1996 until April 1999 (in this capacity, Mr. Owen oversaw the leasing and management activities for a 200-million-square-foot investment property portfolio, restructured leasing and management across 20 markets and led due diligence and integration in various corporate acquisitions).

      Stanley M. Stevens has been Executive Vice President since September 1996 and Chief Legal Counsel and Secretary since October 1996. Mr. Stevens also was Executive Vice President and General Counsel of Equity Office Holdings, L.L.C. from September 1996 until October 1997.

      Marsha C. Williams has been Executive Vice President and Chief Financial Officer since August 2002. Ms. Williams also has held the following positions:

•  Chief Administrative Officer of Crate and Barrel, a national Chicago-based retailer of home furnishings and accessories (Crate and Barrel is the trade name of Euromarket Designs Inc., which is an indirect majority-owned subsidiary of Otto, formerly Otto Versand GmbH & Co., a German mail-order company), from May 1998 until August 2002 (in this capacity, Ms. Williams participated in the planning and execution of Crate and Barrel’s growth strategy and managed its finance, accounting, information technology, warehousing, distribution and logistics, loss prevention, strategic planning, direct marketing operations and purchasing departments); and

•  Vice President of Amoco Corporation, a worldwide energy and chemical company, from December 1997 until April 1998 and Treasurer of Amoco Corporation from October 1993 until April 1998, as well as other capacities and positions from November 1989 until October 1993.

9

      Robert J. Winter, Jr. has been Executive Vice President — Development and Joint Venture Management since February 2005. Mr. Winter also has held the following positions:

•  Executive Vice President — Development and Portfolio Management from November 2002 until February 2005;

•  Senior Vice President — Development from June 2002 until November 2002;

•  Senior Vice President — Development Investments from July 2001 until June 2002;

•  President and Chief Executive Officer of Amli Commercial Properties Trust, a private real estate investment trust with office and industrial properties in the suburban Chicago market, from August 1998 until July 2001 (in this capacity, Mr. Winter was responsible for all aspects of the company’s business, including the development, management and ownership of its properties); and

•  President and Chief Executive Officer of Amli Commercial Properties, LLC, a limited liability company and predecessor of Amli Commercial Properties Trust, from November 1996 until July 1998 (in this capacity, along with developing the business, Mr. Winter was responsible for forming Amli Commercial Properties Trust).

Item 1A. Risk Factors.

Forward-Looking Statements

      This Annual Report on Form 10-K includes certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used, words such as “anticipate”, “believe”, “intend”, “may be”, “will be” and similar words or phrases, or the negative thereof, unless the context requires otherwise, are intended to identify forward-looking statements. These forward-looking statements are based on management’s present expectations and beliefs about future events. As with any projection or forecast, these statements are inherently susceptible to uncertainty and changes in circumstances.

      Important factors that could cause actual results to differ materially from those reflected in such forward-looking statements and that should be considered in evaluating our outlook include, but are not limited to, those listed under the caption “Risk Factors” below. Equity Office is under no obligation to, and expressly disclaims any obligation to, update or alter its forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise.

Risk Factors

      We are subject to various risks, including the ones identified below. If the events discussed in these risk factors occur, Equity Office’s business, financial condition, results of operations or cash flows could be materially adversely affected. In such case, the market value of our securities could decline.

Improvements in our market conditions have not yet offset the impact of prior declines in rent and in overall activity in our markets as well as increases in our expenses and other adverse factors

      During periods of slower economic growth and decline in white-collar employment, such as occurred beginning in 2001, we experience a decrease in occupancy as well as rental rates accompanied by increases in the cost of re-leasing space (including for tenant improvements) and in uncollectible receivables. Although we believe office market conditions have, or have begun to, stabilize and are improving in most of the markets in which we have a presence, the financial impact of the on-going roll-down in rents of expiring leases to lower current market rents will continue to impact our financial results negatively until the earlier of the expiration of all leases entered into at the height of the market or full recovery of such markets.

      A significant contributor to the decline in occupancy for our office properties since 2001 has been early lease terminations. Early lease termination payments increased in 2005 as compared to 2004 (largely as a result of a single transaction, which did not impact our occupancy as a result of our ability to re-lease the space). While lease termination fees increase current period income, future rental income is generally lower

10

because, during periods in which market rents have declined, it is unlikely that we will collect from replacement tenants the full contracted amount which had been payable under the terminated leases. Moreover, our ability to release the vacated space is not assured and may be affected by macroeconomic factors we do not control.

      An improvement in our operating results related to the recent improvement in the office market fundamentals has been offset by the rent roll down that we continue to experience, increased operating and general and administrative expenses and the dilutive impact of our disposition activities. Our financial results were also adversely impacted by losses and impairment charges as a result of assets sold and assets we intend to sell.

Our long term leases cause our operating results to lag improving market conditions; our geographic diversity may cause our operating results to be less favorable than operating results in the strongest markets

      Since our average lease term is approximately five to six years, only 10% to 15% of our Total Office Portfolio square feet expires and is “re-priced” to current market rates each year. This means that when business fundamentals improve in the office business, improvements in our operating results tend to lag such improvements. Further, we operate in a large number of office markets. All office markets do not recover at the same pace. As a result, our operating results may, in the short or medium term, be less favorable than that demonstrated by portfolios which are concentrated in markets that recover more rapidly than the overall market.

In order to continue to pay distributions to our common shareholders at anticipated levels, we must borrow funds or sell assets

      Lower occupancy levels, reduced rental rates, and reduced revenues as a result of asset sales, together with certain increases in operating expenses have had the effect of reducing our net cash provided by operating activities. In addition, our tenant improvement and leasing costs have increased significantly due to competitive market conditions for new leases. During the years ended December 31, 2005 and 2004, our net cash provided by operating activities was insufficient to pay 100% of distributions to our shareholders and unitholders, in addition to capital investments in our properties such as tenant improvements, leasing costs and capital improvements. We funded these deficits primarily with a combination of borrowings under our line of credit and proceeds from property dispositions. Although we anticipate that our 2006 annual common share dividend, which is subject to quarterly board approval, will be reduced from $2.00 per share to $1.32 per share, these deficits are likely to continue in 2006 (based on expected levels of capital expenditures), though at a diminished level and it is anticipated that we will fund such deficits in a similar manner.

We were a net seller of real estate in 2005, which will further reduce our income from continuing operations and funds from operations. Future disposition activity may also result in gains or losses on sales of real estate and impairment charges

      We were a net seller of real estate in 2003, a net buyer in 2004 and a net seller of real estate in 2005. We may engage in additional disposition activity in 2006 (not expected to be at the level of 2005) which will further reduce our income from continuing operations and funds from operations and may also result in gains or losses on sales of real estate and impairment charges. The impact from such dispositions on our financial condition and results of operations will also depend, to a great extent, on how we utilize the proceeds of such dispositions and the timing of such utilization. Whether we are in fact a net seller of real estate in 2006, will depend on various factors, certain of which are beyond our control, including market conditions.

11

Our performance and share value are subject to risks associated with the real estate industry

      As a REIT, we are susceptible to the risks associated with the real estate industry, including the following:

•  Downturns in national, regional and local economic conditions and the level of white-collar employment in markets where our properties are located;

•  Unfavorable capital market conditions which could affect our ability to complete any property dispositions or acquisitions on a timely basis or on economically attractive terms;

•  Local conditions such as an oversupply of office properties, including space available by sublease, or a reduction in demand for high-rise and other office properties;

•  The relative attractiveness of our properties to tenants;

•  The extent of competition from other available office properties;

•  Changes in market rental rates, particularly as our buildings age, and our ability to fund repair and maintenance costs;

•  Our ability to fund the increased cost of tenant improvements and other costs required to lease or re-lease space;

•  Our ability to collect rent and expense reimbursements from tenants;

•  Our ability to complete and lease current and future developments on schedule and in accordance with budget; and

•  The cost and availability of adequate insurance (including coverage for catastrophic events such as earthquakes, hurricanes and terrorist acts).

•  Increases in utility, security and other operating costs, including real estate taxes, that may increase over time as markets stabilize or otherwise be subject to macroeconomic factors, and that are not necessarily reduced when circumstances such as local market factors and competition cause a reduction in income from the property.

Our properties face significant leasing competition

      We face significant competition from other owners, operators and developers of office properties. All of our properties face competition from similar properties in the same markets. Such competition affects our ability to attract and retain tenants, impacts the rents we are able to charge and may increase tenant improvement and leasing costs. These competing properties may have vacancy rates higher than our properties, which may result in their owners being willing to make space available at lower rental rates than the space in our properties.

We face potential adverse effects from tenant bankruptcies or insolvencies

      The bankruptcy or insolvency of our tenants may adversely affect the income produced by our properties. If a tenant defaults, we may experience delays and incur substantial costs in enforcing our rights as landlord. If a tenant files for bankruptcy, we cannot evict the tenant solely because of such bankruptcy. A court, however, may authorize the tenant to reject and terminate its lease with us. In such a case, our claim against the tenant for unpaid future rent would be subject to a statutory cap that might be substantially less than the remaining rent owed under the lease. In any event, it is highly unlikely that a bankrupt tenant would pay in full amounts it owes us under a lease. In other circumstances, where a tenant’s financial condition has become impaired, we have sometimes agreed to partially or wholly terminate the lease in advance of the termination date in consideration for a lease termination fee that is less than the agreed rental amount. Without regard to the manner in which a lease termination occurs, we are likely to incur additional costs in the form of tenant improvements and leasing commissions in our efforts to lease the space to a new tenant, as well as likely lower rental rates reflective of declines in market rents.

12

New acquisitions may fail to perform as expected

      Assuming we are able to obtain capital on commercially reasonable terms, we may acquire new office properties. Newly acquired properties may fail to perform as expected. Inaccurate assumptions regarding future rental or occupancy rates could result in overly optimistic estimates of future revenues. Similarly, we may underestimate future operating expenses or the costs necessary to bring an acquired property up to standards established for its intended market position.

Contingent or unknown liabilities acquired in acquisitions, mergers or similar transactions could require us to make substantial payments

      The properties we purchase from time to time may be acquired subject to liabilities and without any recourse with respect to liabilities, whether known or unknown. As a result, if liabilities were asserted against us based upon any of those properties, we may incur substantial and unexpected costs. Unknown liabilities with respect to properties acquired might include:

•  liabilities for clean-up or remediation of environmental conditions;

•  claims of tenants, vendors or other persons dealing with the former owners of the properties;

•  liabilities incurred in the ordinary course of business; and

•  claims for indemnification by general partners, directors, officers and others indemnified by us in the context of a merger or the former owners of the properties.

Competition for acquisitions or disposition of properties could adversely affect us

      We expect other major real estate investors with significant capital to compete with us for attractive investment opportunities. These competitors include publicly traded REITs, private REITs, investment banking firms, domestic or non-domestic institutional investors and private institutional investment funds, some of whom may enjoy a lower cost of capital and therefore, a competitive advantage. This competition could increase prices for office properties. We face similar competition with other property owners in our efforts to dispose of assets, which may result in lower sales prices. Any such increase in prices for acquired office properties or decrease in prices for properties to be sold by us could impair our growth prospects or reduce our available capital. Furthermore, our ability to redeploy capital arising from our disposition activities into investments in our core markets depends on our ability to effectively compete for attractive investment opportunities.

Our investment in property development may be more costly than anticipated

      We intend to continue to develop and redevelop office properties where we believe market conditions warrant. Our development and construction activities may include the following risks:

•  we may incur construction costs for a development project which exceed our original estimates due to increased material, labor or other costs; this, in turn, could make completion of the project uneconomical because we may not be able to increase rents to compensate for the increase in construction costs;

•  we may be unable to obtain, or face delays in obtaining, required zoning, land-use, building, occupancy, and other governmental permits and authorizations, which could result in increased costs and could require us to abandon our activities entirely with respect to a project;

•  we may abandon development opportunities after we begin to explore them and as a result we may fail to recover expenses already incurred;

•  we may expend funds on and devote management time to projects which we do not complete;

•  we may be unable to complete construction and leasing of a property on schedule, resulting in increased debt service expense and construction or renovation costs;

13

•  we may lease developed properties at below expected rental rates; and

•  occupancy rates and rents at newly completed properties may fluctuate depending on a number of factors, including market and economic conditions, and may result in our investment not being profitable.

Because real estate investments are illiquid, we may not be able to sell properties when appropriate

      Real estate investments generally cannot be sold quickly. In addition, there are limitations under the federal income tax laws applicable to REITs and tax protection agreements that we have entered into in connection with the acquisition of a significant percentage of our properties that may limit our ability to sell our assets or require certain tax free transaction structures. As a result, we may not be able to liquidate our portfolio promptly in response to economic or other conditions.

Various factors limit our ability to dispose of assets

      Our ability to dispose of assets may be limited by constraints on our ability to utilize disposition proceeds to make acquisitions on financially attractive terms and the requirement that we take additional impairment charges on certain assets. More specifically, we are required to distribute or pay tax on all capital gains generated from the sale of assets. In addition, we have tax protection agreements which require that we reimburse certain of EOP Partnership’s limited partners for taxes incurred in connection with the sale of certain of our properties. As a result, we are motivated to structure the sale of these assets as tax-free exchanges. To accomplish this we must identify attractive re-investment opportunities. Recently, while capital market conditions have been favorable for dispositions, investment yields on acquisitions have been less attractive due to the abundant capital inflows into the real estate sector. In addition, if we elect to sell a property we may incur an impairment charge to the extent we determine that the sum of the property’s future cash flow plus eventual disposition proceeds is likely to be less than the property’s recorded carrying value. These considerations impact our decision of whether or not to market for sale certain of our assets.

Certain perils could adversely affect our business

      Significant portions of our properties are located in California and Washington, which are high risk geographical areas for earthquakes. Significant portions of our properties are also located in New York, Washington, D.C. and other major urban areas which could be the target of future terrorist acts. In addition, we have properties that are located in coastal counties or in Florida which can be susceptible to wind or flood damage. Depending upon its magnitude, an earthquake, hurricane or terrorist act could severely damage one or more of our properties, which would adversely affect our business. As described more fully below, we maintain earthquake, terrorism, wind and flood insurance for our properties and the resulting business interruption. However, any earthquake, wind, flood or terrorist peril, whether or not insured, could have an adverse effect on our results of operations and financial condition.

14

Some potential losses, including losses arising from earthquakes and terrorist acts, may not be covered by insurance

      We carry insurance on our properties with respect to specified catastrophic events, as summarized in the table below:

Type of Insurance Coverage	Equity Office Loss Exposure/Deductible	Third-Party Coverage Limitation
Property damage and business interruption(a)	$50 million per occurrence and $75 million annual aggregate exposure (which includes amounts paid for earthquake loss), plus $1 million per occurrence deductible	$1.0 billion per occurrence(c)
Earthquake(a)(b)	$75 million per occurrence and annual aggregate exposure (which includes amounts paid for property damage and business interruption loss), plus $1 million per occurrence deductible	$325 million in the aggregate per year(c)
Acts of terrorism(d)	$4.9 million per occurrence deductible (plus 10% of the remainder of each and every loss with a maximum per occurrence exposure of $37.4 million which includes the $4.9 million deductible); however, TRIEA provides that if the aggregate industry loss as a result of any such foreign terrorism occurrence is less than $50 million ($100 million in 2007), we are responsible for 100% of such loss. Our intent is to insure such amounts in excess of $50 million in 2007.	$825 million per occurrence(e)

(a)	We retain up to $75 million annual aggregate loss throughout the portfolio. In the event of a loss in excess of the per occurrence or annual aggregate amount, the third-party insurance carriers would be obligated to cover the losses up to the stated coverage amounts in the table above.
(b)	The amount of the third party insurance relating to earthquakes is based on maximum probable loss studies performed by independent third parties. The maximum annual aggregate payment amount for earthquake loss is $325 million, inclusive of our loss exposure of $75 million plus $1 million per occurrence deductible. There can be no assurance that the actual losses suffered in the event of an earthquake would not exceed the amount of such insurance coverage.
(c)	These amounts include our loss exposure/deductible amount.
(d)	This coverage includes nuclear, chemical and biological events under the Terrorism Risk Insurance Act of 2002 (“TRIA”). This coverage does not apply to non-TRIA events (which are terrorism events that are not committed by a foreigner or a foreign country). We maintain separate insurance with a $325 million annual aggregate limit subject to a deductible of $1 million for non-TRIA events. This separate coverage for non-TRIA events excludes nuclear, biological and chemical events.
	TRIA established the Terrorism Risk Insurance Program (“TRIP”) to mandate that insurance carriers offer insurance covering physical damage from terrorist incidents certified by the U.S. government as foreign terrorist acts. Under TRIP, the federal government shares in the risk of loss associated with

15

certain future terrorist acts. TRIA was extended for two years under the Terrorism Risk Insurance Extension Act (“TRIEA”), which established new requirements and expires on December 31, 2007. TRIEA created a new program trigger for any certified act of terrorism occurring after March 31, 2006 that prohibits payment of federal compensation unless the aggregate industry insured losses resulting from that act of terrorism exceed $50 million for 2006 and $100 million for 2007. The trigger for federal reimbursement through March 31, 2006 is $5 million, rather than $50 million. The full interim guidelines established by the U.S. Treasury Department explaining these and other new requirements are available at www.treas.gov/trip. There can be no assurance that TRIEA will be further extended. Should such legislation not be extended, the premiums and scope of coverages for this program could be adversely affected.

(e)

This amount is in excess of our deductible amounts.

      Should an uninsured loss or a loss in excess of insured limits occur, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property. Nevertheless, we might remain obligated for any mortgage debt or other financial obligations related to the property. It is also possible that third-party insurance carriers will not be able to maintain reinsurance sufficient to cover any losses that may be incurred.

      In addition, if any of our properties were to experience a catastrophic loss that was insured, it could still seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Also, due to inflation, changes in codes and ordinances, environmental considerations and other factors, it may not be feasible to use insurance proceeds to replace a building after it has been damaged or destroyed.

      As a further matter, we also have to renew our policies every year (and in some cases every three years) and negotiate acceptable terms for coverage, exposing us to the volatility of the insurance markets, including the possibility of rate increases or decrease in available coverage.

Increases in taxes and regulatory compliance costs, including compliance with the Americans with Disabilities Act, may reduce our net income

      Our properties are subject to increases in real estate taxes. Since we generally are not able to pass all real estate tax increases through to our tenants, we may incur significant increases in our operating expenses.

      Our properties are also subject to various federal, state and local regulatory requirements, such as state and local fire and life safety requirements including those mandated by the U.S. Environmental Protection Agency and the U.S. Occupational Safety and Health Administration. The EPA and OSHA are increasingly involved in indoor air quality standards, especially with respect to asbestos, mold and medical waste. Some trade associations, such as the Building Owners and Managers Association and the National Fire Protection Association, publish standards that are adopted by government authorities. These include standards relating to life, safety and fire protection systems published by the NFPA. Failure to comply with these requirements could result in the imposition of fines by governmental authorities or awards of damages to private litigants. In addition, we cannot provide any assurance that these requirements will not be changed or that new requirements will not be imposed that would require significant unanticipated expenditures by us and could have an adverse effect on our results of operations.

      Under the Americans with Disabilities Act of 1990 and various state and local laws, all public accommodations and commercial facilities must meet certain federal requirements related to access and use by disabled persons. Compliance with these requirements could involve removal of structural barriers from certain disabled persons’ entrances. Other federal, state and local laws may require modifications to or restrict further renovations of our properties with respect to such means of access. Although we believe that our properties are substantially in compliance with present requirements, noncompliance with the ADA or related laws or regulations could result in the imposition of fines by government authorities or in the award to private litigants of damages against us. Costs such as these, as well as the general costs of compliance with these laws or regulations, may also adversely affect our results of operations.

16

Environmental problems are possible and can be costly

      Federal, state and local laws and regulations relating to the protection of the environment may require a current or previous owner or operator of real estate to investigate and clean up hazardous or toxic substances or petroleum product releases at that property or at impacted neighboring properties. If unidentified environmental problems arise, we may have to make substantial payments. These adverse effects could arise because:

•  the owner or operator may have to pay a governmental entity or third parties for property damage and for investigation and clean-up costs incurred by these parties in connection with the contamination;

•  environmental laws typically impose clean-up responsibility and liability without regard to whether the owner or operator knew about or caused the presence of the contaminants;

•  even if more than one person may have been responsible for the contamination, each person covered by the environmental laws may be held responsible for all of the clean-up costs incurred; and

•  third parties, such as neighboring property owners, may sue the owner or operator of a site for damages and costs resulting from environmental contamination emanating or migrating from that site.

      Environmental laws also govern the presence, maintenance and removal of asbestos. These laws require that owners or operators of buildings containing asbestos:

•  properly manage and maintain the asbestos;

•  notify and/or train those who may come into contact with asbestos, such as tenants, visitors and employees; and

•  undertake special precautions, including removal or other abatement, if asbestos would be disturbed during renovation or demolition of a building.

      These laws may impose fines and penalties on building owners or operators who fail to comply with these requirements. Moreover, third parties may seek recovery from owners or operators for personal injuries associated with exposure to asbestos fibers.

      As a result, our properties may be subject to material environmental liabilities. In addition, no assurances can be given that (a) future laws, ordinances or regulations will not impose any material environmental liability, (b) 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 or (c) our limited insurance that we maintain with respect to environmental matters will cover all possible losses.

We may not control the decisions of joint ventures or partnerships in which we have an interest

      From time to time we invest in joint ventures or partnerships in which we do not hold a controlling interest. These investments involve risks that are not present with assets in which we own a controlling interest, including:

•  the possibility that our co-venturers or partners might at any time have economic or other business interests or goals that are inconsistent with our business interests or goals;

•  the possibility that our co-venturers or partners may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives (including actions that may be inconsistent with our REIT status);

•  the possibility that our co-venturers or partners may have different objectives from us regarding the appropriate timing and pricing of any sale or refinancing of properties; and

•  the possibility that our co-venturers or partners might become bankrupt or insolvent.

      Even when we have a controlling interest, certain major decisions may require partner approval.

17

      We also have joint venture and partnership agreements that contain buy-sell clauses that could require us to buy or sell our interest at a time we do not deem favorable for financial or other reasons, including the availability of cash at such time and the impact of tax consequences resulting from any sale. There is no limitation under our organizational documents as to the amount of available funds that we may invest in joint ventures or partnerships.

Scheduled debt payments could adversely affect us, including as a result of refinancing risk and foreclosure risk

      Our business is subject to risks normally associated with debt financing. If principal payments due at maturity cannot be refinanced, extended or paid with proceeds of other capital transactions, such as new equity or debt capital, our cash flow may not be sufficient in all years to repay all maturing debt. If prevailing interest rates or other factors at the time of refinancing, such as the possible reluctance of lenders to make commercial real estate loans or if our debt is no longer rated investment grade by the rating agencies, result in higher interest rates, it would adversely affect our ability to service our debt and make distributions to our securityholders and our results of operations and financial condition may suffer. In addition, if we are unable to refinance our indebtedness on acceptable terms, or at all, events or conditions that may adversely affect our results of operations or financial condition would also include the following:

•  we may need to dispose of one or more of our properties upon disadvantageous terms;

•  if we mortgage property to secure payment of indebtedness and are unable to meet mortgage payments, the mortgagee could foreclose upon such property or appoint a receiver to receive an assignment of our rents and leases; and

•  foreclosures upon mortgaged property could create taxable income without accompanying cash proceeds and, therefore, hinder our ability to meet the REIT distribution requirements of the Internal Revenue Code.

      Neither the limited partnership agreement of EOP Partnership nor our governing documents limit the amount or the percentage of indebtedness that we may incur. Accordingly, we may incur substantial additional amounts of secured and unsecured debt, increasing the related risks arising from our indebtedness.

We are obligated to comply with financial covenants in our debt agreements that could restrict our range of operating activities

      The mortgages on our properties contain customary negative covenants, including limitations on our ability, without the prior consent of the lender, to further mortgage the property, to enter into new leases outside of stipulated guidelines or to materially modify existing leases. In addition, our credit facilities contain customary requirements, including the requirement that we limit indebtedness to no more than a given percentage of the total asset value as defined. Other restrictions include limitations on the amount of secured debt to total assets, a minimum fixed charge coverage ratio and a maximum unsecured debt to unencumbered assets ratio. The indentures under which our senior unsecured debt have been issued contain financial and operating covenants, including coverage ratios and limitations on the borrower’s ability to incur secured and unsecured debt.

      These covenants reduce our flexibility in conducting our operations and create a risk of default on our debt if we cannot continue to satisfy them. Further, if we were to breach certain of our debt covenants, our lenders could require us to repay the debt immediately, and, if the debt is secured, could take possession of the property securing the loan. If any other lender declared its loan due and payable as a result of a default, the holders of our senior unsecured debt, along with the lenders under our credit facility, might be able to require that those debts be paid immediately. As a result, any default under our debt covenants under any indebtedness could create a risk of default on other material components of our debt.

18

Our leverage could limit our ability to obtain additional financing and have other adverse effects

      Our debt to market capitalization ratio, which we calculate as total debt as a percentage of total debt plus the liquidation value of our preferred shares and the market value of our outstanding common shares and the outstanding units of EOP Partnership owned by third parties, was 48.9% as of December 31, 2005, compared to 48.4% as of December 31, 2004. Our leverage could have important consequences to our securityholders, including affecting our ability to obtain additional financing in the future for working capital, capital improvements, acquisitions, development or other general corporate purposes (including distributions to security holders) and making us more vulnerable to a downturn in business or the economy generally. In addition, as a result of the financial and operating covenants described above, our leverage could reduce our flexibility in conducting our business and planning for, or reacting to, changes in our business and in the real estate industry.

      The indentures pursuant to which EOP Partnership has issued a substantial portion of our unsecured debt contain various covenants which restrict our ability to increase leverage. Among other things, this may limit our ability to utilize leverage to increase the compounded annual rate of growth of our per share funds from operations.

Rising interest rates or a downgrade in credit ratings could adversely affect our cash flow

      Advances under certain of our credit facilities bear interest at a variable rate. We also, from time to time, enter into interest rate swap agreements effectively converting fixed-rate debt into variable rate debt. We may borrow additional money with variable interest rates in the future. Although we may enter into hedging agreements to limit our exposure to rising interest rates as we determine to be appropriate and cost effective, increases in interest rates, or the loss of the benefits of hedging agreements, would increase our interest expense.

      Moody’s, Standard & Poor’s and Fitch provide credit ratings on our unsecured notes and preferred stock. In July 2004, Moody’s downgraded our credit ratings from Baa1 to Baa2 with a stable outlook. In December 2005, Standard & Poor’s and Fitch downgraded our credit ratings from BBB+ to BBB. As a result of these downgrades, the interest rate on our term loan facility increased 10 basis points to LIBOR plus 55 basis points and the interest rate on our revolving credit facility increased 12.5 basis points to LIBOR plus 60 basis points plus a facility fee of 20 basis points. In addition, the interest rate associated with any future financings may be impacted or we may not be able to borrow more funds if our credit ratings decline. A security rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any other rating. Further downgrades in our credit rating, or the loss of an investment grade rating, could have a material adverse impact on our cost of new financing and our ability to borrow funds.

Our hedging arrangements involve risks

      As noted above, we may use interest rate hedging agreements to manage our exposure to interest rate volatility. However, these arrangements may expose us to additional risks. Although our interest rate risk management policy establishes minimum credit ratings for counterparties, this does not eliminate the risk that a counterparty may fail to honor its obligations. Developing an effective interest rate risk strategy is complex and no strategy can completely insulate us from risks associated with interest rate fluctuations. In addition, hedging agreements may involve costs, such as transaction fees or breakage costs, if we terminate them. Any failure by us to effectively manage our exposure to interest rate risk through hedging agreements or otherwise, and any costs associated with hedging arrangements, could adversely affect our results of operations or financial condition.

In order to maintain our REIT status, we may need to borrow funds on a short-term basis during unfavorable market conditions

      In order to maintain our REIT status, we may need to borrow funds on a short-term basis to meet the REIT distribution requirements, even if the then prevailing market conditions are not favorable for these

19

borrowings. To qualify as a REIT, we generally must distribute to our shareholders at least 90% of our taxable net income each year, excluding capital gains. In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which dividends paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. We may need short-term debt to fund required distributions as a result of differences in timing between the actual receipt of income and the recognition of income for federal income tax purposes, or the effect of non-deductible capital improvements, the creation of reserves or required debt or amortization payments.

Provisions of Maryland law and our declaration of trust and bylaws could inhibit changes in control

      Maryland law and our declaration of trust and bylaws contain a number of provisions that may have the effect of discouraging transactions that involve an actual or threatened change in control. As a result, holders of our securities may not receive premiums or other increases in value of our securities that may be associated with any such actual or threatened change in control. These provisions include:

•  Removal of trustees — Under our declaration of trust, subject to the rights of one or more classes or series of preferred shares to elect one or more trustees, a trustee may be removed at any time, but only with cause, at a meeting of the shareholders by the affirmative vote of the holders of not less than a majority of the shares then outstanding and entitled to vote generally in the election of trustees.

•  Unsolicited takeover provisions of Maryland law — Maryland law provides protection for Maryland REITs against unsolicited takeovers by protecting the board of trustees with regard to actions taken in a takeover context. Maryland law provides that the duties of trustees will not require them to (a) accept, recommend or respond to any proposal by a person seeking to acquire control, (b) authorize the REIT to redeem any rights under, modify or render inapplicable a shareholder rights plan, (c) make a determination under the Maryland Business Combination Act or the Maryland Control Share Acquisition Act, or (d) act or fail to act solely because of the effect the act or failure to act may have on an acquisition or potential acquisition of control or the amount or type of consideration that may be offered or paid to shareholders in an acquisition. Maryland law also establishes a presumption that an act of a trustee satisfies the required standard of care. In addition, an act of a trustee relating to or affecting an acquisition or a potential acquisition of control is not subject under Maryland law to a higher duty or greater scrutiny than is applied to any other act of a trustee. Maryland law also provides that the duty of a trustee is only enforceable by the REIT or in the right of the REIT. A shareholder suit to enforce the duty of a trustee, therefore, can only be brought by or in the right of Equity Office.

•  Call of special meetings of shareholders — Our bylaws provide that special meetings of shareholders may be called only by the chairman of the board, the president, one-third of the trustees or by the holders of shares entitled to cast not less than a majority of all the votes entitled to be cast at the meeting. This provision limits the ability of shareholders to call special meetings.

•  Advance notice provisions for shareholder nominations and shareholder new business proposals — Our bylaws require advance written notice for shareholders to nominate a trustee or bring other business before a meeting of shareholders. This provision limits the ability of shareholders to make nominations for trustees or introduce other proposals that are not timely received for consideration at a meeting.

•  Board authority to issue preferred shares without shareholder approval — Our board of trustees is authorized to issue preferred shares having a preference as to dividends or liquidation over the common shares without shareholder approval. The issuance of preferred shares could adversely affect the voting power of the holders of our common shares and could be used to discourage, delay or prevent a change in control of Equity Office.

•  Two-thirds shareholder vote required to approve many amendments to our declaration of trust — Under Maryland law and our declaration of trust, the trustees, by a two-thirds vote, may at any time amend the declaration of trust solely to enable Equity Office to qualify as a REIT under the Internal Revenue Code or as a real estate investment trust under Maryland law, without action by Equity Office

20

	shareholders. Our board of trustees also may amend the declaration of trust to set the terms of one or more series of preferred shares without action by holders of Equity Office common shares. Other amendments to the declaration of trust must first be declared advisable by our board of trustees and thereafter must be approved by shareholders by the affirmative vote of not less than two-thirds of all votes entitled to be cast, or, in the case of amendments to the declaration of trust in connection with mergers and other specified business combinations or that involve an increase or decrease in the number of authorized common shares or preferred shares, not less than a majority of all votes entitled to be cast. The two-thirds shareholder vote requirement for many amendments to our declaration of trust may make amendments to our declaration of trust that shareholders believe desirable more difficult to effect.
•	Exclusive authority of board to amend bylaws, except for specified amendments — Our bylaws provide that the power to amend, repeal or adopt new bylaws is vested exclusively with the board of trustees, except that any amendments by the board of trustees to the bylaw provisions relating to meetings of shareholders, the size of the board, and the requirement that at least two-thirds of the trustees must be persons who are not executive officers of Equity Office or persons affiliated with Mr. Zell or his affiliates are subject to the approval of shareholders by vote of a majority of the votes cast. These provisions may make more difficult bylaw amendments that shareholders may believe are desirable.
•	Business combination with interested shareholders — The Maryland Business Combination Act provides that, unless exempted, a Maryland REIT may not engage in business combinations, including mergers, dispositions of 10% or more of its assets, issuances of shares and other specified transactions, with an “interested shareholder” or its affiliates, for five years after the most recent date on which the interested shareholder became an interested shareholder and thereafter unless specified criteria are met. Our board of trustees has elected by resolution to exempt from the provisions of the Maryland Business Combination Act any business combination with any person. Our board of trustees may, however, repeal this election in whole or in part at any time and cause us to become subject to these provisions in the future, except with respect to a securityholder who became an interested shareholder in connection with our formation in July 1997.
•	Other constituencies — Maryland law expressly codifies the authority of a Maryland REIT to include in its charter a provision that allows the board of trustees to consider the effect of a potential acquisition of control on shareholders, employees, suppliers, customers, creditors and communities in which offices or other establishments of the trust are located. Our declaration of trust does not include a provision of this type. Maryland law also provides, however, that the inclusion or omission of this type of provision in the declaration of trust of a Maryland REIT does not create an inference concerning factors that may be considered by the board of trustees regarding a potential acquisition of control. This law may allow the board of trustees to reject an acquisition proposal even though the proposal was in the best interests of our shareholders.

We have share ownership limits for REIT tax purposes

      Primarily to facilitate maintenance of our REIT qualification, our declaration of trust generally prohibits ownership by any single shareholder of more than 9.9%, in value or number of shares, whichever is more restrictive, of any class or series of our outstanding shares. This is referred to as the “ownership limit.” The federal tax laws include complex stock ownership and attribution rules that apply in determining whether a shareholder exceeds the ownership limit. These rules may cause a shareholder to be treated as owning the shares that are actually owned by others, including family members and entities in which a shareholder has an ownership interest. Our declaration of trust permits, and in some cases requires, the board of trustees to waive or modify the ownership limit, if the board of trustees is satisfied that the waiver or modification will not jeopardize our REIT qualification. In addition, our declaration of trust allows the board of trustees to modify the ownership limits applicable to series of preferred shares issued in business combination transactions. Absent a modification or waiver, shares acquired or held in violation of the ownership limit will be transferred to a trust for the exclusive benefit of a designated charitable beneficiary, and the shareholder’s rights to distributions and to vote would terminate. Also, the ownership limit could delay or prevent a change in control

21

that is opposed by the board of trustees and, therefore, could adversely affect our securityholders’ ability to realize a premium over the then-prevailing market price for their securities.

      Our declaration of trust also includes an additional ownership limit designed to help us remain qualified as a “domestically controlled REIT” for federal income tax purposes. This ownership limit prevents any person from acquiring our shares if the acquisition by that person would cause 43% or more of the fair market value of our issued and outstanding shares to be owned, directly or indirectly, by non-U.S. persons. The ownership limit does not apply to any acquisition of our preferred shares that were outstanding as of June 19, 2000, or to common shares issued upon conversion of any of these preferred shares.

We are dependent on key personnel

      We depend on the efforts of Samuel Zell, our chairman of the board, and our executive officers, particularly Richard D. Kincaid, our president and chief executive officer. If they were to resign or were unable to serve, our operations could be adversely affected. We do not have employment agreements with Mr. Zell or any of our executive officers, including Mr. Kincaid.

Changes in market conditions could adversely affect the market value of our securities

      As with other publicly traded equity securities, the market value of our securities depends on various market conditions which may change from time to time. Among the market conditions that may affect the market value of our securities are the following:

•  the extent of investor interest in us;

•  the general reputation of REITs and the attractiveness of our equity securities (including anticipated levels of distribution) in comparison to other equity securities, including securities issued by other real estate-based companies;

•  our financial performance, credit rating and the perceived attractiveness of our portfolio of assets; and

•  general stock and bond market conditions.

      We believe the market value of our common shares is based primarily upon the market’s perception of our growth potential and our current and potential future earnings and cash available for distribution. Consequently, our common shares may trade at prices that are higher or lower than our net asset value per common share. If our future earnings or cash available for distribution is less than expected, it is likely that the market price of our securities will diminish.

Market interest rates may have an effect on the value of our debt and equity securities

      One of the factors that investors consider important in deciding whether to buy or sell preferred shares or debt securities of a REIT is the distribution rate on the REIT’s shares or the coupon on its debt securities, considered as a percentage of the price of those shares or debt securities, relative to market interest rates. If market interest rates increase, prospective purchasers of REIT shares or debt securities may expect a higher distribution rate or coupon. Higher market interest rates would not, however, result in more funds for us to distribute or use to make debt payments. To the contrary, higher market interest rates would likely increase our borrowing costs and potentially decrease our funds available for distribution or debt service. Thus, higher market interest rates could cause the market value of our preferred equity and debt securities to go down. Higher market interest rates could also cause the market value of our common equity to go down.

The number of shares available for future sale could adversely affect the market value of our securities

      As part of our initial public offering in 1997 and since then we have completed transactions where units of limited partnership interest in EOP Operating Limited Partnership (“EOP Partnership”) were issued to owners of properties we acquired. Common shares issuable in exchange for such interests in EOP Partnership may be sold in the public securities markets over time pursuant to registration rights we granted to these

22

investors. Additional common shares including those reserved under our employee benefit and other incentive plans, including share options, may also be sold in the market at some time in the future. Future sales of our common shares in the market, whether in the form of primary or secondary offerings could adversely affect the price of our common shares. We cannot predict the effect which the perception in the market that such sales may occur will have on the market value of our common shares.

We are dependent on external sources of capital for future growth

      To qualify as a REIT, we must distribute to our shareholders each year at least 90% of our net taxable income, excluding any net capital gain. Because of this distribution requirement, it is not likely that we will be able to fund all future capital needs, including for acquisitions and developments, from income from operations. Therefore, we will have to rely on third-party sources of capital, which may or may not be available on favorable terms or at all. Our access to third-party sources of capital depends on a number of things, including the market’s perception of our growth potential and our current and potential future earnings. To the extent we seek to meet our capital needs through additional equity offerings, that may result in substantial dilution of our shareholders’ interests, and additional debt financing may substantially increase our leverage.

If we fail to qualify as a REIT, our shareholders would be adversely affected

      We believe that we have qualified for taxation as a REIT for federal income tax purposes since 1997. We currently plan to continue to meet the requirements for taxation as a REIT but we cannot assure shareholders that we will qualify as a REIT. As a REIT, we are subject to various restrictions and requirements, including restrictions and requirements on our income, assets and activities. Many of these REIT requirements are highly technical and complex. The determination that we are a REIT requires an analysis of various factual matters and circumstances, some of which may not be totally within our control, including, in limited circumstances, factual matters and circumstances relating to some corporations that were operating as REITs at the time we acquired them or actions taken by our joint venture partners. For example, to qualify as a REIT, at least 95% of our gross income must come from sources that are itemized in the REIT tax laws and we are prohibited from owning specified amounts of debt or equity securities of some issuers. The fact that we hold our assets through EOP Partnership and its subsidiaries and our ongoing reliance on factual determinations, such as determinations related to the valuation of our assets, further complicate the application of the REIT requirements for us. Even a technical or inadvertent mistake could jeopardize our REIT status. Furthermore, Congress and the Internal Revenue Service might make changes to the tax laws and regulations, and the courts might issue new rulings that make it more difficult, or impossible, for us to remain qualified as a REIT.

      If we fail to qualify as a REIT for federal income tax purposes, we would be subject to federal and state income tax at regular corporate rates. As a regular, non-REIT corporation, we would not be allowed to take a deduction for distributions to shareholders in computing our taxable income. Also, unless the Internal Revenue Service were to grant us relief under statutory provisions, we would remain disqualified as a REIT for the four years following the year we first failed to qualify. If we failed to qualify as a REIT, we would have to pay significant income taxes, which would reduce our net earnings available for investment or distribution to our shareholders. This would likely have a significant adverse effect on the value of our securities. In addition, we would no longer be required to make any distributions to shareholders.

We pay some taxes

      Even if we qualify as a REIT for federal income tax purposes, we are required to pay some federal, state and local taxes on our income and property. For example, we will be subject to income tax to the extent we distribute less than 100% of our REIT taxable income. We also may have to pay some state or local income taxes because not all states and localities treat REITs the same as they are treated for federal income tax purposes. Several corporate subsidiaries of Equity Office have elected to be treated as “taxable REIT subsidiaries” of Equity Office for federal income tax purposes since January 1, 2001. A taxable REIT subsidiary is a fully taxable corporation and is limited in its ability to deduct interest payments in excess of a certain amount made to Equity Office. In addition, we will be subject to a 100% penalty tax on some payments

23

that we receive if the economic arrangements among our tenants, our taxable REIT subsidiaries and us are not comparable to similar arrangements among unrelated parties. To the extent that Equity Office or any taxable REIT subsidiary is required to pay federal, state or local taxes, we will have less cash available for distribution to shareholders.

We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our common shares

      At any time, the federal income tax laws or regulations governing REITs or the administrative interpretations of those laws or regulations may be amended. Any of those new laws or interpretations may take effect retroactively and could adversely affect us or our shareholders. The rules dealing with federal income taxation are constantly under review by persons involved with the legislative process and by the IRS and the Treasury Department, resulting in statutory changes as well as promulgation of new, or revisions to existing, regulations and revised interpretations of established concepts. No prediction can be made as to the likelihood of passage of any new tax legislation or other provisions either directly or indirectly affecting us or our shareholders or the value of our common shares.

Tax Consequences

      The material U.S. federal income tax consequences relating to the taxation of Equity Office as a REIT and the ownership and disposition of Equity Office common shares are described in our Form 8-K dated March 9, 2006.

Item 1B.     Unresolved Staff Comments.

      None.

24

Item 2. Properties.

      For information regarding encumbrances on our properties see Item 7, Item 8 and Item 15 — Schedule III. Included in the Total Office Portfolio are 82 properties in which the title-holding entities generally have leasehold interests, rather than fee ownership, and two properties in which we are the lender of mortgage debt encumbering the property.

Office Property Statistics

      The following table sets forth certain data related to the Total Office Portfolio and the Effective Office Portfolio as of December 31, 2005. Our 17 core markets are presented from greatest to least based on our property net operating income from continuing operations for the fourth quarter 2005.

					Total Office Portfolio								Effective Office Portfolio
							Percentage of								Percentage of
							Total Office								Effective Office						Percent of
							Portfolio								Portfolio						Property Net
			Number of		Rentable		Rentable			Percent			Rentable		Rentable			Percent			Operating
Markets			Buildings		Square Feet		Square Feet			Occupied			Square Feet		Square Feet			Occupied			Income(a)
	1	Boston		52		12,680,201		11.4	%		91.3	%		11,606,811		11.4	%		91.9	%		14.0	%
	2	San Francisco		89		10,232,402		9.2	%		87.2	%		9,424,616		9.3	%		87.7	%		10.9	%
	3	Los Angeles		48		8,410,339		7.5	%		93.7	%		7,280,010		7.2	%		93.3	%		9.5	%
	4	New York		7		5,367,110		4.8	%		96.1	%		5,361,421		5.3	%		96.1	%		8.9	%
	5	San Jose		81		6,485,614		5.8	%		85.1	%		6,485,614		6.4	%		85.1	%		8.8	%
	6	Seattle		54		9,989,686		9.0	%		92.7	%		8,776,587		8.6	%		93.2	%		7.6	%
	7	Washington, D.C.		28		6,619,080		5.9	%		94.2	%		6,096,783		6.0	%		93.8	%		7.6	%
	8	Chicago		33		11,700,945		10.5	%		89.8	%		10,442,233		10.3	%		89.9	%		6.9	%
	9	Atlanta		40		7,733,425		6.9	%		85.6	%		7,028,021		6.9	%		84.5	%		4.6	%
	10	Orange County		32		6,034,128		5.4	%		94.1	%		6,034,128		5.9	%		94.1	%		4.5	%
	11	Portland		45		4,164,536		3.7	%		91.9	%		4,164,536		4.1	%		91.9	%		2.8	%
	12	Denver		15		4,553,765		4.1	%		89.6	%		4,553,765		4.5	%		89.6	%		2.4	%
	13	Sacramento		37		2,612,655		2.3	%		94.1	%		2,410,265		2.4	%		93.8	%		2.0	%
	14	Stamford		7		1,654,296		1.5	%		92.7	%		1,654,296		1.6	%		92.7	%		1.9	%
	15	Oakland/ East Bay		12		2,606,341		2.3	%		92.9	%		2,330,856		2.3	%		92.2	%		1.9	%
	16	Austin		15		2,856,424		2.6	%		80.3	%		2,856,424		2.8	%		80.3	%		1.9	%
	17	San Diego		17		2,365,977		2.1	%		87.3	%		1,874,702		1.8	%		86.0	%		1.7	%
	18-22	All others		10		5,442,129		4.9	%		89.0	%		3,327,223		3.3	%		88.0	%		2.2	%
		Total/Weighted Average		622		111,509,053		100.0	%		90.5	%		101,708,291		100.0	%		90.4	%		100.0	%

(a)  Property Net Operating Income represents fourth quarter 2005 property net operating income from continuing operations (see Item 8 — Note 19) for wholly-owned properties and our share of consolidated and unconsolidated joint ventures owned and in service as of December 31, 2005.

Total Office Portfolio Lease Expiration Schedule

      The following schedule is based upon the contractual termination date of the leases, without regard to any early lease termination and/or renewal options. Some of the leases are subject to various forms of lease termination options exercisable by tenants. Although it is not possible to predict which tenants are likely to exercise these options, it has been our experience that the greatest incidence of lease termination option exercises occur in markets in which the contractual rents under the lease are significantly higher than current market rents. As a result of these lease termination options, renewal options and other factors, such as tenant insolvencies, the actual termination dates of some portion of our leases may vary from the contractual expiration date set forth in the schedule.

25

Total Office Portfolio Lease Expiration Schedule (a)

December 31, 2005

	Year of Expiration
	2006(b)			2007			2008			2009			2010			2011			2012			2013			2014			2015			Thereafter(f)			Totals
	(Dollars in thousands except per square foot amounts)
Boston
Square Feet(c)		901,117			1,173,913			1,593,288			1,328,450			1,557,965			454,243			1,095,733			1,425,253			727,593			272,129			1,045,935			11,575,619
% Square Feet(d)		7.1	%		9.3	%		12.6	%		10.5	%		12.3	%		3.6	%		8.6	%		11.2	%		5.7	%		2.1	%		8.2	%		91.3	%
Annualized Rent for occupied square feet(e)	$	26,598		$	49,148		$	57,753		$	49,655		$	59,448		$	18,622		$	45,837		$	59,454		$	26,310		$	9,057		$	41,630		$	443,512
Annualized Rent per occupied square foot(e)	$	29.52		$	41.87		$	36.25		$	37.38		$	38.16		$	41.00		$	41.83		$	41.71		$	36.16		$	33.28		$	39.80		$	38.31
San Francisco
Square Feet(c)		1,124,597			1,278,854			1,411,339			913,602			1,864,124			792,332			432,610			378,371			223,717			296,682			210,420			8,926,648
% Square Feet(d)		11.0	%		12.5	%		13.8	%		8.9	%		18.2	%		7.7	%		4.2	%		3.7	%		2.2	%		2.9	%		2.1	%		87.2	%
Annualized Rent for occupied square feet(e)	$	46,398		$	43,899		$	52,739		$	29,202		$	74,656		$	29,972		$	11,847		$	11,611		$	5,828		$	8,863		$	13,429		$	328,444
Annualized Rent per occupied square foot(e)	$	41.26		$	34.33		$	37.37		$	31.96		$	40.05		$	37.83		$	27.38		$	30.69		$	26.05		$	29.87		$	63.82		$	36.79
Los Angeles
Square Feet(c)		977,496			1,247,266			710,237			777,186			1,032,915			592,383			709,563			536,497			358,284			665,656			276,498			7,883,981
% Square Feet(d)		11.6	%		14.8	%		8.4	%		9.2	%		12.3	%		7.0	%		8.4	%		6.4	%		4.3	%		7.9	%		3.3	%		93.7	%
Annualized Rent for occupied square feet(e)	$	35,414		$	40,802		$	21,910		$	21,590		$	31,617		$	23,136		$	23,476		$	18,110		$	12,621		$	20,973		$	8,473		$	258,122
Annualized Rent per occupied square foot(e)	$	36.23		$	32.71		$	30.85		$	27.78		$	30.61		$	39.06		$	33.09		$	33.76		$	35.23		$	31.51		$	30.64		$	32.74
New York
Square Feet(c)		151,627			179,343			189,327			1,261,182			322,130			437,637			476,698			445,167			114,544			84,009			1,493,740			5,155,404
% Square Feet(d)		2.8	%		3.3	%		3.5	%		23.5	%		6.0	%		8.2	%		8.9	%		8.3	%		2.1	%		1.6	%		27.8	%		96.1	%
Annualized Rent for occupied square feet(e)	$	9,096		$	9,199		$	7,732		$	74,582		$	14,910		$	23,841		$	21,225		$	24,120		$	6,953		$	5,950		$	73,703		$	271,311
Annualized Rent per occupied square foot(e)	$	59.99		$	51.29		$	40.84		$	59.14		$	46.29		$	54.48		$	44.53		$	54.18		$	60.70		$	70.83		$	49.34		$	52.63
San Jose
Square Feet(c)		710,862			775,129			534,178			497,635			962,887			742,373			488,279			129,475			331,712			193,645			154,992			5,521,167
% Square Feet(d)		11.0	%		12.0	%		8.2	%		7.7	%		14.8	%		11.4	%		7.5	%		2.0	%		5.1	%		3.0	%		2.4	%		85.1	%
Annualized Rent for occupied square feet(e)	$	23,881		$	25,482		$	12,935		$	14,081		$	36,835		$	42,932		$	32,566		$	4,079		$	6,512		$	6,558		$	4,245		$	210,106
Annualized Rent per occupied square foot(e)	$	33.59		$	32.87		$	24.21		$	28.30		$	38.25		$	57.83		$	66.70		$	31.50		$	19.63		$	33.87		$	27.39		$	38.05

26

Total Office Portfolio Lease Expiration Schedule (a)
December 31, 2005 — (Continued)
	Year of Expiration
	2006(b)			2007			2008			2009			2010			2011			2012			2013			2014			2015			Thereafter(f)			Totals
	(Dollars in thousands except per square foot amounts)
Seattle
Square Feet(c)		981,173			936,770			1,237,815			1,396,313			1,446,993			561,694			509,514			574,545			429,886			520,697			665,318			9,260,718
% Square Feet(d)		9.8	%		9.4	%		12.4	%		14.0	%		14.5	%		5.6	%		5.1	%		5.8	%		4.3	%		5.2	%		6.7	%		92.7	%
Annualized Rent for occupied square feet(e)	$	26,725		$	25,230		$	30,996		$	33,838		$	38,314		$	13,364		$	14,119		$	14,936		$	9,408		$	10,445		$	17,161		$	234,536
Annualized Rent per occupied square foot(e)	$	27.24		$	26.93		$	25.04		$	24.23		$	26.48		$	23.79		$	27.71		$	26.00		$	21.88		$	20.06		$	25.79		$	25.33
Washington, D.C.
Square Feet(c)		489,312			808,707			933,734			662,220			445,135			810,318			359,189			250,325			672,696			556,174			247,631			6,235,441
% Square Feet(d)		7.4	%		12.2	%		14.1	%		10.0	%		6.7	%		12.2	%		5.4	%		3.8	%		10.2	%		8.4	%		3.7	%		94.2	%
Annualized Rent for occupied square feet(e)	$	15,364		$	23,249		$	31,946		$	20,944		$	17,630		$	26,803		$	11,390		$	8,967		$	23,226		$	20,837		$	9,630		$	209,986
Annualized Rent per occupied square foot(e)	$	31.40		$	28.75		$	34.21		$	31.63		$	39.61		$	33.08		$	31.71		$	35.82		$	34.53		$	37.46		$	38.89		$	33.68
Chicago
Square Feet(c)		1,525,507			929,832			1,394,482			983,602			1,242,517			624,781			738,544			534,629			538,670			1,321,163			673,270			10,506,997
% Square Feet(d)		13.0	%		7.9	%		11.9	%		8.4	%		10.6	%		5.3	%		6.3	%		4.6	%		4.6	%		11.3	%		5.8	%		89.8	%
Annualized Rent for occupied square feet(e)	$	41,845		$	23,826		$	41,391		$	28,751		$	32,878		$	15,988		$	20,553		$	14,590		$	13,900		$	34,067		$	13,880		$	281,669
Annualized Rent per occupied square foot(e)	$	27.43		$	25.62		$	29.68		$	29.23		$	26.46		$	25.59		$	27.83		$	27.29		$	25.80		$	25.79		$	20.62		$	26.81
Atlanta
Square Feet(c)		1,322,323			693,987			699,975			779,051			1,397,137			456,169			210,650			272,422			338,366			181,853			266,959			6,618,892
% Square Feet(d)		17.1	%		9.0	%		9.1	%		10.1	%		18.1	%		5.9	%		2.7	%		3.5	%		4.4	%		2.4	%		3.5	%		85.6	%
Annualized Rent for occupied square feet(e)	$	37,172		$	15,576		$	13,998		$	22,102		$	36,313		$	9,809		$	3,847		$	5,729		$	6,338		$	3,516		$	5,171		$	159,571
Annualized Rent per occupied square foot(e)	$	28.11		$	22.44		$	20.00		$	28.37		$	25.99		$	21.50		$	18.26		$	21.03		$	18.73		$	19.33		$	19.37		$	24.11
Orange County
Square Feet(c)		970,209			983,647			1,548,406			573,502			677,621			432,283			248,030			170,745			6,536			21,146			46,707			5,678,832
% Square Feet(d)		16.1	%		16.3	%		25.7	%		9.5	%		11.2	%		7.2	%		4.1	%		2.8	%		0.1	%		0.4	%		0.8	%		94.1	%
Annualized Rent for occupied square feet(e)	$	26,241		$	25,114		$	36,531		$	14,523		$	16,182		$	9,797		$	6,519		$	4,068		$	165		$	520		$	444		$	140,104
Annualized Rent per occupied square foot(e)	$	27.05		$	25.53		$	23.59		$	25.32		$	23.88		$	22.66		$	26.28		$	23.83		$	25.24		$	24.59		$	9.51		$	24.67

27

Total Office Portfolio Lease Expiration Schedule (a)
December 31, 2005 — (Continued)
	Year of Expiration
	2006(b)			2007			2008			2009			2010			2011			2012			2013			2014			2015			Thereafter(f)			Totals
	(Dollars in thousands except per square foot amounts)
Portland
Square Feet(c)		491,417			606,095			430,980			604,117			802,776			344,599			113,042			58,517			62,113			61,688			251,496			3,826,840
% Square Feet(d)		11.8	%		14.6	%		10.3	%		14.5	%		19.3	%		8.3	%		2.7	%		1.4	%		1.5	%		1.5	%		6.0	%		91.9	%
Annualized Rent for occupied square feet(e)	$	11,551		$	14,734		$	9,265		$	12,755		$	15,348		$	7,971		$	2,333		$	1,491		$	1,559		$	1,295		$	4,335		$	82,637
Annualized Rent per occupied square foot(e)	$	23.51		$	24.31		$	21.50		$	21.11		$	19.12		$	23.13		$	20.64		$	25.48		$	25.10		$	20.99		$	17.24		$	21.59
Denver
Square Feet(c)		587,911			607,280			607,624			688,442			402,051			292,518			419,764			77,953			221,986			56,783			116,053			4,078,365
% Square Feet(d)		12.9	%		13.3	%		13.3	%		15.1	%		8.8	%		6.4	%		9.2	%		1.7	%		4.9	%		1.2	%		2.5	%		89.6	%
Annualized Rent for occupied square feet(e)	$	12,341		$	11,617		$	11,222		$	15,681		$	7,685		$	5,158		$	7,191		$	1,472		$	5,112		$	677		$	1,437		$	79,593
Annualized Rent per occupied square foot(e)	$	20.99		$	19.13		$	18.47		$	22.78		$	19.11		$	17.63		$	17.13		$	18.88		$	23.03		$	11.92		$	12.38		$	19.52
Sacramento
Square Feet(c)		385,987			534,481			314,406			539,010			253,083			164,180			120,112			25,835			26,448			24,719			71,170			2,459,431
% Square Feet(d)		14.8	%		20.5	%		12.0	%		20.6	%		9.7	%		6.3	%		4.6	%		1.0	%		1.0	%		0.9	%		2.7	%		94.1	%
Annualized Rent for occupied square feet(e)	$	10,117		$	14,814		$	8,006		$	13,752		$	6,956		$	4,583		$	3,605		$	720		$	678		$	789		$	770		$	64,790
Annualized Rent per occupied square foot(e)	$	26.21		$	27.72		$	25.46		$	25.51		$	27.49		$	27.91		$	30.01		$	27.87		$	25.64		$	31.92		$	10.82		$	26.34
Stamford
Square Feet(c)		347,699			127,956			208,819			204,543			202,322			248,198			103,236			33,318			44,765			—			12,916			1,533,772
% Square Feet(d)		21.0	%		7.7	%		12.6	%		12.4	%		12.2	%		15.0	%		6.2	%		2.0	%		2.7	%		0.0	%		0.8	%		92.7	%
Annualized Rent for occupied square feet(e)	$	11,020		$	4,717		$	7,148		$	6,962		$	6,830		$	8,485		$	3,379		$	1,011		$	1,368		$	0		$	0		$	50,920
Annualized Rent per occupied square foot(e)	$	31.69		$	36.86		$	34.23		$	34.04		$	33.76		$	34.19		$	32.73		$	30.34		$	30.56		$	0.00		$	0.00		$	33.20
Oakland/East Bay
Square Feet(c)		388,484			291,343			475,527			381,256			310,442			143,047			24,073			368,749			13,500			7,066			18,390			2,421,877
% Square Feet(d)		14.9	%		11.2	%		18.2	%		14.6	%		11.9	%		5.5	%		0.9	%		14.1	%		0.5	%		0.3	%		0.7	%		92.9	%
Annualized Rent for occupied square feet(e)	$	13,303		$	8,824		$	12,670		$	9,142		$	7,998		$	4,995		$	678		$	12,509		$	348		$	137		$	0		$	70,604
Annualized Rent per occupied square foot(e)	$	34.24		$	30.29		$	26.64		$	23.98		$	25.76		$	34.92		$	28.16		$	33.92		$	25.78		$	19.39		$	0.00		$	29.15

28

Total Office Portfolio Lease Expiration Schedule (a)
December 31, 2005 — (Continued)
	Year of Expiration
	2006(b)			2007			2008			2009			2010			2011			2012			2013			2014			2015			Thereafter(f)			Totals
	(Dollars in thousands except per square foot amounts)
Austin
Square Feet(c)		197,469			215,161			299,114			140,055			317,998			137,610			326,644			90,726			218,298			144,419			206,614			2,294,108
% Square Feet(d)		6.9	%		7.5	%		10.5	%		4.9	%		11.1	%		4.8	%		11.4	%		3.2	%		7.6	%		5.1	%		7.2	%		80.3	%
Annualized Rent for occupied square feet(e)	$	4,716		$	5,363		$	7,473		$	3,256		$	6,455		$	3,410		$	9,456		$	1,859		$	5,797		$	2,790		$	5,673		$	56,248
Annualized Rent per occupied square foot(e)	$	23.88		$	24.93		$	24.98		$	23.25		$	20.30		$	24.78		$	28.95		$	20.49		$	26.56		$	19.32		$	27.46		$	24.52
San Diego
Square Feet(c)		376,184			155,157			251,580			479,250			421,652			186,827			16,431			—			10,052			130,647			36,602			2,064,382
% Square Feet(d)		15.9	%		6.6	%		10.6	%		20.3	%		17.8	%		7.9	%		0.7	%		0.0	%		0.4	%		5.5	%		1.5	%		87.3	%
Annualized Rent for occupied square feet(e)	$	13,373		$	5,063		$	8,551		$	12,726		$	12,500		$	5,934		$	519		$	0		$	382		$	3,398		$	192		$	62,638
Annualized Rent per occupied square foot(e)	$	35.55		$	32.63		$	33.99		$	26.55		$	29.65		$	31.76		$	31.59		$	0.00		$	38.00		$	26.01		$	5.25		$	30.34
All Others
Square Feet(c)		968,887			378,800			931,323			710,996			451,404			147,109			246,438			77,833			141,857			163,503			625,450			4,843,600
% Square Feet(d)		17.8	%		7.0	%		17.1	%		13.1	%		8.3	%		2.7	%		4.5	%		1.4	%		2.6	%		3.0	%		11.5	%		89.0	%
Annualized Rent for occupied square feet(e)	$	15,456		$	7,814		$	19,701		$	17,327		$	10,362		$	3,790		$	6,070		$	1,791		$	3,573		$	3,623		$	18,531		$	108,038
Annualized Rent per occupied square foot(e)	$	15.95		$	20.63		$	21.15		$	24.37		$	22.96		$	25.76		$	24.63		$	23.01		$	25.19		$	22.16		$	29.63		$	22.31
Total Portfolio
Square Feet(c)		12,898,261			11,923,721			13,772,154			12,920,412			14,111,152			7,568,301			6,638,550			5,450,360			4,481,023			4,701,979			6,420,161			100,886,074
% Square Feet(d)		11.6	%		10.7	%		12.4	%		11.6	%		12.7	%		6.8	%		6.0	%		4.9	%		4.0	%		4.2	%		5.8	%		90.5	%
Annualized Rent for occupied square feet(e)	$	380,611		$	354,471		$	391,967		$	400,869		$	432,917		$	258,590		$	224,610		$	186,517		$	130,078		$	133,495		$	218,705		$	3,112,830
Annualized Rent per occupied square foot(e)	$	29.51		$	29.73		$	28.46		$	31.03		$	30.68		$	34.17		$	33.83		$	34.22		$	29.03		$	28.39		$	34.07		$	30.85

(a)	Based on the contractual termination date of the lease without regard to any early lease termination and/or renewal options.
(b)	640,783 square feet expiring in 2006 is from month to month leases.
(c)	Represents occupied square feet of expiring leases as of the reporting date.
(d)	Represents occupied square feet of expiring leases in the market divided by the market’s total building square feet.
(e)	Annualized rent is the monthly contractual rent as of the reporting date under existing leases in which occupancy has commenced as of the reporting date multiplied by 12 months (“Annualized Rent”). If the current rent payable is $0 (as a result of rent abatements), then the first monthly rent payment due under the existing lease is used to calculate annualized rent. The contractual rent amounts include total base rent and estimated expense reimbursements from tenants as of the reporting date before any adjustments for rent abatements and contractual increases or decreases in rent subsequent to December 31, 2005. Total rent abatements for leases in which occupancy has commenced as of the reporting date for the period from January 1, 2006 to December 31, 2006 are approximately $30.8 million. We believe Annualized Rent is a useful measure because this information can be used for comparison to current market rents as published by various third party sources.
(f)	EOP management offices and owner-building use space totaling 796,991 square feet is included in square feet, however, the rent per square foot is $0.

29

Item 3.     Legal Proceedings.

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

Item 4.     Submission of Matters to a Vote of Security Holders.

      None.

30

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

      Our Common Shares are traded on the New York Stock Exchange (“NYSE”) under the symbol “EOP”. On February 28, 2006, the reported closing sale price per Common Share on the NYSE was $31.45 and there were 3,293 holders of record. The high and low sales prices and closing sales prices on the NYSE and distributions for the Common Shares during 2005 and 2004 are set forth in the table below:

Year	Quarter		High		Low		Close		Distributions
2005		Fourth	$	33.17	$	28.20	$	30.33	$	0.50
		Third	$	35.79	$	31.31	$	32.71	$	0.50
		Second	$	34.39	$	30.00	$	33.10	$	0.50
		First	$	31.17	$	27.45	$	30.13	$	0.50
2004		Fourth	$	29.86	$	27.11	$	29.12	$	0.50
		Third	$	28.95	$	25.71	$	27.25	$	0.50
		Second	$	29.20	$	23.90	$	27.20	$	0.50
		First	$	30.39	$	27.81	$	28.89	$	0.50

Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities

      Under our repurchase program announced in July 2002, as amended, we have been authorized to repurchase in the open market or in privately-negotiated transactions up to $2.1 billion of our Common Shares through May 31, 2006 (the $1.1 billion previously authorized for repurchase under this program was increased $500 million to $1.6 billion in November 2005 and an additional $500 million in December 2005 to $2.1 billion). We also announced in May 2004 that we may repurchase Common Shares from time to time to fund our employee benefit programs, including the 1997 Employee Share Purchase Plan and Supplemental Retirement Savings Plan (“SERP”). Such repurchases are not considered part of our open market repurchase program. The following table summarizes repurchases of our Common Shares during the fourth quarter of 2005:

						Total Number of		Dollar Value of
						Shares Purchased		Shares that May
						as Part of Publicly		Yet be Purchased
		Total Number of		Average Price		Announced Plans		Under the Plans
Period		Shares Purchased(a)		Paid per Share(a)		or Programs(a)		or Programs(b)
October 1 - 31			2,364,195	$	32.48		2,364,195	$	330,819,258
November 1 - 30			14,101,100		29.84		14,101,100	$	410,916,424
December 1 - 31			11,541,208		30.77		11,541,208	$	557,348,995
	Fourth quarter 2005		28,006,503	$	30.45		28,006,503

(a)

Of the Common Shares repurchased during the fourth quarter of 2005, 27,953,100 represent Common Shares repurchased under our open market repurchase program and 26,338 represent Common Shares repurchased under our SERP. In addition, 17,064 represent Common Shares repurchased in the open market to fund Common Shares purchased under our 1997 Employee Share Purchase Plan and 8,869 represent Common Shares repurchased in the open market to fund fees paid in Common Shares to each of our nonemployee trustees, except Mr. Zell. The remaining 1,132 Common Shares repurchased represent Common Shares surrendered to Equity Office to satisfy tax withholding obligations in connection with the vesting of restricted stock.

(b)

This dollar value relates to the $2.1 billion open market repurchase program only. The number of Common Shares that may yet be repurchased in the open market to fund shares purchased under our

31

1997 Employee Share Purchase Plan, as amended, was 1,358,224 at October 31, 2005 and November 30, 2005 and 1,341,160 at December 31, 2005.

      The above table excludes the cash redemption by EOP Partnership of 186,754 partnership units in EOP Partnership (“Units”) at an average purchase price of $31.32 per unit for an aggregate dollar value of $5.8 million.

Securities Authorized for Issuance Under Equity Compensation Plans

      Information related to employee compensation plans is set forth in Item 8 — Note 22.

Item 6.     Selected Financial Data.

      The following sets forth our selected consolidated financial and operating information on a historical basis. The selected financial data has been derived from our historical consolidated financial statements. The following information should be read together with our consolidated financial statements and notes thereto included in Item 8.

	For the years ended December 31,
	2005			2004			2003			2002		2001(a)
	(Dollars in thousands, except per share amounts)
Selected Financial Data:
Total revenues	$	3,000,589		$	2,874,032		$	2,825,820		$	2,889,715	$	2,585,550
Income from early lease terminations(b)	$	80,028		$	58,689		$	68,408		$	151,969	$	41,230
Property net operating income from continuing operations(c)	$	1,801,538		$	1,802,422		$	1,816,361		$	1,856,352	$	1,683,060
Income from continuing operations	$	203,894		$	253,811		$	430,603		$	442,539	$	399,713
Net gain on sales of real estate and provision for loss on assets held for sale(d)	$	21,026		$	27,160		$	168,126		$	18,354	$	81,662
Impairment(b)	$	(219,003	)	$	(229,170	)	$	(7,500	)	$	—	$	(135,220	)
Cumulative effect of a change in accounting principle	$	—		$	(33,697	)	$	—		$	—	$	(1,142	)
Net income	$	42,939		$	137,307		$	655,062		$	770,215	$	618,182
Net income available to common shareholders	$	8,136		$	98,214		$	603,190		$	707,642	$	563,796
Funds from Operations available to common shareholders plus assumed conversions(e)	$	608,330		$	931,687		$	1,289,547		$	1,520,268	$	1,190,174
Income from continuing operations per share — diluted	$	0.38		$	0.50		$	1.00		$	1.00	$	1.02
Cumulative effect of a change in accounting principle per share — diluted	$	—		$	(0.07	)	$	—		$	—	$	—
Net income available to common shareholders per share — diluted	$	0.02		$	0.24		$	1.50		$	1.70	$	1.55
Funds from Operations available to common shareholders plus assumed conversions per share — diluted(e)	$	1.35		$	2.07		$	2.80		$	3.18	$	2.83
Cash distributions declared per Common Share	$	2.00		$	2.00		$	2.00		$	2.00	$	1.90

32

		For the years ended December 31,
		2005			2004			2003			2002			2001(a)
		(Dollars in thousands, except per share amounts)
Balance Sheet Data (at end of year):
Total assets		$	22,973,553		$	24,671,539		$	24,189,010		$	25,246,783		$	25,808,422
Mortgage debt net of any discounts and premiums		$	2,164,198		$	2,609,067		$	2,315,889		$	2,507,890		$	2,650,338
Unsecured notes net of any premiums and discounts		$	9,032,620		$	9,652,392		$	8,828,912		$	9,057,651		$	9,093,987
Lines of credit		$	1,631,000		$	548,000		$	334,000		$	205,700		$	244,300
Mandatorily Redeemable Preferred Shares		$	299,497		$	299,500		$	299,500		$	299,500		$	299,500
Other Data (at end of year):
Effective Office Portfolio:
	Number of office properties		622			698			684			734			774
	Rentable square feet of office properties (in millions)		101.7			115.3			113.6			119.6			122.0
	Occupancy of office properties		90.4	%		87.5	%		85.9	%		88.4	%		91.6	%

(a)	On July 2, 2001, we completed our acquisition by merger of Spieker Properties, Inc. (“Spieker”) at a cost of $7.2 billion. As a result, we acquired 391 office properties containing 28.3 million square feet and 98 industrial properties containing 10.1 million square feet.
(b)	These amounts include continuing and discontinued operations and also include our share of unconsolidated joint ventures.
(c)	These amounts represent property operating revenues (which include rental revenues, tenant reimbursements, parking and other operating revenues) less property operating expenses (which include real estate taxes, insurance, repairs and maintenance and property operating expense). See Item 8 — Note 19 on why we present property net operating income from continuing operations.
(d)	These amounts include continuing and discontinued operations after allocations to minority interest partners and also include our share of unconsolidated joint ventures.
(e)	Refer to Item 7 for information regarding why we present funds from operations and for a reconciliation of this non-GAAP financial measure to net income.

33

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Overview

      Our Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read together with our consolidated financial statements and notes thereto and is organized as follows:

I.     Executive Summary (pages 34-38)

           A description of our business as well as key factors and trends that affect our business.

II.     Results of Operations (pages 38-47)

           Period-to-period comparisons of our results of operations for the years ended 2003 through 2005.

III.     Liquidity and Capital Resources (pages 48-61)

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

IV.     Critical Accounting Policies and Estimates (pages 61-65)

      A review of the critical accounting policies and estimates that affect the financial statements and impact of new accounting standards.

V.     Funds From Operations (pages 65-67)

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

I.     Executive Summary

      Equity Office Properties Trust (“Equity Office”) is the largest publicly traded owner and manager of office properties in the United States. The use of the word “we”, “us”, or “our” in this Form 10-K refers to Equity Office and its subsidiaries, including EOP Operating Limited Partnership (“EOP Partnership”), except where the context otherwise requires. We own, manage, lease and develop office properties. At December 31, 2005, we had a national office portfolio comprised of whole or partial interests in 622 office buildings located in 16 states and the District of Columbia. We own premium quality office buildings. Based on our Effective Office Portfolio, which consists of 101.7 million square feet, 39.4% and 60.6% of our properties are located in central business districts and suburban locations, respectively. At December 31, 2005, we owned buildings in 22 markets and 101 submarkets, including our 17 core markets which are:

Atlanta

Austin

Boston

Chicago

Denver

Los Angeles

New York

Oakland/ East Bay

Orange County

Portland

Sacramento

San Diego

San Francisco

San Jose

Seattle

Stamford

Washington, D.C.

      We believe our core markets generally offer the following: a strong opportunity for us to be a market leader; an ability to leverage our operating platform; sufficient market size for us to achieve scale and grow; an intellectual and cultural infrastructure; and a highly educated workforce.

      We operate our properties using a portfolio-based model as compared to many real estate owners who operate on a property-by-property basis. We believe this approach allows us to operate efficiently while

34

providing a high level of service to our tenants. Our market concentrations enable us to provide a wide range of office solutions to tenants who have local, regional and national office space needs.

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

•  the economic environment;

•  our investment activity and our use of the proceeds from dispositions;

•  our liquidity and capital resources; and

•  our operating and leasing results.

Economic Environment

      The business of owning, operating and leasing Class A office properties in the United States was impacted by a prolonged economic downturn, which commenced in the first quarter of 2001 and stabilized around the fourth quarter of 2003. During this time, office market fundamentals deteriorated, rental rates declined and vacancies increased in our major markets. We also experienced a significantly higher level of unscheduled early lease terminations during this period. As a result of the deterioration in our market fundamentals, revenues declined as our leases expired and were either not renewed or were renewed at lower rental rates. Also, we incurred and continue to incur significant tenant improvement and leasing costs to maintain and restore occupancy which was lost during this cycle.

      We typically experience long business cycles because our average lease term is five to six years. Accordingly, when the fundamentals of the office business decline, our operating results do not deteriorate as quickly as would be the case if, for example, we re-priced a substantial percentage of our product “to market” on an annual basis. Conversely, when office business fundamentals improve, our operating results tend to improve more slowly. Further, we have chosen to diversify our portfolio risk by operating in a large number of office markets whose conditions may not deteriorate or recover in tandem. As a result of these factors, our operating results are likely to lag those of the general economy as well as certain of our competitors whose operations are concentrated in fewer markets.

      At the present time, the office market fundamentals are generally improving. Office job growth, a principal driver of demand for our properties, has been positive for over two years and is forecasted to increase in 2006 in most of our core markets. In the past two years, substantially all of our core markets have experienced positive net absorption. Occupancy has increased in most of our core markets, and we expect it to further increase in 2006. More recently, rental rates have begun to trend upwards in most of our core markets. Another market variable that impacts the supply of office space is construction activity. Although construction activity in several of our markets has recently increased, such activity remains below historical levels. Within the last twelve months, construction costs have increased and this may reduce the likelihood of new competitive supply in a number of our markets. Although these market trends are expected to positively impact our operating results over time, our results will continue to be negatively impacted by any decrease in rental rates on new and renewal leases as compared to expiring leases (commonly referred to as rent roll down) and the effect of increased expenses and higher tenant improvement and leasing costs.

Investment Activity

      Over the last two years we took steps to reposition our portfolio for long-term growth. We took advantage of a favorable asset-sale environment and during 2005 sold on an Effective Office Portfolio basis $2.7 billion of assets comprising 17.8 million square feet and several vacant land parcels. Our portfolio is comprised of premium quality office buildings in diverse geographic markets. More than 96% of our assets (based on total square feet) are currently located in our 17 core markets. We expect to continue to take advantage of market opportunities and expect to engage in further sales based on market conditions. When we sell assets in the future, we may recognize gains, losses or impairment charges.

35

      For the year ended December 31, 2005, our net income and FFO were negatively impacted by asset sales. Our income from continuing operations has decreased, and we recorded $228.0 million of gains on assets sold and $426.0 million of non-cash charges on assets sold and assets we intend to sell. See Item 8 — Note 5 for more information regarding the gains, losses and impairment charges recognized.

      We expect to continue, as market conditions permit, to invest a portion of the capital from our dispositions into acquisitions in targeted growth markets. While the current commercial real estate market has provided us with favorable valuations for assets we have sold, this same market has also created an extremely competitive atmosphere for acquiring properties. The properties we acquired in 2005 ($1.4 billion comprising 5.1 million square feet), including redevelopment properties, had average occupancy rates lower than our weighted average portfolio occupancy. We acquired these properties, however, because they were attractively priced, located in our core markets and have growth potential that we believe will make them accretive to our earnings over the long term.

      We may also continue to use disposition proceeds, in part, for reinvestments in our existing portfolio, debt repayments, distributions to our shareholders, and repurchases of our common shares (“Common Share”) and EOP Partnership Units (“Units”). During 2005, we used proceeds from asset sales together with other sources of capital to fund $1.4 billion in acquisitions, to repay $1.7 billion of mortgage debt and unsecured notes (with a weighted average effective interest rate of 6.87%), to repurchase 31.0 million Common Shares (at an average purchase price of $30.68 per share for $950.7 million under our open market repurchase program) and to redeem 1.8 million Units (at an average purchase price of $30.67 per Unit for $56.5 million). We also obtained $769.1 million of mortgage debt on new and existing properties (including our share of unconsolidated properties of $131.8 million) with a weighted average effective interest rate of 5.43%. Although our overall debt levels remained relatively unchanged as of December 31, 2005 as compared to December 31, 2004, we were able to reduce our effective borrowing rate on a weighted average basis from 6.57% at December 31, 2004 to 6.51% at December 31, 2005.

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

Liquidity and Capital Resources

      As discussed later in the Liquidity and Capital Resources section, for 2004 and 2005 our net cash flow provided by operating activities was insufficient to meet all of our cash requirements including capital improvements, tenant improvements and leasing costs as well as distributions to shareholders and unitholders. We anticipate that our 2006 annual Common Share dividend, which is subject to quarterly Board of Trustees approval, will be $1.32 per share, down from the 2005 annual dividend of $2.00 per share. Notwithstanding this reduction in the Common Share dividend, we anticipate that if our net cash from operating activities and our cash requirements continue at these levels, a shortfall will continue in 2006, but at a lower level from 2005, and that we will cover the shortfall with proceeds primarily from financing activities and asset sales.

Operating and Leasing Results

Operating Results for 2005

      As the economy and office markets recover, we have seen improvements in many of our markets. Although occupancy and rental rates on our new leases have gradually been improving, rental rates on new and renewal leases continue to be below those of expiring leases. We also repositioned our portfolio by disposing of $2.7 billion of assets which reduced rental revenues and our net operating income and we recognized significant gains on properties sold and losses and impairments on properties sold and properties we intend to sell. Operating expenses and general and administrative expenses also increased primarily because of increased utility costs, increased repairs and maintenance costs, increases in payroll and severance expenses, consulting fees associated with the implementation of a new accounting system and a shared services center, and the costs incurred for damage to our properties in New Orleans from Hurricane Katrina. As a result, our net

36

income available to common shareholders in 2005 was $8.1 million, or $0.02 per diluted share, down from $98.2 million, or $0.24 per diluted share in 2004.

Leasing Results

Occupancy

      Total square feet for leases under which tenants took occupancy during the years ended December 31, 2005 and 2004 was 21.2 million and 22.0 million, respectively. Our Effective Office Portfolio occupancy was 90.4% as of December 31, 2005, an increase from 87.5% at the end of 2004 and 85.9% at the end of 2003. Approximately half of the increase in occupancy since December 31, 2004 was due to leasing, and the balance from selling properties with low occupancy. We expect occupancy in early 2006 to decline slightly due to several large expiring leases, but to recover to the 91% to 92% range by year-end 2006.

Early Lease Terminations

      We had 3.4 million square feet of early lease terminations during the year ended December 31, 2005, which compares to 3.9 million square feet in the year ended December 31, 2004. On a square footage basis, the number of early lease terminations declined as there were fewer early lease terminations in 2005 as a result of defaults as compared to 2004. We expect this trend to continue in 2006. Income from early lease terminations was slightly higher in 2005 than 2004 primarily because of one large termination fee in the first quarter of 2005.

Rental Rates

      Rental rates on new leases declined during the years ended December 31, 2005 and 2004 by 14.5% and 16.3%, respectively (on a cash basis), when compared to rates on expiring and terminating leases. Market rents began a downward trend in 2001 as vacancy rates increased across the nation. While we have recently been able to increase rental rates in select areas, we expect it to take time for rental rates to improve across the portfolio since only a portion of our leases expire each year. We estimate that rental rates on our leases that are scheduled to expire in 2006 are 10% to 15% above current market. The decline in rents to current market levels adversely affects our rental revenues, and until market rental rates increase from their current levels to the level payable under expiring leases, which we believe may not occur until the latter part of 2007 or early 2008, in a majority of our markets, we expect rent roll down to continue to reduce our rental revenues.

Tenant Improvements and Leasing Costs

      In order to retain tenants and obtain new tenants, we incur tenant improvement and leasing costs, which have been at historically high levels since 2003. Our costs for 2005 averaged $20.24 per square foot, and we expect the costs for 2006 to be between $21.50 and $23.50 per square foot. These increasing costs are due to higher construction costs across the country. Also, the repositioning of our portfolio has resulted in a higher concentration of buildings in markets that require higher tenant improvement costs.

37

Trends in Occupancy and Rental Rates for the Total Office Portfolio

      Below is a summary of leasing activity for tenants taking occupancy in the periods presented.

			For the years ended December 31,
			2005			2004			2003
Office Property Data for Total Office Portfolio:
	Occupancy at end of year			90.5	%		87.7	%		86.3	%
	Gross square footage for tenants whose lease term commenced during the year			21,219,691			22,015,441			22,684,488
	Weighted average annual rent per square foot for tenants whose lease term commenced during the year:
		GAAP basis(a,b)		$26.60			$24.10			$25.68
		Cash basis(b,c)		$25.55			$23.38			$24.86
	Gross square footage for expiring and terminated leases during the year			19,235,670			20,381,369			23,976,592
	Weighted average annual rent per square foot for expiring and terminated leases during the year:
		GAAP basis(a)		$29.01			$27.14			$28.14
		Cash basis(c)		$29.88			$27.94			$28.55
	Change in weighted average annual rent per square foot between expiring and terminated leases and leases that commenced during the year:
		GAAP basis — change in annual rent per square foot		$(2.41	)		$(3.04	)		$(2.46	)
		GAAP basis — percent change in annual rent per square foot		(8.3	)%		(11.2	)%		(8.7	)%
		Cash basis — change in annual rent per square foot		$(4.33	)		$(4.56	)		$(3.69	)
		Cash basis — percent change in annual rent per square foot		(14.5	)%		(16.3	)%		(12.9	)%

(a)	Based on the average annual base rent per square foot over the lease term and current estimated tenant reimbursements, if any.
(b)	Weighted average annual rent per square foot for new leases for tenants whose lease term commenced during the period may lag the market because leasing decisions typically are made one month to 12 or more months prior to taking occupancy.
(c)	Based on the monthly contractual rent when the lease commenced, expired or terminated multiplied by 12 months. For new and renewal leases, if the monthly contractual rent when the lease commenced is $0 (as a result of rent abatements), then the rental rate represents the first monthly rent payment due multiplied by 12 months (“Annualized Cash Rent”). The contractual rent amounts include total base rent and estimated expense reimbursements from tenants before any adjustments for rent abatements and contractual increases or decreases in rent. We believe Annualized Cash Rent is a useful measure because this information can be used for comparison to current market rents as published by various third party sources.

II.     Results of Operations

Period-to-Period Comparisons

      The financial results presented in the consolidated statements of operations show significant changes from period-to-period. Our period-to-period financial results may not be comparable because we acquire and dispose of properties on an ongoing basis. We have also consolidated properties (that we previously recorded under the equity method) as a result of the acquisition of our joint venture partners’ interests. During 2005, we completed a significant amount of disposition activity which adversely impacted our financial results. The net income (loss) for properties sold and properties held for sale is included in Discontinued Operations. See

38

Item 8 — Note 5 for more information, including the results of operations for the properties classified as Discontinued Operations.

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

						Square Feet
			Buildings			Total Office Portfolio			Effective Office Portfolio
Properties owned as of:
	December 31, 2002			734			125,725,399			119,625,725
		Acquisitions		2			829,293			923,879
		Developments placed in service		5			1,218,215			989,307
		Dispositions		(53	)		(5,182,707	)		(7,543,381	)
		Properties taken out of service(a)		(4	)		(450,548	)		(450,548	)
		Building remeasurements		—			115,273			96,135
	December 31, 2003			684			122,254,925			113,641,117
		Consolidation of SunAmerica Center		1			780,063			524,772
		Acquisitions		27			3,315,232			3,104,028
		Developments placed in service		2			298,689			298,689
		Dispositions		(5	)		(567,765	)		(1,922,755	)
		Properties taken out of service(a)		(11	)		(469,771	)		(469,771	)
		Building remeasurements		—			101,872			103,663
	December 31, 2004			698			125,713,245			115,279,743
		Acquisitions		55			3,959,956			3,959,956
		Developments placed in service		1			115,340			115,340
		Dispositions		(131	)		(18,275,376	)		(17,644,205	)
		Properties taken out of service(a)		(1	)		(61,825	)		(61,825	)
		Building remeasurements		—			57,713			59,282
	December 31, 2005			622			111,509,053			101,708,291

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

      As a result of the significant acquisition, disposition and consolidation activity, we have presented condensed consolidated results for properties owned for the comparable periods (the “Same Store Portfolio”) as well as the condensed consolidated statements of operations (the “Total Company”). The Total Company results include the Same Store Portfolio as well as acquisitions, dispositions, consolidations and corporate level expenses.

39

Comparison of the year ended December 31, 2005 to the year ended December 31, 2004

      The table below represents selected operating information for the Total Company and for the Same Store Portfolio. The Same Store Portfolio consists of 498 consolidated office properties and 28 unconsolidated joint venture properties acquired or placed in service on or prior to January 1, 2004.

				Total Company												Same Store Portfolio
										Change												Change
										Favorable/(Unfavorable)												Favorable/(Unfavorable)
				2005			2004			Amount			%			2005			2004			Amount			%
				(Dollars in thousands)
Revenues:
	Property operating revenues			$	2,982,849		$	2,859,806		$	123,043			4.3	%	$	2,686,357		$	2,670,325		$	16,032			0.6	%
	Fee income				17,740			14,226			3,514			24.7			—			—			—			—
		Total revenues			3,000,589			2,874,032			126,557			4.4			2,686,357			2,670,325			16,032			0.6
Expenses:
	Depreciation and amortization				749,765			687,702			(62,063	)		(9.0	)		662,331			633,236			(29,095	)		(4.6	)
	Real estate taxes				339,006			324,481			(14,525	)		(4.5	)		292,987			294,605			1,618			0.5
	Insurance				59,567			29,521			(30,046	)		(101.8	)		56,241			27,163			(29,078	)		(107.1	)
	Repairs and maintenance				340,904			312,928			(27,976	)		(8.9	)		315,192			291,207			(23,985	)		(8.2	)
	Property operating				441,834			390,454			(51,380	)		(13.2	)		410,568			371,836			(38,732	)		(10.4	)
	Ground rent				22,517			20,912			(1,605	)		(7.7	)		21,620			20,623			(997	)		(4.8	)
	Corporate general and administrative(a)				66,536			52,242			(14,294	)		(27.4	)		—			—			—			—
	Impairment				65,738			38,534			(27,204	)		(70.6	)		44,294			14,705			(29,589	)		(201.2	)
		Total expenses			2,085,867			1,856,774			(229,093	)		(12.3	)		1,803,233			1,653,375			(149,858	)		(9.1	)
			Operating income		914,722			1,017,258			(102,536	)		(10.1	)		883,124			1,016,950			(133,826	)		(13.2	)
Other income (expense):
	Interest and dividend income				15,896			8,041			7,855			97.7			5,005			3,132			1,873			59.8
	Realized gain on sale of marketable securities				157			28,976			(28,819	)		(99.5	)		—			—			—			—
	Interest expense(b)				(831,725	)		(848,677	)		16,952			2.0			(149,451	)		(176,595	)		27,144			15.4
		Total other income (expense)			(815,672	)		(811,660	)		(4,012	)		(0.5	)		(144,446	)		(173,463	)		29,017			16.7
Income before income taxes, allocation to minority interests, income from investments in unconsolidated joint ventures and gain on sales of real estate					99,050			205,598			(106,548	)		(51.8	)		738,678			843,487			(104,809	)		(12.4	)
Income taxes					272			(1,981	)		2,253			113.7			(373	)		(325	)		(48	)		(14.8	)
Minority interests:
	EOP Partnership				(907	)		(11,747	)		10,840			92.3			—			—			—			—
	Partially owned properties				(9,825	)		(10,264	)		439			4.3			(9,825	)		(10,263	)		438			4.3
Income from investments in unconsolidated joint ventures					68,996			50,304			18,692			37.2			32,674			39,827			(7,153	)		(18.0	)
Gain on sales of real estate					46,308			21,901			24,407			111.4			—			—			—			—
Income from continuing operations					203,894			253,811			(49,917	)		(19.7	)		761,154			872,726			(111,572	)		(12.8	)
Discontinued operations					(160,955	)		(82,807	)		(78,148	)		(94.4	)		—			—			—			—
Income before cumulative effect of a change in accounting principle					42,939			171,004			(128,065	)		(74.9	)		—			—			—			—
Cumulative effect of a change in accounting principle					—			(33,697	)		33,697			100.0			—			—			—			—
Net income				$	42,939		$	137,307		$	(94,368	)		(68.7	)%	$	761,154		$	872,726		$	(111,572	)		(12.8	)%
Selected Items from Continuing Operations:
	Property net operating income(c)			$	1,801,538		$	1,802,422		$	(884	)		(0.0	)%	$	1,611,369		$	1,685,514		$	(74,145	)		(4.4	)%

40

	Total Company												Same Store Portfolio
							Change												Change
							Favorable/(Unfavorable)												Favorable/(Unfavorable)
	2005			2004			Amount			%			2005			2004			Amount			%
	(Dollars in thousands)
Property operating margin(c,d)		60.4	%		63.0	%					(2.6	)%		60.0	%		63.1	%					(3.1	)%
	$	57,232		$	73,104		$	(15,872	)		(21.7	)%	$	36,118		$	65,355		$	(29,237	)		(44.7	)%
Deferred rental revenue
Income from early lease terminations	$	78,757		$	48,056		$	30,701			63.9	%	$	24,634		$	37,464		$	(12,830	)		(34.2	)%

(a)	Corporate general and administrative expense is not allocated to the Same Store Portfolio because these expenses are not directly incurred in connection with any specific property.
(b)	Interest expense (including amortization of deferred financing costs and prepayment expenses) for the Same Store Portfolio represents interest expense on mortgage debt and does not include interest expense on the unsecured notes or the lines of credit.
(c)	Property net operating income consists of property operating revenues minus property operating expenses. Included in property operating revenues are rental revenue, tenant reimbursements, parking and other income, which includes income from early lease terminations. Included in property operating expenses are real estate taxes, insurance, repairs and maintenance and property operating expenses. See Item 8 — Note 19 for more information.
(d)	Property operating margin is determined by dividing property operating revenues less property operating expenses by property operating revenues.

Property Operating Revenues

      Property operating revenues in the Same Store Portfolio increased primarily because of increased occupancy and an increase in tenant reimbursements (we recover a portion of increases in our operating expenses from our tenants). Same store occupancy increased from 89.4% at the end of 2004 to 91.2% at December 31, 2005. The increase was partially offset by a decrease in income from early lease terminations of $12.8 million, $4.3 million of rent loss in three buildings in New Orleans that were affected by Hurricane Katrina, and the effect of the rent roll down.

      Property operating revenues in the Total Company increased primarily because of property acquisitions, consolidations and developments placed in service which accounted for $160.2 million of the increase and the increases in the Same Store Portfolio, as explained above. This includes income from early lease terminations of which approximately $53.2 million was received at one building from a tenant who terminated its lease. This increase in property operating revenues was partially offset by the effect of partial sales of properties in 2005 and 2004 (which are not classified as discontinued operations), which decreased property revenues by $39.4 million.

Depreciation and Amortization

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

      Depreciation and amortization expense in the Total Company increased because of property acquisitions, consolidations and developments placed in service which accounted for $42.4 million of the increase and the increases in the Same Store Portfolio, as explained above. The increase was partially offset by the effect of partial sales of properties in 2005 and 2004 (which are not classified as discontinued operations), which decreased depreciation and amortization expense by $8.8 million.

41

Real Estate Taxes

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

      Real estate taxes increased in 2005 in the Total Company because of property acquisitions, consolidations and developments placed in service, which accounted for $19.0 million of the increase. The increase was partially offset by the effect of the partial sale of properties in 2005 and 2004 (which are not classified as discontinued operations), which decreased real estate tax expense by $4.0 million, and the decrease in the Same Store Portfolio, as explained above.

Insurance

      Insurance expense for the Total Company and the Same Store Portfolio increased due to Hurricane Katrina damage to the three building Lakeway Center complex of $31.5 million. The hurricane-related damage was higher than earlier projections due to increased costs related to clean-up, remediation and window repairs. See Item 8 — Notes 13 and 24 for more information.

Repairs and Maintenance

      Repairs and maintenance expense increased in the Same Store Portfolio as a result of increased cleaning expense attributable to higher contractual rates and increased occupancy, higher payroll costs for building engineers and higher spending for major repairs. We increased our spending in repairs and maintenance as part of a program to maintain high levels of quality in our properties. Repairs and maintenance expense for 2006 is expected to continue at an increased level as a result of planned projects in 2006.

      Repairs and maintenance expense increased in the Total Company because of property acquisitions, consolidations and developments placed in service, which accounted for $12.3 million of the increase, and increases in the Same Store Portfolio, as explained above. This increase was partially offset by a decrease in repairs and maintenance expense of $8.1 million as a result of the effect of partial sales of properties in 2005 and 2004 (which are not classified as discontinued operations).

Property Operating

      Property operating expense increased for the Same Store Portfolio primarily due to an increase in utilities expense of $19.7 million attributable to higher utility rates and increased occupancy, $3.8 million of consulting fees and other costs associated with the implementation of a new accounting system and a shared services center, 2005 severance costs of $8.7 million and increases in payroll expenses of $8.0 million. We anticipate that utility costs will increase in the coming quarters when compared to historical costs if utility rates and the occupancy levels of our properties continue to increase. A portion of such expenses will be recoverable from tenants.

      Property operating expenses in the Total Company increased because of property acquisitions, consolidations and developments placed in service which accounted for $19.5 million of the increase and increases in the Same Store Portfolio, as explained above. This increase was partially offset by a decrease in property operating expenses of $8.3 million as a result of the effect of partial sales of properties in 2005 and 2004 (which are not classified as discontinued operations).

Corporate General and Administrative Expenses

      Corporate general and administrative expenses increased because of consulting fees, higher payroll expense and expenses related to restricted share awards and stock options.

42

Impairment

      For a discussion of impairment refer to Item 8 — Note 5.

Interest and Dividend Income

      Interest and dividend income increased in 2005 in the Total Company primarily due to larger balances in various notes receivable and investments, including escrow deposits.

Realized Gain on Sale of Marketable Securities

      The gain in 2004 consisted of $24.0 million from the settlement of forward-starting interest rate swaps and $4.7 million from the sale of securities.

Interest Expense

      Interest expense in the Same Store Portfolio decreased because of mortgage debt repayments.

      Interest expense for the Total Company decreased because of the repayment of higher interest rate debt with proceeds from asset sales and the issuance of new debt at lower interest rates. This decrease was partially offset by higher interest expense on variable rate debt and a decrease in capitalized interest expense due to a decrease in development activity (capitalized interest has the effect of reducing overall interest expense). As of December 31, 2005, 84% of our total debt was at a fixed interest rate.

Income from Investments in Unconsolidated Joint Ventures

      Income from investments in unconsolidated joint ventures in the Same Store Portfolio decreased primarily because of a decrease in income from early lease terminations and the effect of rent roll down, partially offset by an increase in occupancy.

      Income from investments in unconsolidated joint ventures for the Total Company increased primarily because of the $26.5 million gain on sale of our interest in three properties, which occurred in 2005, partially offset by the decrease in the Same Store Portfolio as explained above.

Gain on Sales of Real Estate

      The gain in 2005 for the Total Company of $46.3 million primarily relates to the partial sale of our interests in two properties in San Francisco, California. The gain in 2004 for the Total Company relates to the sale of our 3% interest in a property located in Houston, Texas and the partial sale of two properties located in Philadelphia, Pennsylvania. In accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment and Disposal of Long-Lived Assets (“FAS 144”), the net income from these properties that were partially sold, which includes the gain on sale, is not classified as discontinued operations because we maintain an ongoing involvement with the operation of these properties.

Discontinued Operations

      Discontinued operations consists of properties we sold and also properties classified as held for sale. See Item 8 — Note 5 for additional information regarding discontinued operations.

Cumulative Effect of a Change in Accounting Principle

      Under the provisions of Financial Accounting Standards Board Interpretation 46(R), Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51, as revised (“FIN 46(R)”), we consolidated the assets, liabilities and results of operations of SunAmerica Center effective January 1, 2004, and recorded a cumulative effect of a change in accounting principle resulting in a loss of $33.7 million. See Item 8 — Note 3.

43

Comparison of the year ended December 31, 2004 to the year ended December 31, 2003

      The table below represents selected operating information for the Total Company and for the Same Store Portfolio. The Same Store Portfolio consists of 622 consolidated office properties and 21 unconsolidated joint venture properties acquired or placed in service on or prior to January 1, 2003.

				Total Company												Same Store Portfolio
										Change Favorable/												Change Favorable/
										(Unfavorable)												(Unfavorable)
				2004			2003			Amount			%			2004			2003			Amount			%
				(Dollars in thousands)
Revenues:
	Property operating revenues			$	2,859,806		$	2,809,959		$	49,847			1.8	%	$	2,884,776		$	2,952,670		$	(67,894	)		(2.3	)%
	Fee income				14,226			15,861			(1,635	)		(10.3	)		—			—			—			—
		Total revenues			2,874,032			2,825,820			48,212			1.7			2,884,776			2,952,670			(67,894	)		(2.3	)
Expenses:
	Depreciation and amortization				687,702			617,461			(70,241	)		(11.4	)		697,176			645,802			(51,374	)		(8.0	)
	Real estate taxes				324,481			305,588			(18,893	)		(6.2	)		329,462			319,870			(9,592	)		(3.0	)
	Insurance				29,521			19,846			(9,675	)		(48.8	)		33,429			24,818			(8,611	)		(34.7	)
	Repairs and maintenance				312,928			297,677			(15,251	)		(5.1	)		319,347			312,385			(6,962	)		(2.2	)
	Property operating				390,454			370,487			(19,967	)		(5.4	)		398,030			388,473			(9,557	)		(2.5	)
	Ground rent				20,912			20,227			(685	)		(3.4	)		18,818			18,624			(194	)		(1.0	)
	Corporate general and administrative(a)				52,242			62,479			10,237			16.4			—			—			—			—
	Impairment				38,534			—			(38,534	)		—			193,595			7,500			(186,095	)		(2,481.3	)
		Total expenses			1,856,774			1,693,765			(163,009	)		(9.6	)		1,989,857			1,717,472			(272,385	)		(15.9	)
			Operating income		1,017,258			1,132,055			(114,797	)		(10.1	)		894,919			1,235,198			(340,279	)		(27.5	)
Other income (expense):
	Interest and dividend income				8,041			12,426			(4,385	)		(35.3	)		3,306			3,647			(341	)		(9.4	)
	Realized gain on settlement of derivatives and sale of marketable securities				28,976			9,286			19,690			212.0			—			—			—			—
	Interest expense(b)				(848,677	)		(813,304	)		(35,373	)		(4.3	)		(158,311	)		(185,599	)		27,288			14.7
		Total other income (expense)			(811,660	)		(791,592	)		(20,068	)		(2.5	)		(155,005	)		(181,952	)		26,947			14.8
Income before income taxes, allocation to minority interests, income from investments in unconsolidated joint ventures and gain on sales of real estate					205,598			340,463			(134,865	)		(39.6	)		739,914			1,053,246			(313,332	)		(29.7	)
Income taxes					(1,981	)		(5,429	)		3,448			63.5			(336	)		(772	)		436			56.5
Minority interests:
	EOP Partnership				(11,747	)		(74,152	)		62,405			84.2			—			—			—			—
	Partially owned properties				(10,264	)		(9,271	)		(993	)		(10.7	)		(10,263	)		(9,271	)		(992	)		(10.7	)
Income from investments in unconsolidated joint ventures					50,304			79,882			(29,578	)		(37.0	)		30,663			42,387			(11,724	)		(27.7	)
Gain on sales of real estate					21,901			99,110			(77,209	)		(77.9	)		—			—			—			—
Income from continuing operations					253,811			430,603			(176,792	)		(41.1	)		759,978			1,085,590			(325,612	)		(30.0	)
Discontinued operations					(82,807	)		224,459			(307,266	)		(136.9	)		—			—			—			—
Income before cumulative effect of a change in accounting principle					171,004			655,062			(484,058	)		(73.9	)		—			—			—			—
Cumulative effect of a change in accounting principle					(33,697	)		—			(33,697	)		—			—			—			—			—
Net income				$	137,307		$	655,062		$	(517,755	)		(79.0	)%	$	759,978		$	1,085,590		$	(325,612	)		(30.0	)%

44

		Total Company												Same Store Portfolio
								Change Favorable/												Change Favorable/
								(Unfavorable)												(Unfavorable)
		2004			2003			Amount			%			2004			2003			Amount			%
		(Dollars in thousands)
Selected Items from Continuing Operations:
	Property net operating income(c)	$	1,802,422		$	1,816,361		$	(13,939	)		(0.8	)%	$	1,804,508		$	1,907,124		$	(102,616	)		(5.4	)%
	Property operating margin(c,d)		63.0	%		64.6	%					(1.6	)%		62.6	%		64.6	%					(2.0	)%
		$	73,104		$	68,462		$	4,642			6.8	%	$	60,813		$	68,048		$	(7,235	)		(10.6	)%
	Deferred rental revenue
	Income from early lease terminations	$	48,056		$	53,303		$	(5,247	)		(9.8	)%	$	38,489		$	60,211		$	(21,722	)		(36.1	)%

(a)	Corporate general and administrative expense is not allocated to the Same Store Portfolio because these expenses are not directly incurred in connection with any specific property.
(b)	Interest expense (including amortization of deferred financing costs and prepayment expenses) for the Same Store Portfolio represents interest expense on mortgage debt and does not include interest expense on the unsecured notes or the lines of credit.
(c)	Property net operating income consists of property operating revenues minus property operating expenses. Included in property operating revenues are rental revenue, tenant reimbursements, parking and other income, which includes income from early lease terminations. Included in property operating expenses are real estate taxes, insurance, repairs and maintenance and property operating expenses. See Item 8 — Note 19 for more information.
(d)	Property operating margin is determined by dividing property operating revenues less property operating expenses by property operating revenues.

Property Operating Revenues

      Property operating revenues in the Same Store Portfolio decreased in 2004 because of rent roll down and a decrease in average occupancy rates. In addition, income from early lease terminations decreased in 2004 by $21.7 million.

      Property operating revenues in the Total Company increased because of the consolidation of certain properties, acquisitions and developments placed in service, which together increased property operating revenues by $230.9 million. The increase in property operating revenues from 2003 to 2004 was partially offset by the partial sales of properties in 2003 and 2004 (which are not classified as discontinued operations), which accounted for $101.3 million of the change in revenue and the decreases in the Same Store Portfolio, as explained above.

Depreciation and Amortization

      Depreciation and amortization expense in the Same Store Portfolio increased in 2004 because of capital and tenant improvements placed in service since the beginning of the prior period and an increase in deferred leasing costs.

      Depreciation and amortization expense in the Total Company increased in 2004 as a result of the consolidation of certain properties and acquisitions and increases in the Same Store Portfolio, as explained above. The increases were partially offset by the partial sales of properties in 2003 and 2004 (which are not classified as discontinued operations).

45

Real Estate Taxes

      Real estate taxes increased in 2004 in the Same Store Portfolio because of an increase in estimated taxes at our properties located in California of $16.9 million which was partially offset by lower real estate taxes as a result of lower tax assessments of our Boston properties of $7.8 million. We anticipate real estate taxes to continue to fluctuate based on changes in property assessments and tax rates by the taxing authorities.

      Real estate taxes increased in 2004 in the Total Company as a result of the consolidation of certain properties and acquisitions and increases in the Same Store Portfolio as explained above. The increases were partially offset by the partial sales of properties in 2003 and 2004 (which are not classified as discontinued operations).

Insurance Expense

      Insurance expense increased for both the Same Store Portfolio and the Total Company primarily as a result of increased property damage in 2004 and a reduction in insurance expense in 2003. See Item 8 — Note 24.

Repairs and Maintenance

      Repairs and maintenance expense increased in 2004 in the Same Store Portfolio by $7.0 million, primarily because we expanded our preventive maintenance program in 2004 in an effort to reduce future emergency repairs.

      Repairs and maintenance expense increased in 2004 in the Total Company because of the consolidation of certain properties, acquisitions and increases in the Same Store Portfolio as explained above. The increases were partially offset by the partial sales of properties in 2003 and 2004 (which are not classified as discontinued operations).

Property Operating

      Property operating expenses increased in 2004 in the Same Store Portfolio because of increases in utility expenses of$15.7 million, partially offset by a decrease in other property operating expenses of $6.1 million. The increase in utility expense was primarily due to general increases in rates charged by the utility suppliers and also from settlements of utility contracts in 2003, which had the effect of reducing utility expense in 2003.

      Property operating expenses increased in 2004 in the Total Company because of the consolidation of certain properties, acquisitions and increases in the Same Store Portfolio as explained above. The increases were partially offset by the effect of partial sales of properties in 2003 and 2004 (which are not classified as discontinued operations).

Corporate General and Administrative Expenses

      The decrease in 2004 in corporate general and administrative expense was caused by a decrease in consulting expenses of $11.3 million relating to a project that ended in 2003.

Impairment

      For a discussion of impairment refer to Item 8 — Note 5.

Interest and Dividend Income

      Interest and dividend income decreased in 2004 in the Total Company primarily as a result of lower interest and dividends from various notes receivable and investments, which either matured or were redeemed during the period.

46

Realized Gain on Settlement of Derivatives and Sale of Marketable Securities

      The increase from the prior year in the Total Company was primarily due to the $24.0 million gain recorded in 2004 when we settled certain interest rate swaps. In 2004, we also recognized gains of $2.3 million due to the disposition of our investment in shares of Capital Trust (this was a related party transaction, see Item 8 — Note 21) and $2.4 million from the sale of other securities.

      The gain in 2003 was primarily from the sale of common stock received in connection with a lease termination in 2002.

Interest Expense

      Interest expense decreased in 2004 in the Same Store Portfolio because of mortgage debt repayments.

      Interest expense increased in the Total Company because of the consolidation of certain properties, which accounted for $58.4 million of the increase, and the write-off of $5.3 million of unamortized loan costs in connection with the early redemption of certain unsecured notes. These increases were partially offset by a decrease in our weighted average interest rates resulting from having more floating rate debt than fixed rate debt outstanding as compared to the prior year. In addition, the interest rates on the unsecured notes issued in 2004 were lower than the interest rates on the debt repaid in 2004.

Income from Investments in Unconsolidated Joint Ventures

      Income from investments in unconsolidated joint ventures in the Same Store Portfolio decreased primarily because of reduced occupancy and lower average rental rates on new leases as compared to average rental rates on expiring leases. In addition, interest expense increased as a result of the refinancing of a property with a higher loan balance during 2003.

      Income from investments in unconsolidated joint ventures in the Total Company decreased primarily because of the consolidation of 1301 Avenue of the Americas, Key Center and Concar and decreases in the Same Store Portfolio as explained above. In 2003, the net income from these properties was included in income from investments in unconsolidated joint ventures. In addition, we sold our interest in Foundry Square IV and recognized a gain of $7.1 million which was included in income from investments in unconsolidated joint ventures in 2003. This decrease was partially offset by the properties that were partially sold in 2003 and 2004 as they are now accounted for under the equity method.

Gains on Sales of Real Estate

      The gain in 2004 related to the partial sale of our interests in 1601 and 1700 Market Street located in Philadelphia, PA. The gain in 2003 related to the partial sale of our interests in 13 office properties. In accordance with FAS 144, the net income from these properties, which includes the gain on sale, is not classified as discontinued operations because we maintain an ongoing involvement with the operation of these properties.

Discontinued Operations

      The decrease in discontinued operations was a result of the loss of net income due to sales of properties and a lower net gain on the sale of properties in 2004 as compared to 2003. Discontinued operations in 2003 includes the net income of properties sold in 2003 and 2004, whereas the discontinued operations in 2004 only includes the net income of properties sold in 2004. See Item 8 — Note 5 for a summary of the results of operations of properties sold.

Cumulative Effect of a Change in Accounting Principle

      Under the provisions of FIN 46(R), we consolidated the assets, liabilities and results of operations of SunAmerica Center effective January 1, 2004, and recorded a cumulative effect of a change in accounting principle resulting in a loss of $33.7 million. See Item 8 — Note 3.

47

III. Liquidity and Capital Resources

Liquidity

      Net cash provided by operating activities is primarily dependent upon occupancy levels of our properties, rental rates on our leases and our level of operating and other expenses. Our primary sources of liquidity to fund cash requirements include cash provided by operating activities, borrowings against our lines of credit and proceeds from asset sales. Cash requirements include capital improvements, tenant improvements, leasing costs, distributions to our shareholders and unitholders, repurchases of our securities and acquisition and development costs.

      Our ability to draw upon our lines of credit and to incur additional indebtedness is dependent in part on our compliance with various financial and other covenants. A material adverse change in our net cash provided by operating activities may affect the financial performance covenants under our lines of credit and unsecured notes. If we fail to meet our covenants and are unable to reach a satisfactory resolution with our lenders, our lines of credit could become unavailable to us, the maturity dates for our unsecured notes could be accelerated, the interest charged on the lines of credit could increase and we may not be able to access other sources of financing. Moodys, Standard & Poor’s and Fitch provide credit ratings on EOP Partnership. As a result of a downgrade in EOP Partnership’s credit rating in December 2005, the interest rate on our term loan facility increased 10 basis points to LIBOR plus 55 basis points and the interest rate on our revolving credit facility increased 12.5 basis points to LIBOR plus 60 basis points plus a facility fee of 20 basis points. In addition, the interest rate associated with any future financings is likely to be higher due to the decline in our credit ratings. (A security rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any other rating.)

      Over the last two years we have taken steps to reposition our portfolio for long-term growth. In 2005, we took advantage of a strong asset-sale environment and on an Effective Office Portfolio basis sold $2.7 billion of assets comprising 17.8 million square feet and several vacant land parcels. We expect to continue to take advantage of market opportunities and expect to engage in further sales from time to time, based on market conditions.

      We have several options for the proceeds generated from asset sales which include acquiring assets in our core markets, reinvestments in our existing portfolio, debt repayments, distributions to our shareholders, and repurchases of our Common Shares and Units of EOP Partnership. During 2005, we used proceeds from asset sales together with other sources of capital to fund $1.4 billion in acquisitions, to repay $1.7 billion of mortgage debt and unsecured notes (with a weighted average effective interest rate of 6.87%), to repurchase 31.0 million Common Shares (at an average purchase price of $30.68 per share for $950.7 million under our open market repurchase program) and to redeem 1.8 million Units (at an average purchase price of $30.67 per Unit for $56.5 million). We also obtained $769.1 million of mortgage debt on new and existing properties (including our share of unconsolidated properties of $131.8 million) with a weighted average effective interest rate of 5.43%. Although our overall debt levels remained relatively unchanged as of December 31, 2005 as compared to December 31, 2004, we were able to reduce our effective borrowing rate on a weighted average basis from 6.57% at December 31, 2004 to 6.51% at December 31, 2005.

      In order to qualify as a REIT for U.S. federal income tax purposes, we must distribute an amount equal to at least 90% of our taxable income (excluding capital gains) to our shareholders. We currently distribute amounts attributable to capital gains to our shareholders; however, these amounts can be retained by us and taxed at the corporate tax rate. Accordingly, we currently intend, although we are not legally obligated, to continue to make regular quarterly distributions to holders of our common and preferred shares, at least at the level required to maintain our REIT status for U.S. federal income tax purposes. The declaration of distributions on capital shares is at the discretion of the Board of Trustees, which decision is made quarterly by the Board of Trustees based on then prevailing circumstances. We anticipate that our 2006 annual Common Share dividend, which is subject to quarterly Board of Trustees approval, will be $1.32 per share, a decrease from the 2005 annual dividend of $2.00 per share.

48

      Reduced rental rates, reduced revenues as a result of asset sales and increased operating expenses have reduced our net cash provided by operating activities. In addition, tenant improvement and leasing costs have increased as compared to historical levels due to competitive market conditions for new and renewal leases. During 2004 and 2005, net cash provided by operating activities was insufficient to satisfy all our cash needs including capital improvements, tenant improvement and leasing costs and distributions to our shareholders. We funded this shortfall primarily with proceeds from financing activities and asset sales. Notwithstanding the reduction in the Common Share dividend, we anticipate a shortfall will continue in 2006, but at a lower level from 2005, and that we will cover the shortfall with proceeds primarily from financing activities and asset sales. Although we anticipate a shortfall during 2006, we expect our cash needs will fluctuate throughout the year and are dependent on factors such as the timing of our distributions, our leasing activities and asset dispositions and acquisitions.

      As of December 31, 2005, we had $1.6 billion of debt maturing in 2006. Because REIT rules for federal income tax purposes require us to distribute 90% of our taxable income, we will not be able to retain sufficient cash to repay all of our debt as it comes due using only cash from operating activities. As a result, we will be required to repay most of our maturing debt with borrowings and proceeds from asset sales, although there can be no assurance that such dispositions or financings at acceptable terms will be available to us.

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

Distributions

      In 2005, the Board of Trustees declared distributions on the preferred shares as reflected below:

	Quarterly Distribution		Annual Distribution
Security	Per Share		Per Share		2005 Total Distributions
					(Dollars in thousands)
Series B Preferred Shares	$	0.65625	$	2.625	$	15,724
Series G Preferred Shares	$	0.484375	$	1.9375	$	16,469
					$	32,193

      The Board of Trustees also declared distributions on Common Shares for each quarter in 2005 at $0.50 per Common Share.

49

Contractual Obligations

      As of December 31, 2005, we were subject to certain material contractual payment obligations as shown in the table below. We were not subject to any material capital lease obligations.

		Payments Due by Period
		Total		2006		2007		2008		2009		2010		Thereafter
		(Dollars in thousands)
Mortgage debt(a)		$	2,169,383	$	108,704	$	263,018	$	158,178	$	630,698	$	264,076	$	744,709
Unsecured notes(a)			9,056,556		652,924		988,543		490,376		862,475		1,564,207		4,498,031
Lines of Credit			1,631,000		750,000		—		—		881,000		—		—
Series B Preferred Shares			299,497		—		—		299,497		—		—		—
Share of mortgage debt of unconsolidated joint ventures			473,725		52,217		3,999		18,610		11,645		96,174		291,080
Consolidated operating lease obligations(b)			1,320,502		22,124		22,119		21,855		21,644		21,733		1,211,027
Unconsolidated operating lease obligations(b)			33,854		564		564		564		564		564		31,034
	Total Contractual Obligations	$	14,984,517	$	1,586,533	$	1,278,243	$	989,080	$	2,408,026	$	1,946,754	$	6,775,881

(a)  Balance excludes net discounts and premiums.

(b) Represents payments due under long-term leases in which we are the lessee of ground parcels and air rights associated with our office properties.

      In addition to the contractual payment obligations shown in the table above, we also have various properties under development for which we expect to incur an additional $686.0 million of costs through 2008. As of December 31, 2005, we are subject to $99.6 million of payment obligations under our development contracts, which will be paid as costs are incurred through 2007. For a complete listing of properties currently under development, refer to Developments in Process in this MD&A.

          Derivative Financial Instruments

      As of December 31, 2005, we had no outstanding derivative financial instruments. See Item 8 — Note 12.

          Energy Contracts

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

          Off-Balance Sheet Arrangements

      As listed above, our share of mortgage debt of unconsolidated joint ventures is $473.7 million. We do not have any other off-balance sheet arrangements with any unconsolidated investments or joint ventures that we believe have or are reasonably likely to have a material effect on our financial condition, results of operations, liquidity or capital resources.

50

Property Acquisitions

      See Item 8 — Note 24 for information regarding any commitments to acquire properties.

Debt Financing

Consolidated Debt

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

					December 31,
					2005			2004
					(Dollars in thousands)
Balance (includes discounts and premiums):
	Fixed rate:
		Mortgage debt			$	1,988,377		$	2,502,871
		Unsecured notes				8,787,620			8,439,016
			Total			10,775,997			10,941,887
	Variable rate:
		Mortgage debt				175,821			106,196
		Unsecured notes and lines of credit(a)				1,876,000			1,761,376
			Total			2,051,821			1,867,572
				Total	$	12,827,818		$	12,809,459
Percent of total debt:
	Fixed rate					84.0	%		85.4	%
	Variable rate(a)					16.0	%		14.6	%
				Total		100.0	%		100.0	%
Effective interest rate at end of period:
	Fixed rate:
		Mortgage debt				7.01	%		7.80	%
		Unsecured notes				6.80	%		6.87	%
			Effective interest rate			6.84	%		7.09	%
	Variable rate:
		Mortgage debt				5.17	%		5.53	%
		Unsecured notes and lines of credit(a)				5.02	%		3.75	%
			Effective interest rate			5.03	%		3.85	%
				Total		6.55	%		6.61	%

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

51

Unconsolidated Joint Venture Debt

      The table below summarizes our share of unconsolidated joint venture debt, which consists solely of mortgage debt:

			December 31,
			2005			2004
			(Dollars in thousands)
Balance (includes discounts and premiums):
	Fixed rate		$	472,372		$	330,929
	Variable rate			1,353			30,103
		Total	$	473,725		$	361,032
Effective interest rate at end of period:
	Fixed rate			5.47	%		5.56	%
	Variable rate			10.40	%		3.35	%
		Total		5.48	%		5.37	%

Mortgage Debt

      During 2005 the following transactions occurred:

		(Dollars in thousands)
Balance at December 31, 2004(a)		$	2,622,750
	Repayments and scheduled principal amortization		(1,077,322	)
	Assumed through property acquisitions		118,486
	Repaid upon sale of property		(13,386	)
	Refinancing		150
	Issuances		518,705
Balance at December 31, 2005(a)		$	2,169,383

(a)  Excludes net discounts on mortgage debt.

      See Item 8 — Note 9 for more information on our mortgage debt.

Unconsolidated Joint Venture Mortgage Debt

      During 2005, our share of the transactions for unconsolidated joint venture mortgage debt was as follows:

		(Dollars in thousands)
Balance at December 31, 2004		$	361,032
	Scheduled principal payments		(2,807	)
	Assumed by buyer through a property disposition		(16,250	)
	Refinancing		6,750
	Issuance		125,000
Balance at December 31, 2005		$	473,725

      See Item 8 — Note 7 for more information on our unconsolidated joint venture mortgage debt.

Restrictions on Mortgage Debt

      The mortgages encumbering the properties may include restrictions regarding transfer of title to the respective property subject to the terms of the mortgage, prohibit additional liens, require payment of real

52

estate taxes on the properties, require maintenance of the properties in good condition, require maintenance of insurance on the properties and include a requirement to obtain lender consent to enter into material tenant leases.

Lines of Credit

$1.25 Billion Revolving Credit Facility

      In August 2005, we obtained a $1.25 billion revolving line of credit, which had an interest rate of LIBOR plus 47.5 basis points and an annual facility fee of 15 basis points, or $1.875 million. The $1.25 billion line of credit matures in August 2009. We have one option to extend the maturity date for an additional year for an extension fee of $1.875 million. The previously existing $1.0 billion line of credit that was scheduled to mature in May 2006 (which had an interest rate of LIBOR plus 60 basis points plus an annual facility fee of 20 basis points) terminated in August 2005 effective with the first funding of the $1.25 billion line of credit. As a result of a downgrade in EOP Partnership’s debt rating in December 2005, the interest rate on the $1.25 billion line of credit increased to LIBOR plus 60 basis points and the annual facility fee increased to 20 basis points, or $2.5 million. As of December 31, 2005, $881.0 million was outstanding under our $1.25 billion line of credit.

      We use our lines of credit, together with net cash provided by operating activities and proceeds generated from asset sales, to fund capital improvements, tenant improvement and leasing costs, distributions to our shareholders and unitholders, financing and investing activities and for general working capital purposes. As a result of the nature and timing of the draws, the outstanding balance on our lines of credit is subject to ongoing fluctuation and amounts outstanding under the lines of credit may from time to time be significant. We consider all such borrowings to be in the ordinary course of our business and expect fluctuations in the outstanding balance under the lines of credit.

Bridge Facilities

      In October 2005, we obtained and fully drew upon a $500 million unsecured term loan facility, bearing interest at LIBOR plus 45 basis points (the spread is subject to change based on EOP Partnership’s credit rating) and is scheduled to mature in October 2006. As a result of a downgrade in EOP Partnership’s debt rating in December 2005, the interest rate on the term loan facility increased to LIBOR plus 55 basis points. In December 2005, we entered into an amendment that increased the facility to $750 million with an option to draw an additional $250 million (which was exercised in January 2006 — see Item 8 — Note 25). As of December 31, 2005, $750 million was outstanding under this facility.

      In February 2005, we obtained a $250 million unsecured term loan facility, which had an interest rate of LIBOR plus 35 basis points and was scheduled to mature in February 2006. We repaid and terminated the term loan facility in July 2005.

Unsecured Notes

      During 2005, the following transactions occurred:

		(Dollars in thousands)
Balance at December 31, 2004(a)		$	9,690,754
	Repayments		(675,000	)
	Issuance		40,802
Balance at December 31, 2005(a)		$	9,056,556

(a)  Excludes net discounts of $23.9 million and $38.4 million at December 31, 2005 and December 31, 2004, respectively.

      As of December 31, 2005, $2.1 billion was available for issuance under two previously filed shelf registration statements totaling $7.0 billion.

53

Restrictions and Covenants under Unsecured Indebtedness

      The terms of our lines of credit and unsecured notes contain various financial covenants which require satisfaction of certain ratios. As of December 31, 2005, we believe we were in compliance with each of these financial covenants. If we fail to comply with any of these covenants, the indebtedness could become due and payable before its stated due date.

      Set forth below are the financial covenants to which we are subject under our unsecured note indentures and our performance under each covenant as of December 31, 2005:

Covenants(a) (in each case as defined in the respective indenture)	Actual Performance
Debt to Adjusted Total Assets may not be greater than 60%		53	%
Secured Debt to Adjusted Total Assets may not be greater than 40%		11	%
Consolidated Income Available for Debt Service to Annual Debt Service Charge may not be less than 1.50:1		2.2
Total Unencumbered Assets to Unsecured Debt may not be less than 150%(a)		190	%

(a)  The unsecured notes we assumed in the merger with Spieker, of which $1.2 billion are outstanding at December 31, 2005, are subject to a minimum ratio of 165%.

Market Risk

Qualitative Information About Market Risk

      Our future earnings, cash flows and fair values relevant to financial instruments depend upon prevalent market rates for those financial instruments. Market risk is the risk of loss from adverse changes in market prices and interest rates. We manage our market risk by matching projected cash inflows from operating, investing and financing activities with projected cash outflows to fund debt service, acquisitions, capital improvements, distributions to shareholders and other cash requirements. The majority of our outstanding debt obligations (maturing at various times through 2031) have fixed interest rates which limit the risk of fluctuating interest rates. We utilize certain derivative financial instruments at times to limit interest rate risk. Interest rate protection and swap agreements are used to convert fixed rate debt to a variable rate basis, to hedge anticipated financing transactions, or convert variable rate debt to a fixed rate basis. Derivatives are used for hedging purposes rather than speculation. We do not enter into financial instruments for trading purposes.

Quantitative Information About Market Risk

Interest Rate Risk

      As of December 31, 2005 and 2004, $10.8 billion and $10.9 billion of our total outstanding debt was fixed rate debt and $2.1 billion and $1.9 billion was variable debt, respectively. The fair value of our fixed-rate debt was $0.7 billion and $1.1 billion higher at December 31, 2005 and 2004, respectively, than the book value, primarily due to the general decrease in market interest rates on secured and unsecured debt since the date of issuance of our debt. The fair market value of our variable rate debt approximates book value because the interest rate is based on LIBOR plus a spread, which approximates a market interest rate.

      The table below discloses the effect of hypothetical changes in market rates of interest on the fair value of total outstanding debt and net income (as a result of changes in interest expense). Interest risk amounts were determined by considering the impact of hypothetical interest rates on our debt. This analysis does not reflect the impact that a changing interest rate environment could have on the overall level of economic activity. Further, in the event of a changing interest rate environment, management would likely take actions to further

54

mitigate its exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, this analysis assumes no change in our financial structure.

	Hypothetical change in		(Decrease)/Increase		(Decrease)/Increase
As of	market rates of interest		Fair Value of Total Debt		Net Income
December 31, 2005		+10% or 43 basis points	$	(227) million	$	(8.9) million
		-10% or 43 basis points	$	236  million	$	8.9  million
December 31, 2004		+10% or 27 basis points	$	(258) million	$	(5.1) million
		-10% or 27 basis points	$	272  million	$	5.1  million

Interest Rate Risk — Forward-Starting and Fixed-to-Floating Interest Rate Swaps

      As of December 31, 2005, we had no outstanding interest rate swaps. See Item 8 — Note 12 for information on the forward-starting and fixed-to-floating interest rate swaps that were outstanding during 2004 and 2005.

Equity Securities

      We are authorized to repurchase up to $2.1 billion of Common Shares under our open market repurchase program through May 2006. As shown in the table below, we repurchased a total of $1.5 billion Common Shares under this $2.1 billion program. Repurchases to fund our employee benefit programs, including the Employee Share Purchase Plan and Supplemental Retirement Savings Plan, are not considered part of the open market repurchase program. See Item 8 — Note 25 for information about activity in our open market purchase program subsequent to December 31, 2005.

		Total Number of		Average Price		Total Dollar Value of
Year		Shares Purchased		Paid Per Share		Shares Repurchased
						(Dollars in thousands)
	2002		7,901,900	$	24.92	$	196,882
	2003		14,236,400		25.53		363,487
	2004		1,260,600		25.80		32,518
	2005		30,986,900		30.68		950,720
	Total		54,385,800	$	28.38	$	1,543,607

      The limited partners of EOP Partnership have the right to require EOP Partnership to redeem their Units for Common Shares or an equivalent amount of cash, as determined by Equity Office as general partner. The following table reflects Units redeemed for cash, which are not considered part of our open market repurchase program.

		Total Number of		Average Price		Total Dollar Value of
Year		Units Purchased		Paid Per Unit		Units Repurchased
						(Dollars in thousands)
	2002		3,727,925	$	28.62	$	106,690
	2003		240,240		26.75		6,427
	2004		139,256		28.03		3,904
	2005		1,843,164		30.67		56,525
	Total		5,950,585	$	29.16	$	173,546

55

Capital Improvements, Tenant Improvements and Leasing Costs

Capital Improvements

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

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

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

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

			For the years ended December 31,
			2005				2004				2003
					Unconsolidated				Unconsolidated				Unconsolidated
			Consolidated		Properties		Consolidated		Properties		Consolidated		Properties
			Properties		(our share)		Properties		(our share)		Properties		(our share)
			(Dollars in thousands)
Capital Improvements:
	Capital improvements		$	87,445	$	6,258	$	70,594	$	6,387	$	64,052	$	9,222
	Development and redevelopment costs			29,424		—		51,602		—		105,127		5,538
		Total capital improvements	$	116,869	$	6,258	$	122,196	$	6,387	$	169,179	$	14,760

      During 2005, we increased our spending for capital improvements as part of a program to maintain high levels of quality in our properties. We anticipate spending a similar or higher amount in 2006 as a result of planned projects.

Tenant Improvements and Leasing Costs

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

56

      The amounts shown below represent total tenant improvements and leasing costs for tenants who commenced occupancy during the respective period shown.

			For the years ended December 31,
			2005				2004				2003
					Total Cost				Total Cost				Total Cost
					per Square				per Square				per Square
			Total Costs		Foot Leased		Total Costs		Foot Leased		Total Costs		Foot Leased
			(Dollars in thousands, except per square foot amounts)
Consolidated Properties:
	Renewals		$	107,458	$	12.90	$	97,214	$	11.62	$	128,673	$	13.07
	Retenanted
		Vacant for less than 12 months		160,061		22.71		154,923		21.12		142,874		21.84
		Vacant longer than 12 months		100,887		28.91		104,583		28.03		105,490		30.67
	Total Retenanted			260,948		24.76		259,506		23.45		248,364		24.31
		Total/Weighted Average		368,406		19.52		356,720		18.36		377,037		18.79
Unconsolidated Joint Ventures(a):
	Renewals			2,759		12.40		12,330		21.95		17,936		24.09
	Retenanted
		Vacant for less than 12 months		14,811		36.15		5,399		21.13		4,948		19.13
		Vacant longer than 12 months		15,658		46.14		7,177		46.37		3,078		35.34
	Total Retenanted			30,469		40.68		12,576		30.65		8,026		23.21
		Total/Weighted Average		33,228		34.20		24,906		25.62		25,962		23.81
Total Properties:
	Total/Weighted Average		$	401,634	$	20.24	$	381,626	$	18.70	$	402,999	$	19.05

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

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

57

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

				For the years ended December 31,
				2005			2004		2003
				(Dollars in thousands)
Capital improvements				$	87,445		$	70,594	$	64,052
Tenant improvements and leasing costs:
	Office properties				368,406			356,720		377,037
	Industrial properties				—			4,584		3,366
Expenditures for corporate furniture, fixtures and equipment, software, leasehold improvements and other					22,299			10,726		32,397
			Subtotal		478,150			442,624		476,852
Development costs					29,424			50,815		96,736
Redevelopment costs					—			787		8,391
Timing differences					(14,255	)		82,038		(4,399	)
		Total capital improvements, tenant improvements and leasing costs		$	493,319		$	576,264	$	577,580
Selected items from the consolidated statement of cash flows:
	Capital and tenant improvements (including development costs)			$	370,595		$	453,227	$	438,601
	Lease commissions and other costs				122,724			123,037		138,979
		Total		$	493,319		$	576,264	$	577,580

Developments in Process

      We own 100% of the following properties which are under development. Our developments consist of new construction as well as significant renovation of existing buildings. Development costs are primarily funded by our lines of credit. Specifically identifiable direct acquisition, development and construction costs are capitalized, including salaries and related payroll costs, real estate taxes and interest incurred in developing the property. All figures stated below are as of December 31, 2005.

		Estimated
		Placed in								Costs		Total		Current
		Service				Number of		Square		Incurred to		Estimated		Percentage
Property		Date(a)		Location		Buildings		Feet		Date(b)		Costs(c)		Leased
										(Dollars in thousands)
Summit at Douglas Ridge II			Q2 2005		Roseville, CA		1		93,349	$	20,378	$	23,806		35	%
Kruse Oaks II(d)			Q4 2006		Portland, OR		1		107,000		4,922		20,923		0	%
Bridge Pointe Corporate Center III			Q4 2006		San Diego, CA		2		150,000		11,712		35,967		0	%
1095 Avenue of the Americas(e)			Q3 2007		New York, NY		1		1,028,083		515,512		849,753		(e	)
Foundry Square I (Barclays)			Q4 2007		San Francisco, CA		1		335,890		12,481		145,564		96	%
City Center Plaza West			Q1 2008		Bellevue, WA		1		559,400		13,043		188,025		0	%
	Total						7		2,273,722	$	578,048	$	1,264,038		16	%

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

58

(b) The Costs Incurred to Date are presented in the balance sheet as follows:

Developments in process	$	567,129
Deferred leasing costs and other related intangibles recorded at acquisition		10,919
Total costs incurred to date	$	578,048

(c)  The Total Estimated Costs include the acquisition cost of the land and building. The Total Estimated Costs are subject to change upon, or prior to, the completion of the development and include amounts required to lease-up the property.

(d)	The land underlying this development is owned by a third party from whom we lease it under a ground lease agreement.
(e)	On September 29, 2005 we acquired 79%, or 1,028,083 square feet, of 1095 Avenue of the Americas. Verizon, the sole tenant, occupied 96.8% of the property at acquisition. Verizon will be moving out in phases throughout 2006. We plan to redevelop the property as Verizon vacates the premises, and we anticipate the redevelopment to be completed in Q3 2007.

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

Inflation

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

Cash Flows

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

		For the years ended December 31,
		2005			2004			2003
		(Dollars in thousands)
Cash and cash equivalents at the beginning of the period		$	107,126		$	69,398		$	58,471
	Net cash provided by operating activities		987,990			1,207,967			1,219,571
	Net cash provided by (used for) investing activities		921,413			(685,333	)		657,553
	Net cash (used for) financing activities		(1,938,365	)		(484,906	)		(1,866,197	)
Cash and cash equivalents at the end of the period		$	78,164		$	107,126		$	69,398

Operating Activities

      Cash provided by operating activities depends primarily on cash received from tenants in our properties in accordance with their lease obligations, less payments for our operating and other expenses. The decrease in net cash provided by operating activities from 2004 to 2005 is primarily due to reduced net income as a result

59

of asset sales and increased operating expenses (as previously discussed within this document) and an increase in prepaid real estate taxes in 2005.

Investing Activities

      Net cash provided by and used for investing activities reflects the net impact of acquisitions and dispositions of properties, expenditures for capital improvements, tenant improvements and lease costs (as previously discussed within this document). It also includes decreases in escrow deposits and restricted cash which primarily relates to the release of escrow funds from property sales.

Financing Activities

      Net cash used for financing activities generally includes cash provided by or used for debt transactions, distributions to our common and preferred shareholders and repurchases of our securities. Our significant 2005 transactions have been discussed previously within this document.

Analysis of Selected Balance Sheet Items

      The table below contains selected balance sheet items that have changed significantly from December 31, 2004 to December 31, 2005.

	December 31,		December 31,
	2005		2004		Change
	(Dollars in thousands)
Developments in process	$	567,129	$	40,492	$	526,637
Investments in real estate held for sale, net of accumulated depreciation	$	75,211	$	163,390	$	(88,179	)
Tenant and other receivables	$	94,858	$	75,775	$	19,083
Investments in unconsolidated joint ventures	$	947,989	$	1,117,143	$	(169,154	)
Deferred leasing costs and other related intangibles	$	522,926	$	450,625	$	72,301
Prepaid expenses and other assets	$	303,181	$	191,992	$	111,189

Developments in Process

      As of December 31, 2005, we had six properties under development, one of which comprised $516 million (see Developments in Process in this MD&A for information on these six developments). As of December 31, 2004, we had one property under development which was placed in service during the second quarter of 2005.

Investment in Real Estate Held for Sale, Net of Accumulated Depreciation

      In accordance with FAS 144, we have classified certain properties as held for sale. Properties held for sale are reflected in our consolidated balance sheets at the lower of their historical cost or their fair value less cost to sell (determined based on the estimated sales prices and estimated transaction costs). The properties’ net income and provision for losses, if any, are included in discontinued operations (see Item 8 — Note 5). At December 31, 2004, we had one property held for sale, Northland Plaza, which was sold in 2005. At December 31, 2005, we had three properties held for sale, two of which were sold in 2006.

Tenant and Other Receivables

      The increase in tenant and other receivables was primarily driven by an increase in operating expense reimbursements due from tenants. The increase in these tenant reimbursements was impacted by increases in utility and repair and maintenance costs during late 2005. We recover a portion of the increase in our operating expenses from our tenants.

60

Investments in Unconsolidated Joint Ventures

      The decrease in investments in unconsolidated joint ventures was primarily caused by several transactions during 2005 including the sales of our interests in Preston Commons, Sterling Plaza and Chase Center, as well as the mortgage financing of Yahoo! Center and SunTrust Center.

Deferred Leasing Costs and Other Related Intangibles

      The increase in deferred leasing costs and other related intangibles was primarily the result of leasing costs incurred during 2005 for new and renewal leases and deferred leasing costs recorded in accordance with Statement of Financial Accounting Standards No. 141, Business Combinations (“FAS 141”), partially offset by amortization expense and dispositions.

Prepaid Expenses and Other Assets

      The increase in prepaid expenses and other assets was the result of a $26.1 million increase in prepaid real estate taxes primarily attributable to the New York region, a $40.7 million note receivable, net of deferred gain, representing a bridge loan that we made to the buyer of One Phoenix Plaza (see Item 8 — Note 5) and a $50.0 million investment in junior mezzanine debt that we made as part of a debt refinancing on 375 Park Avenue (accounted for as a note receivable — see Item 8 — Note 4). The increase was partially offset by a $17.3 million distribution from the refinancing proceeds of our investment in John Hancock Complex (see Item 8 — Note 4).

IV. Critical Accounting Policies and Estimates

      The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting periods. We base our estimates on historical experience and other assumptions that we believe are reasonable. Certain accounting policies are considered to be critical accounting policies, as they require management to make assumptions about matters that are uncertain at the time the estimate is made. In the event our estimates and assumptions are different from actual results, adjustments are made in subsequent periods to reflect more current information. Management believes the following critical accounting policies reflect our more significant judgments and estimates used in the preparation of our consolidated financial statements. For a summary of all of our significant accounting policies, see Item 8 — Note 2.

Revenue Recognition

      Our revenue is primarily derived from contractual lease obligations. Management’s determination of the collectibility of current tenant receivables requires significant judgment which may impact the recognition of revenues. See Allowance for Doubtful Accounts below for more information.

      We recognize revenue from rent, tenant reimbursements, parking and other revenue once all of the following criteria are met in accordance with SEC Staff Accounting Bulletin 104:

•  the agreement has been fully executed and delivered;

•  services have been rendered;

•  the amount is fixed or determinable; and

•  the collectibility of the amount is reasonably assured.

      Listed below are our primary sources of revenue:

          Rental Revenues

      We record rental revenues on a straight-line basis as they are earned during the lease term. Certain leases provide for tenant occupancy during periods for which no rent is due or where minimum rent payments change

61

during the lease term. Accordingly, a receivable is recorded representing the difference between the straight-line rent and the rent that is contractually due from the tenant. These amounts are classified as deferred rent receivable on the consolidated balance sheets. When a property is acquired, the terms of existing leases are considered to commence as of the acquisition date for purposes of this calculation. Deferred rental revenue included in rental revenue from continuing operations for the years ended December 31, 2005, 2004 and 2003 totaled $57.2 million, $73.1 million and $68.5 million, respectively. Deferred rental revenue is not recognized for income tax purposes.

      We begin recognizing rental revenue when the tenant takes possession or controls the physical use of the leased space. In order for the tenant to take possession of the finished space, the leased space must be substantially ready for its intended use. When we are the owner of the tenant improvements, the leased space is ready for its intended use when the tenant improvements are substantially completed. In limited instances, when the tenant is the owner of the tenant improvements, straight-line rent is recognized when the tenant takes possession of the unimproved space.

      The determination of who owns the tenant improvements is subject to significant judgment. In making that determination, we consider various factors, including, but not limited to:

•  Whether the lease agreement specifies what or how the tenant improvement allowance is spent;

•  Whether the tenant improvements are unique to the tenant or general-purpose in nature;

•  Whether the ownership of the tenant improvements remains with the landlord or remains with the tenant at the end of the lease term;

•  Who bears substantial construction risk and cost of the tenant improvements.

      When we are the owner of the tenant improvements we record our cost to construct the tenant improvements as an asset and depreciate the cost over the shorter of the asset’s useful life or the non-cancelable lease term. To the extent we funded all or a portion of an improvement that is owned by the tenant, we treat the cost as a lease incentive and amortize the costs as a reduction to rental revenue on a straight-line basis over the term of the lease. Lease incentives may also include cash payments to or on behalf of tenants or the buy-out of a prospective tenant’s existing lease obligation with a third party and are amortized as a reduction to rental revenue on a straight-line basis over the term of the lease.

          Tenant Reimbursement Revenues

      Tenant reimbursements represent amounts due from tenants for items such as common area maintenance, real estate taxes, insurance, repairs and maintenance and other recoverable costs. Tenant reimbursement revenue is recognized as the related expenses are incurred.

          Parking Revenues

      Parking revenues represent amounts generated from contractual and transient parking at our office building garages. Revenue is recognized in accordance with contractual terms or as services are rendered.

          Other Revenues

      Other revenues primarily consist of income from early lease terminations. Income from early lease terminations represents amounts received from tenants (net of any deferred rent receivable) in connection with the early termination of their remaining lease obligation. If, upon termination of the lease, it is probable that the tenant will file for bankruptcy within 90 days, or if significant contingencies in the lease termination agreement exist, we will defer recognizing the lease termination fee as revenue until such uncertainties have been eliminated.

62

          Allowance for Doubtful Accounts

      An allowance for doubtful accounts is maintained for estimated losses resulting from the inability of certain tenants to meet the contractual obligations under their lease agreements. Management actively reviews receivables from tenants and determines the probability of collection for receivables identified as potentially uncollectible. The amount of the allowance is recorded net of any security deposits or outstanding letters of credit held by us from the tenant.

      We continue to experience uncollectible receivables relating to tenants in bankruptcy or tenants experiencing financial difficulty. If we underestimate the allowance for doubtful accounts, our financial condition and results of operations could be adversely affected. Our bad debt expense from continuing and discontinued operations for each of the three years in the period ended December 31, 2005 was $12.8 million (in 2003), $5.5 million (in 2004) and $6.4 million (in 2005).

Impairment of Long-Lived Assets

      We account for the impairment or disposal of long-lived assets in accordance with FAS 144. Rental properties are individually evaluated for impairment when conditions exist which may indicate that it is probable that the sum of expected future cash flows (on an undiscounted basis) over the anticipated holding period is less than its historical cost. Upon determination that a permanent impairment has occurred, rental properties are reduced to their fair value. If a property is considered held for sale, a provision for loss is recognized if the fair value of the property, less the estimated cost to sell, is less than the carrying amount of the property. Depreciation and amortization expense ceases once a property is considered held for sale.

      Our estimate of the expected future cash flows used in testing for impairment is highly subjective and based on, among other things, our estimates regarding future market conditions, rental rates, occupancy levels, costs of tenant improvements, leasing commissions and other tenant concessions, assumptions regarding the residual value of our properties at the end of our anticipated holding period and the length of our anticipated holding period. These assumptions could differ materially from actual results. If our strategy changes or if market conditions otherwise dictate a reduction in the holding period and an earlier sale date, an impairment loss could be recognized and such loss could be material.

      Over the last two years, we took steps to reposition our portfolio for long-term growth. We identified assets in non-core markets and non-strategic assets in core markets that we intended to sell as market conditions warranted. As a result, we incurred significant impairment charges (see Item 8 — Note 5).

Depreciation and Amortization

      FAS 141 was effective for business combinations initiated on or after July 1, 2001. Depreciation expense on properties acquired prior to July 1, 2001 is computed using the straight-line method based on an estimated useful life of 40 years. A significant portion of the acquisition cost of each property was allocated to building (usually 85% to 90% unless the property was subject to a ground lease in which case 100% of the acquisition cost was allocated to building). Depreciation expense on properties acquired subsequent to the effective date of FAS 141 is based on the allocation of the acquisition cost to land, building, tenant improvements and intangibles and their estimated useful lives. We engage a third party to assist in the allocation of the acquisition cost. The assumptions used in the allocation of the acquisition cost are subjective and are based on many factors including, but not limited to, the hypothetical expected lease-up periods, local market conditions including anticipated rental rate growth and the estimated probability of lease renewal and its estimated term. If we do not appropriately allocate acquisition cost to these components or we incorrectly estimate the useful lives of these components, our recognition of depreciation and amortization expense over future periods may be inaccurate.

Insurance

      We have a captive insurance company which is a wholly-owned taxable REIT subsidiary. We are responsible for losses up to a certain level for property damage, business interruption, earthquakes, terrorism

63

and other events, general liabilities and other programs prior to third-party insurance coverage. When damages occur, we rely on third-party providers, such as actuaries and adjustors, to assist in determining the estimated loss. In some instances, this may require significant judgment and to the extent the actual loss incurred differs from the initial estimate, our financial results may be impacted. See Item 8 — Note 24 for more information.

Fair Value of Financial Instruments

      We are required to determine periodically the fair value of our mortgage debt and unsecured notes for disclosure purposes. Our debt consists of notes that have fixed and variable interest rates. The fair market value of variable rate debt approximates book value because the interest rate is based on LIBOR plus a spread, which approximates a market interest rate. As of December 31, 2005 and 2004, the fair value of our fixed-rate debt was $0.7 billion and $1.1 billion higher than the book value of $10.8 billion and $10.9 billion, respectively, primarily due to the general decrease in market interest rates on secured and unsecured debt since the date of issuance of our debt. In the determination of these fair values, we engage a third party and use internally developed models based on our estimates of current market conditions. The net present value of the difference between future contractual interest payments and future interest payments based on a current market rate represents the difference between the book value and the fair value. The current market rates are determined by adding an estimated risk premium to the quoted yields on federal government debt securities with similar maturity dates to our own debt. The risk premium estimates are based on our historical experience in obtaining either secured or unsecured financing and are also affected by current market conditions.

      In accordance with Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (“FAS 133”), the carrying values of interest rate swaps, as well as the underlying hedged liability, if applicable, are reflected at their fair value. We rely on quotations from a third party to determine these fair values.

      Because the valuations of our financial instruments are based on estimates, the fair value may change if the estimates are inaccurate. For the effect of hypothetical changes in market interest rates on interest expense for variable rate debt, the fair value of total outstanding debt and our interest rate swaps, see the Market Risk section.

Impact of New Accounting Standards and Accounting Standards Recently Adopted

New Accounting Standards

      In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (“FAS 123(R)”), which replaced FAS 123. FAS 123(R) requires compensation cost related to share-based payment transactions to be recognized in the financial statements. The provisions of FAS 123(R) may be adopted using either a modified-prospective or a modified-retrospective transition method. We will adopt FAS 123(R) effective January 1, 2006 using the modified-prospective method. Because we used a fair value based method of accounting for determining compensation expense associated with the issuance of all share options and other equity awards granted or modified after January 1, 2003, we do not expect the adoption of this standard will have a material effect on our results of operations and financial position. Had we adopted FAS 123(R) in prior periods, the impact of that standard would have approximated the impact of FAS 123 as described in the disclosure of pro forma net income and earnings per share in Item 8 — Note 2.

      In June 2005, the FASB ratified the consensus in Emerging Issues Task Force 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (“EITF 04-5”), which states that the general partner in a limited partnership is presumed to control that limited partnership. This presumption may be overcome if the limited partners have either (1) the substantive ability to dissolve the limited partnership or otherwise remove the general partner without cause or (2) substantive participating rights, which provide the limited partners with the ability to effectively participate in significant decisions that would be expected to be made in the ordinary course of business and thereby preclude the general partner from exercising unilateral control over the partnership. EITF 04-5 is effective June 30, 2005 for new or modified limited partnership

64

arrangements and effective January 1, 2006 for existing limited partnership arrangements. Although our adoption had no effect on net income available to common shareholders or shareholders’ equity, we will be required to consolidate certain existing joint ventures effective January 1, 2006 that we previously accounted for under the equity method. We expect that the consolidation of these joint ventures effective January 1, 2006 will result in an increase in total assets of $2 billion and total liabilities of $790 million (including mortgage debt of $680 million, our share of which is $307 million).

      In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections — a replacement of APB Opinion No. 20 and FASB Statement No. 3 (“FAS 154”). FAS 154 changes the requirements for the accounting and reporting of a change in accounting principle by requiring retrospective application to prior periods’ financial statements, unless it is impracticable to do so. FAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We will apply the provisions of FAS 154 beginning January 1, 2006.

      In March 2005, the FASB issued Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations — an interpretation of FASB Statement No. 143 (“FIN 47”). FIN 47 clarifies that the term “conditional asset retirement obligation” as used in Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations, represents a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement is conditional on a future event that may or may not be within a company’s control. Under this standard, a liability for a conditional asset retirement obligation must be recorded if the fair value of the obligation can be reasonably estimated. FIN 47 is effective for fiscal years ending after December 15, 2005. Certain of our real estate assets contain asbestos. The asbestos is appropriately contained and we believe we are compliant with current environmental regulations. If these properties undergo major renovations or are demolished, certain environmental regulations are in place, which specify the manner in which the asbestos must be handled and disposed. As of December 31, 2005, we recorded an asset retirement obligation of $7.0 million related to asbestos at a redevelopment property we acquired in late 2005. We have asbestos at other properties, but because the obligations to remove the asbestos from these properties have indeterminable settlement dates, we are unable to reasonably estimate the fair value.

Subsequent Events

      See Item 8 — Note 25 for events that occurred subsequent to December 31, 2005 through March 8, 2006.

V.     Funds From Operations (“FFO”)

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

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

65

			For the Years Ended December 31,
			2005			2004			2003			2002			2001
			(Dollars in thousands, except per share amounts)
Reconciliation of net income to FFO(a):
Net income			$	42,939		$	137,307		$	655,062		$	770,215		$	618,182
Adjustments:
	Plus depreciation and amortization:
		Included in income from continuing operations and discontinued operations		797,441			793,144			730,351			691,004			575,030
		Included in income from investments in unconsolidated joint ventures		51,382			47,185			53,802			50,443			52,901
		Allocated to minority interests in partially owned properties		(5,907	)		(6,917	)		(4,899	)		(3,606	)		(4,132	)
		Non-real estate related depreciation and amortization		(15,606	)		(16,100	)		(14,647	)		(11,790	)		(9,877	)
	Less net gain on sales of real estate:
		Included in income from continuing operations and discontinued operations		(231,223	)		(29,497	)		(161,063	)		(17,926	)		(81,662	)
		Included in income from investments in unconsolidated joint ventures		(26,499	)		—			(7,063	)		(428	)		—
		Allocated to minority interests in partially owned properties		29,699			214			—			—			—
Plus extraordinary item				—			—			—			—			1,000
Plus cumulative effect of a change in accounting principle				—			33,697			—			—			1,142
Less minority interests in EOP Partnership share of the above adjustments				(60,127	)		(87,784	)		(65,381	)		(79,225	)		(63,527	)
FFO				582,099			871,249			1,186,162			1,398,687			1,089,057
Put option settlement				—			—			—			—			2,655
Preferred distributions				(34,803	)		(39,093	)		(51,872	)		(62,573	)		(57,041	)
FFO available to common shareholders — basic			$	547,296		$	832,156		$	1,134,290		$	1,336,114		$	1,034,671

Adjustments to arrive
at net income and
FFO available to
common
shareholders plus	Net Income			FFO			Net Income			FFO			Net Income			FFO			Net Income			FFO			Net Income			FFO
assumed conversions:
Net income and FFO	$	42,939		$	582,099		$	137,307		$	871,249		$	655,062		$	1,186,162		$	770,215		$	1,398,687		$	618,182		$	1,089,057
Put option settlement		—			—			—			—			—			—			—			—			2,655			2,655
Preferred distributions		(34,803	)		(34,803	)		(39,093	)		(39,093	)		(51,872	)		(51,872	)		(62,573	)		(62,573	)		(57,041	)		(57,041	)
Net income and FFO available to common shareholders		8,136			547,296			98,214			832,156			603,190			1,134,290			707,642			1,336,114			563,796			1,034,671
Net income allocated to minority interests in EOP Partnership		907			907			11,747			11,747			74,152			74,152			89,205			89,205			76,249			76,249
Minority interests in EOP Partnership share of the above adjustments		—			60,127			—			87,784			—			65,381			—			79,225			—			63,527
Preferred distributions on Series B preferred shares, of which are assumed to be converted into Common Shares(b)		—			—			—			—			—			15,724			—			15,724			—			15,727
Net income and FFO available to common shareholders plus assumed conversions	$	9,043		$	608,330		$	109,961		$	931,687		$	677,342		$	1,289,547		$	796,847		$	1,520,268		$	640,045		$	1,190,174
Weighted average Common Shares, dilutive potential common shares plus assumed conversions outstanding		452,046,455			452,046,455			450,997,247			450,997,247			452,561,353			460,950,707			469,138,720			477,528,074			411,986,897			420,379,753
Net income and FFO available to common shareholders plus assumed conversions per share	$	0.02		$	1.35	(c)	$	0.24		$	2.07	(c)	$	1.50		$	2.80	(c)	$	1.70		$	3.18		$	1.55		$	2.83	(c)

		Common Shares and common share equivalents
Weighted average Common Shares outstanding			403,147,751	400,755,733	401,016,093	414,689,029	360,026,097
Effect of dilutive potential common shares:
	Units		45,199,136	48,163,569	49,578,372	52,445,745	48,893,485
	Share options and restricted shares		3,699,568	2,077,945	1,966,888	2,003,946	3,067,315
Weighted average Common Shares and dilutive potential common shares used for net income available to common shareholders			452,046,455	450,997,247	452,561,353	469,138,720	411,986,897
Impact of conversion of Series B preferred shares(b)			—	—	8,389,354	8,389,354	8,392,856
Weighted average Common Shares, dilutive potential common shares plus assumed conversions used for the calculation of FFO available to common shareholders plus assumed conversions			452,046,455	450,997,247	460,950,707	477,528,074	420,379,753

(a)	FFO is a non-GAAP financial measure. The most directly comparable GAAP measure is net income, to which it is reconciled. See definition below.
(b)	The Series B preferred shares are not dilutive to EPS for each period presented and are not dilutive to FFO per share for the years ended December 31, 2005 and December 31, 2004 but are dilutive to FFO per share for all other periods presented.
(c)	FFO for the years ended December 31, 2005, December 31, 2004, December 31, 2003 and December 31, 2001 includes approximately $426.0 million, $231.3 million, $7.5 million and $135.2 million, respectively, of non-cash charges relating to properties sold and properties we intend to sell, which is equivalent to $0.94 per share, $0.51 per share, $0.02 per share and $0.32 per share on a diluted basis, respectively. These charges are not added back to net income when calculating FFO.

66

FFO Definition:

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

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

      Quantitative and qualitative disclosures about market risk are incorporated herein by reference from Item 7.

67

Item 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

      The Board of Trustees and Shareholders of Equity Office Properties Trust

      We have audited the accompanying consolidated balance sheets of Equity Office Properties Trust (“Equity Office”) as of December 31, 2005 and 2004, and the related consolidated statements of operations, shareholders’ equity, net comprehensive income and cash flows for each of the three years in the period ended December 31, 2005. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of Equity Office’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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 consolidated financial position of Equity Office at December 31, 2005 and 2004, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

      We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Equity Office’s internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 8, 2006 expressed an unqualified opinion thereon.

      As discussed in Notes 2 and 3 to the consolidated financial statements, in 2004 Equity Office changed its method of accounting for certain property holding entities and other subsidiaries in which Equity Office owns less than a 100% equity interest. In addition, in 2003 Equity Office changed its method of accounting for stock-based employee compensation.

/s/     Ernst & Young LLP

Chicago, Illinois

March 8, 2006

68

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Trustees and Shareholders of Equity Office Properties Trust

      We have audited management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting included at Item 9A, that Equity Office Properties Trust (“Equity Office”) maintained effective internal control over financial reporting as of December 31, 2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Equity Office’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial reporting based on our audit.

      We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

      A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

      Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

      In our opinion, management’s assessment that Equity Office maintained effective internal control over financial reporting as of December 31, 2005 is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Equity Office maintained, in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets as of December 31, 2005 and 2004, and the related consolidated statements of operations, shareholders’ equity, net comprehensive income and cash flows for each of the three years in the period ended December 31, 2005 of Equity Office and our report dated March 8, 2006, expressed an unqualified opinion thereon.

/s/     Ernst & Young LLP

Chicago, Illinois

March 8, 2006

69

EQUITY OFFICE PROPERTIES TRUST

CONSOLIDATED BALANCE SHEETS

				December 31,
				2005			2004
				(Dollars in thousands,
				except per share amounts)
Assets:
	Investments in real estate			$	22,949,723		$	24,835,216
	Developments in process				567,129			40,492
	Land available for development				176,868			252,524
	Investments in real estate held for sale, net of accumulated depreciation				75,211			163,390
	Accumulated depreciation				(3,336,789	)		(3,151,446	)
		Investments in real estate, net of accumulated depreciation			20,432,142			22,140,176
	Cash and cash equivalents				78,164			107,126
	Tenant and other receivables (net of allowance for doubtful accounts of $8,853 and $6,908, respectively)				94,858			75,775
	Deferred rent receivable				496,826			478,184
	Escrow deposits and restricted cash				38,658			48,784
	Investments in unconsolidated joint ventures				947,989			1,117,143
	Deferred financing costs (net of accumulated amortization of $45,920 and $59,748, respectively)				58,809			61,734
	Deferred leasing costs and other related intangibles (net of accumulated amortization of $232,024 and $193,348, respectively)				522,926			450,625
	Prepaid expenses and other assets				303,181			191,992
		Total Assets		$	22,973,553		$	24,671,539
Liabilities, Minority Interests, Mandatorily Redeemable Preferred Shares and Shareholders’ Equity:
	Liabilities:
	Mortgage debt (net of (discounts) of $(5,185) and $(13,683), respectively)			$	2,164,198		$	2,609,067
	Unsecured notes (net of (discounts) of $(23,936) and $(38,362), respectively)				9,032,620			9,652,392
	Lines of credit				1,631,000			548,000
	Accounts payable and accrued expenses				574,225			556,851
	Distribution payable				3,736			2,652
	Other liabilities (net of (discounts) of $(25,597) and $(28,536), respectively)				483,468			484,378
	Commitments and contingencies				—			—
		Total Liabilities			13,889,247			13,853,340
	Minority Interests:
		EOP Partnership			863,923			1,065,376
		Partially owned properties			172,278			182,041
		Total Minority Interests			1,036,201			1,247,417
	Mandatorily Redeemable Preferred Shares:
		5.25% Series B Convertible, Cumulative Redeemable Preferred Shares, liquidation preference $50.00 per share, 5,989,930 and 5,990,000 issued and outstanding, respectively			299,497			299,500
	Shareholders’ Equity:
		Preferred Shares, 100,000,000 authorized:
			7.75% Series G Cumulative Redeemable Preferred Shares, liquidation preference $25.00 per share, 8,500,000 issued and outstanding		212,500			212,500
		Common Shares, $0.01 par value; 750,000,000 shares authorized, 380,674,998 and 403,842,441 issued and outstanding, respectively			3,807			4,038
		Other Shareholders’ Equity:
			Additional paid in capital		9,745,819			10,479,305
			Deferred compensation		(533	)		(1,916	)
			Dividends in excess of accumulated earnings		(2,156,627	)		(1,359,722	)
			Accumulated other comprehensive loss (net of accumulated amortization of $11,948 and $5,133, respectively)		(56,358	)		(62,923	)
		Total Shareholders’ Equity			7,748,608			9,271,282
		Total Liabilities, Minority Interests, Mandatorily Redeemable Preferred Shares and Shareholders’ Equity		$	22,973,553		$	24,671,539

See accompanying notes.

70

EQUITY OFFICE PROPERTIES TRUST

CONSOLIDATED STATEMENTS OF OPERATIONS

				For the years ended December 31,
				2005			2004			2003
				(Dollars in thousands,
				except per share amounts)
Revenues:
	Rental			$	2,340,922		$	2,278,286		$	2,224,934
	Tenant reimbursements				422,436			403,816			405,290
	Parking				114,057			108,061			103,107
	Other				105,434			69,643			76,628
	Fee income				17,740			14,226			15,861
			Total revenues		3,000,589			2,874,032			2,825,820
Expenses:
	Depreciation				656,102			614,748			561,033
	Amortization				93,663			72,954			56,428
	Real estate taxes				339,006			324,481			305,588
	Insurance				59,567			29,521			19,846
	Repairs and maintenance				340,904			312,928			297,677
	Property operating				441,834			390,454			370,487
	Ground rent				22,517			20,912			20,227
	Corporate general and administrative				66,536			52,242			62,479
	Impairment				65,738			38,534			—
			Total expenses		2,085,867			1,856,774			1,693,765
			Operating income		914,722			1,017,258			1,132,055
Other income (expense):
	Interest and dividend income				15,896			8,041			12,426
	Realized gain on settlement of derivatives and sale of marketable securities				157			28,976			9,286
	Interest:
		Expense incurred			(819,868	)		(833,393	)		(806,812	)
		Amortization of deferred financing costs and prepayment expenses			(11,857	)		(15,284	)		(6,492	)
			Total other income (expense)		(815,672	)		(811,660	)		(791,592	)
Income before income taxes, allocation to minority interests, income from investments in unconsolidated joint ventures and gain on sales of real estate					99,050			205,598			340,463
Income taxes					272			(1,981	)		(5,429	)
Minority Interests:
	EOP Partnership				(907	)		(11,747	)		(74,152	)
	Partially owned properties				(9,825	)		(10,264	)		(9,271	)
Income from investments in unconsolidated joint ventures (including gain on sales of real estate of $26,499, $0 and $7,063, respectively)					68,996			50,304			79,882
Gain on sales of real estate					46,308			21,901			99,110
Income from continuing operations					203,894			253,811			430,603
Discontinued operations (including net gain on sales of real estate and provision for (loss) on properties held for sale of $(22,082), $5,473 and $61,953, respectively)					(160,955	)		(82,807	)		224,459
Income before cumulative effect of a change in accounting principle					42,939			171,004			655,062
Cumulative effect of a change in accounting principle					—			(33,697	)		—
Net income					42,939			137,307			655,062
Preferred distributions					(34,803	)		(39,093	)		(51,872	)
Net income available to common shareholders				$	8,136		$	98,214		$	603,190
Earnings per share — basic:
	Income from continuing operations per share			$	0.38		$	0.50		$	1.01
	Net income available to common shareholders per share			$	0.02		$	0.25		$	1.50
	Weighted average Common Shares outstanding				403,147,751			400,755,733			401,016,093
Earnings per share — diluted:
	Income from continuing operations per share			$	0.38		$	0.50		$	1.00
	Net income available to common shareholders per share			$	0.02		$	0.24		$	1.50
	Weighted average Common Shares outstanding and dilutive potential common shares				452,046,455			450,997,247			452,561,353
Distributions declared per Common Share outstanding				$	2.00		$	2.00		$	2.00

See accompanying notes.

71

EQUITY OFFICE PROPERTIES TRUST

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

		For the years ended December 31,
		2005			2004			2003
		(Dollars in thousands)
Mandatorily Redeemable Preferred Shares:
Balance, beginning of period		$	299,500		$	299,500		$	299,500
	Conversion of Series B Cumulative Redeemable Preferred Shares to Common Shares		(3	)		—			—
Balance, end of period		$	299,497		$	299,500		$	299,500
Preferred Shares:
Balance, beginning of period		$	212,500		$	326,573		$	576,573
	Redemptions		—			(114,073	)		(250,000	)
Balance, end of period		$	212,500		$	212,500		$	326,573
Common Shares, $0.01 par Value Per Share:
Balance, beginning of period		$	4,038		$	4,005		$	4,112
	Issuance of Common Shares through exercise of share options		53			24			16
	Issuance of Common Shares in exchange for Units		21			14			10
	Common Shares issued for restricted shares, trustee fees and for the dividend reinvestment plan, net of restricted shares retired, net of cancellations		8			9			9
	Common Shares repurchased		(313	)		(14	)		(142	)
Balance, end of period		$	3,807		$	4,038		$	4,005
Additional Paid in Capital:
Balance, beginning of period		$	10,479,305		$	10,396,864		$	10,691,610
	Issuance of Common Shares through exercise of share options		141,929			59,245			37,728
	Issuance of Common Shares in exchange for Units		56,351			37,491			23,855
	Common Shares issued for restricted shares, trustee fees and for the dividend reinvestment plan, net of restricted shares retired, net of cancellations		(1,073	)		2,473			(9	)
	Offering costs		(92	)		(84	)		(257	)
	Amortization of offering costs		2,611			6,737			—
	Common Shares repurchased		(958,816	)		(37,760	)		(363,344	)
	Compensation expense related to restricted shares and stock options issued to employees		22,504			13,992			7,500
	Adjustment for minority interests ownership in EOP Partnership		3,100			347			(219	)
Balance, end of period		$	9,745,819		$	10,479,305		$	10,396,864
Deferred Compensation:
Balance, beginning of period		$	(1,916	)	$	(5,889	)	$	(15,472	)
	Amortization of restricted shares		1,383			3,973			9,583
Balance, end of period		$	(533	)	$	(1,916	)	$	(5,889	)
Distributions in Excess of Accumulated Earnings:
Balance, beginning of period		$	(1,359,722	)	$	(652,036	)	$	(452,636	)
	Net income		42,939			137,307			655,062
	Preferred distributions		(34,803	)		(39,093	)		(51,872	)
	Distributions to common shareholders		(805,041	)		(805,900	)		(802,590	)
Balance, end of period		$	(2,156,627	)	$	(1,359,722	)	$	(652,036	)

See accompanying notes.

72

EQUITY OFFICE PROPERTIES TRUST

CONSOLIDATED STATEMENTS OF NET COMPREHENSIVE INCOME

		For the years ended December 31,
		2005			2004			2003
		(Dollars in thousands)
Net income		$	42,939		$	137,307		$	655,062
Other comprehensive income (loss):
	Unrealized holding (losses) gains on forward starting interest rate swaps		—			(34,665	)		8,930
	Reversal of unrealized holding loss (gain) on settlement of forward starting interest rate swaps		—			45,115			(768	)
	(Payments) proceeds from settlement of forward starting interest rate swaps		—			(69,130	)		768
	Reclassification of ineffective portion of swap settlement payment to net income		—			212			—
	Amortization of payments (proceeds) from settlement of forward starting interest rate swaps		6,815			5,206			(73	)
	Unrealized holding (losses) gains from investments arising during the year		(250	)		23			848
	Reclassification adjustment for realized (gains) included in net income		—			(31	)		(1,142	)
Net comprehensive income		$	49,504		$	84,037		$	663,625

See accompanying notes.

73

EQUITY OFFICE PROPERTIES TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS

					For the years ended December 31,
					2005			2004			2003
					(Dollars in thousands)
Operating Activities:
	Net income				$	42,939		$	137,307		$	655,062
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization (including discontinued operations)				818,172			806,620			716,773
		Compensation expense related to restricted shares and stock options				23,887			17,965			17,094
		Income from investments in unconsolidated joint ventures				(68,996	)		(50,304	)		(79,882	)
		Net distributions from unconsolidated joint ventures				52,690			66,829			87,268
		Net (gain) on sales of real estate and provision for loss on properties held for sale (including discontinued operations)				(24,226	)		(27,374	)		(161,063	)
		Impairment (including discontinued operations)				219,003			229,170			7,500
		Cumulative effect of a change in accounting principle				—			33,697			—
		Provision for doubtful accounts				6,428			5,455			12,803
		Income allocated to minority interests (including discontinued operations)				41,097			22,940			82,268
		Other				448			(2,090	)		—
		Changes in assets and liabilities:
			(Increase) decrease in rent receivable			(21,933	)		7,289			(6,893	)
			(Increase) in deferred rent receivable			(63,455	)		(88,651	)		(72,240	)
			(Increase) decrease in prepaid expenses and other assets			(34,580	)		49,824			(8,409	)
			Increase (decrease) in accounts payable and accrued expenses			2,222			(7,659	)		(17,487	)
			(Decrease) increase in other liabilities			(5,706	)		6,949			(13,223	)
				Net cash provided by operating activities		987,990			1,207,967			1,219,571
Investing Activities:
	Property acquisitions (including deposits made for property acquisitions)					(1,266,584	)		(472,053	)		(189,415	)
	Property dispositions (including deposits received for property dispositions)					1,828,954			414,256			1,345,554
	Distributions from (investments in) unconsolidated joint ventures related to disposition and acquisition activity					89,961			(220,833	)		24,854
	Distributions from unconsolidated joint ventures related to mortgage financings					148,278			16,820			29,512
	Capital and tenant improvements (including development costs)					(370,595	)		(453,227	)		(438,601	)
	Lease commissions and other costs					(122,724	)		(123,037	)		(138,979	)
	Sale of investment in CT Convertible Trust I preferred shares					—			32,089			—
	Decrease in escrow deposits and restricted cash					664,123			124,167			23,329
	Investments in notes receivable					(50,000	)		(3,515	)		—
	Repayments of notes receivable					—			—			1,299
				Net cash provided by (used for) investing activities		921,413			(685,333	)		657,553

74

EQUITY OFFICE PROPERTIES TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS — (continued)

			For the years ended December 31,
			2005			2004			2003
			(Dollars in thousands)
Financing Activities:
	Proceeds from mortgage debt			518,855			—			—
	Principal payments on mortgage debt			(1,077,322	)		(438,828	)		(233,809	)
	Proceeds from unsecured notes			40,549			2,061,979			494,810
	Repayment of unsecured notes			(675,000	)		(1,205,000	)		(700,000	)
	Proceeds from lines of credit			13,867,270			6,123,300			5,215,400
	Repayment of lines of credit			(12,784,270	)		(5,909,300	)		(5,087,100	)
	Payments of loan costs and offering costs			(8,920	)		(3,004	)		(8,935	)
	Settlement of interest rate swap agreements			(8,677	)		(69,130	)		768
	(Distributions to) minority interests in partially owned properties			(11,208	)		(12,810	)		(10,062	)
	Proceeds from exercise of stock options			141,982			59,269			37,744
	Distributions to common shareholders and unitholders			(893,779	)		(902,865	)		(901,259	)
	Repurchase of Common Shares			(959,129	)		(37,774	)		(363,486	)
	Redemption of Units			(56,525	)		(3,904	)		(6,427	)
	Repurchase of preferred shares			—			(114,073	)		(250,000	)
	Payment of preferred distributions			(32,191	)		(32,766	)		(53,841	)
		Net cash (used for) financing activities		(1,938,365	)		(484,906	)		(1,866,197	)
	Net (decrease) increase in cash and cash equivalents			(28,962	)		37,728			10,927
	Cash and cash equivalents at the beginning of the year			107,126			69,398			58,471
	Cash and cash equivalents at the end of the year		$	78,164		$	107,126		$	69,398

75

EQUITY OFFICE PROPERTIES TRUST

CONSOLIDATED STATEMENTS OF CASH FLOWS — (continued)

				For the years ended December 31,
				2005			2004			2003
				(Dollars in thousands)
Supplemental Information:
	Interest paid during the period, including a reduction of interest expense for capitalized interest of $441, $4,648 and $10,089, respectively			$	829,209		$	824,289		$	849,337
Non-Cash Investing and Financing Activities:
	Investing Activities:
		Escrow deposits used for property acquisitions		$	—		$	36,541		$	—
		Escrow deposits related to property dispositions		$	(639,439	)	$	(117,144	)	$	(69,330	)
		Mortgage loan repayment as a result of a property disposition (including prepayment expense of $375 in the year ended December 31, 2004)		$	(13,386	)	$	(5,830	)	$	(16,279	)
		Mortgage loan assumed upon acquisition of property		$	118,487		$	82,970		$	—
		Mortgage loan assumed upon consolidation of property		$	—		$	—		$	59,166
		Loan issued in connection with a property disposition		$	(66,300	)	$	—		$	—
		Units issued in connection with a property acquisition		$	3,339		$	50		$	—
		Changes in accounts due to a like-kind exchange:
			Increase in investment in real estate due to property acquisition	$	—		$	130,203		$	—
			Decrease in investment in real estate due to property disposition	$	—		$	(130,865	)	$	—
			Decrease in accumulated depreciation	$	—		$	9,137		$	—
			Decrease in other assets and liabilities	$	—		$	(1,770	)	$	—
		Changes in accounts due to consolidation of existing interest in a property as a result of acquiring the remaining economic interest:
			Decrease in investment in unconsolidated joint ventures	$	—		$	(157,659	)	$	—
			Increase in investment in real estate	$	—		$	612,411		$	—
			Increase in accumulated depreciation	$	—		$	(44,440	)	$	—
			Increase in mortgage debt	$	—		$	(451,285	)	$	—
			Increase in other assets and liabilities	$	—		$	40,973		$	—
		Changes in accounts due to partial sale of real estate:
			Increase in investment in unconsolidated joint ventures	$	36,349		$	18,445		$	155,710
			Decrease in investment in real estate	$	(43,931	)	$	(21,726	)	$	(169,390	)
			Decrease in accumulated depreciation	$	8,403		$	4,310		$	19,336
			Decrease in other assets and liabilities	$	(940	)	$	(1,030	)	$	(4,460	)
	Financing Activities:
		Mortgage loan repayment as a result of a property disposition (including prepayment expense of $375 in the year ended December 31, 2004)		$	13,386		$	5,830		$	16,279
		Mortgage loan assumed upon acquisition of property		$	(118,487	)	$	(82,970	)	$	—
		Mortgage loan assumed upon consolidation of property		$	—		$	—		$	(59,166	)
		Loan issued in connection with a property disposition		$	66,300		$	—		$	—
		Units issued in connection with a property acquisition		$	(3,339	)	$	(50	)	$	—

See accompanying notes.

76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 — BUSINESS OF EQUITY OFFICE

      Equity Office Properties Trust is a Maryland real estate investment trust (“REIT”) and the sole general partner of EOP Operating Limited Partnership, a Delaware limited partnership (“EOP Partnership”). The use of the words “Equity Office”, “we”, “us”, or “our” in this Form 10-K refers to Equity Office Properties Trust and its subsidiaries, including EOP Partnership, except where the context otherwise requires. We are a fully integrated, self-administered and self-managed real estate company principally engaged, through our subsidiaries, in owning, managing, leasing and developing office properties.

      As of December 31, 2005, we owned whole or partial interests in 622 office buildings comprising 111.5 million square feet in 16 states and the District of Columbia (“Total Office Portfolio”). After excluding the partial interests owned by our joint venture partners, our share of the Total Office Portfolio is 101.7 million square feet and is referred to as the “Effective Office Portfolio.” The Effective Office Portfolio represents our economic interest in the office properties from which we derive the net income we recognize in accordance with U.S. generally accepted accounting principles (“GAAP”). The Effective Office Portfolio square feet of 101.7 million has not been reduced to reflect our minority interest partners’ share of EOP Partnership. Properties that have been taken out of service and properties under development are not included in these property statistics. Throughout this report, information is disclosed for both the Total Office Portfolio and the Effective Office Portfolio. The information disclosed throughout this report with respect to number of buildings, square feet and occupancy and leased levels is unaudited. The table below shows, in summary, the property statistics for each portfolio as of December 31, 2005.

				Total Office Portfolio					Effective Office Portfolio
		Number of		Occupied					Occupied
		Buildings		Square Feet			Square Feet		Square Feet			Square Feet
Wholly-Owned Properties			562		77,309,801			85,927,640		77,309,801			85,927,640
Consolidated Joint Ventures			22		10,585,857			11,143,588		9,529,373			9,983,557
Unconsolidated Joint Ventures			38		12,990,416			14,437,825		5,146,371			5,797,094
	Total		622		100,886,074			111,509,053		91,985,545			101,708,291
Percent Occupied					90.5	%				90.4	%
Percent Leased					91.8	%				91.9	%

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

      We own substantially all of our assets and conduct substantially all of our operations through EOP Partnership and its subsidiary entities. We owned 89.7% and 89.5% of EOP Partnership at December 31, 2005 and 2004, respectively, through our ownership of partnership units of EOP Partnership (“Units”). All intercompany transactions and balances have been eliminated in consolidation. Property holding entities and other subsidiaries of which we own 100% of the equity or receive all of the economics are consolidated. We consolidate certain property holding entities and other subsidiaries in which we own less than a 100% equity interest if the entity is a variable interest entity and we are the primary beneficiary (as defined in Financial Accounting Standards Board (“FASB”) Interpretation 46(R) Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51, as revised (“FIN 46(R)”)). We also consolidate those joint ventures of which we own less than 100% of the equity interest, if we receive substantially all of the economics or have the direct or indirect ability to control major decisions with regards to participating rights. Major decisions are defined in the respective joint venture agreements and generally include participating and protective rights such as

77

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (continued)

decisions regarding annual operating budgets, the execution of major leases, encumbering a property with mortgage debt and whether to dispose of the properties.

Investments in Real Estate

      Rental property and improvements, including interest and other costs capitalized during construction, are included in investments in real estate and are stated at cost. Expenditures for ordinary repairs and maintenance are expensed as incurred. Significant renovations and improvements, which improve or extend the useful life of the assets, are capitalized. Rental property and improvements, excluding land, are depreciated over their estimated useful lives using the straight-line method. The estimated useful lives by asset category are:

Asset Category	Estimated Useful Life
Building		18-59 years
Building improvements		3-40 years
Tenant improvements	Shorter of the asset’s useful life or the non-cancelable term of lease
Furniture and fixtures		3-12 years

      In accordance with Statement of Financial Accounting Standards No. 141 Business Combinations (“FAS 141”), we allocate the purchase price of real estate to land, building, in-place tenant improvements and intangible assets and liabilities (such as the value of above, below and at-market leases, origination costs associated with the in-place leases, and the value of tenant relationships, if any). The values of the above and below market leases are recorded to “deferred leasing costs and other related intangibles” and “other liabilities,” respectively, in the consolidated balance sheets and are amortized and recorded as either a decrease (in the case of above market leases) or an increase (in the case of below market leases) to rental income over the remaining term of the associated lease. The value assigned to ground leases assumed upon acquisition of a property is recorded in “deferred leasing costs and other related intangibles” in the consolidated balance sheets and amortized to ground rent expense over the remaining term of the associated lease. The value, if any, associated with in-place leases and tenant relationships is recorded in “deferred leasing costs and other related intangibles” and amortized to amortization expense over the expected term, which includes an estimated probability of the lease renewal and its estimated term.

      The weighted-average amortization period for the value assigned to in-place leases, origination costs and above/below market leases (excluding the value assigned to above/below market ground leases assumed upon acquisition) is seven years. The weighted-average amortization period for the value assigned to above/below market ground leases is 52 years. The table below shows the estimated aggregate amortization expense related to our intangible assets and liabilities over the next five years:

Year		(Dollars in thousands)
2006		$	34,695
2007			21,139
2008			17,859
2009			15,622
2010			14,372
	Total	$	103,687

      If a tenant vacates its space prior to the contractual termination of the lease or the estimated renewal term and no rental payments are being made on the lease, any unamortized balance of the related intangible

78

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (continued)

asset or liability will be written off. The tenant improvements are depreciated and origination costs are amortized over the remaining term of the lease or charged against earnings if the lease is terminated prior to its contractual expiration date.

      In accordance with FAS 141 and its applicability to acquired in-place leases, we engage a third party to perform the following procedures for properties we acquire:

1)	calculate the fair value of assumed debt, if any;
2)	estimate the value of the real estate “as if vacant” or arrive at a “go dark” value as of the acquisition date;
3)	calculate the value of the property and allocate that value among land, building, building improvements and equipment and determine the associated useful life for each;
4)	calculate the value and associated life of the above and below market leases;
5)	calculate the value and associated life of tenant relationships, if any, by taking the direct identifiable benefits of the tenant relationship and discounting them to present value;
6)	estimate the fair value of the in-place tenant improvements, legal costs and leasing commissions incurred in obtaining the leases and calculate the associated useful lives; and
7)	calculate the intangible value of the in-place leases and their associated useful lives.

      We account for the impairment or disposal of long-lived assets in accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long Lived Assets (“FAS 144”). Rental properties are individually evaluated for impairment when conditions exist which may indicate that it is probable that the sum of expected future cash flows (on an undiscounted basis) over the anticipated holding period is less than its historical cost. Upon determination that a permanent impairment has occurred, rental properties are reduced to their fair value. If a property is considered held for sale, a provision for loss is recognized if the fair value of the property, less the estimated cost to sell, is less than the carrying amount of the property. Depreciation and amortization expense ceases once a property is considered held for sale.

      Developments in process are carried at cost, which includes land acquisition cost, architectural fees, general contractor fees, capitalized interest, internal costs related directly to the development and other costs related directly to the construction of the property. Depreciation is recorded when the property is placed in service, which typically occurs after a certificate of occupancy is obtained.

      Land available for development is carried at cost and is not depreciated.

Investments in Unconsolidated Joint Ventures

      Investments in unconsolidated joint ventures are accounted for using the equity method of accounting because we do not have majority control over the activities of the joint ventures but we do have substantive participating rights with respect to operating and financing policies. Our net equity investment is reflected on our consolidated balance sheets and our consolidated statements of operations include our share of net income or loss from the unconsolidated joint ventures. Any difference between the carrying amount of these investments and the historical cost of the underlying equity is primarily the result of a step-up in basis as a result of acquisitions. This increase in basis is depreciated generally over 40 years and is included in net income from unconsolidated joint ventures.

79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (continued)

Deferred Leasing Costs

      Deferred leasing costs consist primarily of costs incurred to execute new and renewal leases. Deferred leasing costs are amortized over the terms of the respective leases on a straight-line basis. We also record deferred leasing costs in accordance with FAS 141 when allocating the purchase price to acquired in-place leases and tenant relationships, if any (see Investments in Real Estate above).

Deferred Financing Costs

      Deferred financing costs consist primarily of fees paid for financing transactions. Deferred financing costs are amortized over the terms of the respective financings on a straight-line basis, which approximates the effective-yield method.

Revenue Recognition

      We recognize revenue from rent, tenant reimbursements, parking and other revenue once all of the following criteria are met in accordance with SEC Staff Accounting Bulletin 104:

•  the agreement has been fully executed and delivered;

•  services have been rendered;

•  the amount is fixed or determinable; and

•  the collectibility of the amount is reasonably assured.

          Rental Revenues

      We record rental revenue on a straight-line basis as it is earned during the lease term. Certain leases provide for tenant occupancy during periods for which no rent is due or where minimum rent payments change during the lease term. Accordingly, a receivable is recorded representing the difference between the straight-line rent and the rent that is contractually due from the tenant. These amounts are classified as deferred rent receivable on the consolidated balance sheets. When a property is acquired, the terms of existing leases are considered to commence as of the acquisition date for purposes of this calculation. Deferred rental revenue included in rental revenue from continuing operations for the years ended December 31, 2005, 2004 and 2003 totaled $57.2 million, $73.1 million and $68.5 million, respectively. Deferred rental revenue is not recognized for income tax purposes.

      We begin recognizing rental revenue when the tenant takes possession or controls the physical use of the leased space. In order for the tenant to take possession of the finished space, the leased space must be substantially ready for its intended use. When we are the owner of the tenant improvements, the leased space is ready for its intended use when the tenant improvements are substantially completed. In limited instances, when the tenant is the owner of the tenant improvements, straight-line rent is recognized when the tenant takes possession of the unimproved space.

      The determination of who owns the tenant improvements is subject to significant judgment. In making that determination, we consider various factors, including, but not limited to:

•  Whether the lease agreement specifies what or how the tenant improvement allowance is spent;

•  Whether the tenant improvements are unique to the tenant or general-purpose in nature;

•  Whether the ownership of the tenant improvements remains with the landlord or remains with the tenant at the end of the lease term;

•  Who bears substantial construction risk and cost of the tenant improvements.

80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (continued)

      When we are the owner of the tenant improvements, we record our cost to construct the tenant improvements as an asset and depreciate the cost over the shorter of the asset’s useful life or the non-cancelable lease term. To the extent we funded all or a portion of an improvement that is owned by the tenant, we treat the cost as a lease incentive and amortize the costs as a reduction to rental revenue on a straight-line basis over the term of the lease. Lease incentives may also include cash payments to or on behalf of tenants or the buy-out of a prospective tenant’s existing lease obligation with a third party and are amortized as a reduction to rental revenue on a straight-line basis over the term of the lease.

Tenant Reimbursement Revenues

      Tenant reimbursements represent amounts due from tenants for items such as common area maintenance, real estate taxes, insurance, repairs and maintenance and other recoverable costs. Tenant reimbursement revenue is recognized as the related expenses are incurred.

Parking Revenues

      Parking revenue represents amounts generated from contractual and transient parking at our office building garages. Revenue is recognized in accordance with contractual terms or as services are rendered.

Other Revenues

      Other revenues primarily consist of income from early lease terminations. Income from early lease terminations represents amounts received from tenants (net of any deferred rent receivable) in connection with the early termination of their remaining lease obligations. If, upon termination of the lease, it is probable that the tenant will file for bankruptcy within 90 days, or if significant contingencies in the lease termination agreement exist, we will defer recognizing the lease termination fee as revenue until such uncertainties have been eliminated.

Allowance for Doubtful Accounts

      An allowance for doubtful accounts is maintained for estimated losses resulting from the inability of certain tenants to meet the contractual obligations under their lease agreements. Management actively reviews receivables from tenants and determines the probability of collection for receivables identified as potentially uncollectible. The amount of the allowance is recorded net of any security deposits or outstanding letters of credit held by us from the tenant.

Cash Equivalents

      Cash equivalents are highly liquid investments with a maturity of three months or less at the date of purchase.

Escrow Deposits and Restricted Cash

      Escrow deposits primarily consist of amounts held by mortgage lenders to provide for future real estate tax expenditures and tenant improvements, earnest money deposits on acquisitions and proceeds from property sales that were executed as tax-deferred dispositions. Restricted cash represents amounts on deposit for various utility and security deposits.

Fair Value of Financial Instruments

      Our debt consists of notes that have fixed and variable interest rates. The fair market value of variable rate debt approximates book value because the interest rate is based on LIBOR plus a spread, which approximates a market interest rate. As of December 31, 2005 and 2004, the fair value of our fixed-rate debt

81

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (continued)

was $0.7 billion and $1.1 billion higher than the book value of $10.8 billion and $10.9 billion, respectively, primarily due to the general decrease in market interest rates on secured and unsecured debt since the date of issuance of our debt. In the determination of these fair values, we engage a third party and use internally developed models based on our estimates of current market conditions. The net present value of the difference between future contractual interest payments and future interest payments based on a current market rate represents the difference between the book value and the fair value. The current market rates are determined by adding an estimated risk premium to the quoted yields on federal government debt securities with similar maturity dates to our own debt. The risk premium estimates are based on our historical experience in obtaining either secured or unsecured financing and are also affected by current market conditions.

      In accordance with Statement of Financial Accounting Standards No. 133 Accounting for Derivative Instruments and Hedging Activities (“FAS 133”), the carrying values of interest rate swaps, as well as the underlying hedged liability, if applicable, are reflected at their fair value. We rely on quotations from a third party to determine these fair values.

      In addition, the carrying values of cash equivalents, restricted cash, escrow deposits, tenant and other receivables, prepaid expenses and other assets, accounts payable and accrued expenses and other liabilities approximate their fair value.

Derivatives and Hedging Activities

      We may periodically enter into certain interest rate protection and interest rate swap agreements to effectively convert fixed rate debt to a floating rate basis, convert floating rate debt to a fixed rate basis or to hedge anticipated future financings. Amounts paid or received under these agreements are recognized as an adjustment to interest expense when such amounts are incurred or earned. For effective cash flow hedges, settlement amounts paid or received in connection with settled or unwound interest rate protection agreements and interest rate swap agreements are deferred and recorded to accumulated other comprehensive income and then amortized as an adjustment to interest expense over the remaining term of the related financing transaction. For effective fair value hedges, changes in the fair value of the derivative will be offset against the corresponding change in fair value of the hedged asset, liability, or firm commitment through net income or recognized in other comprehensive income until the hedged item is recognized in net income. The ineffective portion of a derivative’s change in fair value will be recognized in net income. All derivative instruments are recorded at fair value. Derivatives that do not qualify for hedge accounting are recorded at fair value through net income.

Income Taxes

      Our properties are primarily owned by limited partnerships or limited liability companies, which are substantially pass-through entities. Some of the pass-through entities have corporate general partners or members, which are subject to federal and state income and franchise taxes. Our property management business, which provides management services to properties owned by third parties and provides certain other services to many of our properties, is owned by a corporation and is subject to federal and state income and franchise taxes.

      We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”). As a REIT, we generally will not be subject to federal income tax if we distribute 100% of our annual taxable income to our shareholders. As a REIT, we 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 income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate tax rates. Even if we qualify for taxation as a REIT, we may be subject to state and local income taxes and to federal income tax and excise tax on any undistributed income. In addition, taxable income from our taxable REIT subsidiaries is subject to federal, state and local income taxes. The aggregate

82

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (continued)

cost of land and depreciable property, net of accumulated tax depreciation, for federal income tax purposes as of December 31, 2005 and 2004 was $14.9 billion and $13.9 billion, respectively.

Reconciliation Between Net Income and Estimated Taxable Income (Unaudited):

		For the years ended December 31,
		2005			2004			2003
		(Dollars in thousands)
Net income available to common shareholders		$	8,136		$	98,214		$	603,190
	Straight-line rent adjustments		(59,516	)		(80,374	)		(76,847	)
	Preferred distributions not deductible for tax		32,192			32,192			51,872
	Excess of tax gain over GAAP gain		270,532			78,268			232,299
	Excess of GAAP depreciation/amortization over tax depreciation/amortization		395,669			360,840			230,182
	Other adjustments		(22,992	)		(50,580	)		(57,775	)
	Impairment		219,003			229,170			7,500
	Cumulative effect of a change in accounting principle		—			33,697			—
	Net operating loss utilization		—			—			(69,199	)
Taxable income			843,024			701,427			921,222
	Less capital gains		(321,257	)		(119,329	)		(393,362	)
Adjusted taxable income subject to 90% dividend requirement		$	521,767		$	582,098		$	527,860

Reconciliation Between Cash Distributions Paid and Distributions Paid Deduction (Unaudited):

	For the years ended December 31,
	2005		2004			2003
	(Dollars in thousands)
Cash dividends paid	$	833,024	$	831,580		$	854,462
Less: Dividends designated to prior year		—		(66,760	)		—
Plus: Dividends designated from following year		10,000		—			66,760
Less: Return of capital distributions		—		(63,393	)		—
Dividends paid deduction	$	843,024	$	701,427		$	921,222

83

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (continued)

Characterization of Distributions (Unaudited):

	For the years ended December 31,
	2005					2004					2003
	$		%			$		%			$		%
	(Dollars in thousands)
Ordinary income	$	489,096		61.0	%	$	614,358		76.9	%	$	456,674		56.9	%
Qualified dividends		2,894		0.4	%		7,308		0.9	%		3,210		0.4	%
Return of capital		—		—	%		63,393		7.9	%		—		—
Capital gains		192,670		24.1	%		84,366		10.6	%		227,133		28.3	%
Unrecaptured section 1250 gain		116,172		14.5	%		29,963		3.7	%		115,573		14.4	%
Common distributions		800,832		100.0	%		799,388		100.0	%		802,590		100.0	%
Preferred distributions		32,192					32,192					51,872
Total REIT distributions	$	833,024				$	831,580				$	854,462

Minority Interests

EOP Partnership

      Net income is allocated to minority interest partners in EOP Partnership based on their weighted average ownership percentage during the period. The ownership percentage is calculated by dividing the number of Units held by the minority interest partners by the sum of the Units held by us and the Units held by the minority interest partners, all calculated based on the weighted average days outstanding. For the years ended December 31, 2005 and 2004, we had a 90.0% and 89.3% weighted average interest in EOP Partnership, respectively. Minority interest in EOP Partnership on the consolidated balance sheets is calculated by dividing the number of Units held by the minority interest partners by the sum of the Units held by us and the Units held by the minority interest partners, all calculated based on the total Units outstanding at the end of the year. As of December 31, 2005 and 2004, we had an 89.7% and 89.5% interest in EOP Partnership, respectively. Changes in the number of outstanding common shares of beneficial interest (“Common Shares”) and Units will change our ownership interest and the ownership interest of the minority interest partners.

Partially Owned Properties

      We consolidate certain properties that we control, but do not wholly own. The minority interest partners’ share of the equity of these consolidated properties is reflected in the consolidated balance sheets as “Minority Interests — Partially owned properties.” The net income from these properties attributable to the minority interest partners is reflected as “Minority Interests — Partially owned properties” in the consolidated statements of operations.

      In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150 Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“FAS 150”). FAS 150 establishes standards for classifying and measuring as liabilities certain financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. FAS 150 is effective for all financial instruments created or modified after May 31, 2003, and otherwise is effective July 1, 2003. In November 2003, the FASB issued FSP No. FAS 150-3, which deferred for an indefinite period the classification and measurement provisions, but not the disclosure provisions, of FAS 150 as it relates to certain noncontrolling interests that are classified as equity in the financial statements of a subsidiary but would be

84

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (continued)

classified as a liability in the parent’s financial statements under FAS 150 (e.g., minority interests in consolidated limited-life subsidiaries).

      We are the controlling partner in various consolidated entities having a minority interest book value of $92.7 million at December 31, 2005. The organizational documents of these entities contain provisions that require the entities to be liquidated through the sale of their assets upon reaching a future date as specified in each respective organizational document. As controlling partner, we have an obligation to cause these property owning entities to distribute proceeds of liquidation to the minority interest partners in these partially owned properties only if the net proceeds received by each of the entities from the sale of its assets warrant a distribution based on the agreements. In accordance with the disclosure provisions of FAS 150, we estimate the value of minority interest distributions would have been $155 million (“Settlement Value”) had the entities been liquidated as of December 31, 2005. This Settlement Value is based on the estimated third party consideration realizable by the entities upon a hypothetical disposition of the properties and is net of all other assets and liabilities and yield maintenance (or prepayment penalties) associated with the hypothetical repayment of any mortgages encumbering the properties, that would have been due. The amount of any actual distributions to minority interest holders in our partially owned properties is very difficult to predict due to many factors, including the inherent uncertainty of real estate sales. If the entities’ underlying assets are worth less than the underlying liabilities, we have no obligation to remit any consideration to the minority interest holders in partially owned properties.

Use of Estimates

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

Reclassifications

      Certain reclassifications have been made to the previously reported 2004 and 2003 statements in order to provide comparability with the 2005 statements reported herein. These reclassifications have not changed the 2004 or 2003 results of operations or combined shareholders’ equity and mandatorily redeemable preferred shares.

Share Based Employee Compensation Plans

      Effective January 1, 2003, we adopted Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (“FAS 123”), which requires a fair value based accounting method for determining compensation expense associated with the issuance of share options and other equity awards. In accordance with Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure — an Amendment of FASB Statement No. 123, we adopted FAS 123 using the prospective method, which requires the recognition of compensation expense based on the fair value method for share options and other equity awards granted on or after January 1, 2003 and for certain modifications made subsequent to December 31, 2002 to share options and other equity awards that were outstanding as of December 31, 2002.

      The following table illustrates the unaudited effect on net income available to common shareholders and earnings per share if the fair value based method had been applied to all outstanding and unvested share options for the last three years. Compensation expense related to restricted share awards is not presented in the table below because the expense amount is the same under Accounting Principles Board Opinion No. 25,

85

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (continued)

Accounting for Stock Issued to Employees (“APB 25”), which we applied prior to adopting FAS 123, and FAS 123 and, therefore, is already reflected in net income.

			For the years ended December 31,
			2005			2004			2003
			(Dollars in thousands, except
			per share amounts)
Historical net income available to common shareholders			$	8,136		$	98,214		$	603,190
Add back compensation expense for share options included in historical net income available to common shareholders				6,758			5,150			2,907
Deduct compensation expense for share options determined under fair value based method				(7,259	)		(9,493	)		(10,916	)
Allocation of net expense to minority interests in EOP Partnership				50			464			877
Pro forma net income available to common shareholders			$	7,685		$	94,335		$	596,058
Earnings per share — basic:
	Historical net income available to common shareholders
		per share	$	0.02		$	0.25		$	1.50
	Pro forma net income available to common shareholders
		per share	$	0.02		$	0.24		$	1.49
Earnings per share — diluted:
	Historical net income available to common shareholders
		per share	$	0.02		$	0.24		$	1.50
	Pro forma net income available to common shareholders
		per share	$	0.02		$	0.23		$	1.48

Impact of New Accounting Standards

      In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (“FAS 123(R)”), which replaced FAS 123. FAS 123(R) requires compensation cost related to share-based payment transactions to be recognized in the financial statements. The provisions of FAS 123(R) may be adopted using either a modified-prospective or a modified-retrospective transition method. We will adopt FAS 123(R) effective January 1, 2006 using the modified-prospective method. Because we used a fair value based method of accounting for determining compensation expense associated with the issuance of all share options and other equity awards granted or modified after January 1, 2003, we do not expect the adoption of this standard will have a material effect on our results of operations and financial position. Had we adopted FAS 123(R) in prior periods, the impact of that standard would have approximated the impact of FAS 123 as described in the disclosure of pro forma net income and earnings per share above.

      In June 2005, the FASB ratified the consensus in Emerging Issues Task Force 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights (“EITF 04-5”), which states that the general partner in a limited partnership is presumed to control that limited partnership. This presumption may be overcome if the limited partners have either (1) the substantive ability to dissolve the limited partnership or otherwise remove the general partner without cause or (2) substantive participating rights, which provide the limited partners with the ability to effectively participate in significant decisions that would be expected to be made in

86

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (continued)

the ordinary course of business and thereby preclude the general partner from exercising unilateral control over the partnership. EITF 04-5 is effective June 30, 2005 for new or modified limited partnership arrangements and effective January 1, 2006 for existing limited partnership arrangements. Although our adoption had no effect on net income available to common shareholders or shareholders’ equity, we will be required to consolidate certain existing joint ventures effective January 1, 2006 that we previously accounted for under the equity method. The consolidation of these joint ventures effective January 1, 2006 will result in an increase in total assets of $2 billion and total liabilities of $790 million (including mortgage debt of $680 million, our share of which is $307 million).

      In May 2005, the FASB issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections — a replacement of APB Opinion No. 20 and FASB Statement No. 3 (“FAS 154”). FAS 154 changes the requirements for the accounting and reporting of a change in accounting principle by requiring retrospective application to prior periods’ financial statements, unless it is impracticable to do so. FAS 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. We will apply the provisions of FAS 154 beginning January 1, 2006.

      In March 2005, the FASB issued Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations — an interpretation of FASB Statement No. 143 (“FIN 47”). FIN 47 clarifies that the term “conditional asset retirement obligation” as used in Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations, represents a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement is conditional on a future event that may or may not be within a company’s control. Under this standard, a liability for a conditional asset retirement obligation must be recorded if the fair value of the obligation can be reasonably estimated. FIN 47 is effective for fiscal years ending after December 15, 2005. Certain of our real estate assets contain asbestos. The asbestos is appropriately contained and we believe we are compliant with current environmental regulations. If these properties undergo major renovations or are demolished, certain environmental regulations are in place, which specify the manner in which the asbestos must be handled and disposed. As of December 31, 2005, we recorded an asset retirement obligation of $7.0 million related to asbestos at a redevelopment property we acquired in late 2005. We have asbestos at other properties, but because the obligations to remove the asbestos from these properties have indeterminable settlement dates, we are unable to reasonably estimate the fair value.

NOTE 3 — VARIABLE INTEREST ENTITIES

      Under the provisions of FIN 46(R), which we adopted on January 1, 2004, we consolidated the assets, liabilities and results of operations of two properties, as follows:

SunAmerica Center

      We consolidated SunAmerica Center, an office property comprising 780,063 square feet located in Century City, California. We own a 67% share of a $202.2 million mezzanine-level debt position, for which we paid $73.9 million in 1999. As a result of this ownership position, we determined we were the primary beneficiary of this variable interest entity. As of December 31, 2003, this investment was recorded as a note receivable and was included in other assets. The note matures in August 2014 and prior to then interest is payable based on available cash flow. Our maximum exposure to loss as a result of the investment is equivalent to the $73.9 million we invested in 1999 and an additional $2.5 million which we may be required to loan the entity in the event of a cash shortfall. Our payment recourse is limited to the mezzanine borrower’s equity in the property.

87

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 3 — VARIABLE INTEREST ENTITIES — (continued)

      As a result of the consolidation of SunAmerica Center, we recorded a cumulative effect of a change in accounting principle loss of $33.7 million in 2004. The effect on our assets and liabilities as a result of the consolidation of SunAmerica Center as of January 1, 2004 was:

	(Dollars in thousands)
Investment in real estate	$	330,787
Accumulated depreciation	$	(31,219	)
Mortgage debt	$	(203,225	)
Net other assets and liabilities, including a net discount of $31,476	$	(130,040	)(a)

(a)  As of January 1, 2004, our joint venture partner’s share of the mezzanine-level debt of $49.7 million is recorded in other liabilities, which is net of a discount of $31.5 million. Interest expense on the $66 million face amount of the joint venture partner’s debt is accrued at 7.25% per annum and the discount is amortized to interest expense through the maturity of the mezzanine-level loan in 2014. The remaining debt of $15 million does not accrue interest.

Concar

      We consolidated Concar, an office property comprising 218,985 square feet located in San Mateo, California. We owned a 79.96% economic interest in this property. As a result of this ownership position, we determined that we were the primary beneficiary of this variable interest entity, and therefore, we consolidated the property effective January 1, 2004. We sold our interest in this property in 2005.

      The effect on our assets and liabilities as a result of the consolidation of Concar as of January 1, 2004 was:

	(Dollars in thousands)
Investment in real estate	$	53,154
Accumulated depreciation	$	(1,274	)
Investment in unconsolidated joint ventures	$	(54,731	)
Minority Interests — partially owned properties	$	(3,054	)
Net other assets and liabilities	$	5,905

88

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 4 — INVESTMENTS IN REAL ESTATE

      The following major accounts comprise our real estate investments:

			December 31,
			2005			2004
			(Dollars in thousands)
Land			$	2,673,797		$	2,947,605
Land available for development				176,868			252,524
Buildings				18,311,143			20,082,105
Building improvements				578,609			547,262
Tenant improvements				1,290,239			1,173,684
Furniture and fixtures				95,935			84,560
Developments in process				567,129			40,492
Investment in real estate held for sale, net of accumulated depreciation				75,211			163,390
	Investments in real estate			23,768,931			25,291,622
	Accumulated depreciation			(3,336,789	)		(3,151,446	)
		Net investments in real estate	$	20,432,142		$	22,140,176

89

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 4 — INVESTMENTS IN REAL ESTATE — (continued)

      We have acquired whole or partial interests in the following properties since January 1, 2003:

						Effective Office Portfolio
			Acquisition	Number of
Property		Location	Date	Buildings		Square Feet		Purchase Price(a)
								(Dollars in thousands)
2005:
Office properties:
	Summit at Douglas Ridge I	Roseville, CA	January 21		1		92,941	$	25,000
	Park 22	Austin, TX	March 22		3		203,716		35,650
	11111 Sunset Hills Road (fka XO Building)(b)	Reston, VA	May 4		1		216,469		50,700
	Summit at Douglas Ridge II(c)	Roseville, CA	May 20		—		—		18,650
	Shorebreeze I & II(b)(d)	Redwood City, CA	June 9		2		230,853		56,500
	Research Park Plaza I & II	Austin, TX	June 16		2		271,882		55,000
	Golden Gate Plaza	Novato, CA	June 30		2		114,364		24,499
	Woodside Office Center	Novato, CA	June 30		1		89,031		23,950
	1179 North McDowell	Petaluma, CA	June 30		1		53,846		9,200
	Parkway Plaza (fka 3850 & 3880 Brickway)	Santa Rosa, CA	June 30		2		126,585		23,734
	Oak Valley Business Center	Santa Rosa, CA	June 30		3		129,523		24,450
	25 Mall Road	Burlington, MA	July 7		1		277,647		54,750
	The Lakes	Santa Rosa, CA	July 19		5		135,332		21,505
	333 Twin Dolphin Plaza	Redwood City, CA	July 28		1		185,285		52,700
	Stonebridge Plaza II	Austin, TX	August 19		1		193,131		36,800
	Clocktower Square(e)	Palo Alto, CA	September 27		4		97,133		41,250
	1095 Avenue of the Americas(f)	New York, NY	September 29		—		—		504,600
	300 W. 6th Street	Austin, TX	October 4		1		446,637		131,685
	Waterfall Towers(b)	Santa Rosa, CA	October 11		3		90,671		16,800
	Redwood Business Park I(b)	Petaluma, CA	October 28		4		101,201		16,531

90

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 4 — INVESTMENTS IN REAL ESTATE — (continued)

						Effective Office Portfolio
			Acquisition	Number of
Property		Location	Date	Buildings		Square Feet		Purchase Price(a)
								(Dollars in thousands)
	Redwood Business Park II(b)	Petaluma, CA	October 28		5		169,389		29,781
	Redwood Business Park V(b)	Petaluma, CA	October 28		1		57,587		9,640
	Fountaingrove I	Santa Rosa, CA	October 28		1		37,428		9,872
	Redwood Business Park III (including vacant land)(b)	Petaluma, CA	November 2		2		144,000		26,648
	Redwood Business Park IV (including vacant land)(b)	Petaluma, CA	November 2		1		66,656		13,750
	Parkpoint Business Center(b)	Santa Rosa, CA	November 2		5		67,869		11,225
	211 Perimeter Center	Atlanta, GA	November 10		1		225,447		43,500
	Great Hills Plaza	Austin, TX	December 21		1		135,333		16,240
		Total office properties:			55		3,959,956		1,384,610
Vacant land:
	Two Main Place	Portland, OR	March 14		—		—		7,600
Other:
	375 Park Avenue Mezzanine Loan(g)	New York, NY	October 19		—		—		50,000
		Total 2005 acquisitions:			55		3,959,956	$	1,442,210

91

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 4 — INVESTMENTS IN REAL ESTATE — (continued)

						Effective Office Portfolio
			Acquisition	Number of
Property		Location	Date	Buildings		Square Feet		Purchase Price(a)
								(Dollars in thousands)
2004:
Office properties:
	1301 Avenue of the Americas(h)	New York, NY	February/April		—		274,212	$	151,132
	American Center	Tyson’s Corner, VA	May 25		2		328,741		60,500
	500 Orange Tower(i)	Orange, CA	May 25		—		—		50
	Yahoo! Center (fka Colorado Center)(j)	Santa Monica, CA	July 30		6		545,545		221,785
	717 Fifth Avenue(k)	New York, NY	September 8		1		323,984		160,500
	Olympus Corporate Centre	Roseville, CA	September 22		4		191,494		37,923
	Redstone Plaza(l)	Newport Beach, CA	September 23		2		166,562		38,000
	Commerce Plaza(l)	Oakbrook, IL	September 23		3		510,757		99,000
	5800 & 6000 Meadows	Lake Oswego, OR	September 30		2		198,347		49,000
	La Jolla Executive Tower	La Jolla, CA	November 17		1		227,570		70,500
	Westech 360	Austin, TX	November 19		4		178,777		28,604
	Shoreline Office Center(e)	Mill Valley, CA	December 14		2		97,910		19,175
	Foundry Square II(m)	San Francisco, CA	December 30		—		60,129		2,700
		Total office properties:			27		3,104,028		938,869
Vacant land:
	Station Oaks Landing	Walnut Creek, CA	January 14		—		—		15
	Dulles Station(n)	Herndon, VA	September 15		—		—		7,600
	La Jolla Centre III & IV	San Diego, CA	December 22		—		—		5,526
		Total vacant land:			—		—		13,141
		Total 2004 acquisitions:			27		3,104,028	$	952,010

92

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 4 — INVESTMENTS IN REAL ESTATE — (continued)

						Effective Office Portfolio
			Acquisition	Number of
Property		Location	Date	Buildings		Square Feet		Purchase Price(a)
								(Dollars in thousands)
2003:
Office properties:
	The John Hancock Complex(o)	Boston, MA	May 21		—		—	$	25,132
	U.S. Bank Tower	Denver, CO	August 12		1		485,902		80,200
	Key Center(p)	Bellevue, WA	September 10		—		94,586		15,600
	225 West Santa Clara Street	San Jose, CA	December 31		1		343,391		103,041
		Total office properties:			2		923,879		223,973
Vacant land:
	Parkshore Plaza Phase V	Folsom, CA	September 30		—		—		3,423
Other:
	Riverside Centre Land	Portland, OR	August 15		—		—		360
		Total 2003 acquisitions:			2		923,879	$	227,756

(a)	The purchase price shown above represents the gross purchase price related to property acquisitions, of which $84.2 million, $85.3 million and $21.9 million were recorded to intangible assets during the years ended December 31, 2005, 2004 and 2003, respectively. The purchase price shown above for the year ended December 31, 2004 also includes our share of the intangible assets associated with properties acquired in 2004 that we account for under the equity method, which was $20.1 million.
	The allocations of the purchase prices and other costs related to the acquisition of tangible and intangible assets are estimates and are subject to adjustment within one year of the closing date of each respective acquisition.
(b)	The purchase price includes the assumption of the following mortgage debt:

Property		Principal Balance		Coupon Rate			Effective Rate			Maturity Date
		(Dollars in thousands)
11111 Sunset Hills Road		$	22,546		6.12	%		4.97	%		July 2008
Shorebreeze I & II			22,428		4.19	%		5.43	%		March 2007
Waterfall Towers			7,739		6.08	%		5.58	%		January 2013
Redwood Business Park I			10,389		7.41	%		5.87	%		August 2011
Redwood Business Park II			18,227		7.41	%		5.86	%		August 2011
Redwood Business Park V			6,439		7.41	%		5.85	%		August 2011
Redwood Business Park III			15,096		7.46	%		5.95	%		August 2011
Redwood Business Park IV			8,193		7.41	%		5.92	%		August 2011
Parkpoint Business Center			7,429		5.53	%		5.62	%		January 2015
	Total	$	118,486

The effective rates shown in the table above include the effects of recording the assumed debt at fair value and transaction costs.

93

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 4 — INVESTMENTS IN REAL ESTATE — (continued)

(c)	Summit at Douglas Ridge II, which consists of one building comprising 93,349 square feet, is classified as a development property and, therefore, is not included in the total number of buildings or total square footage statistics.
(d)	The purchase price for Shorebreeze I & II includes the issuance of 108,190 Units valued at $3.3 million.
(e)	This property is subject to a ground lease.
(f)	1095 Avenue of the Americas, which consists of one building comprising 1,020,000 square feet, is classified as a development property and, therefore, is not included in the total number of buildings or total square footage statistics.
(g)	In October 2005, we invested $50.0 million in junior mezzanine debt as part of a debt refinancing on the 375 Park Avenue property located in New York, NY. The mezzanine debt bears interest at a rate of 8.95% and matures in 2015. We account for this investment as a note receivable, which is included in “Prepaid expenses and other assets” on the consolidated balance sheet.
(h)	In 2004, we acquired certain partners’ interests in 1301 Avenue of the Americas for $68.2 million and we assumed our partner’s share of the mortgage notes of $83.0 million. This property was previously accounted for under the equity method. As a result of these transactions, our economic interest in the joint venture is 100% and effective February 2004, we consolidated the property. The mortgage debt encumbering this property upon consolidation was $534.3 million.
(i)	In May 2004, we acquired our partner’s interest in the 500 Orange office property by issuing 1,930 Units valued at $50,000.
(j)	In July 2004, we acquired a 50% interest in Yahoo! Center for $221.8 million and account for our investment under the equity method (see Note 7 — Investments in Unconsolidated Joint Ventures).
(k)	This property consists of both office and retail space. We acquired the office space, except for the fourth floor.
(l)	These properties were acquired through a like-kind exchange transaction in which we disposed of certain industrial properties (see Note 5 — Gains/ Losses on Sales of Real Estate, Provisions for Loss on Assets Held for Sale and Impairments).
(m)	In December 2004, we acquired our partner’s 12.5% interest in Foundry Square II for $2.7 million. Following this transaction, we owned 100% of this property. We subsequently sold this property in 2005.
(n)	In September 2004, we acquired a 70% interest in Dulles Station for $7.6 million. We subsequently sold our interest in this joint venture in 2005 (see Note 14 — Minority Interests in Partially Owned Properties).
(o)	In May 2003, we acquired 8.1% of the equity in the joint venture that owns The John Hancock Complex in Boston, Massachusetts for $25.0 million. The investment in the joint venture is accounted for under the cost method of accounting because we own a noncontrolling interest in the property. Our investment is included in “Prepaid expenses and other assets” in the consolidated balance sheets. In 2005, we received $17.3 million of cash proceeds from additional mortgage financing placed on this property, which effectively reduced our book basis investment in the joint venture.
(p)	In September 2003, we acquired the remaining 20% equity interest in Key Center from Wright Runstad Associates Limited Partnership (“WRALP”) and affiliates in exchange for our 30% equity interest in WRALP and a cash payment by us of $7.9 million. This property was previously accounted for under the equity method. As a result of this acquisition, effective September 2003, we consolidated the property.

94

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 5 — GAINS/LOSSES ON SALES OF REAL ESTATE, PROVISIONS FOR LOSS ON ASSETS HELD FOR SALE AND IMPAIRMENTS

Sales of Real Estate

      During the last three years, we sold whole or partial interests in the following properties:

		For the years ended December 31,
		2005		2004		2003
Office Properties and Vacant Land Parcels(a)(b):
	Number of buildings		131		5		53
	Number of vacant land parcels		5		1		4
	Effective Office Portfolio:
	Square feet		17,644,205		1,922,755		7,543,381
	Sales price (in thousands)	$	2,736,505	$	252,194	$	1,517,779
Industrial Properties(c):
	Number of buildings		—		71		2
	Square feet		—		5,125,622		216,900
	Sales price (in thousands)		—	$	432,033	$	11,850

(a)	The number of buildings sold during the years ended December 31, 2005, 2004 and 2003 exclude the sale of partial interests in two buildings, two buildings, and 13 buildings, respectively.
	The number of buildings and square feet sold during the year ended December 31, 2005 excludes eight buildings comprising 0.2 million square feet relating to properties previously taken out of service, which were no longer included in building and square footage statistics. Properties taken out of service represent office properties we are no longer attempting to lease and may be sold in the future or redeveloped.
	The sales price shown for the year ended December 31, 2003 also includes the disposition of 32 residential units, which are excluded from the number of buildings shown above.
(b)	During the year ended December 31, 2004, we sold our 3% interest in an office property that we accounted for under the cost method. This property is excluded from the number of buildings and square feet shown above.
(c)	Of the 71 industrial properties disposed of during 2004, 29 were sold in a single transaction to an unrelated party for $73.3 million in cash (before closing costs) and two office properties valued at $137.0 million for total consideration of $210.3 million (35% monetary/65% nonmonetary). The net book value of the 29 industrial properties sold was $198.0 million. This transaction was accounted for as a like-kind exchange transaction, which also included cash. Because the transaction included a monetary and nonmonetary component, we recognized a gain on sale of $3.6 million on the monetary portion of the transaction. The nonmonetary portion of this transaction yielded no gain or loss. The remaining book value of the industrial properties, or $130.0 million, represents the book value of the two office properties acquired in the transaction. The two office properties acquired are Commerce Plaza and Redstone Plaza, as further described in Note 4 — Investments in Real Estate.

95

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 5 — GAINS/ LOSSES ON SALES OF REAL ESTATE, PROVISIONS FOR LOSS ON ASSETS HELD FOR SALE AND IMPAIRMENTS — (continued)

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

      During the years ended December 31, 2005, 2004 and 2003, we recognized gains/losses on sales of real estate, provisions for loss on assets held for sale and impairments, as follows:

			For the years ended December 31,
			2005			2004			2003
			(Dollars in thousands)
Gains on partial sales of real estate included in Income from Continuing Operations			$	46,308		$	21,901		$	99,110
Gain on sales of real estate included in Discontinued Operations				184,916			7,596			61,953
Minority interests’ share of gains on sales of real estate				(29,699	)		(214	)		—
Our share of gains on sales of real estate classified as income from unconsolidated joint ventures				26,499			—			7,063
	Our share of the gains on sales of real estate		$	228,024		$	29,283		$	168,126
Impairment on properties anticipated to be sold deducted from Income from Continuing Operations			$	(65,738	)	$	(38,534	)	$	—
Discontinued Operations:
	Impairment on properties sold			(153,265	)		(190,636	)		(7,500	)
	Loss on properties sold			(169,566	)		—			—
	Provision for loss on properties held for sale			(37,432	)		(2,123	)		—
		Total non-cash charge	$	(426,001	)	$	(231,293	)	$	(7,500	)

2005

      Due to favorable market conditions, our previously announced disposition program was accelerated in 2005 and expanded to include certain non-strategic assets in core markets. As a result, we reduced our intended holding period for 63 assets comprising 7.0 million square feet and several land parcels and recognized non-cash impairment charges of $219.0 million ($65.7 million of this charge is included in continuing operations and $153.3 million is included in discontinued operations). The fair values of these assets were calculated either by discounting estimated future cash flows and sales proceeds, based on the sales price contained in the respective sales contracts or based on market comparables.

      In addition, we recognized provisions for loss of $37.4 million to write-down the carrying value of seven assets comprising 2.5 million square feet deemed held for sale during the year to their fair value less costs to sell. The fair values less costs to sell for these properties were determined based on the sales prices and estimated transaction costs.

2004

      During 2004, in order to reposition our portfolio for long-term growth, we announced a program to dispose of certain assets in non-core markets over a five-year period, as market conditions warrant. After an in-depth review of our portfolio on an asset-by-asset basis, we reduced our intended holding period for 96 non-core assets comprising 17.7 million square feet due to our intent to sell these assets over a five-year period. Based on our analysis of the future cash flows of each asset over the shortened holding period, we determined that 46 of the assets comprising 2.8 million square feet were permanently impaired. The difference between the fair value (calculated either by discounting estimated future cash flows and sales proceeds or utilizing

96

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 5 — GAINS/ LOSSES ON SALES OF REAL ESTATE, PROVISIONS FOR LOSS ON ASSETS HELD FOR SALE AND IMPAIRMENTS — (continued)

market comparables) and the net book value was $229.2 million, which was reflected as a non-cash impairment charge in 2004 ($38.5 million of this charge is included in continuing operations and $190.6 million is included in discontinued operations).

      We also recognized a provision for loss of $2.1 million to write-down the carrying value of one building comprising 0.3 million square feet deemed held for sale at December 31, 2004 to its fair value less costs to sell. The fair value less costs to sell for this property was determined based on the sales price and estimated transaction costs.

2003

      During 2003, we determined that one office property was permanently impaired based on our analysis of the future cash flows. As a result, we recognized a non-cash impairment charge of $7.5 million, which reduced the book value of the property to its fair value of $3.8 million. Fair value was determined as the present value of estimated future cash flows including residual proceeds. This office property was sold in 2005; therefore the impairment loss is included in discontinued operations.

Deferred Gain

      During 2005, we deferred the recognition of a $25.6 million gain on the sale of one office property until 2006. We sold the office property for $76.3 million and received $10 million of cash consideration from the buyer in December 2005. We loaned the buyer $66.3 million to finance the remaining portion of the sales price. The loan had a term of 60 days and bore interest at LIBOR plus 1.70%, with an option to extend the term for an additional 60 days at an interest rate of LIBOR plus 2.20%. We accounted for this loan as a note receivable, which is included in “Prepaid expenses and other assets” on the consolidated balance sheet at December 31, 2005, and deferred recognition of the gain on sale of this property until January 2006 when the loan was repaid. The gain was deferred in accordance with the provisions of Statement of Financial Accounting Standards No. 66, Accounting for Sales of Real Estate, because the buyer’s initial investment of $10 million was not deemed adequate to demonstrate the buyer’s commitment to pay for the property. The deferred gain of $25.6 million is included in “Prepaid expenses and other assets” on the consolidated balance sheet, as an offset against the related note receivable at December 31, 2005 (see Note 25 — Subsequent Events).

Properties Held for Sale

      The following properties were classified as held for sale as of December 31, 2005 and December 31, 2004:

							Effective
							Office
							Portfolio
			Disposition		Number of
Property	Location		Date		Buildings		Square Feet
As of December 31, 2005:
120 Montgomery		San Francisco, CA		1/20/2006		1		430,523
3001 Stender Way(a)		Santa Clara, CA		(a)		1		61,825
8-16 Perimeter		Atlanta, GA		2/17/2006		5		65,350
				Total		7		557,698
As of December 31, 2004:
Northland Plaza		Bloomington, MN		1/4/2005		1		296,967

(a) This disposition is subject to certain contingencies and is expected to close in the first quarter of 2006.

97

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 5 — GAINS/ LOSSES ON SALES OF REAL ESTATE, PROVISIONS FOR LOSS ON ASSETS HELD FOR SALE AND IMPAIRMENTS — (continued)

      The net (loss) income for properties sold and properties held for sale is reflected in the consolidated statements of operations as Discontinued Operations for the periods presented. The properties that were partially sold are not reflected as Discontinued Operations in accordance with FAS 144. Below is a summary of the results of operations for properties classified as Discontinued Operations:

				For the years ended December 31,
				2005			2004			2003
				(Dollars in thousands)
Property operating revenues				$	161,969		$	354,788		$	453,641
Expenses:
	Depreciation and amortization				47,676			105,442			112,890
	Property operating				66,782			139,016			158,209
	Ground rent				2,413			4,555			78
	Impairment				153,265			190,636			7,500
		Total expenses			270,136			439,649			278,677
			Operating (loss) income		(108,167	)		(84,861	)		174,964
Other income (expense):
	Interest income				340			263			315
	Interest expense and amortization of deferred financing costs and prepayment expenses				(619	)		(2,717	)		(14,051	)
		Total other (expense) income			(279	)		(2,454	)		(13,736	)
(Loss) income before income taxes, allocations to minority interests, net gain on sales of real estate and provision for (loss) on properties held for sale					(108,446	)		(87,315	)		161,228
Income taxes					(62	)		(36	)		123
(Income) loss allocated to minority interests — partially owned properties (including gain on sales of real estate of $29,699, $214 and $0, respectively)					(30,365	)		(929	)		1,155
Net gain on sales of real estate					15,350			7,596			61,953
Provision for (loss) on properties held for sale					(37,432	)		(2,123	)		—
Net (loss) income				$	(160,955	)	$	(82,807	)	$	224,459
Property net operating income from discontinued operations				$	95,187		$	215,772		$	295,432

      For the properties sold during 2005 and included in discontinued operations, the investments in real estate, net of accumulated depreciation, and mortgage debt balances were $2.5 billion and $61.7 million, respectively, at December 31, 2004.

NOTE 6 — REALIZED GAIN ON SETTLEMENT OF DERIVATIVES AND SALE OF

MARKETABLE SECURITIES

2004

      In May 2004, we settled five forward-starting interest rate swaps that had a combined notional amount of $500 million and recognized a gain of $24.0 million (see Note 12 — Derivative Financial Instruments).

98

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 6 — REALIZED GAIN ON SETTLEMENT OF DERIVATIVES AND SALE OF
MARKETABLE SECURITIES — (continued)

      In July 2004, we disposed of our investment in common shares of Capital Trust and recognized a gain of $2.3 million (see Note 21 — Related Party Transactions).

      We also recognized a gain of $2.7 million from the sale of other securities during 2004.

2003

      We recognized a gain of $8.1 million from the sale of common stock received in connection with an early lease termination and an additional $1.2 million due to the sale of other securities.

NOTE 7 — INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

      The properties listed below are owned by us and other unaffiliated parties in joint ventures, which we account for using the equity method. Our ownership interest shown for each period below represents our economic interest in the office properties from which we derive the net income we recognize in accordance with GAAP. Net income, cash flow from operations and capital transactions for these properties are allocated to us and our joint venture partners in accordance with the respective partnership agreements.

						Our
						Ownership Interest
		Total		Effective		as of December 31,
		Office Portfolio		Office Portfolio
Property	Location	Square Feet		Square Feet		2005			2004
One Post Office Square	Boston, MA		765,296		382,648		50	%		50	%
75-101 Federal Street	Boston, MA		813,195		419,704		51.61	%		51.61	%
Rowes Wharf	Boston, MA		344,645		151,644		44	%		44	%
10 & 30 South Wacker	Chicago, IL		2,003,288		1,502,466		75	%		75	%
Chase Center (fka Bank One Center)(a)	Indianapolis, IN		—		—		—			25	%
Pasadena Towers	Los Angeles, CA		439,366		109,842		25	%		25	%
Promenade II	Atlanta, GA		774,344		387,172		50	%		50	%
SunTrust Center(b)	Orlando, FL		640,741		160,185		25	%		25	%
Preston Commons(c)	Dallas, TX		—		—		—			50	%
Sterling Plaza(c)	Dallas, TX		—		—		—			50	%
Columbia Center (fka Bank of America Tower)	Seattle, WA		1,545,008		774,049		50.1	%		50.1	%
One Post	San Francisco, CA		421,121		210,561		50	%		50	%
161 North Clark(d)	Chicago, IL		1,010,520		252,630		25	%		25	%
Prominence in Buckhead(d)	Atlanta, GA		424,309		106,077		25	%		25	%
World Trade Center East(d)	Seattle, WA		186,912		46,728		25	%		25	%
Treat Towers(d)	Walnut Creek, CA		367,313		91,828		25	%		25	%
Parkshore Plaza I(d)	Folsom, CA		114,356		28,589		25	%		25	%
Parkshore Plaza II(d)	Folsom, CA		155,497		38,874		25	%		25	%
Bridge Pointe Corporate Center I & II(d)	San Diego, CA		372,653		93,163		25	%		25	%
1111 19th Street(d)	Washington, DC		252,014		50,403		20	%		20	%
1620 L Street(d)	Washington, DC		156,272		31,254		20	%		20	%
1333 H Street(d)	Washington, DC		244,585		48,917		20	%		20	%

99

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 7 — INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES — (continued)

						Our
						Ownership Interest
		Total		Effective		as of December 31,
		Office Portfolio		Office Portfolio
Property	Location	Square Feet		Square Feet		2005			2004
Yahoo! Center (fka Colorado Center)(e)	Santa Monica, CA		1,087,628		543,814		50	%		50	%
1601 Market Street(f)	Philadelphia, PA		681,289		74,942		11	%		11	%
1700 Market Street(f)	Philadelphia, PA		841,172		92,529		11	%		11	%
201 Mission Street(g)	San Francisco, CA		483,289		120,822		25	%		100	%
580 California(g)	San Francisco, CA		313,012		78,253		25	%		100	%
Foundry Square IV(h)	San Francisco, CA		—		—		—			—
	Total		14,437,825		5,797,094

(a)	In 2005, we sold our 25% interest in Chase Center (fka Bank One Center), which consisted of two office buildings comprising 1,057,877 square feet, for $45.0 million (which includes the transfer of $16.3 million of mortgage debt encumbering this property to the buyer).
(b)	In December 2005, the joint venture refinanced the mortgage debt encumbering the SunTrust Center. The new mortgage debt has a principal balance of $77.0 million, bears interest at a fixed coupon rate of 5.34% and matures in January 2016. Our share of the principal balance is $19.3 million. Our share of the prior mortgage, which bore interest at a variable rate based on LIBOR plus 80 basis points, was $12.5 million.
(c)	In 2005, we sold our 50% interest in Preston Commons and Sterling Plaza, which consisted of four office buildings comprising 721,351 square feet, for $69.2 million.
(d)	In December 2003, we sold partial interests in these office properties for $596.5 million.
(e)	In July 2004, we acquired a 50% interest in Yahoo! Center for $221.8 million. In 2005, the joint venture obtained a $250.0 million mortgage financing, which bears interest at a fixed coupon rate of 5.27% and matures in October 2015. Our share of the principal balance is $125.0 million.
(f)	In November 2004, we sold partial interests in these office properties for $172.2 million. We account for our remaining interest under the equity method of accounting because we have participating rights with respect to certain significant policies.
(g)	In July 2005, we sold partial interests in these office properties for $162.8 million.
(h)	In 2000, we formed a joint venture with Wilson Investors to develop, construct, lease and manage Foundry Square IV, a 225,490 square foot office building located in San Francisco, California. Through the sale of the office building in July 2003, we disposed of our 40% indirect interest. Our share of the gain on the sale of the property was $7.1 million and is included in income from investments in unconsolidated joint ventures. Our share of the gross proceeds from the sale was $56.6 million, which includes the repayment of a $44.5 million construction loan. Wilson Investors’ share of the proceeds was $17.1 million.

100

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 7 — INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES — (continued)

      Combined summarized financial information for our unconsolidated joint ventures is as follows:

			December 31,
			2005		2004
			(Dollars in thousands)
Balance Sheets:
	Assets:
	Real estate, net of accumulated depreciation		$	3,002,906	$	3,068,975
	Other assets			356,016		343,075
		Total Assets	$	3,358,922	$	3,412,050
	Liabilities and Partners’ and Shareholders’ Equity:
	Mortgage debt(a)		$	1,138,455	$	931,976
	Other liabilities			151,303		138,010
	Partners’ and shareholders’ equity			2,069,164		2,342,064
		Total Liabilities and Partners’ and Shareholders’ Equity	$	3,358,922	$	3,412,050
Our share of historical partners’ and shareholders’ equity			$	878,225	$	1,032,664
Net excess of cost of investments over the net book value of underlying net assets (net of accumulated depreciation of $21,303 and $22,797, respectively)(b)				69,764		84,479
Carrying value of investments in unconsolidated joint ventures			$	947,989	$	1,117,143
Our share of unconsolidated non-recourse mortgage debt			$	473,725	$	361,032

(a) Our share of the scheduled principal payments on non-recourse mortgage debt through maturity as of December 31, 2005 is as follows:

Year		Dollars in thousands
2006		$	52,217
2007			3,999
2008			18,610
2009			11,645
2010			96,174
Thereafter			291,080
	Total	$	473,725

(b) This amount represents the aggregate difference between the Company’s historical cost basis and the basis reflected at the joint venture level, which is typically amortized over the life of the related asset. The basis differentials occur primarily upon the transfer of assets that were previously owned by the Company into a joint venture or the acquisition of partial interests in joint ventures by us.

101

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 7 — INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES — (continued)

				For the years ended December 31,
				2005		2004		2003
				(Dollars in thousands)
Statements of Operations:
	Revenues			$	528,273	$	485,770	$	472,124
	Expenses:
		Interest expense and loan cost amortization			55,732		45,026		75,289
		Depreciation and amortization			132,819		121,722		92,196
		Operating expenses, ground rent and general and administrative expenses			252,804		204,567		180,087
			Total expenses		441,355		371,315		347,572
	Net income before gain on sale of real estate				86,918		114,455		124,552
	Gain on sale of real estate				39,585		—		43,255
	Net income			$	126,503	$	114,455	$	167,807
Our share of:
	Net income			$	68,996	$	50,304	$	79,882
	Interest expense and loan cost amortization			$	22,015	$	21,319	$	50,059
	Depreciation and amortization (real estate related)			$	50,823	$	46,621	$	53,208
	Gain on sale of real estate			$	26,499	$	—	$	7,063

NOTE 8 — LEASE TERMINATION

      In 2005, we executed amendments to a lease that reduced a tenant’s space at the 1301 Avenue of the Americas office property, located in New York, NY, from 564,000 square feet to 217,000 square feet. In connection with these amendments, we recognized lease termination income of $53.2 million, which is included in “Other revenues” in the consolidated statements of operations.

NOTE 9 — MORTGAGE DEBT

      Payments on mortgage debt are generally due in monthly installments of principal and interest or interest only. The historical cost, net of accumulated depreciation, of encumbered properties at December 31, 2005 and 2004 was $4.0 billion and $5.0 billion, respectively.

102

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 9 — MORTGAGE DEBT — (continued)

      During the last two years, the following transactions occurred:

		For the years ended
		December 31,
		2005			2004
		(Dollars in thousands)
Balance at beginning of year(a)		$	2,622,750		$	2,329,552
	Repayments and scheduled principal amortization(b)		(1,077,322	)		(438,828	)
	Assumed through property acquisitions (see Note 4 — Investments in Real Estate)		118,486			534,256
	Recorded in connection with the consolidation of a property (see Note 3 — Variable Interest Entities)		—			203,225
	Repaid upon sale of property		(13,386	)		(5,455	)
	Refinancing(c)		150			—
	Issuances(d)		518,705			—
Balance at end of year(a)		$	2,169,383		$	2,622,750

(a)	Excludes net discounts on mortgage debt of $5.2 million and $13.7 million as of December 31, 2005 and 2004, respectively.
(b)	During 2005, we repaid mortgage debt on the following properties: Sixty State Street, Island Corporate Center, San Mateo BayCenter II, 1740 Technology, One Market, Central Park, Perimeter Center and 1301 Avenue of the Americas. During 2004, we repaid mortgage debt on the following properties: 580 California, BP Tower, 110 Atrium Place, Fremont Bayside, Industrial Drive Warehouse, John Marshall and Worldwide Plaza.
(c)	During 2005, we refinanced the mortgage debt encumbering the Washington Mutual Tower property. The new mortgage has a principal balance of $79.25 million, bears interest at a fixed coupon rate of 4.55% and matures in June 2010. The prior mortgage had a principal balance of $79.1 million, bore interest at a fixed coupon rate of 7.53% and was scheduled to mature in November 2005. The effective interest rate on the new debt is 4.56% as compared to 7.77% on the prior mortgage.
	During 2005, we also refinanced the mortgage debt encumbering the Wells Fargo Center property. The new mortgage has a principal balance of $110 million, bears interest at LIBOR plus 55 basis points and matures in January 2011. The prior mortgage bore interest at a fixed coupon rate of 8.74%. The effective interest rate on the new debt is LIBOR plus 68 basis points as compared to 7.97% on the prior mortgage.
(d)	During 2005, we obtained mortgage financing for the 1301 Avenue of the Americas property. The financing includes senior mortgage debt and a mezzanine loan. The senior mortgage debt has a principal balance of $420.8 million, bears interest at a fixed coupon rate of 5.37% and matures in January 2016. The mezzanine loan has a principal balance of $65.8 million, bears interest at LIBOR plus 90 basis points and matures in January 2009. The effective interest rates on the senior mortgage debt and the mezzanine loan are 5.39% and 5.36%, respectively, as of December 31, 2005.
	Prior to the disposition of the San Felipe Plaza property in 2005, the property was encumbered by a 5.81% mortgage note with an outstanding principal balance of $47.8 million that was scheduled to mature in 2013. The lender agreed to substitute the 1300 North 17th Street property, located in Arlington, Virginia, as replacement collateral. As a result, no prepayment penalty was incurred. The terms of the mortgage note were otherwise unchanged as a result of this transaction. In December 2005, we obtained additional mortgage financing on the 1300 North 17th Street property. This additional mortgage has a principal balance of $32.1 million, bears interest at a fixed coupon rate of 6.03% and an effective interest rate of 6.07%. The mortgage matures in January 2013.

103

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 9 — MORTGAGE DEBT — (continued)

      The table below summarizes our mortgage debt outstanding at December 31, 2005 and 2004:

			December 31,
			2005			2004
			(Dollars in thousands)
Balance
	Fixed interest rate mortgage debt		$	1,993,562		$	2,516,554
	Variable interest rate mortgage debt			175,821			106,196
		Subtotal		2,169,383			2,622,750
	Net discount on mortgage debt			(5,185	)		(13,683	)
		Total mortgage debt	$	2,164,198		$	2,609,067
Weighted average effective interest rate at end of period
	Fixed interest rate mortgage debt(a)			7.01	%		7.80	%
	Variable interest rate mortgage debt(b)			5.17	%		5.53	%
		Effective interest rate		6.86	%		7.71	%

(a)	As of December 31, 2005 and 2004, the effective interest rates on the fixed interest rate mortgage debt ranged from 4.56% to 8.51% and 5.81% to 8.51%, respectively.
(b)	As of December 31, 2005, the effective interest rates on the variable interest rate mortgage debt ranged from 5.06% to 5.36%.

Repayment Schedule

      Our mortgage debt matures at various times through January 2016. As of December 31, 2005, scheduled principal payments through maturity are as follows:

Year		Dollars in thousands
2006		$	108,704
2007			263,018
2008			158,178
2009			630,698
2010			264,076
Thereafter			744,709
	Total	$	2,169,383

104

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 10 — UNSECURED NOTES

      During the last two years, the following transactions occurred:

2005:

Unsecured Notes — Issued:

Original Term	Month of Issuance		Amount			Coupon Rate		Effective Rate(a)		Year of Maturity
			(Dollars in
			thousands)
2 Years to 4 Years		January	$	6,221			3.45%-4.15%		3.76%-4.39%		2007-2009
2 Years to 4 Years		February		3,220			3.70%-4.15%		4.01%-4.39%		2007-2009
3 Years to 5 Years		March		4,997			4.05%-4.75%		4.33%-5.00%		2008-2010
2 Years to 4 Years		April		7,672			4.30%-4.80%		4.61%-5.04%		2007-2009
2 Years to 6 Years		June		6,426			4.10%-4.63%		4.41%-4.87%		2007-2011
3 Years to 4 Years		July		4,722			4.40%-4.55%		4.68%-4.79%		2008-2009
3 Years to 6 Years		September		5,739			4.40%-4.70%		4.68%-4.92%		2008-2011
3 Years to 6 Years		October		1,805			4.55%-5.00%		4.83%-5.22%		2008-2011
Less Issuance Costs				(253	)
Net Proceeds			$	40,549

Unsecured Notes — Repaid:

Month Repaid		Amount		Coupon Rate		Effective Rate(a)
		(Dollars in
		thousands)
February		$	125,000		6.88%		6.40%
February			400,000		6.63%		4.99%
July			100,000		8.00%		6.49%
September			50,000		7.36%		7.69%
	Total/ Weighted Average	$	675,000		6.93%		5.67%

105

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 10 — UNSECURED NOTES — (continued)

2004:

Unsecured Notes — Issued:

Original Term	Month of Issuance		Amount			Coupon Rate			Effective Rate(a)		Year of Maturity
			(Dollars in
			thousands)
10 Years		March	$	1,000,000			4.75%			4.25%		2014
10 Years		May		45,000			3.16%	(b)		3.26%		2014
4 Years to 6 Years		June		4,342			4.75%-5.25%			4.98%-5.46%		2008- 2010
4 Years to 6.5 Years		July		17,570			3.70%-5.15%			3.97%-5.36%		2008- 2011
6 Years		October		800,000			4.65%			4.81%		2010
6 Years		October		200,000			2.64%	(b)		2.77%		2010
4 Years		October		3,771			3.80%-4.00%			4.04%-4.24%		2008
2 Years to 4 Years		November		1,677			3.30%-3.90%			3.61%-4.14%		2006- 2008
2 Years to 4.5 Years		December		6,894			3.35%-4.10%			3.66%-4.34%		2006- 2009
Less Issuance Costs				(17,275	)
Net Proceeds			$	2,061,979

Unsecured Notes — Repaid:

Month Repaid		Amount			Coupon Rate			Effective Rate(a)
		(Dollars in
		thousands)
January		$	300,000			6.50	%		4.59	%
January			100,000			6.90	%		6.27	%
May			200,000			6.80	%		6.10	%
June			250,000			6.50	%		5.31	%
September			30,000			7.24	%		7.26	%
November			325,000	(c)		7.25	%		7.64	%
	Total/ Weighted Average	$	1,205,000			6.80	%		6.02	%

106

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 10 — UNSECURED NOTES — (continued)

      The table below summarizes the unsecured notes outstanding as of December 31, 2005:

		Coupon			Effective			Principal
Original Term		Rate			Rate(a)			Balance		Maturity Date
								(Dollars in
								thousands)
Fixed Rate Unsecured Notes:
6 Years			8.38	%		7.65	%	$	500,000		03/15/06
9 Years			7.44	%		7.74	%		50,000		09/01/06
10 Years			7.13	%		6.74	%		100,000		12/01/06
9 Years			7.00	%		6.80	%		1,500		02/02/07
9 Years			6.88	%		6.83	%		25,000		04/30/07
9 Years			6.76	%		6.76	%		300,000		06/15/07
10 Years			7.41	%		7.70	%		50,000		09/01/07
7 Years			7.75	%		7.91	%		600,000		11/15/07
10 Years			6.75	%		6.97	%		150,000		01/15/08
10 Years			6.75	%		7.01	%		300,000		02/15/08
10 Years			6.80	%		6.94	%		500,000		01/15/09
10 Years			7.25	%		7.14	%		200,000		05/01/09
11 Years			7.13	%		6.97	%		150,000		07/01/09
10 Years			8.10	%		8.22	%		360,000		08/01/10
6 Years			4.65	%		4.81	%		800,000		10/01/10
10 Years			7.65	%		7.20	%		200,000		12/15/10
10 Years			7.00	%		6.83	%		1,100,000		07/15/11
10 Years			6.75	%		7.02	%		500,000		02/15/12
10 Years			5.88	%		5.98	%		500,000		01/15/13
10 Years(d)			4.75	%		5.54	%		1,000,000		03/15/14
20 Years			7.88	%		8.08	%		25,000		12/01/16
20 Years			7.35	%		8.08	%		200,000		12/01/17
20 Years			7.25	%		7.54	%		250,000		02/15/18
30 Years			7.50	%		8.24	%		150,000		10/01/27
30 Years			7.25	%		7.31	%		225,000		06/15/28
30 Years			7.50	%		7.55	%		200,000		04/19/29
30 Years			7.88	%		7.94	%		300,000		07/15/31
EOP InterNotes(e)			4.30	%		4.56	%		75,056		11/15/06-10/15/11
	Total/ Weighted Average Fixed Rate Unsecured Notes		6.67	%		6.80	%		8,811,556

107

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 10 — UNSECURED NOTES — (continued)

			Coupon			Effective			Principal
Original Term			Rate			Rate(a)			Balance			Maturity Date
									(Dollars in
									thousands)
Variable Rate Unsecured Notes:
6 Years				4.65	%		4.78	%		200,000			10/01/10
10 Years				5.17	%		5.27	%		45,000			05/27/14
	Total/ Weighted Average Variable Rate Unsecured Notes			4.75	% 6.62%		4.87	% 6.75%	245,000 9,056,556
	Total/ Weighted Average Unsecured Notes									(23,936	)
Net Discount on Unsecured Notes									$	9,032,620
		Total Unsecured Notes

(a)	Includes the effect of settled interest rate protection and interest rate swaps, offering and transaction costs and premiums and discounts.
(b)	The $45 million notes have a variable interest rate of LIBOR plus 77.5 basis points plus an additional 10 basis points attributed to loan costs. The $200 million notes have a variable interest rate of LIBOR plus 60 basis points plus an additional 13 basis points attributed to loan costs.
(c)	In November 2004, we redeemed our 7.25% Senior Exchangeable Notes due November 15, 2008. The total paid on the redemption date was the principal amount of $325 million plus accrued interest. In conjunction with the redemption, we expensed $5.3 million of unamortized loan costs, which are included in amortization of deferred financing costs and prepayment expenses on the consolidated statements of operations.
(d)	In March 2004, we entered into four interest rate swaps that each had a notional amount of $250 million for a combined notional amount of $1 billion that effectively converted these notes to a variable interest rate based on the 6-month LIBOR rate. One of the interest rate swaps was terminated during June 2005 and the remaining swaps were terminated in September 2005. The termination of the swaps effectively converted the notes back to a fixed interest rate (see Note 12 — Derivative Financial Instruments).
(e)	In June 2004, we launched a new program allowing for the issuance of up to $500 million of unsecured medium-term notes for sale to retail investors through licensed brokers (“EOP InterNotes”). The rates shown are weighted average rates. The coupon rates on the EOP InterNotes range from 3.30% to 5.25%. Including all offering expenses, the all-in effective rates of the EOP InterNotes range from 3.61% to 5.46%.

108

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 10 — UNSECURED NOTES — (continued)

Restrictions and Covenants under Unsecured Notes

      The terms of our unsecured notes contain financial covenants described below. As of December 31, 2005, we believe we were in compliance with each of these financial covenants. If we fail to comply with any of these covenants, the indebtedness could become due and payable before its stated due date.

      Set forth below are the financial covenants to which we are subject under our unsecured note indentures as of December 31, 2005:

Covenants (in each case as defined in the respective indenture)

• Debt to Adjusted Total Assets may not be greater than 60%;

• Secured Debt to Adjusted Total Assets may not be greater than 40%;

• Consolidated Income Available for Debt Service to Annual Debt Service Charge may not be less than 1.50:1; and

• Total Unencumbered Assets to Unsecured Debt may not be less than 150%(a)

(a) The unsecured notes we assumed in the merger with Spieker, of which $1.2 billion are still outstanding at December 31, 2005, are subject to a minimum ratio of 165%.

NOTE 11 — LINES OF CREDIT

Line of Credit

      In August 2005, we obtained a $1.25 billion revolving line of credit, which bore interest at LIBOR plus 47.5 basis points and had an annual facility fee of 15 basis points, or $1.875 million. The $1.25 billion line of credit matures in August 2009. We have one option to extend the maturity date for an additional year for an extension fee of $1.875 million. The previously existing $1.0 billion line of credit that was scheduled to mature in May 2006 (which bore interest at LIBOR plus 60 basis points plus an annual facility fee of 20 basis points) terminated in August 2005 effective with the first funding of the $1.25 billion line of credit. As a result of a downgrade in EOP Partnership’s debt rating in December 2005, the interest rate on the $1.25 billion line of credit increased to LIBOR plus 60 basis points and the annual facility fee increased to 20 basis points, or $2.5 million. As of December 31, 2005 and 2004, $881 million and $548 million was outstanding under our $1.25 billion and $1.0 billion line of credit facility, respectively.

Bridge Facilities

      In October 2005, we obtained and fully drew upon a $500 million unsecured term loan facility, bearing interest at LIBOR plus 45 basis points (the spread is subject to change based on EOP Partnership’s credit rating) and is scheduled to mature in October 2006. As a result of a downgrade in EOP Partnership’s debt rating in December 2005, the interest rate on the term loan facility increased to LIBOR plus 55 basis points. In December 2005, we entered into an amendment that increased the facility to $750 million with an option to draw an additional $250 million, which was exercised in January 2006 (see Note 25 — Subsequent Events). As of December 31, 2005, $750 million was outstanding under this facility.

      In February 2005, we obtained a $250 million unsecured term loan facility, which bore interest at LIBOR plus 35 basis points and was scheduled to mature in February 2006. We repaid and terminated the term loan facility in July 2005.

      In July 2004, we obtained a $500 million unsecured term loan facility, which bore interest at LIBOR plus 65 basis points and had an annual facility fee of $750,000 payable quarterly. This credit facility had a term of 364 days and was terminated in October 2004.

109

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 11 — LINES OF CREDIT — (continued)

      In December 2003, we obtained a $1.0 billion unsecured term loan facility, which bore interest at LIBOR plus 65 basis points and had an annual facility fee of $1.5 million payable quarterly. This credit facility had a term of 364 days and was terminated in March 2004.

Financial Covenants

      The terms of our line of credit and term loan facility contain financial covenants summarized below. As of December 31, 2005, we believe we were in compliance with each of these financial covenants. If we fail to comply with any of these covenants, the indebtedness could become due and payable before its stated date.

•  total debt to total asset value may not exceed 0.60:1 at any time and, in certain circumstances, may not exceed 0.65:1;

•  cash flow to fixed charges may not be less than 1.5:1;

•  secured debt to total asset value may not exceed 0.40:1;

•  unsecured debt to unencumbered asset value may not exceed 0.60:1 and, in certain circumstances, may not exceed 0.65:1; and

•  our investments in unimproved assets, developments, joint venture interests, mortgages and securities, and properties which constitute primarily warehouse distribution facilities, in the aggregate, may not exceed 30% of our total asset value.

NOTE 12 — DERIVATIVE FINANCIAL INSTRUMENTS

Interest Rate Swaps

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

      The fixed-to-floating interest rate swaps were reflected on the consolidated balance sheets at market value. The hedged unsecured notes were adjusted on the consolidated balance sheets by the amount that they changed in value due to changes in interest rates during the hedged period. The market value of the swaps at December 31, 2004 represented a liability of $29.5 million and was included in other liabilities. The corresponding market adjustment to the hedged unsecured notes was recorded as a discount on the unsecured notes. There are no swaps outstanding at December 31, 2005.

110

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 12 — DERIVATIVE FINANCIAL INSTRUMENTS — (continued)

Forward-Starting Interest Rate Swaps

      As of December 31, 2003, we had forward-starting interest rate swaps with a combined notional amount of $1.3 billion outstanding. All of the forward-starting interest rate swaps were terminated in 2004, as follows:

•  In May 2004, we settled five forward-starting interest rate swaps with a combined notional amount of $500 million and recognized a gain of $24.0 million, which is classified as “realized gain on settlement of derivatives and sale of marketable securities” on the consolidated statements of operations. The swaps were entered into in 2003 to hedge an unsecured note offering that was expected to occur in June 2004, but did not occur. The market value of these swaps at December 31, 2003 represented an asset of $11.1 million which was recorded in other assets with a corresponding adjustment to accumulated other comprehensive income.

•  In conjunction with the issuance of $1.0 billion of 4.75% unsecured notes in March 2004 due March 2014, we paid $69.1 million to settle four forward-starting interest rate swaps that had a combined notional amount of $800 million that were previously entered into to hedge the interest rate of the $1.0 billion notes. $0.2 million of the settlement amount was immediately recognized in interest expense because the hedge was not perfectly effective and the remaining $68.9 million was charged to accumulated other comprehensive income. The amount charged to accumulated other comprehensive income is being amortized to interest expense over the 10-year term of the hedged notes. The market value of these swaps at December 31, 2003 represented a liability of $21.5 million which was recorded in other liabilities and a corresponding adjustment to accumulated other comprehensive income.

•  $6.8 million will be reclassified from accumulated other comprehensive income to interest expense in 2006 related to amortization of net payments on settlements of forward starting interest rate swaps.

NOTE 13 — IMPACT OF HURRICANE KATRINA

      In August 2005, One Lakeway Center, Two Lakeway Center, and Three Lakeway Center located in Metairie, LA sustained extensive damage due to Hurricane Katrina. As a result, we recorded $10.6 million of property damage and lost $1.9 million of rental revenue during the third quarter 2005. During the fourth quarter 2005, we revised our previous estimate with respect to the extent of the property damage and recorded an additional $20.9 million of expenses due to increased costs related to clean up and remediation and greater than expected wind damage, primarily to windows. The total property damage of $31.5 million is classified as “Insurance expense” on the consolidated statement of operations. We also lost an additional $2.4 million of rental revenue during the fourth quarter 2005, resulting in a total loss of $4.3 million of revenues during the year ended December 31, 2005. These losses are not covered by third-party insurance because we are self-insured up to $50 million as discussed further in Note 24. While we believe that the assumptions used to determine estimated damages as a result of Hurricane Katrina are reasonable, actual results could differ from these estimates.

NOTE 14 — MINORITY INTERESTS IN PARTIALLY OWNED PROPERTIES

      The assets, liabilities and results of operations of the following properties are consolidated because we receive substantially all of the economics or have the direct or indirect ability to control major decisions, except for SunAmerica Center (see Note 3 — Variable Interest Entities).

111

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 14 — MINORITY INTERESTS IN PARTIALLY OWNED PROPERTIES — (continued)

      The amounts shown below approximate our economic ownership interest for the periods presented. Net income, cash flow from operations and capital transactions are allocated to us and our minority interest partners in accordance with the respective partnership agreements. Our share of these items is subject to change based upon, among other things, the operations of the property and the timing and amount of capital transactions.

								Our Economic
								Interest
				Total Office		Effective Office		As of December 31,
				Portfolio		Portfolio
Property		Location		Square Feet		Square Feet		2005			2004
Joint Ventures with Contractual Termination Dates:
	The Plaza at La Jolla Village		San Diego, CA		635,419		423,634		66.7	%		66.7	%
	222 Berkley Street		Boston, MA		519,608		475,441		91.5	%		91.5	%
	500 Boylston Street		Boston, MA		706,864		646,781		91.5	%		91.5	%
	Wells Fargo Center		Minneapolis, MN		1,117,439		838,079		75.0	%		75.0	%
	Ferry Building(a)		San Francisco, CA		243,812		243,812		100.0	%		100.0	%
	2951 28th Street		Santa Monica, CA		85,000		83,300		98.0	%		98.0	%
	San Felipe Plaza(b)		Houston, TX		—		—		—			100.0	%
	Four Forest Plaza(b)		Dallas, TX		—		—		—			100.0	%
	Market Square		Washington, D.C.		681,051		681,051		100.0	%		100.0	%
	One Ninety One Peachtree Tower		Atlanta, GA		1,215,288		1,215,288		100.0	%		100.0	%
	Brea Corporate Plaza		Brea, CA		117,195		117,195		100.0	%		100.0	%
	Northborough Tower(b)		Houston, TX		—		—		—			100.0	%
	Sixty State Street		Boston, MA		823,014		823,014		100.0	%		100.0	%
	Worldwide Plaza Amenities		New York, NY		108,391		108,391		100.0	%		100.0	%
Total Joint Ventures with Contractual Termination Dates:					6,253,081		5,655,986
Joint Ventures without Contractual Termination Dates:
	Water’s Edge(b)		Playa Vista, CA		—		—		—			87.5	%
	Park Avenue Tower		New York, NY		568,060		568,060		100.0	%		100.0	%
	850 Third Avenue		New York, NY		568,867		563,178		99.0	%		99.0	%
	Washington Mutual Tower		Seattle, WA		1,207,823		905,867		75.0	%		75.0	%
	1301 Avenue of the Americas		New York, NY		1,765,694		1,765,694		100.0	%		100.0	%
	SunAmerica Center		Century City, CA		780,063		524,772		67.27	%		67.27	%
	Concar(b)		San Mateo, CA		—		—		—			79.96	%
	Dulles Station(b)		Herndon, VA		—		—		—			70.0	%
Total Joint Ventures without Contractual Termination Dates:					4,890,507		4,327,571
Total					11,143,588		9,983,557

(a) A joint venture between us and other unaffiliated parties leased the Ferry Building from the City and County of San Francisco, through its Port Commission (the “Port”). Under this lease, the Port is paid a

112

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 14 — MINORITY INTERESTS IN PARTIALLY OWNED PROPERTIES — (continued)

	stated base rent. In addition, once the joint venture has received from the project a cumulative preferred return of 8% (prior to stabilization) and 11% (after stabilization), then 50% of the proceeds from the operation and ownership of the project are paid to the Port as percentage rent.
	The joint venture redeveloped the Ferry Building in a manner to permit the use of federal rehabilitation tax credits (“Historic Tax Credits”). Since the original members of the joint venture could not take full advantage of the Historic Tax Credits, the joint venture admitted a new member who could do so. This investor member contributed $24.7 million in equity and is entitled to a 3% preferred return. This investor member’s interest is subject to put/call rights during 2009 and 2010. Upon the purchase of the investor member’s interest pursuant to the put/call, it is estimated that the joint venture will retain $11 million of the capital contributed by the investor member (based on a formula to determine the purchase price for the investor member’s interest and after taking into account the preferred return that will have been paid to the investor member by such time).
	Through the creation of a master lease, our effective ownership percentage in the net cash flow of the Ferry Building project is 100% after the payment to the Port of the percentage rent described above and the distribution of the preferred returns.
(b)	During 2005, we sold our entire interests in these properties.

NOTE 15 — SHAREHOLDERS’ EQUITY AND MANDATORILY REDEEMABLE PREFERRED SHARES

Common Shares

      The following table presents the changes in the issued and outstanding Common Shares since January 1, 2004, excluding 43,639,766 Units and 47,494,701 Units outstanding at December 31, 2005 and 2004, respectively, which are exchangeable for Common Shares on a one-for-one basis, or the cash equivalent thereof, subject to certain restrictions:

		For the years ended
		December 31,
		2005			2004
Outstanding at January 1,			403,842,441			400,460,388
	Repurchased and retired under our open market repurchase program (at an average purchase price of $30.68 and $25.80 per share, respectively)(a)		(30,986,900	)		(1,260,600	)
	Repurchased and retired under our Supplemental Retirement Savings Plan (at an average purchase price of $31.44 and $29.44 per share, respectively)		(267,410	)		(152,630	)
	Repurchased in 2004 under our Supplemental Retirement Savings Plan, but retired in 2005 (at an average purchase price of $29.63 per share)		(25,728	)		—
	Issued upon exercise of share options		5,256,055			2,489,462
	Issued upon redemption of Units		2,114,915			1,390,129
	Restricted shares issued to employees, net of cancellations		720,612			915,692
	Common Shares issued as compensation for Board of Trustee fees		20,915			—
	Issued upon conversion of 70 Series B Preferred Shares		98			—
Outstanding at December 31,			380,674,998			403,842,441

(a) Under our open market repurchase program announced in July 2002, as amended, we have been authorized to repurchase in the open market or in privately-negotiated transactions up to $2.1 billion of Common Shares through May 31, 2006. As of December 31, 2005, $557.3 million of Common Shares are available for repurchase under the program. Common Shares repurchased to fund our employee benefit programs, including the Employee Share Purchase Plan and Supplemental Retirement Savings Plan, are

113

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 15 — SHAREHOLDERS’ EQUITY AND MANDATORILY REDEEMABLE PREFERRED SHARES — (continued)

not considered part of the repurchase program. During the years ended December 31, 2005 and 2004, 30,986,900 and 1,260,600 Common Shares were repurchased under our open market purchase program for $950.7 million and $32.5 million, respectively.

Distributions

      The quarterly distribution through the fourth quarter of 2005 was $0.50 per Common Share. For the years ended December 31, 2005, 2004 and 2003, the per share distributions were $2.00.

Mandatorily Redeemable Preferred Shares

      The Series B Convertible, Cumulative Redeemable Preferred Shares (“PIERS”) are convertible at any time, at the option of the holder, into Common Shares at a conversion price of $35.70 per Common Share (equivalent to a conversion rate of 1.40056 Common Shares for each PIERS). The PIERS are subject to mandatory redemption on February 15, 2008 at a price of $50.00 per share, plus accumulated and unpaid distributions at the redemption date, if any.

Preferred Shares

      We have $212.5 million of Series G Cumulative Redeemable Preferred Shares outstanding as of December 31, 2005 and 2004. We are the original issuer of these preferred shares and have recorded the associated $7.0 million of deferred issuance costs to shareholders’ equity. Upon any redemption of these preferred shares, we will recognize the deferred issuance costs as an additional preferred distribution in accordance with EITF Topic D-42 The Effect on the Calculation of Earnings per Share for the Redemption or Induced Conversion of Preferred Stock. The preferred shareholders are entitled to receive, when and as authorized by our Board of Trustees, cumulative preferential cash distributions at an annual distribution rate of 7.75% or $1.9375 per share. We may, but are not obligated to, redeem the preferred shares in whole or in part on or after July 29, 2007 at a cash redemption price equal to $25.00 per share plus all accrued dividends at the redemption date, if any.

      The annual per share distributions were as follows:

	For the years ended December 31,
	2005		2004		2003
Series B	$	2.625	$	2.625	$	2.625
Series C(a)	$	—	$	0.12578125	$	2.15625
Series E(b)	$	—	$	—	$	1.3015625
Series F(c)	$	—	$	—	$	1.00
Series G	$	1.9375	$	1.9375	$	1.9375

(a)	In January 2004, we redeemed all 4,562,900 outstanding 8.625% Series C Cumulative Redeemable Preferred Shares of Beneficial Interest (“Series C”). The Series C were redeemed at a redemption price of $25.00 per share for an aggregate redemption price of $114.1 million. The deferred issuance costs of $4.1 million were reflected as a preferred distribution.
(b)	In June 2003, we redeemed all 6,000,000 outstanding 7.875% Series E Cumulative Redeemable Preferred Shares, which were issued in connection with the Spieker Merger, at a redemption price of $25.00 per share for an aggregate redemption price of $151.9 million, which includes $1.9 million of accrued and unpaid distributions.

114

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 15 — SHAREHOLDERS’ EQUITY AND MANDATORILY REDEEMABLE PREFERRED SHARES — (continued)

(c) In June 2003, we redeemed all 4,000,000 outstanding 8.0% Series F Cumulative Redeemable Preferred Shares, which were issued in connection with the Spieker Merger, at a redemption price of $25.00 per share for an aggregate redemption price of $100.0 million.

Accumulated Other Comprehensive Loss

      The table below summarizes the changes in accumulated other comprehensive loss over the past three years and the accumulated balances by item:

															Investments
															in Marketable
															Securities
	Forward-Starting Interest Rate Swaps
																		Reclassification
										Reclassification					Unrealized			adjustment for
				Reversal of						of ineffective		Amortization			holding			realized losses			Total
	Unrealized			unrealized			Proceeds			portion of swap		of (proceeds)			gains			(gains) from			Accumulated
	holding			holding (gain)			(payments)			settlement		payments			(losses)			investments			Other
	(losses)			loss on			from			payment to net		from			from			included in			Comprehensive
	gains			settlements			settlements			income		settlements			investments			net income			Loss
	(Dollars in thousands)
Balance at December 31, 2002	$	(18,611	)	$	—		$	—		$	—	$	—		$	280		$	116		$	(18,215	)
Change during the period		8,930			(768	)		768			—		(73	)		848			(1,142	)		8,562
Balance at December 31, 2003		(9,682	)		(768	)		768			—		(73	)		1,128			(1,026	)		(9,653	)
Change during the period		(34,665	)		45,115			(69,130	)		212		5,206			23			(31	)		(53,270	)
Balance at December 31, 2004		(44,347	)		44,347			(68,362	)		212		5,133			1,151			(1,057	)		(62,923	)
Change during the period		—			—			—			—		6,815			(250	)		—			6,565
Balance at December 31, 2005	$	(44,347	)	$	44,347		$	(68,362	)	$	212	$	11,948		$	901		$	(1,057	)	$	(56,358	)

NOTE 16 — FUTURE MINIMUM RENTS

      Future minimum rental receipts due on noncancelable operating leases as of December 31, 2005 were as follows:

Year		Dollars in thousands
2006		$	2,356,994
2007			2,164,140
2008			1,917,083
2009			1,632,476
2010			1,331,385
Thereafter			3,889,649
	Total	$	13,291,727

      We are subject to the usual business risks associated with the collection of the above scheduled rents. The future minimum rental receipts due on noncancelable operating leases from our joint ventures accounted for under the equity method are not included.

115

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 17 — FUTURE MINIMUM LEASE PAYMENTS

      Certain properties are subject to ground leases. Some of these leases require rental payment increases based upon the appraised value of the property at specified dates, increases in pricing indexes or certain financial calculations based on the operations of the respective property. Any incremental changes in the rental payments as a result of these adjustments are not included in the table below because the amount of the change is not determinable. Future minimum lease obligations under these noncancelable leases and our corporate office lease as of December 31, 2005 were as follows:

Year		Dollars in thousands
2006		$	22,124
2007			22,119
2008			21,855
2009			21,644
2010			21,733
Thereafter			1,211,027
	Total	$	1,320,502

      Rental expense deducted in calculating income from continuing operations for the years ended December 31, 2005, 2004 and 2003 was $27.2 million, $25.0 million and $24.2 million, respectively. Of the total rental expense recorded in the years ended December 31, 2005, 2004 and 2003, $22.5 million, $20.9 million and $20.2 million is included in ground rent expense in the consolidated statements of operations and $4.7 million, $4.1 million and $4.0 million is included in corporate general and administrative expense, respectively.

116

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 18 — EARNINGS PER SHARE

      The following table sets forth the computation of basic and diluted earnings per share:

			For the years ended December 31,
			2005			2004			2003
			(Dollars in thousands, except per share amounts)
Numerator:
Income from continuing operations			$	203,894		$	253,811		$	430,603
Preferred distributions				(34,803	)		(39,093	)		(51,872	)
Income from continuing operations available to common shareholders				169,091			214,718			378,731
Discontinued operations (including net gain on sales of real estate and provision for (loss) on properties held for sale of $(22,082), $5,473 and $61,953, respectively)				(160,955	)		(82,807	)		224,459
Cumulative effect of a change in accounting principle				—			(33,697	)		—
Numerator for basic earnings per share — net income available to common shareholders				8,136			98,214			603,190
Add back income allocated to minority interests in EOP Partnership				907			11,747			74,152
Numerator for diluted earnings per share — net income available to common shareholders			$	9,043		$	109,961		$	677,342
Denominator:
Denominator for basic earnings per share — weighted average Common Shares outstanding				403,147,751			400,755,733			401,016,093
Effect of dilutive potential common shares:
	Units			45,199,136			48,163,569			49,578,372
	Share options and restricted shares			3,699,568			2,077,945			1,966,888
		Dilutive potential common shares		48,898,704			50,241,514			51,545,260
Denominator for diluted earnings per share — weighted average Common Shares outstanding and dilutive potential common shares				452,046,455			450,997,247			452,561,353
Earnings per share — basic:
Income from continuing operations available to common shareholders, net of minority interests			$	0.38		$	0.50		$	1.01
Discontinued operations, net of minority interests				(0.36	)		(0.18	)		0.50
Cumulative effect of a change in accounting principle, net of minority interests				—			(0.08	)		—
Net income available to common shareholders, net of minority interests(a)			$	0.02		$	0.25		$	1.50
Earnings per share — diluted:
Income from continuing operations available to common shareholders			$	0.38		$	0.50		$	1.00
Discontinued operations				(0.36	)		(0.18	)		0.50
Cumulative effect of a change in accounting principle				—			(0.07	)		—
Net income available to common shareholders(a)			$	0.02		$	0.24		$	1.50

117

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 18 — EARNINGS PER SHARE — (continued)

(a)  Net income available to common shareholders per share may not total the sum of the per share components due to rounding.

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

				For the years ended December 31,
		Weighted Average
Antidilutive Securities		Exercise Price		2005		2004		2003
Share options		$	32.960		562,765		—		—
Share options		$	29.134		—		15,153,748		—
Share options		$	29.220		—		—		13,436,967
Series B Preferred Shares(b)		$	35.700		8,389,265		8,389,354		8,389,354
	Total				8,952,030		23,543,102		21,826,321

(b) The amounts shown represent the resulting Common Shares upon conversion (see Note 15 — Shareholders’ Equity and Mandatorily Redeemable Preferred Shares).

      For additional disclosures regarding employee share options and restricted shares, see Note 2 — Summary of Significant Accounting Policies and Note 22 — Share-Based Employee Compensation Plans.

NOTE 19 — SEGMENT INFORMATION

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

			As of or for the years ended December 31,
			2005		2004		2003
			(Dollars in thousands)
Property Operating Revenues:
	Rental		$	2,340,922	$	2,278,286	$	2,224,934
	Tenant reimbursements			422,436		403,816		405,290
	Parking			114,057		108,061		103,107
	Other(a)			105,434		69,643		76,628
		Total Property Operating Revenues		2,982,849		2,859,806		2,809,959

118

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 19 — SEGMENT INFORMATION — (continued)

			As of or for the years ended December 31,
			2005			2004			2003
			(Dollars in thousands)
Property Operating Expenses:
	Real estate taxes			339,006			324,481			305,588
	Insurance			59,567			29,521			19,846
	Repairs and maintenance			340,904			312,928			297,677
	Property operating			441,834			390,454			370,487
		Total Property Operating Expenses		1,181,311			1,057,384			993,598
		Property Net Operating Income from Continuing Operations	$	1,801,538		$	1,802,422		$	1,816,361
Property Operating Margin from Continuing Operations(b)				60.4	%		63.0	%		64.6	%
Reconciliation of Property Net Operating Income from Continuing Operations to Income from Continuing Operations:
Property Net Operating Income from Continuing Operations			$	1,801,538		$	1,802,422		$	1,816,361
Add: Fee income				17,740			14,226			15,861
Less:
	Depreciation			(656,102	)		(614,748	)		(561,033	)
	Amortization			(93,663	)		(72,954	)		(56,428	)
	Ground rent			(22,517	)		(20,912	)		(20,227	)
	Corporate general and administrative			(66,536	)		(52,242	)		(62,479	)
	Impairment			(65,738	)		(38,534	)		—
Operating Income				914,722			1,017,258			1,132,055
Less:
	Other expenses			(815,672	)		(811,660	)		(791,592	)
	Income taxes			272			(1,981	)		(5,429	)
	Minority interests:
		EOP Partnership		(907	)		(11,747	)		(74,152	)
		Partially owned properties		(9,825	)		(10,264	)		(9,271	)
Add:
	Income from investments in unconsolidated joint ventures (including gain on sales of real estate of $26,499, $0 and $7,063, respectively)			68,996			50,304			79,882
	Gain on sales of real estate			46,308			21,901			99,110
Income from Continuing Operations			$	203,894		$	253,811		$	430,603
Capital and tenant improvements and lease commissions			$	471,020		$	565,538		$	545,183
Investments in unconsolidated joint ventures			$	947,557		$	1,116,748		$	1,128,175

(a)	Other income consists primarily of income from early lease terminations and ancillary income from tenants.
(b)	Defined as Property Net Operating Income from Continuing Operations divided by Total Property Operating Revenues.

119

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 20 — QUARTERLY DATA (UNAUDITED)

		For the three months ended
		12/31/05			9/30/05		6/30/05			3/31/05
		(Dollars in thousands, except per share amounts)
Total revenues(a)		$	786,555		$	732,081	$	723,839		$	758,114
Operating income(a)		$	177,291		$	221,652	$	220,689		$	295,089
(Loss) income from continuing operations(a)		$	(6,897	)	$	70,746	$	63,150		$	76,895
Discontinued operations(a)		$	34,560		$	31,700	$	(259,891	)	$	32,676
Net income (loss)		$	27,663		$	102,446	$	(196,741	)	$	109,571
Earnings (loss) per share — basic:
	Net income (loss) per share	$	0.05		$	0.23	$	(0.51	)	$	0.25
Earnings (loss) per share — diluted:
	Net income (loss) per share	$	0.05		$	0.23	$	(0.51	)	$	0.25

(a)  The amounts presented for the first three quarters are not equal to the same amounts previously reported in Form 10-Q for each period as a result of discontinued operations. Below is a reconciliation to the amounts previously reported in Form 10-Q:

	For the three months ended
	9/30/05			6/30/05			3/31/05
	(Dollars in thousands)
Total revenues previously reported	$	738,594		$	757,093		$	825,756
Discontinued operations		(6,513	)		(33,254	)		(67,642	)
Revised total revenues	$	732,081		$	723,839		$	758,114
Operating income previously reported	$	223,554		$	77,819		$	316,559
Discontinued operations		(1,902	)		142,870			(21,470	)
Revised operating income	$	221,652		$	220,689		$	295,089
Income (loss) from continuing operations previously reported	$	72,903		$	(79,647	)	$	98,040
Discontinued operations		(2,157	)		142,797			(21,145	)
Revised income from continuing operations	$	70,746		$	63,150		$	76,895
Discontinued operations previously reported	$	29,543		$	(117,094	)	$	11,531
Additional discontinued operations from properties sold subsequent to the respective reporting period		2,157			(142,797	)		21,145
Revised discontinued operations	$	31,700		$	(259,891	)	$	32,676

120

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 20 — QUARTERLY DATA (UNAUDITED) — (continued)

		For the three months ended
		12/31/04		9/30/04			6/30/04		3/31/04
		(Dollars in thousands, except per share amounts)
Total revenues(b)		$	738,724	$	715,130		$	713,591	$	706,587
Operating income(b)		$	248,060	$	220,255		$	267,577	$	281,368
Income from continuing operations(b)		$	54,591	$	41,341		$	79,627	$	78,257
Discontinued operations(b)		$	15,448	$	(161,620	)	$	29,881	$	33,479
Income (loss) before cumulative effect of a change in accounting principle		$	70,039	$	(120,279	)	$	109,508	$	111,736
Cumulative effect of a change in accounting principle		$	—	$	—		$	—	$	(33,697	)
Net income (loss)		$	70,039	$	(120,279	)	$	109,508	$	78,039
Earnings (loss) per share — basic:
	Income (loss) before cumulative effect of a change in accounting principle per share	$	0.15	$	(0.32	)	$	0.25	$	0.23
Earnings (loss) per share — diluted:
	Income (loss) before cumulative effect of a change in accounting principle per share	$	0.15	$	(0.32	)	$	0.25	$	0.23

(b)  The amounts presented for the four quarters are not equal to the same amounts previously reported in Form 10-Q or Form 10-K for each period as a result of discontinued operations. Below is a reconciliation to the amounts previously reported in Form 10-Q or Form 10-K:

	For the three months ended
	12/31/04			9/30/04			6/30/04			3/31/04
	(Dollars in thousands)
Total revenues previously reported	$	819,528		$	721,883		$	748,930		$	777,803
Discontinued operations		(80,804	)		(6,753	)		(35,339	)		(71,216	)
Revised total revenues	$	738,724		$	715,130		$	713,591		$	706,587
Operating income previously reported	$	266,594		$	214,537		$	278,723		$	305,857
Discontinued operations		(18,534	)		5,718			(11,146	)		(24,489	)
Revised operating income	$	248,060		$	220,255		$	267,577		$	281,368
Income from continuing operations previously reported	$	72,821		$	36,327		$	90,749		$	101,476
Discontinued operations		(18,230	)		5,014			(11,122	)		(23,219	)
Revised income from continuing operations	$	54,591		$	41,341		$	79,627		$	78,257
Discontinued operations previously reported	$	(2,782	)	$	(156,606	)	$	18,759		$	10,260
Additional discontinued operations from properties sold subsequent to the respective reporting period		18,230			(5,014	)		11,122			23,219
Revised discontinued operations	$	15,448		$	(161,620	)	$	29,881		$	33,479

121

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 21 — RELATED PARTY TRANSACTIONS

      Amounts paid to related parties for the years ended December 31, 2005, 2004 and 2003 were as follows:

		For the years ended
		December 31,
		2005		2004		2003
		(Dollars in thousands)
Office rent(a)		$	4,726	$	3,755	$	3,959
Development fees, leasing commissions and management fees(b)			—		1,532		3,569
	Total	$	4,726	$	5,287	$	7,528
Payable to related parties at year end(a)(b)(c)		$	1,018	$	313	$	273

(a)  We lease office space from Two North Riverside Plaza Joint Venture, a partnership composed of trusts established for the benefit of the families of Samuel Zell, the Chairman of our Board of Trustees (“Mr. Zell”), and Robert Lurie, a deceased former business partner of Mr. Zell. The term of the lease expires on May 31, 2014.

Amounts payable to related parties as of December 31, 2005 and 2004 include $0.3 million of office rent expense incurred but not yet paid.

(b)  The amounts paid for the periods shown above were paid to an affiliate of William Wilson III, one of our trustees through May 2004. We entered into a joint venture agreement with Wilson Investors in 2000 for the purpose of developing, constructing, leasing and managing developments in northern California. We own 49.9% of Wilson/ Equity Office, LLC (“W/ EO”) and Wilson Investors owns 50.1% of W/ EO. William Wilson III, through his ownership of Wilson Investors, indirectly owns 22% of W/ EO and 30% of any promote to which Wilson Investors is entitled under the joint venture agreement. Our investment in W/ EO as of December 31, 2004 and 2003 was $0.4 million and $1.3 million, respectively, which represents an indirect interest in Concar (a consolidated office property sold during 2005). As of December 31, 2005, our investment in W/ EO was $0.4 million.

We created joint ventures with W/ EO and also, in certain cases, unaffiliated parties for the development of various office properties. We agreed to provide first mortgage financing to the ownership entities of each of these developments at the greater of 6.5% or LIBOR plus 3.25%, generally maturing 36 months after initial funding or earlier at our option, in the event alternative financing sources are available on terms reasonably acceptable to Wilson Investors and any unaffiliated party. The aggregate amount of any such financing would generally be capped at 70% of budgeted construction costs (76% in the case of Concar). At December 31, 2002, we had committed to make mortgage loans for Foundry Square IV and Concar totaling $96 million of which $74 million in principal and $0.4 million in accrued interest was outstanding. The mortgage loan for Foundry Square IV was repaid in 2003 in connection with the sale of the property. Following this sale, W/ EO’s sole asset was its ownership interest in Concar. The total principal and interest outstanding on the mortgage loans at December 31, 2004 and 2003 was $40 million, which was repaid in 2005 in connection with the sale of Concar.

A Wilson Investors subsidiary provided development management services to the Foundry Square II, Ferry Building and Concar properties through project stabilization. In 2004, the final project reached stabilization and accordingly, the subsidiary of Wilson Investors has ceased providing development management services. We also engaged a subsidiary of Wilson Investors to provide leasing brokerage services for Foundry Square II and the Ferry Building. As of December 31, 2003, $0.3 million was payable to Wilson Investors in relation to such services. These services for Foundry Square II were terminated by us and these services for the Ferry Building were terminated in part by us in January 2004.

122

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 21 — RELATED PARTY TRANSACTIONS — (continued)

(c)  We owned the San Felipe Plaza office property in a partnership with an affiliate of Mr. Zell. In accordance with the agreements governing the ownership of this property, we agreed to pay any capital gains tax incurred by the affiliate if the property was sold. As a result of the sale of this property in August 2005, we are obligated to pay $0.7 million to this affiliate, which is due in April 2006, to cover its capital gains tax liability.

Amounts Received from Related Parties

      In July 2004, we disposed of common shares of Capital Trust for $32.1 million and recognized a gain of $2.3 million. Prior to selling our investment, we received $1.5 million and $3.0 million of dividends from the shares during 2004 and 2003, respectively. Mr. Zell is Chairman of the Board and a principal stockholder of Capital Trust, Mr. Dobrowski (a Trustee on our Board of Trustees), is also a Trustee of Capital Trust, and Ms. Rosenberg (a Trustee on our Board of Trustees) was a Trustee of Capital Trust during the time we owned securities in Capital Trust.

      We have entered into property management contracts and a licensing agreement to provide property management and leasing services at certain properties owned or controlled by affiliates of Mr. Zell. Income recognized by us for providing these management services during 2005, 2004 and 2003 was $0.9 million, $0.9 million and $0.8 million, respectively.

      In addition, we provided real estate tax consulting and risk management services to related parties for which we received $0.5 million, $0.5 million and $0.3 million, during 2005, 2004 and 2003, respectively.

      We lease office space to Navigant Consulting, Inc. (“Navigant”), of which William Goodyear, a Trustee on our Board of Trustees, is the Chairman of the Board and Chief Executive Officer. During the years ended December 31, 2005, 2004 and 2003, we received $3.4 million, $2.5 million and $2.0 million, respectively, from Navigant in connection with such space. These leases were executed at market terms.

      During 2003, we received $0.8 million from W/ EO for lease commissions.

NOTE 22 — SHARE-BASED EMPLOYEE COMPENSATION PLANS

      We have three share-based employee compensation plans: the 1997 Share Option and Share Award Plan, as amended (the “1997 Plan”), the 2003 Share Option and Share Incentive Plan, as amended (the “2003 Plan”) and the 1997 Non-Qualified Share Purchase Plan, as amended (the “Non-Qualified Share Purchase Plan”). We also have assumed individual options in connection with prior merger transactions.

      The purpose of the 1997 Plan is to attract and retain highly qualified executive officers, trustees, employees and consultants. Through the 1997 Plan, eligible officers, trustees, employees and consultants are offered the opportunity to acquire Common Shares pursuant to grants of (a) options to purchase Common Shares (“Options”) and (b) Share Awards (defined below). The 1997 Plan is administered by the Compensation Committee of the Board of Trustees (the “Compensation Committee”), which is appointed by the Board of Trustees. The Compensation Committee interprets the 1997 Plan and determines the terms and provisions of Options and Share Awards. In 2005, 2004 and 2003 the Common Shares subject to Options and Share Awards under the 1997 Plan were limited to 32.1 million, 32.0 million and 32.7 million, respectively. The maximum aggregate number of Options and Share Awards that may be granted under the 1997 Plan may not exceed 6.8% of the outstanding Common Shares calculated on a fully diluted basis and determined annually on the first day of each calendar year. The issuance of awards or shares under the 2003 Plan does not increase the number of shares that may be issued under the 1997 Plan. No more than one-half of the maximum aggregate number of Options and Share Awards may be granted as Share Awards. To the extent that Options expire unexercised or are terminated, surrendered or canceled, the Options and Share Awards become available for future grants under the 1997 Plan, unless the 1997 Plan has terminated.

123

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 22 — SHARE-BASED EMPLOYEE COMPENSATION PLANS — (continued)

      The 1997 Plan permits the issuance of Share Awards to executive officers, trustees and key employees. A Share Award is an award of a Common Share which (a) may be fully vested upon issuance (“Share Award”) or (b) may vest over time (“Restricted Share Award”). Generally, members of the Board of Trustees have been granted Share Awards pursuant to the 1997 Plan or the 2003 Plan as payment of their board fees. In each case, the number of Share Awards granted to trustees was equal to the dollar value of the fee divided by the fair market value of a Common Share on the date the fee was payable.

      Our shareholders approved the 2003 Plan at our 2003 annual meeting of shareholders. A total of 20,000,000 Common Shares are reserved for issuance under the 2003 Plan to trustees, officers, employees and consultants of Equity Office and its subsidiaries. The 2003 Plan provides for awards of share options, restricted shares, unrestricted shares, share units, dividend equivalent rights, share appreciation rights and performance awards. No more than 10,000,000 of the Common Shares reserved under the 2003 Plan may be issued in connection with awards other than options. The maximum number of shares subject to options and share appreciation rights that can be awarded to any person is 750,000 per year, and the maximum number of shares that can be awarded to any person, other than pursuant to an option or share appreciation right, is 300,000 per year. In 2005, 2004 and 2003 the Common Shares available for issuance under the 2003 Plan were limited to 14.6 million, 19.0 million and 20.0 million, respectively. The 2003 Plan is administered by the Compensation Committee. Subject to the terms of the 2003 Plan, the Compensation Committee may select participants to receive awards, determine the types of awards and the terms and conditions of awards, and interpret the provisions of the 2003 Plan.

      Under both the 1997 Plan and 2003 Plan, the Compensation Committee determines the vesting schedule of each Share Award and Option. All Restricted Share Awards granted in 2005 and all Restricted Share Awards granted in 2004, except for officers’ bonuses, vest evenly over a four-year period, 25% per year on each of the first four anniversaries of the grant date. During 2004, officers’ bonuses were paid in Restricted Share Awards. Twelve days after the grant date 75% of the Restricted Share Awards granted to vice presidents vested and 50% of the Restricted Share Awards granted to senior vice presidents, executive vice presidents and the president vested. The remaining unvested Restricted Share Awards vest evenly over a four-year period on each of the first four anniversaries of the grant date. Restricted Share Awards granted in 2003 vest evenly over a five-year period, 20% per year on each of the first five anniversaries of the grant date. As to the Options that have been granted, each vests evenly over a three year period, one-third per year on each of the first three anniversaries of the grant date. The exercise price for Options is equivalent to the fair market value of the underlying Common Shares at the grant date. The Compensation Committee also determines the term of each Option, which shall not exceed 10 years from the grant date.

      The fair value for Options granted in 2005, 2004 and 2003 was estimated at the time the Options were granted using the Black-Scholes option-pricing model applying the following weighted average assumptions:

	Options Granted in
Assumptions:	2005		2004		2003
Risk-free interest rate		4.1%		3.6%		3.2%
Expected dividend yield		7.0%		7.0%		6.6%
Volatility		0.21		0.21		0.22
Weighted average expected life of the Options		7  years		7  years		7  years
Weighted average fair value of Options granted		$2.37		$2.18		$2.36

      The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions, including the expected stock price volatility.

124

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 22 — SHARE-BASED EMPLOYEE COMPENSATION PLANS — (continued)

      In 2005, 2004 and 2003 we recognized compensation expense related to Restricted Shares and Options issued to employees of $23.9 million, $18.0 million and $17.1 million, respectively.

      The table below summarizes the Option activity under our 1997 Plan and 2003 Plan for the last three years:

					Weighted Average
		Common Shares			Exercise Price
		Subject to Options			Per Option
Balance at December 31, 2002			20,495,093		$	27.18
	Options granted		3,550,017			24.70
	Options canceled		(1,358,070	)		27.78
	Options exercised		(1,661,333	)		22.72
Balance at December 31, 2003			21,025,707			27.10
	Options granted		3,929,195			28.50
	Options canceled		(1,237,162	)		28.42
	Options exercised		(2,489,462	)		23.81
Balance at December 31, 2004			21,228,278			27.66
	Options granted		4,003,203			29.59
	Options canceled		(303,206	)		27.67
	Options exercised		(5,256,055	)		27.01
Balance at December 31, 2005			19,672,220		$	28.23

      The following table summarizes information regarding Options outstanding at December 31, 2005:

	Options Outstanding						Options Exercisable				Options Not Exercisable
			Weighted-
			average		Weighted-				Weighted-				Weighted-
			remaining		average				average				average
			contractual life		exercise				exercise				exercise
Range of Exercise Prices	Options		in years(a)		price		Options		price		Options		price
$18.10 to $23.40		573,000		2.0	$	21.60		573,000	$	21.60		—	$	—
$24.23 to $26.95		3,533,105		6.1		24.66		2,654,738		24.62		878,367		24.80
$27.45 to $28.36		3,395,856		5.8		28.32		3,387,725		28.32		8,131		27.57
$28.54 to $29.19		3,214,339		8.0		28.56		1,017,874		28.60		2,196,465		28.54
$29.50 to $29.76		5,490,685		6.9		29.51		1,797,490		29.50		3,693,195		29.52
$29.98 to $33.30		3,465,235		4.6		30.53		3,382,699		30.48		82,536		32.73
$18.10 to $33.30		19,672,220		6.2	$	28.23		12,813,526	$	28.01		6,858,694	$	28.64

(a)  Expiration dates ranged from January 2006 to December 2015.

Restricted Shares

      During 2005, 2004 and 2003, there were 952,157, 1,235,225 and 944,121 Restricted Share Awards granted, respectively. The Restricted Shares Awards issued in 2005, 2004 and 2003 were valued at an average price of $29.54, $28.50 and $24.60 each, respectively. The value of the Restricted Share Awards is recognized as compensation expense evenly over the vesting period.

125

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 22 — SHARE-BASED EMPLOYEE COMPENSATION PLANS — (continued)

Non-Qualified Purchase Plan

      The Non-Qualified Purchase Plan was adopted to encourage eligible employees and trustees to purchase Common Shares. Under the Non-Qualified Purchase Plan, a total of 2,000,000 Common Shares are reserved for issuance. The minimum amount an eligible employee can contribute is $10 per pay period. The maximum amount an eligible employee can contribute is 20% of gross pay per pay period, up to $100,000 per calendar year. Trustees may contribute up to $100,000 per year. Contributions are held as part of the general assets of Equity Office. All contributions are fully vested. At the end of each purchase period, participant contributions are used to purchase Common Shares. The price for the Common Shares is 85% of the lesser of: (a) the closing price of the Common Shares on the last business day of the applicable purchase period or (b) the average closing price of the Common Shares for the purchase period. The number of Common Shares purchased is calculated on a per participant basis by dividing the contributions made by each participant during the Purchase Period by the purchase price. Only whole Common Shares are purchased, with any partial share of remaining cash being rolled over to the next purchase period. Shares purchased under the Non-Qualified Purchase Plan generally may not be sold, transferred or disposed of until the first anniversary of the purchase. If a participant violates this restriction, he or she is required to pay Equity Office an amount equal to the discount on the shares when purchased less, the excess, if any, of the amount the participant paid for the shares over the then current market price of the shares. At December 31, 2005, a total of 1,341,160 Common Shares remained available for issuance under the Non-Qualified Purchase Plan. Common Share purchases under this plan totaled 85,061, 83,222 and 93,815 in 2005, 2004 and 2003, respectively. In 2005, 2004 and 2003, we recognized compensation expense related to Common Shares issued under this plan of $0.5 million, $0.4 million and $0.5 million, respectively.

NOTE 23 — 401(K) PLAN

      Our 401(k) Plan was established to cover eligible employees and employees of any designated affiliate. The 401(k) Plan permits eligible persons to defer up to 50% of their annual compensation into the 401(k) Plan, subject to certain limitations imposed by the Internal Revenue Code. Employees’ elective deferrals are immediately vested upon contribution to the 401(k) Plan. We match employee contributions to the 401(k) Plan dollar for dollar up to 4% of the employee’s annual salary. In addition, we may elect to make an annual discretionary profit-sharing contribution. In each of the years ended December 31, 2005, 2004 and 2003, we recognized $8.0 million, $7.9 million and $6.7 million as expense, respectively.

NOTE 24 — COMMITMENTS AND CONTINGENCIES

Concentration of Credit Risk

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

Environmental

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

126

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 24 — COMMITMENTS AND CONTINGENCIES — (continued)

Litigation

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

Property Acquisitions

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

      We signed an agreement to acquire a 75% interest in the 124 West 42nd Street office property comprising 37,035 square feet located in New York, New York for $12.4 million. This acquisition is subject to certain contingencies and is expected to close in the first quarter of 2006.

      We signed an agreement to acquire the One and Three Harbor Drive office properties comprising 111,772 square feet located in Sausalito, California for $32.5 million. This acquisition closed in the first quarter of 2006.

Contingencies

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

      195 of our properties, consisting of 27.9 million square feet, are subject to restrictions on taxable dispositions under tax protection agreements entered into with some of the contributors of the properties. The carrying value of these properties was $5.9 billion at December 31, 2005. The restrictions on taxable dispositions are effective for periods expiring at different times through 2021. The terms of these tax protection agreements generally prevent us from selling the properties in taxable transactions unless we indemnify the contributing partners for their income tax liability on the portion of the gain on sale allocated to them as a result of the property’s value at the time of its contribution to us or to our predecessor. We do not believe that the tax protection agreements materially affect the conduct of our business or our decisions whether to dispose of restricted properties because we generally hold our properties for long-term investment purposes. However, where we have deemed it to be in our shareholders’ best interests to dispose of restricted properties, we have endeavored to do so, when practicable, through transactions structured as tax-deferred transactions under section 1031 of the Internal Revenue Code.

      Whenever practicable, we anticipate structuring most future dispositions of restricted properties as transactions intended to qualify for tax-deferred treatment. We therefore view the likelihood of incurring any material indemnification obligations as a result of our tax protection agreements to be remote. Were we to

127

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 24 — COMMITMENTS AND CONTINGENCIES — (continued)

dispose of a restricted property in a taxable transaction, we generally would be required to pay to a partner (that is a beneficiary of one of the tax protection agreements) an amount based on the amount of income tax the partner would be required to pay on the incremental gain allocated to such partner as a result of the built-in gain that existed with respect to such property at the time of its contribution to us or to our predecessor. In some cases there is a further requirement to reimburse any additional tax liability arising from the indemnification payment itself. The exact amount that would be payable with respect to any particular taxable sale of a restricted property would depend on a number of factors, many of which can only be calculated at the time of any future sale, including the sale price of the property at the time of the sale, the partnership’s basis in the property at the time of the sale, the partner’s basis in the assets at the time of the contribution, the partner’s applicable rate of federal, state and local taxation at the time of the sale and the timing of the sale itself.

Insurance

      Property Damage, Business Interruption, Earthquake and Terrorism: We have a captive insurance company which is a wholly-owned taxable REIT subsidiary. As described below, we are responsible for losses up to certain levels for property damage (including wind and flood damage resulting from hurricanes), business interruption, earthquakes, terrorism and other events prior to third-party insurance coverage. Accordingly, any losses incurred up to our loss exposure amounts or in excess of third-party coverage limitations will be reflected in our financial statements as insurance expense. The insurance coverage provided through third-party insurance carriers is subject to coverage limitations.

Type of Insurance		Third-Party Coverage
Coverage	Equity Office Loss Exposure/Deductible	Limitation
Property damage and business interruption(a)	$50 million per occurrence and $75 million annual aggregate exposure (which includes amounts paid for earthquake loss), plus $1 million per occurrence deductible	$1.0 billion per occurrence(c)
Earthquake(a)(b)	$75 million per occurrence and annual aggregate exposure (which includes amounts paid for property damage and business interruption loss), plus $1 million per occurrence deductible	$325 million in the aggregate per year(c)
Acts of terrorism(d)	$4.9 million per occurrence deductible (plus 10% of the remainder of each and every loss with a maximum per occurrence exposure of $37.4 million which includes the $4.9 million deductible); however, TRIEA provides that if the aggregate industry loss as a result of any such foreign terrorism occurrence is less than $50 million ($100 million in 2007), we are responsible for 100% of such loss. Our intent is to insure such amounts in excess of $50 million in 2007.	$825 million per occurrence(e)

(a)	We retain up to $75 million annual aggregate loss throughout the portfolio. In the event of a loss in excess of the per occurrence or annual aggregate amount, the third-party insurance carriers would be obligated to cover the losses up to the stated coverage amounts in the table above.
(b)	The amount of the third party insurance relating to earthquakes is based on maximum probable loss studies performed by independent third parties. The maximum annual aggregate payment amount for earthquake loss is $325 million, inclusive of our loss exposure of $75 million plus $1 million per

128

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 24 — COMMITMENTS AND CONTINGENCIES — (continued)

occurrence deductible. There can be no assurance that the actual losses suffered in the event of an earthquake would not exceed the amount of such insurance coverage.

(c)

These amounts include our loss exposure/deductible amount.

(d)

This coverage includes nuclear, chemical and biological events under the Terrorism Risk Insurance Act of 2002 (“TRIA”). This coverage does not apply to non-TRIA events (which are terrorism events that are not committed by a foreigner or a foreign country). We maintain separate insurance with a $325 million annual aggregate limit subject to a deductible of $1 million for non-TRIA events. This separate coverage for non-TRIA events excludes nuclear, biological and chemical events.

TRIA established the Terrorism Risk Insurance Program (“TRIP”) to mandate that insurance carriers offer insurance covering physical damage from terrorist incidents certified by the U.S. government as foreign terrorist acts. Under TRIP, the federal government shares in the risk of loss associated with certain future terrorist acts. TRIA was extended for two years under the Terrorism Risk Insurance Extension Act (“TRIEA”), which established new requirements and expires on December 31, 2007. TRIEA created a new program trigger for any certified act of terrorism occurring after March 31, 2006 that prohibits payment of federal compensation unless the aggregate industry insured losses resulting from that act of terrorism exceed $50 million for 2006 and $100 million for 2007. The trigger for federal reimbursement through March 31, 2006 is $5 million, rather than $50 million.

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

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

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

NOTE 25 — SUBSEQUENT EVENTS

      The following events occurred subsequent to December 31, 2005, through March 8, 2006:

1.	We repurchased 13.0 million Common Shares under our open market repurchase program at an average purchase price of $31.49 per share for $408.6 million. EOP Partnership also redeemed 2.3 million Units at an average purchase price of $30.48 per Unit for $69.0 million.
2.	In January 2006, we exercised our option to draw an additional $250 million on our $750 million term loan, which increased the amount outstanding under the facility to $1.0 billion. As of March 8, 2006, we also had $478 million outstanding under our $1.25 billion revolving credit facility.
3.	On February 28, 2006, we obtained a $500 million unsecured term loan facility, which we fully drew upon on March 8, 2006. The loan matures in February 2007 and bears interest at the higher of the Prime Rate or the federal funds rate plus 50 basis points; plus a spread of 55 basis points (the spread is subject to change based on EOP Partnership’s credit rating). The proceeds from this loan will primarily be used to repay unsecured notes scheduled to mature on March 15, 2006.

129

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)

NOTE 25 — SUBSEQUENT EVENTS — (continued)

4.  We acquired the following properties:

						Effective Office Portfolio
		Acquisition		Number of		Square
Property	Location	Date		Buildings		Feet		Purchase Price
								(Dollars in thousands)
One and Three Harbor Drive	Sausalito, CA		1/19/2006		2		111,772	$	32,500
Pointe O’Hare(a)	Rosemont, IL		3/8/2006		1		262,991		55,675
			Total		3		374,763	$	88,175

(a)  In addition to our acquisition of a wholly owned interest in this office property, we also contributed $2.0 million to a new joint venture formed with the seller of Pointe O’Hare, who contributed a vacant land parcel and a parking structure adjacent to the building.

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

						Effective Office Portfolio
		Disposition		Number of		Square
Property	Location	Date		Buildings		Feet		Sales Price
								(Dollars in thousands)
120 Montgomery(a)	San Francisco, CA		1/20/2006		1		430,523	$	67,500
Westridge and Pacific Corporate Plaza	San Diego, CA		2/8/2006		3		158,173		30,500
8-16 Perimeter(a)	Atlanta, GA		2/17/2006		5		65,350		10,712
One Crosswoods	Columbus, OH		3/3/2006		1		129,583		5,300
			Total		10		783,629	$	114,012

(a) These properties were classified as held for sale at December 31, 2005.

6.	During February 2006, the ownership structure of the Sixty State Street property was restructured. Pursuant to this restructure, we converted our former debt position in this property into an approximate 95% equity interest. In addition, new mortgage financing was obtained on the property. The new mortgage loan has a principal balance of $180.0 million, bears interest at a fixed coupon rate of 5.629% and matures on March 1, 2011. Following this restructure, we will continue to consolidate the financial position and results of operations of this property because we continue to control the property.
7.	We collected the $66.3 million note receivable related to the One Phoenix property that was sold in 2005 and recognized the $25.6 million gain on sale that had previously been deferred.
8.	Paces West, an office property comprising two buildings and 646,471 square feet located in Atlanta, GA, was classified as held for sale. The investment in real estate, net of accumulated depreciation for this property is $73.5 million. This disposition is subject to certain contingencies and is expected to close in the second quarter of 2006.

130

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

      None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

      As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their evaluation as of December 31, 2005, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective to ensure that information required to be disclosed by us in our Exchange Act filings is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.

Management’s Report on Internal Control over Financial Reporting

      Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2005 based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2005.

      Management’s assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included elsewhere herein.

Changes in Internal Control over Financial Reporting

      During 2005, we began the consolidation of our enterprise-wide accounts receivable processing function into a centralized shared services environment. We expect that this consolidation process will continue into the second quarter of 2006. In the fourth quarter of 2005, we implemented an upgrade to our financial and accounting systems software that affected primarily our processing of accounts receivable and our lease administration function. Accordingly, we have modified our system of internal control over financial reporting for the impact of these system upgrades and structural changes. We believe that our controls, as modified, are designed appropriately and operating effectively.

      There were no other changes in our internal control structure that management believes have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.     Other Information.

      None.

131

PART III

Item 10. Directors and Executive Officers of the Registrant.

      Information about Trustees of Equity Office and Section 16(a) beneficial ownership reporting compliance is incorporated by reference from the discussion under Proposal 1 in our Proxy Statement for the 2006 Annual Meeting of Shareholders. The balance of the response to this item is contained in the discussion entitled “Executive Officers of the Registrant” under Item 1 of Part I of this report.

      Information about our audit committee and our audit committee financial expert is incorporated by reference to our Proxy Statement for the 2006 Annual Meeting of Shareholders.

      We have adopted a code of ethics that applies to our principal executive officer, principal financial officer and principal accounting officer, which is available on our website at www.equityoffice.com. Any amendment to, or waiver from, a provision of such code of ethics will be posted on our website.

Item 11. Executive Compensation.

      Information about executive compensation is incorporated by reference from the discussion under the heading “Executive Compensation” in our Proxy Statement for the 2006 Annual Meeting of Shareholders.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

      Information about security ownership of certain beneficial owners and management, and information about our equity compensation plans are incorporated by reference from the discussion under the headings “Common Share and Unit Ownership by Trustees and Executive Officers” and “Equity Compensation Plan Information” in our Proxy Statement for the 2006 Annual Meeting of Shareholders.

Item 13. Certain Relationships and Related Transactions.

      Information about certain relationships and transactions with related parties is incorporated herein by reference from the discussion under the heading “Certain Relationships and Related Transactions” in our Proxy Statement for the 2006 Annual Meeting of Shareholders.

Item 14. Principal Accounting Fees and Services.

      Information about principal accountant fees and services is incorporated by reference from the discussion under the heading “Proposal 2: Ratification of the Audit Committee’s Appointment of Independent Auditors” in our Proxy Statement for the 2006 Annual Meeting of Shareholders.

132

PART IV

Item 15. Exhibits and Financial Statement Schedules.

      (a)(1) Financial Statements:

           Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2005 and 2004

Consolidated Statements of Operations for the years ended December 31, 2005, 2004 and 2003

Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2005, 2004 and 2003

Consolidated Statements of Net Comprehensive Income for the years ended December 31, 2005, 2004 and 2003

Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003

           Notes to Consolidated Financial Statements

      (a)(2) Financial Statement Schedules:

           Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2005

      All other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related instructions or are inapplicable and therefore have been omitted.

      (a)(3) Exhibits:

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

      (b) Exhibits:

See Item 15(a)(3) above.

      (c) Financial Statement Schedules:

      Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2005.

133

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.

Equity Office Properties Trust

By:  /s/ Richard D. Kincaid

Richard D. Kincaid

President and Chief Executive Officer

Date: March 14, 2006

      Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities indicated as of March 14, 2006.

Signature	Title
/s/ Richard D. Kincaid Richard D. Kincaid	President, Chief Executive Officer and Trustee (principal executive officer)
/s/ Marsha C. Williams Marsha C. Williams	Executive Vice President and Chief Financial Officer (principal financial officer)
/s/ Virginia L. Seggerman Virginia L. Seggerman	Senior Vice President and Chief Accounting Officer (principal accounting officer)
/s/ Samuel Zell Samuel Zell	Chairman of the Board of Trustees
/s/ Marilyn A. Alexander Marilyn A. Alexander	Trustee
/s/ Thomas E. Dobrowski Thomas E. Dobrowski	Trustee
/s/ William M. Goodyear William M. Goodyear	Trustee
/s/ James D. Harper, Jr. James D. Harper, Jr.	Trustee
/s/ David K. McKown David K. McKown	Trustee
/s/ Sheli Z. Rosenberg Sheli Z. Rosenberg	Trustee

134

Signature	Title
/s/ Stephen I. Sadove Stephen I. Sadove	Trustee
/s/ Sally Susman Sally Susman	Trustee
/s/ Jan H.W.R. van der Vlist Jan H.W.R. van der Vlist	Trustee

135

EXHIBIT INDEX

Exhibit No.		Description	Location
	3.1	Restated Declaration of Trust	Incorporated by reference to Exhibit 3.2 to Equity Office’s 2003 Third Quarter Form 10-Q
	3.2	Third Amended and Restated Bylaws	Incorporated by reference to Exhibit 3.1 to Equity Office’s 2003 First Quarter Form 10-Q
	4.1	Indenture, dated as of September 2, 1997, between EOP Partnership and State Street Bank and Trust Company	Incorporated by reference to Exhibit 4.1 to Equity Office’s 1997 Annual Report on Form 10-K, as amended
	4.2	First Supplemental Indenture, dated as of February 9, 1998, between EOP Partnership and State Street Bank and Trust Company	Incorporated by reference to Exhibit 4.2 to Equity Office’s 1997 Annual Report on Form 10-K, as amended
	4.3	$200,000,000 6.625% Note due 2005. Another $200,000,000 6.625% Note due 2005, identical in all material respects to the Note filed as Exhibit 4.4 to Equity Office’s 1997 Annual Report on Form 10-K, as amended, has not been filed.	Incorporated by reference to Exhibit 4.4 to Equity Office’s 1997 Annual Report on Form 10-K, as amended
	4.4	$200,000,000 6.750% Note due 2008. A $100,000,000 6.750% Note due 2008, identical in all material respects other than principal amount to the Note filed as Exhibit 4.5 to Equity Office’s 1997 Annual Report on Form 10-K, as amended, has not been filed.	Incorporated by reference to Exhibit 4.5 to Equity Office’s 1997 Annual Report on Form 10-K, as amended
	4.5	$200,000,000 7.250% Note due 2018. A $50,000,000 7.250% Note due 2018, identical in all material respects other than principal amount to the Note filed as Exhibit 4.6 to Equity Office’s Annual Report on Form 10-K for the year ended December 31, 1997, as amended, has not been filed.	Incorporated by reference to Exhibit 4.6 to Equity Office’s 1997 Annual Report on Form 10-K, as amended
	4.6	$50,000,000 7.36% Senior Note due 2005	Incorporated by reference to Exhibit 4.9 to Equity Office’s 1997 Annual Report on Form 10-K, as amended
	4.7	$50,000,000 7.44% Senior Note due 2006	Incorporated by reference to Exhibit 4.10 to Equity Office’s 1997 Annual Report on Form 10-K, as amended
	4.8	$50,000,000 7.41% Senior Note due 2007	Incorporated by reference to Exhibit 4.11 to Equity Office’s 1997 Annual Report on Form 10-K, as amended
	4.9	$300,000,000 6.763% Notes due 2007	Incorporated by reference to Exhibit 4.13 to Equity Office’s 2000 Annual Report on Form 10-K, as amended
	4.10	$225,000,000 7.25% Notes due 2028	Incorporated by reference to Exhibit 4.14 to Equity Office’s 2000 Annual Report on Form 10-K, as amended

136

Exhibit No.		Description	Location
	4.11	$500,000,000 6.8% Notes due 2009	Incorporated by reference to Exhibit 4.17 to Equity Office’s 2000 Annual Report on Form 10-K, as amended
	4.12	$200,000,000 7.5% Notes due April 19, 2029	Incorporated by reference to Exhibit 4.23 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on April 19, 1999
	4.13	$400,000,000 8.375% Note due March 15, 2006	Incorporated by reference to Exhibit 4.24 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on March 24, 2000
	4.14	$100,000,000 8.375% Note due March 15, 2006	Incorporated by reference to Exhibit 4.25 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on March 24, 2000
	4.15	$360,000,000 8.10% Note due August 1, 2010 of EOP Partnership	Incorporated by reference to Exhibit 4.1 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on August 8, 2000
	4.16	Indenture, dated August 29, 2000, by and between EOP Partnership and U.S. Bank National Association (formerly known as U.S. Bank Trust National Association)	Incorporated by reference to Exhibit 4.1 to EOP Partnership’s Registration Statement on Form S-3, as amended (SEC File No. 333-43530)
	4.17	First Supplemental Indenture, dated June 18, 2001, among EOP Partnership, Equity Office and U.S. Bank National Association (formerly known as U.S. Bank Trust National Association)	Incorporated by reference to Exhibit 4.2 to Equity Office’s Registration Statement on Form S-3, as amended (SEC File No. 333-58976)
	4.18	$400,000,000 73/4% Note due 2007	Incorporated by reference to Exhibit 4.5 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on November 20, 2000
	4.19	$200,000,000 73/4% Note due 2007	Incorporated by reference to Exhibit 4.6 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on November 20, 2000
	4.20	$500,000,000 7.000% Note due July 15, 2011, and related Guarantee	Incorporated by reference to Exhibit 4.4 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on July 18, 2001

137

Exhibit No.		Description	Location
	4.21	$500,000,000 7.000% Note due July 15, 2011, and related Guarantee	Incorporated by reference to Exhibit 4.5 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on July 18, 2001
	4.22	$100,000,000 7.000% Note due July 15, 2011, and related Guarantee	Incorporated by reference to Exhibit 4.6 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on July 18, 2001
	4.23	$300,000,000 7.875% Note due July 15, 2031, and related Guarantee	Incorporated by reference to Exhibit 4.7 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on July 18, 2001
	4.24	$400,000,000 63/4% Note due February 15, 2012, and related Guarantee	Incorporated by reference to Exhibit 4.1 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on February 15, 2002
	4.25	$100,000,000 63/4% Note due February 15, 2012, and related Guarantee	Incorporated by reference to Exhibit 4.2 to EOP Partnership’s Current Report on Form 8-K filed with the SEC on February 15, 2002
	4.26	Indenture, dated as of December 6, 1995, among Spieker and State Street Bank and Trust, as Trustee	Incorporated by reference to Exhibit 99.17.1 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.27	Sixth Supplemental Indenture, dated as of December 10, 1996, among Spieker, Spieker Partnership and State Street Bank and Trust, as Trustee	Incorporated by reference to Exhibit 99.17.12 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.28	$100,000,000 7.125% Note due December 1, 2006	Incorporated by reference to Exhibit 99.17.13 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.29	Seventh Supplemental Indenture, dated as of December 10, 1996, among Spieker, Spieker Partnership and State Street Bank and Trust, as Trustee	Incorporated by reference to Exhibit 99.17.14 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.30	$25,000,000 7.875% Note due December 1, 2016	Incorporated by reference to Exhibit 99.17.15 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.31	Eighth Supplemental Indenture, dated as of July 14, 1997, among Spieker, Spieker Partnership and State Street Bank and Trust, as Trustee	Incorporated by reference to Exhibit 99.17.16 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.32	$150,000,000 7.125% Note due July 1, 2009	Incorporated by reference to Exhibit 99.17.17 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001

138

Exhibit No.		Description	Location
	4.33	Ninth Supplemental Indenture, dated as of September 29, 1997, among Spieker, Spieker Partnership, First Trust of California, National Association, as Trustee, and State Street Bank and Trust	Incorporated by reference to Exhibit 99.17.18 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.34	$150,000,000 7.50% Debenture due October 1, 2027	Incorporated by reference to Exhibit 99.17.19 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.35	Tenth Supplemental Indenture, dated as of December 8, 1997, among Spieker, Spieker Partnership and First Trust of California, National Association, as Trustee, and State Street Bank and Trust	Incorporated by reference to Exhibit 99.17.20 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.36	$200,000,000 7.35% Debenture due December 1, 2017	Incorporated by reference to Exhibit 99.17.21 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.37	Eleventh Supplemental Indenture, dated as of January 27, 1998, among Spieker, Spieker Partnership and First Trust of California, National Association, as Trustee	Incorporated by reference to Exhibit 99.17.22 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.38	$150,000,000 6.75% Note due January 15, 2008	Incorporated by reference to Exhibit 99.17.23 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.39	Twelfth Supplemental Indenture, dated as of February 2, 1998, among Spieker, Spieker Partnership and First Trust of California, National Association, as Trustee	Incorporated by reference to Exhibit 99.17.24 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.40	$125,000,000 6.875% Note due February 1, 2005	Incorporated by reference to Exhibit 99.17.25 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.41	Thirteenth Supplemental Indenture, dated as of February 2, 1998, among Spieker, Spieker Partnership and First Trust of California, National Association, as Trustee	Incorporated by reference to Exhibit 99.17.26 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.42	$1,500,000 7.0% Note due February 1, 2007	Incorporated by reference to Exhibit 99.17.27 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.43	Fourteenth Supplemental Indenture, dated as of April 29, 1998, among Spieker, Spieker Partnership and U.S. Bank Trust National Association (formerly known as First Trust of California, National Association), as Trustee	Incorporated by reference to Exhibit 99.17.28 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001

139

Exhibit No.		Description	Location
	4.44	$25,000,000 6.88% Note due April 30, 2007	Incorporated by reference to Exhibit 99.17.29 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.45	Fifteenth Supplemental Indenture, dated as of May 11, 1999, among Spieker, Spieker Partnership and U.S. Bank Trust National Association, as Trustee	Incorporated by reference to Exhibit 99.17.30 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.46	$200,000,000 7.25% Note due May 1, 2009	Incorporated by reference to Exhibit 99.17.32 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.47	Sixteenth Supplemental Indenture, dated as of December 11, 2000, among Spieker, Spieker Partnership and U.S. Bank Trust National Association, as Trustee	Incorporated by reference to Exhibit 99.17.33 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.48	$200,000,000 7.65% Note due December 15, 2010	Incorporated by reference to Exhibit 99.17.34 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.49	Seventeenth Supplemental Indenture, dated as of July 2, 2001, relating to the substitution of Equity Office and EOP Partnership as successor entities for Spieker and Spieker Partnership, respectively	Incorporated by reference to Exhibit 99.17.35 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	4.50	$400,000,000 5.875% Note due January 15, 2013, and related Guarantee	Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of EOP Partnership filed with the SEC on January 15, 2003
	4.51	$100,000,000 5.875% Note due January 15, 2013, and related Guarantee	Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of EOP Partnership filed with the SEC on January 15, 2003
	4.52	$500,000,000 4.75% Note due March 15, 2014 and related Guarantee (another $500,000,000 4.75% Note due March 15, 2014 and related Guarantee, identical in all material respects to the Note filed as Exhibit 4.3 to the Current Report on Form 8-K of EOP Partnership filed with the SEC on March 26, 2004, has not been filed)	Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K of EOP Partnership filed with the SEC on March 26, 2004
	4.53	$45,000,000 Floating Rate Note due May 27, 2014 and related Guarantee	Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K of EOP Partnership filed with the SEC on May 26, 2004

140

Exhibit No.		Description	Location
	4.54	$500,000,000 4.65% Fixed Rate Note due October 1, 2010 and related Guarantee (another $300,000,000 4.65% Fixed Rate Note due October 1, 2010 and related Guarantee, identical in all material respects, other than the principal amount, to the Note filed as Exhibit 4.3 to the Current Report on Form 8-K of EOP Partnership filed with the SEC on October 7, 2004, has not been filed)	Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K of EOP Partnership filed with the SEC on October 7, 2004
	4.55	$200,000,000 Floating Rate Note due October 1, 2010 and related Guarantee	Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K of EOP Partnership filed with the SEC on October 7, 2004
	4.56	Form of Medium-Term InterNote (Fixed Rate) and related Guarantee	Incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K of EOP Partnership filed with the SEC on June 15, 2004
	4.57	Form of Medium-Term InterNote (Floating Rate) and related Guarantee	Incorporated by reference to Exhibit 4.4 to the Current Report on Form 8-K of EOP Partnership filed with the SEC on June 15, 2004
	4.58	New Trustee Appointment Agreement, dated June 10, 2004, among EOP Partnership, Equity Office and BNY Midwest Trust Company	Incorporated by reference to Exhibit 4.5 to the Current Report on Form 8-K of EOP Partnership filed with the SEC on June 15, 2004
	4.59	Schedule of Medium-Term InterNotes (Fixed Rate) issued as of June 30, 2004	Incorporated by reference to Exhibit 4.5 to EOP Partnership’s 2004 Second Quarter Form 10-Q
	4.60	Schedule of Medium-Term InterNotes (Fixed Rate) issued from July 1, 2004 to September 30, 2004	Incorporated by reference to Exhibit 4.6 to EOP Partnership’s 2004 Third Quarter Form 10-Q
	4.61	Schedule of Medium-Term InterNotes (Fixed Rate) issued from October 1, 2004 to December 31, 2004	Incorporated by reference to Exhibit 4.73 to EOP Partnership’s 2004 Annual Report on Form 10-K
	4.62	Schedule of Medium-Term InterNotes (Fixed Rate) issued from January 1, 2005 to March 31, 2005	Incorporated by reference to Exhibit 4.5 to EOP Partnership’s 2005 First Quarter Form 10-Q
	4.63	Schedule of Medium-Term InterNotes (Fixed Rate) issued from April 1, 2005 to June 30, 2005	Incorporated by reference to Exhibit 4.5 to EOP Partnership’s 2005 Second Quarter Form 10-Q
	4.64	Schedule of Medium-Term InterNotes (Fixed Rate) issued from July 1, 2005 to September 30, 2005	Incorporated by reference to Exhibit 4.5 to EOP Partnership’s 2005 Third Quarter Form 10-Q
	4.65	Schedule of Medium-Term InterNotes (Fixed Rate) issued from October 1, 2005 to December 31, 2005	Incorporated by reference to Exhibit 4.65 to EOP Partnership’s 2005 Annual Report on Form 10-K

141

Exhibit No.		Description	Location
	10.1	Third Amended and Restated Agreement of Limited Partnership of EOP Partnership	Incorporated by reference to Exhibit 99.8 to Equity Office’s Current Report on Form 8-K filed with the SEC on July 5, 2001
	10.2	First Amendment to Third Amended and Restated Agreement of Limited Partnership of EOP Partnership	Incorporated by reference to Exhibit 4.1 to EOP Partnership’s 2002 Third Quarter Form 10-Q
	10.3	Second Amendment to the Third Amended and Restated Agreement of Limited Partnership of EOP Partnership	Incorporated by reference to Exhibit 10.1 to Equity Office’s 2003 Second Quarter Form 10-Q
	10.4	Third Amendment to the Third Amended and Restated Agreement of Limited Partnership of EOP Partnership	Incorporated by reference to Exhibit 10.4 to Equity Office’s 2003 Annual Report on Form 10-K
	10.5	Fourth Amendment to the Third Amended and Restated Agreement of Limited Partnership of EOP Partnership	Incorporated by reference to Exhibit 3.1 to EOP Partnership’s 2004 Second Quarter Form 10-Q
	10.6	Fifth Amendment to the Third Amended and Restated Agreement of Limited Partnership of EOP Partnership	Incorporated by reference to Exhibit 3.1 to EOP Partnership’s 2005 Second Quarter Form 10-Q
	10.7	Registration Rights Agreement, dated as of July 11, 1997	Incorporated by reference to Exhibit 10.2 to Equity Office’s 1997 Annual Report on Form 10-K, as amended
	10.8	Noncompetition Agreement between Equity Office and Samuel Zell	Incorporated by reference to Exhibit 10.3 to Equity Office’s 1997 Annual Report on Form 10-K, as amended
	10.9†	First Amended and Restated 1997 Share Option and Share Award Plan	Incorporated by reference to Exhibit 10.2 to Equity Office’s 2003 Second Quarter Form 10-Q
	10.10†	First Amendment to First Amended and Restated 1997 Share Option and Share Award Plan	Incorporated by reference to Exhibit 10.1 to Equity Office’s 2003 Third Quarter Form 10-Q
	10.11†	Second Amendment to First Amended and Restated 1997 Share Option and Share Award Plan	Incorporated by reference to Exhibit 10.2 to Equity Office’s 2004 Second Quarter Form 10-Q
	10.12†	Form of Share Appreciation Rights Agreement between Equity Office and Jan H. W. R. van der Vlist	Incorporated by reference to Exhibit 10.1 to Equity Office’s 2002 First Quarter Form 10-Q
	10.13†	Share Appreciation Rights Agreement dated September 20, 2004 between Equity Office and Jan H. W. R. van der Vlist (for SARs expiring June 15, 2013)	Incorporated by reference to Exhibit 10.1 to Equity Office’s Current Report on Form 8-K filed with the SEC on September 23, 2004
	10.14†	First Amendment dated May 31, 2005 to Equity Office Properties Trust Share Appreciation Rights Agreement dated September 20, 2004 between Equity Office Properties Trust and Jan H. W. R. van der Vlist (for SARs expiring June 15, 2013)	Incorporated by reference to Exhibit 10.2 to Equity Office’s 2005 Second Quarter Form 10-Q

142

Exhibit No.		Description	Location
	10.15†	Second Amendment dated June 29, 2005 to Equity Office Properties Trust Share Appreciation Rights Agreement dated September 20, 2004 between Equity Office Properties Trust and Jan H. W. R. van der Vlist (for SARs expiring June 15, 2013)	Incorporated by reference to Exhibit 10.4 to Equity Office’s 2005 Second Quarter Form 10-Q
	10.16†	Share Appreciation Rights Agreement dated September 20, 2004 between Equity Office and Jan H. W. R. van der Vlist (for SARs expiring June 15, 2014)	Incorporated by reference to Exhibit 10.2 to Equity Office’s Current Report on Form 8-K filed with the SEC on September 23, 2004
	10.17†	First Amendment dated May 31, 2005 to Equity Office Properties Trust Share Appreciation Rights Agreement dated September 20, 2004 between Equity Office Properties Trust and Jan H. W. R. van der Vlist (for SARs expiring June 15, 2014)	Incorporated by reference to Exhibit 10.3 to Equity Office’s 2005 Second Quarter Form 10-Q
	10.18†	Second Amendment dated June 29, 2005 to Equity Office Properties Trust Share Appreciation Rights Agreement dated September 20, 2004 between Equity Office Properties Trust and Jan H. W. R. van der Vlist (for SARs expiring June 15, 2014)	Incorporated by reference to Exhibit 10.5 to Equity Office’s 2005 Second Quarter Form 10-Q
	10.19†	2003 Share Option and Share Incentive Plan	Incorporated by reference to Exhibit 10.3 to Equity Office’s 2003 Second Quarter Form 10-Q
	10.20†	First Amendment to 2003 Share Option and Share Incentive Plan	Incorporated by reference to Exhibit 10.2 to Equity Office’s 2003 Third Quarter Form 10-Q
	10.21†	Second Amendment to 2003 Share Option and Share Incentive Plan	Incorporated by reference to Exhibit 10.1 to Equity Office’s Current Report on Form 8-K filed with the SEC on December 21, 2005
	10.22†	Third Amended and Restated Supplemental Retirement Savings Plan, as amended and restated effective October 5, 2004	Incorporated by reference to Exhibit 10.19 to Equity Office’s 2004 Annual Report on Form 10-K
	10.23†	Second Amended and Restated 1997 Non- Qualified Employee Share Purchase Plan, effective as of October 5, 2004	Incorporated by reference to Exhibit 10.20 to Equity Office’s 2004 Annual Report on Form 10-K
	10.24†	First Amendment to the Second Amended and Restated 1997 Non-Qualified Employee Share Purchase Plan, effective as of December 7, 2004	Incorporated by reference to Exhibit 10.21 to Equity Office’s 2004 Annual Report on Form 10-K
	10.25†	Change in Control Agreement by and between Equity Office Management L.L.C., Equity Office and Richard D. Kincaid	Incorporated by reference to Exhibit 10.7 to Equity Office’s 2003 Third Quarter Form 10-Q
	10.26†	Change in Control Agreement by and between Equity Office Properties Management Corp., Equity Office and Stanley M. Stevens	Incorporated herein by reference to Exhibit 10.8 to Equity Office’s 2001 Third Quarter Form 10-Q

143

Exhibit No.		Description	Location
	10.27†	Assumption and Amendment to Change in Control Agreement by and between Equity Office Properties Management Corp., Equity Office, EOP Partnership and Stanley M. Stevens	Incorporated by reference to Exhibit 10.4 to Equity Office’s 2002 Third Quarter Form 10-Q
	10.28†	Second Assumption and Amendment to Change in Control Agreement by and between Equity Office Management L.L.C., Equity Office, EOP Partnership and Stanley M. Stevens	Incorporated by reference to Exhibit 10.26 to Equity Office’s 2003 Annual Report on Form 10-K
	10.29†	Change in Control Agreement by and between EOP Partnership, Equity Office and Marsha C. Williams	Incorporated herein by reference to Exhibit 10.1 to Equity Office’s 2004 First Quarter Form 10-Q
	10.30†	Assumption to Change in Control Agreement by and between Equity Office Management L.L.C., Equity Office, Equity Office Properties Management Corp., EOP Partnership and Marsha C. Williams	Incorporated herein by reference to Exhibit 10.2 to Equity Office’s 2004 First Quarter Form 10-Q
	10.31†	Change in Control Agreement by and between Equity Office Management L.L.C., Equity Office and Jeffrey L. Johnson	Incorporated herein by reference to Exhibit 10.3 to Equity Office’s 2004 First Quarter Form 10-Q
	10.32†	Change in Control Agreement by and between Equity Office Management L.L.C., Equity Office and Peyton H. Owen	Incorporated herein by reference to Exhibit 10.2 to Equity Office’s 2005 First Quarter Form 10-Q
	10.33†	Trustee Compensation Agreement between Sam Zell and Equity Office, as amended	Incorporated by reference to Exhibit 10.28 to Equity Office’s 2003 Annual Report on Form 10-K
	10.34†	First Amendment to Trustee Compensation Agreement between Sam Zell and Equity Office, as amended	Incorporated herein by reference to Exhibit 10.1 to Equity Office’s 2005 First Quarter Form 10-Q
	10.35†	Form of Non-Qualified Share Option Agreement for Members of the Board of Trustees	Incorporated by reference to Exhibit 10.1 to Equity Office’s Current Report on Form 8-K filed with the SEC on February 23, 2005
	10.36†	Form of Participant Summary and Restricted Share Agreement for Trustees	Incorporated by reference to Exhibit 10.2 to Equity Office’s Current Report on Form 8-K filed with the SEC on February 23, 2005
	10.37†	Form of Non-Qualified Share Option Agreement for Employees	Filed herewith
	10.38†	Form of Participant Summary and Restricted Share Agreement for Employees	Filed herewith
	10.39†	Summary of 2005 Trustee Compensation Program	Incorporated by reference to Exhibit 10.1 to Equity Office’s Current Report on Form 8-K filed with the SEC on May 27, 2005

144

Exhibit No.		Description	Location
	10.40†	Form of Participant Summary and Performance Award Agreement (LTIP)	Incorporated by reference to Exhibit 10.2 to Equity Office’s Current Report on Form 8-K filed with the SEC on December 21, 2005
	10.41	Revolving Credit Agreement for $1,250,000,000 Revolving Credit Facility dated as of August 4, 2005 among EOP Operating Limited Partnership and the Banks listed therein, and related Guaranty of Payment	Incorporated herein by reference to Exhibit 10.1 to EOP Partnership’s 2005 Second Quarter Form 10-Q
	10.42	Amended and Restated Credit Agreement for $750,000,000 Credit Facility dated as of December 9, 2005 among EOP Operating Limited Partnership and the Banks listed therein (including option to expand by $250,000,000 to $1,000,000,000), and related Guaranty of Payment	Incorporated by reference to Exhibit 10.10 to EOP Partnership’s 2005 Annual Report on Form 10-K
	10.43	Credit Agreement for $500,000,000 Credit Facility dated as of February 28, 2006 among EOP Operating Limited Partnership, the Banks listed therein, Merrill Lynch Bank USA, and Merrill, Lynch, Pierce, Fenner & Smith Incorporated, and related Guaranty of Payment	Incorporated by reference to Exhibit 10.11 to EOP Partnership’s 2005 Annual Report on Form 10-K
	12.1	Statement of Earnings to Fixed Charges	Filed herewith
	21.1	List of Subsidiaries	Incorporated by reference to Exhibit 21.1 to Equity Office’s 2002 Annual Report on Form 10-K
	23.1	Consent of Independent Registered Public Accounting Firm	Filed herewith
	31.1	Certifications of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act, as amended	Filed herewith
	31.2	Certifications of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act, as amended	Filed herewith
	32.1	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith
	99.1	1997 Non-Qualified Employee Share Purchase Plan Financial Statements as of and for the years ended December 31, 2005, 2004 and 2003	Filed herewith

†  Represents a management contract or compensatory plan, contract or arrangement.

145

Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2005

												Costs Capitalized					Gross Amount Carried at
												Subsequent to					Close of Period
								Initial Cost				Acquisition					12/31/05
																										Date of
						Encumbrances				Building and				Building and					Building and				Accumulated			Construction/	Date	Depreciable
Description	Notes		Location	State		at 12/31/05		Land		Improvements		Land		Improvements			Land		Improvements		Total(1)		Depreciation(1)			Renovation	Acquired	Lives(2)
Office Properties:
Atlanta Region
200 Galleria			Atlanta		GA	$	—	$	10,282	$	58,266	$	—	$	4,914		$	10,282	$	63,180	$	73,462	$	(9,919	)	1985	06/19/00		40
One Ninety One Peachtree Tower			Atlanta		GA		—		46,500		263,500		—		1,194			46,500		264,694		311,194		(37,093	)	1991	06/19/00		40
Central Park			Atlanta		GA		—		9,163		82,463		—		9,123			9,163		91,586		100,749		(20,931	)	1986	10/17/95		40
Lakeside Office Park			Atlanta		GA		—		4,792		43,132		—		4,173			4,792		47,305		52,097		(10,179	)	1972-1978	12/19/97		40
Paces West			Atlanta		GA		—		8,336		75,025		—		9,652			8,336		84,677		93,013		(19,203	)	1988	10/31/94		40
Perimeter Center			Atlanta		GA		—		43,464		391,237		267		38,880			43,731		430,117		473,848		(95,651	)	1970/1989	12/19/97		40
211 Perimeter Center		(3)	Atlanta		GA		—		15,379		28,055		—		—			15,379		28,055		43,434		(327	)	1980/2000	11/10/05		24
Atlanta Region Totals							—		137,916		941,678		267		67,936			138,183		1,009,614		1,147,797		(193,303	)
Boston Region
Crosby Corporate Center		(4)	Bedford		MA		—		5,958		53,620		115		(27,529	)		6,073		26,091		32,164		—		1996	12/19/97		40
Crosby Corporate Center II		(4)	Bedford		MA		—		9,385		27,584		8		(13,411	)		9,393		14,173		23,566		—		1998	12/19/97		40
125 Summer Street			Boston		MA		67,665		18,000		102,000		—		13,593			18,000		115,593		133,593		(17,925	)	1989	06/19/00		40
222 Berkeley Street			Boston		MA		—		25,593		145,029		—		6,040			25,593		151,069		176,662		(22,565	)	1991	06/19/00		40
500 Boylston Street			Boston		MA		—		39,000		221,000		—		3,383			39,000		224,383		263,383		(31,162	)	1988	06/19/00		40
Sixty State Street			Boston		MA		—		—		256,000		—		9,382			—		265,382		265,382		(37,318	)	1979	06/19/00		40
100 Summer Street			Boston		MA		—		22,271		200,439		—		68,756			22,271		269,195		291,466		(53,208	)	1974/1990	03/18/98		40
150 Federal Street			Boston		MA		—		14,131		127,182		—		18,543			14,131		145,725		159,856		(35,348	)	1988	12/19/97		40
175 Federal Street			Boston		MA		—		4,894		44,045		—		6,047			4,894		50,092		54,986		(11,017	)	1977	12/19/97		40
225 Franklin Street			Boston		MA		—		34,608		311,471		—		15,149			34,608		326,620		361,228		(67,999	)	1966/1996	12/19/97		40
28 State Street			Boston		MA		—		9,513		85,623		—		42,960			9,513		128,583		138,096		(40,474	)	1968/1997	01/23/95		40
Center Plaza			Boston		MA		—		18,942		170,480		—		17,634			18,942		188,114		207,056		(39,019	)	1969	12/19/97		40
Russia Wharf			Boston		MA		—		3,891		35,023		—		2,956			3,891		37,979		41,870		(9,040	)	1978-1982	12/19/97		40
South Station			Boston		MA		—		—		31,074		—		2,279			—		33,353		33,353		(6,911	)	1988	12/19/97		40
25 Mall Road		(3)	Burlington		MA		—		5,217		49,739		—		745			5,217		50,484		55,701		(1,299	)	1987	07/07/05		45
New England Executive Park			Burlington		MA		—		14,733		132,594		194		17,465			14,927		150,059		164,986		(33,805	)	1970/1985	12/19/97		40
New England Executive Park 17			Burlington		MA		—		904		8,135		8		952			912		9,087		9,999		(2,151	)	1970/1985	12/19/97		40
The Tower at N.E.E.P			Burlington		MA		—		2,793		31,462		5		11,590			2,798		43,052		45,850		(9,036	)	1971/1999	03/31/98		40
Cambridge Science Center (a.k.a. Riverview I)		(5)	Cambridge		MA		—		1,959		35,916		—		7,476			1,959		43,392		45,351		(2,343	)	1984/2004	12/19/97		40
245 First Street (a.k.a Riverview II)			Cambridge		MA		—		3,978		35,804		6		3,914			3,984		39,718		43,702		(9,754	)	1985-1986	12/19/97		40
One Memorial Drive			Cambridge		MA		54,754		14,862		88,216		—		5,492			14,862		93,708		108,570		(13,569	)	1985	06/19/00		40
One Canal Park			Cambridge		MA		—		2,006		18,054		—		2,177			2,006		20,231		22,237		(4,337	)	1987	12/19/97		40
Ten Canal Park			Cambridge		MA		—		2,383		21,448		—		181			2,383		21,629		24,012		(4,345	)	1987	12/19/97		40
Riverside Center			Newton		MA		—		24,000		69,849		—		19,933			24,000		89,782		113,782		(18,112	)	2000	12/19/97		40
175 Wyman Street			Walthan		MA		—		14,600		5,400		3		2,127			14,603		7,527		22,130		(6,831	)	1999	12/19/97		40
Wellesley Office Park 1-4			Wellesley		MA		—		5,518		49,662		6		6,625			5,524		56,287		61,811		(12,159	)	1963/1984	12/19/97		40
Wellesley 5-7			Wellesley		MA		—		9,335		84,018		13		6,841			9,348		90,859		100,207		(18,734	)	1963/1984	12/19/97		40
Wellesley 8			Wellesley		MA		—		1,639		14,754		2		289			1,641		15,043		16,684		(3,033	)	1963/1984	12/19/97		40
Boston Region Totals							122,419		310,113		2,455,621		360		251,589			310,473		2,707,210		3,017,683		(511,494	)
Chicago Region
300 W. 6th Street		(3)	Austin		TX		—		8,359		122,714		—		—			8,359		122,714		131,073		(636	)	2002	10/04/05		56
Great Hills Plaza			Austin		TX		—		3,559		14,238		—		—			3,559		14,238		17,797		(11	)	1985	12/21/05		42
Park 22		(3)	Austin		TX		—		2,779		32,223		—		93			2,779		32,316		35,095		(1,332	)	2000	03/22/05		40
One Congress Plaza			Austin		TX		—		6,502		58,521		—		9,033			6,502		67,554		74,056		(15,314	)	1987	11/12/93		40
One American Center			Austin		TX		—		—		70,812		—		12,222			—		83,034		83,034		(18,674	)	1984	11/01/95		40
Research Park Plaza I & II		(3)	Austin		TX		—		6,301		47,470		—		206			6,301		47,676		53,977		(939	)	1999	06/16/05		54
San Jacinto Center			Austin		TX		—		5,075		45,671		—		9,920			5,075		55,591		60,666		(12,482	)	1987	12/13/91		40
Stonebridge II		(3)	Austin		TX		—		1,505		35,379		—		—			1,505		35,379		36,884		(382	)	2001	08/19/05		46
Westech 360		(3)	Austin		TX		—		2,680		25,961		—		243			2,680		26,204		28,884		(2,430	)	1986	11/19/04		33
101 North Wacker			Chicago		IL		—		10,035		90,319		—		5,877			10,035		96,196		106,231		(21,139	)	1980/1990	12/19/97		40
200 West Adams			Chicago		IL		—		11,654		104,887		—		10,405			11,654		115,292		126,946		(26,451	)	1985/1996	12/19/97		40
30 North LaSalle			Chicago		IL		—		12,489		112,401		—		9,304			12,489		121,705		134,194		(28,152	)	1974/1990	06/13/97		40
Civic Opera House			Chicago		IL		—		12,771		114,942		—		9,866			12,771		124,808		137,579		(27,672	)	1929/1996	12/19/97		40

146

												Costs Capitalized					Gross Amount Carried at
												Subsequent to					Close of Period
								Initial Cost				Acquisition					12/31/05
																										Date of
						Encumbrances				Building and				Building and					Building and				Accumulated			Construction/	Date	Depreciable
Description	Notes		Location	State		at 12/31/05		Land		Improvements		Land		Improvements			Land		Improvements		Total(1)		Depreciation(1)			Renovation	Acquired	Lives(2)
One North Franklin			Chicago		IL		—		9,830		88,474		—		10,809			9,830		99,283		109,113		(21,412	)	1991	12/31/92		40
Presidents Plaza			Chicago		IL		—		13,435		120,919		—		12,825			13,435		133,744		147,179		(28,230	)	1980-1982	12/19/97		40
Community Corporate Center		(4)	Columbus		OH		—		3,019		27,170		—		(10,835	)		3,019		16,335		19,354		(13	)	1987	06/14/90		40
One Crosswoods		(4)(6)	Columbus		OH		—		1,059		9,530		—		(6,027	)		1,059		3,503		4,562		16		1984	11/12/93		40
Corporate 500 Centre			Deerfield		IL		76,597		20,100		113,900		—		12,467			20,100		126,367		146,467		(18,867	)	1986/1990	06/19/00		40
1700 Higgins Centre			Des Plaines		IL		—		1,323		11,908		64		1,693			1,387		13,601		14,988		(3,135	)	1986	11/12/93		40
Tri-State International			Lincolnshire		IL		—		10,925		98,327		291		7,098			11,216		105,425		116,641		(22,620	)	1986	12/19/97		40
One Lakeway Center			Metairie		LA		—		2,804		25,235		—		4,538			2,804		29,773		32,577		(7,756	)	1981/1996	11/12/93		40
Two Lakeway Center			Metairie		LA		—		4,644		41,792		49		5,302			4,693		47,094		51,787		(11,391	)	1984/1996	11/12/93		40
Three Lakeway Center			Metairie		LA		—		4,695		43,661		59		4,536			4,754		48,197		52,951		(11,625	)	1987/1996	11/12/93		40
LaSalle Plaza		(4)	Minneapolis		MN		—		9,681		87,127		—		(15,749	)		9,681		71,378		81,059		(1,055	)	1991	11/25/97		40
Wells Fargo Center			Minneapolis		MN		110,000		39,045		221,255		—		3,510			39,045		224,765		263,810		(31,249	)	1988	06/19/00		40
1111 West 22nd Street			Oakbrook		IL		—		4,834		43,508		48		2,961			4,882		46,469		51,351		(9,583	)	1984	12/19/97		40
Commerce Plaza		(3)	Oakbrook		IL		—		18,000		76,149		—		1,269			18,000		77,418		95,418		(8,433	)	1972-1974/1988	09/23/04		35
One Lincoln Centre			Oakbrook		IL		—		7,350		41,650		—		5,471			7,350		47,121		54,471		(7,355	)	1986	06/19/00		40
Oakbrook Terrace Tower			Oakbrook Terrace		IL		—		11,950		107,552		486		7,927			12,436		115,479		127,915		(26,679	)	1988	04/16/97		40
Westbrook Corporate Center			Westchester		IL		92,102		24,875		223,874		30		29,275			24,905		253,149		278,054		(54,902	)	1985/1996	12/19/97		40
Chicago Region Totals							278,699		271,278		2,257,569		1,027		144,239			272,305		2,401,808		2,674,113		(419,903	)
Los Angeles Region
Stadium Towers			Anaheim		CA		—		6,509		36,886		—		1,804			6,509		38,690		45,199		(4,943	)	1988	07/02/01		40
Brea Corporate Place			Brea		CA		—		—		35,129		—		1,780			—		36,909		36,909		(4,516	)	1987	07/02/01		40
Brea Corporate Plaza			Brea		CA		—		1,902		10,776		—		697			1,902		11,473		13,375		(1,706	)	1982	07/02/01		40
Brea Financial Commons			Brea		CA		—		2,640		14,960		—		862			2,640		15,822		18,462		(1,928	)	1982/1989	07/02/01		40
Brea Park Centre			Brea		CA		—		2,682		15,198		—		2,208			2,682		17,406		20,088		(2,690	)	1979-1982,1990	07/02/01		40
SunAmerica Center		(7)	Century City		CA		198,349		47,863		271,223		—		18,915			47,863		290,138		338,001		(47,665	)	1990	09/07/99		40
Cerritos Towne Center			Cerritos		CA		—		—		60,368		—		3,646			—		64,014		64,014		(7,868	)	1989/1998	07/02/01		40
700 North Brand			Glendale		CA		23,367		5,970		33,828		—		3,554			5,970		37,382		43,352		(6,139	)	1981	06/19/00		40
18301 Von Karman (a.k.a. Apple  Building)			Irvine		CA		—		6,027		34,152		—		2,173			6,027		36,325		42,352		(5,831	)	1991	06/19/00		40
18581 Teller			Irvine		CA		—		1,485		8,415		—		2,562			1,485		10,977		12,462		(1,820	)	1983	07/02/01		40
2600 Michelson			Irvine		CA		—		11,291		63,984		—		5,391			11,291		69,375		80,666		(8,769	)	1986	07/02/01		40
Fairchild Corporate Center			Irvine		CA		—		2,363		13,388		—		774			2,363		14,162		16,525		(1,816	)	1979	07/02/01		40
Inwood Park			Irvine		CA		—		3,543		20,079		—		1,036			3,543		21,115		24,658		(2,682	)	1985/1996	07/02/01		40
Tower 17			Irvine		CA		—		7,562		42,849		—		2,143			7,562		44,992		52,554		(5,596	)	1987	07/02/01		40
1920 Main Plaza			Irvine		CA		—		5,481		47,526		—		4,932			5,481		52,458		57,939		(12,676	)	1988	09/29/94		40
2010 Main Plaza			Irvine		CA		—		5,197		46,774		—		4,877			5,197		51,651		56,848		(12,239	)	1988	12/13/94		40
The Tower in Westwood			Los Angeles		CA		—		10,041		56,899		—		2,341			10,041		59,240		69,281		(6,917	)	1989	07/02/01		40
10880 Wilshire Boulevard			Los Angeles		CA		—		28,009		149,841		—		12,801			28,009		162,642		190,651		(34,964	)	1970/1992	12/19/97		40
10960 Wilshire Boulevard			Los Angeles		CA		—		16,841		151,574		—		12,272			16,841		163,846		180,687		(32,354	)	1971/1992	12/19/97		40
550 South Hope Street			Los Angeles		CA		—		10,016		90,146		—		11,968			10,016		102,114		112,130		(22,413	)	1991	10/06/97		40
Two California Plaza			Los Angeles		CA		—		—		156,197		—		52,346			—		208,543		208,543		(58,879	)	1992	08/23/96		40
1201 Dove Street			Newport Beach		CA		—		1,998		11,320		—		698			1,998		12,018		14,016		(1,499	)	1975/1989	07/02/01		40
Redstone Plaza		(3)	Newport Beach		CA		—		7,000		29,054		—		461			7,000		29,515		36,515		(2,987	)	1976/1995	09/23/04		35
The City — 3800 Chapman			Orange		CA		—		3,019		17,107		—		431			3,019		17,538		20,557		(1,952	)	1984	07/02/01		40
500 Orange Tower			Orange		CA		—		2,943		32,610		—		4,354			2,943		36,964		39,907		(8,455	)	1988	01/01/01		40
500–600 City Parkway			Orange		CA		—		7,296		41,342		—		18,107			7,296		59,449		66,745		(10,273	)	1974, 1978, 1998	07/02/01		40
City Plaza			Orange		CA		—		6,809		38,584		—		6,738			6,809		45,322		52,131		(6,577	)	1970	07/02/01		40
City Tower			Orange		CA		—		10,440		59,160		—		4,310			10,440		63,470		73,910		(7,917	)	1988	07/02/01		40
1100 Executive Tower			Orange		CA		—		4,622		41,599		—		5,900			4,622		47,499		52,121		(10,544	)	1987	12/15/94		40
3280 E. Foothill Boulevard			Pasadena		CA		—		3,396		19,246		—		1,800			3,396		21,046		24,442		(2,745	)	1982	07/02/01		40
790 Colorado			Pasadena		CA		—		2,355		13,343		—		2,882			2,355		16,225		18,580		(2,293	)	1981	07/02/01		40
Century Square			Pasadena		CA		—		6,787		38,457		—		534			6,787		38,991		45,778		(4,351	)	1984	07/02/01		40
Pasadena Financial			Pasadena		CA		—		4,779		27,084		—		1,219			4,779		28,303		33,082		(3,300	)	1984/1996	07/02/01		40
Centerside II			San Diego		CA		21,179		5,777		32,737		—		5,117			5,777		37,854		43,631		(5,797	)	1987	06/19/00		40
La Jolla Centre I & II			San Diego		CA		—		12,904		73,122		—		4,196			12,904		77,318		90,222		(9,924	)	1986-1989	07/02/01		40
La Jolla Executive Tower		(3)	San Diego		CA		—		10,200		60,376		—		893			10,200		61,269		71,469		(3,255	)	1990	11/17/04		39
Nobel Corporate Plaza			San Diego		CA		—		3,697		20,948		—		1,227			3,697		22,175		25,872		(2,664	)	1985	07/02/01		40
Pacific Corporate Plaza			San Diego		CA		—		2,100		11,900		—		658			2,100		12,558		14,658		(1,347	)	1988	07/02/01		40

147

												Costs Capitalized					Gross Amount Carried at
												Subsequent to					Close of Period
								Initial Cost				Acquisition					12/31/05
																										Date of
						Encumbrances				Building and				Building and					Building and				Accumulated			Construction/	Date	Depreciable
Description	Notes		Location	State		at 12/31/05		Land		Improvements		Land		Improvements			Land		Improvements		Total(1)		Depreciation(1)			Renovation	Acquired	Lives(2)
Park Plaza			San Diego		CA		—		2,203		12,484		—		808			2,203		13,292		15,495		(1,553	)	1982	07/02/01		40
Westridge			San Diego		CA		—		1,500		8,500		—		—			1,500		8,500		10,000		(947	)	1980	07/02/01		40
Smith Barney Tower			San Diego		CA		—		2,658		23,919		—		4,273			2,658		28,192		30,850		(7,476	)	1987	04/28/97		40
The Plaza at La Jolla Village			San Diego		CA		75,727		11,839		98,243		19		5,954			11,858		104,197		116,055		(23,324	)	1987-1990	03/10/94		40
Griffin Towers			Santa Ana		CA		—		14,317		81,127		—		6,070			14,317		87,197		101,514		(9,246	)	1987	07/02/01		40
Lincoln Town Center			Santa Ana		CA		—		4,403		24,950		—		2,213			4,403		27,163		31,566		(4,295	)	1987	06/19/00		40
2951 28th Street			Santa Monica		CA		—		3,612		20,465		—		3,015			3,612		23,480		27,092		(2,918	)	1971	07/02/01		40
429 Santa Monica			Santa Monica		CA		—		2,523		14,298		—		1,264			2,523		15,562		18,085		(2,347	)	1982	06/19/00		40
Arboretum Courtyard			Santa Monica		CA		—		6,573		37,245		—		1,533			6,573		38,778		45,351		(4,698	)	1999	07/02/01		40
Santa Monica Business Park			Santa Monica		CA		6,852		—		242,155		—		12,638			—		254,793		254,793		(29,678	)	1979-1981	07/02/01		40
Searise Office Tower			Santa Monica		CA		—		4,380		24,818		—		1,475			4,380		26,293		30,673		(3,922	)	1975	06/19/00		40
Wilshire Palisades			Santa Monica		CA		38,375		9,763		55,323		—		2,733			9,763		58,056		67,819		(8,364	)	1981	06/19/00		40
Bixby Ranch			Seal Beach		CA		25,011		6,450		36,550		—		3,307			6,450		39,857		46,307		(6,378	)	1987	06/19/00		40
Los Angeles Region Totals							388,860		341,765		2,608,258		19		253,890			341,784		2,862,148		3,203,932		(475,437	)
New York Region
1301 Avenue of Americas			New York		NY		486,605		151,285		605,788		—		32,324			151,285		638,112		789,397		(82,694	)	1963/1989	08/03/00		40
527 Madison Avenue			New York		NY		—		9,155		51,877		—		7,794			9,155		59,671		68,826		(8,709	)	1986	06/19/00		40
717 Fifth Avenue		(3) (8)	New York		NY		—		47,000		115,058		—		1,366			47,000		116,424		163,424		(7,103	)	1959	09/08/04		45
850 Third Avenue		(9)	New York		NY		490		9,606		86,453		30		18,652			9,636		105,105		114,741		(21,753	)	1960/1996	03/20/95		40
Park Avenue Tower		(9)	New York		NY		180,000		48,976		196,566		719		13,383			49,695		209,949		259,644		(41,040	)	1986	07/15/98		40
Tower 56			New York		NY		21,712		6,853		38,832		—		5,108			6,853		43,940		50,793		(6,587	)	1983	06/19/00		40
WorldWide Plaza			New York		NY		—		124,919		496,665		—		10,475			124,919		507,140		632,059		(91,216	)	1989	10/01/98		40
177 Broad Street			Stamford		CT		—		2,562		23,056		—		2,762			2,562		25,818		28,380		(5,659	)	1989	01/29/97		40
300 Atlantic Street			Stamford		CT		—		4,632		41,691		—		3,773			4,632		45,464		50,096		(10,466	)	1987/1996	03/30/93		40
Canterbury Green		(10)	Stamford		CT		—		—		41,987		92		2,258			92		44,245		44,337		(10,227	)	1987	12/15/92		40
Four Stamford Plaza			Stamford		CT		—		4,471		40,238		24		2,453			4,495		42,691		47,186		(9,152	)	1979/1994	08/31/94		40
One and Two Stamford Plaza			Stamford		CT		—		8,268		74,409		—		9,107			8,268		83,516		91,784		(20,135	)	1986/1994	03/30/93		40
Three Stamford Plaza			Stamford		CT		—		3,957		35,610		—		3,319			3,957		38,929		42,886		(8,358	)	1980/1994	12/15/92		40
New York Region Totals							688,807		421,684		1,848,230		865		112,774			422,549		1,961,004		2,383,553		(323,099	)
San Francisco Region
Golden Bear Center			Berkeley		CA		17,880		4,500		25,500		—		1,545			4,500		27,045		31,545		(4,024	)	1986	06/19/00		40
Bay Park Plaza I & II			Burlingame		CA		—		12,906		73,133		—		2,710			12,906		75,843		88,749		(10,798	)	1985/1998	06/19/00		40
One Bay Plaza			Burlingame		CA		—		8,642		48,973		—		3,196			8,642		52,169		60,811		(7,836	)	1979	06/19/00		40
Pruneyard Office Towers			Campbell		CA		—		16,502		154,783		—		10,121			16,502		164,904		181,406		(23,906	)	1971/1999	06/19/00		40
One & Two Corporate Center			Concord		CA		—		6,379		36,146		—		3,876			6,379		40,022		46,401		(6,370	)	1985-1987	06/19/00		40
Watergate Office Towers			Emeryville		CA		—		44,901		254,441		—		11,125			44,901		265,566		310,467		(31,004	)	1973/2001	07/02/01		40
Metro Center			Foster City		CA		—		—		282,329		—		10,422			—		292,751		292,751		(33,661	)	1985-1988	07/02/01		40
Drake’s Landing			Larkspur		CA		—		5,735		32,499		—		1,907			5,735		34,406		40,141		(4,370	)	1986	07/02/01		40
Larkspur Landing Office Park			Larkspur		CA		—		8,316		47,126		—		3,638			8,316		50,764		59,080		(6,351	)	1981-1982	07/02/01		40
Wood Island Office Complex			Larkspur		CA		—		3,735		21,163		—		645			3,735		21,808		25,543		(2,521	)	1978	07/02/01		40
2180 Sand Hill Road			Menlo Park		CA		—		3,408		19,314		—		1,928			3,408		21,242		24,650		(2,669	)	1976	07/02/01		40
1900 McCarthy			Milpitas		CA		—		1,998		11,319		—		736			1,998		12,055		14,053		(1,458	)	1984	07/02/01		40
California Circle II		(4)	Milpitas		CA		—		1,764		9,997		—		(1,471	)		1,764		8,526		10,290		(148	)	1984	07/02/01		40
Shoreline Office Center		(3)	Mill Valley		CA		—		—		19,218		—		2,237			—		21,455		21,455		(1,666	)	1985	12/14/04		40
Golden Gate Plaza		(3)	Novato		CA		—		3,687		20,851		—		—			3,687		20,851		24,538		(514	)	1994	06/30/05		45
Woodside Office Center		(3)	Novato		CA		—		3,072		19,916		—		829			3,072		20,745		23,817		(384	)	2003	06/30/05		57
Clocktower Square		(3)	Palo Alto		CA		—		—		41,279		—		33			—		41,312		41,312		(452	)	1967-1983	09/27/05		44
Embarcadero Place			Palo Alto		CA		33,237		10,500		59,500		—		4,833			10,500		64,333		74,833		(9,053	)	1984	06/19/00		40
Foothill Research Center			Palo Alto		CA		—		—		104,894		—		60			—		104,954		104,954		(12,315	)	1991	07/02/01		40
Lockheed			Palo Alto		CA		—		—		27,712		—		70			—		27,782		27,782		(3,188	)	1991	07/02/01		40
Palo Alto Square			Palo Alto		CA		—		—		78,143		161		8,416			161		86,559		86,720		(21,152	)	1971/1985	10/01/99		23
Xerox Campus			Palo Alto		CA		—		—		132,810		—		2			—		132,812		132,812		(15,182	)	1991	07/02/01		40
1179 North McDowell		(3)	Petaluma		CA		—		1,585		7,638		—		—			1,585		7,638		9,223		(253	)	1983	06/30/05		38
Redwood Business Park I		(3)	Petaluma		CA		11,395		2,616		15,034		—		1			2,616		15,035		17,651		(55	)	1985-1988	10/28/05		35-49
Redwood Business Park II		(3)	Petaluma		CA		19,991		4,254		27,621		—		—			4,254		27,621		31,875		(100	)	1989-2000	10/28/05		34-51
Redwood Business Park III		(3)	Petaluma		CA		16,528		995		27,407		—		—			995		27,407		28,402		(83	)	1995	11/02/05		50
Redwood Business Park IV		(3)	Petaluma		CA		8,950		300		14,392		—		—			300		14,392		14,692		(43	)	2000	11/02/05		53

148

												Costs Capitalized						Gross Amount Carried at
												Subsequent to						Close of Period
								Initial Cost				Acquisition						12/31/05
																											Date of
						Encumbrances				Building and					Building and					Building and				Accumulated			Construction/	Date	Depreciable
Description	Notes		Location	State		at 12/31/05		Land		Improvements		Land			Improvements			Land		Improvements		Total(1)		Depreciation(1)			Renovation	Acquired	Lives(2)
Redwood Business Park V		(3)	Petaluma		CA		7,069		701		9,645		—			—			701		9,645		10,346		(32	)	1987	10/28/05		42
Hacienda Terrace			Pleasanton		CA		—		7,039		39,887		—			8,793			7,039		48,680		55,719		(7,765	)	1984	06/19/00		40
Shorebreeze I & II		(3)	Redwood City		CA		22,006		14,028		41,970		—			666			14,028		42,636		56,664		(1,523	)	1985-1986	06/09/05		35
Towers at Shores Center			Redwood City		CA		—		35,578		69,054		—			13,436			35,578		82,490		118,068		(10,039	)	2002	07/02/01		40
333 Twin Dolphin Plaza		(3)	Redwood City		CA		—		12,054		40,719		—			73			12,054		40,792		52,846		(1,420	)	1985	07/28/05		48
555 Twin Dolphin Plaza			Redwood Shores		CA		—		11,790		66,810		—			3,565			11,790		70,375		82,165		(8,816	)	1989	07/02/01		40
Douglas Corporate Center			Roseville		CA		—		2,391		13,550		—			640			2,391		14,190		16,581		(1,620	)	1990	07/02/01		40
Douglas Corporate Center II			Roseville		CA		—		1,700		10,962		—			3,349			1,700		14,311		16,011		(1,252	)	2004	07/02/01		40
Johnson Ranch Corp Centre I & II			Roseville		CA		—		4,380		24,819		—			694			4,380		25,513		29,893		(2,940	)	1990-1998	07/02/01		40
Olympus Corporate Centre		(3)	Roseville		CA		—		7,510		30,457		—			523			7,510		30,980		38,490		(2,605	)	1992-1996	09/22/04		40
Roseville Corporate Center			Roseville		CA		—		3,008		17,046		—			85			3,008		17,131		20,139		(1,920	)	1999	07/02/01		40
Summit at Douglas Ridge I		(3)	Roseville		CA		—		2,937		23,444		—			(1,087	)		2,937		22,357		25,294		(1,392	)	2003	01/21/05		59
3600-3620 American River Drive			Sacramento		CA		—		2,209		12,518		—			2,169			2,209		14,687		16,896		(1,702	)	1977-1979/1997	07/02/01		40
455 University Avenue			Sacramento		CA		—		465		2,634		—			245			465		2,879		3,344		(381	)	1973	07/02/01		40
555 University Avenue			Sacramento		CA		—		939		5,323		—			624			939		5,947		6,886		(675	)	1974	07/02/01		40
575 & 601 University Avenue			Sacramento		CA		—		1,159		6,569		—			1,146			1,159		7,715		8,874		(928	)	1977	07/02/01		40
655 University Avenue			Sacramento		CA		—		672		3,806		—			589			672		4,395		5,067		(605	)	1979	07/02/01		40
701 University Avenue			Sacramento		CA		—		934		5,294		—			249			934		5,543		6,477		(694	)	1990	07/02/01		40
740 University Avenue			Sacramento		CA		—		212		1,199		—			64			212		1,263		1,475		(155	)	1973	07/02/01		40
Exposition Centre			Sacramento		CA		—		1,200		7,800		—			499			1,200		8,299		9,499		(1,352	)	1984	06/19/00		40
Gateway Oaks I			Sacramento		CA		—		2,391		13,546		—			1,151			2,391		14,697		17,088		(1,725	)	1990	07/02/01		40
Gateway Oaks II			Sacramento		CA		—		1,341		7,600		—			514			1,341		8,114		9,455		(1,040	)	1992	07/02/01		40
Gateway Oaks III			Sacramento		CA		—		936		5,305		—			357			936		5,662		6,598		(676	)	1996	07/02/01		40
Gateway Oaks IV			Sacramento		CA		—		1,658		9,395		—			499			1,658		9,894		11,552		(1,147	)	1998	07/02/01		40
Point West Commercentre			Sacramento		CA		—		2,321		13,154		—			1,362			2,321		14,516		16,837		(1,958	)	1983	07/02/01		40
Point West Corporate Center I & II			Sacramento		CA		—		3,653		14,779		—			1,507			3,653		16,286		19,939		(1,991	)	1984	07/02/01		40
Wells Fargo Center			Sacramento		CA		—		17,819		100,975		—			3,958			17,819		104,933		122,752		(15,236	)	1987	06/19/00		40
Bayhill Office Center			San Bruno		CA		85,242		24,010		136,055		—			8,991			24,010		145,046		169,056		(20,537	)	1982/1987	06/19/00		40
Skyway Landing I & II			San Carlos		CA		—		15,535		35,994		—			18,658			15,535		54,652		70,187		(7,108	)	2000	07/02/01		40
150 California			San Francisco		CA		—		12,567		46,184		—			6,976			12,567		53,160		65,727		(9,122	)	2000	12/19/97		40
201 California			San Francisco		CA		38,354		10,520		59,611		—			9,924			10,520		69,535		80,055		(9,842	)	1980	06/19/00		40
188 Embarcadero			San Francisco		CA		13,682		4,108		23,280		—			1,835			4,108		25,115		29,223		(3,747	)	1985	06/19/00		40
60 Spear Street			San Francisco		CA		—		2,125		19,126		15			3,839			2,140		22,965		25,105		(5,179	)	1967/1987	09/29/87		40
Maritime Plaza			San Francisco		CA		—		11,531		103,776		—			24,599			11,531		128,375		139,906		(26,977	)	1967/1990	04/21/97		40
One Market			San Francisco		CA		—		34,814		313,330		—			50,951			34,814		364,281		399,095		(90,907	)	1976/1995	11/22/94		40
Ferry Building			San Francisco		CA		—		—		94,652		—			17,592			—		112,244		112,244		(9,787	)	1898/2002	06/19/00		40
10 Almaden			San Jose		CA		—		12,583		71,303		—			2,981			12,583		74,284		86,867		(10,420	)	1989	06/19/00		40
1740 Technology			San Jose		CA		—		8,766		49,673		—			3,067			8,766		52,740		61,506		(6,353	)	1986/1994	07/02/01		40
2290 North First Street		(6)	San Jose		CA		—		2,431		13,776		—			(6,959	)		2,431		6,817		9,248		(1,044	)	1984	07/02/01		40
Central Park Plaza			San Jose		CA		—		11,181		63,358		23			4,668			11,204		68,026		79,230		(8,873	)	1984-1985	07/02/01		40
Metro Plaza			San Jose		CA		—		18,029		102,164		—			7,165			18,029		109,329		127,358		(12,837	)	1986-1987	07/02/01		40
Skyport East and West			San Jose		CA		—		6,779		87,193		—			26,800			6,779		113,993		120,772		(16,386	)	2001	07/02/01		40
Concourse			San Jose		CA		—		49,279		279,248		(50	)		6,713			49,229		285,961		335,190		(32,950	)	1980/2000	07/02/01		40
San Jose Gateway I			San Jose		CA		—		7,873		44,616		—			3,994			7,873		48,610		56,483		(5,735	)	1981	07/02/01		40
San Jose Gateway II			San Jose		CA		—		16,286		92,288		—			5,144			16,286		97,432		113,718		(11,187	)	1983-1984	07/02/01		40
San Jose Gateway III			San Jose		CA		—		6,409		36,315		—			679			6,409		36,994		43,403		(4,172	)	1998	07/02/01		40
North First Office Center			San Jose		CA		—		6,395		36,239		—			989			6,395		37,228		43,623		(4,112	)	1985-1986	07/02/01		40
225 West Santa Clara Street		(3)	San Jose		CA		—		8,600		94,035		—			1,286			8,600		95,321		103,921		(9,278	)	2001	12/31/03		43
Peninsula Office Park			San Mateo		CA		76,760		27,275		154,561		—			6,278			27,275		160,839		188,114		(23,014	)	1971/1998	06/19/00		40
San Mateo BayCenter I			San Mateo		CA		—		5,382		30,498		—			2,421			5,382		32,919		38,301		(3,965	)	1984	07/02/01		40
San Mateo BayCenter II			San Mateo		CA		—		6,245		35,389		—			2,423			6,245		37,812		44,057		(4,509	)	1984	07/02/01		40
San Mateo BayCenter III			San Mateo		CA		—		3,357		19,023		—			421			3,357		19,444		22,801		(2,245	)	1987	07/02/01		40
The Plaza at San Ramon			San Ramon		CA		—		7,460		42,273		—			9,435			7,460		51,708		59,168		(8,185	)	1987-1989	06/19/00		40
2727 Augustine		(6)	Santa Clara		CA		—		3,000		17,000		—			(11,600	)		3,000		5,400		8,400		(720	)	1975	07/02/01		40
3281-3285 Scott Boulevard		(6)	Santa Clara		CA		—		1,275		7,225		—			(3,390	)		1,275		3,835		5,110		(473	)	1981	07/02/01		40
Applied Materials I & II		(6)	Santa Clara		CA		—		5,100		28,900		—			(15,815	)		5,100		13,085		18,185		(796	)	1979	07/02/01		40
Patrick Henry Drive			Santa Clara		CA		—		2,475		14,025		—			4			2,475		14,029		16,504		(1,564	)	1981	07/02/01		40
Santa Clara Office Center I			Santa Clara		CA		—		2,010		11,391		—			534			2,010		11,925		13,935		(1,398	)	1981	07/02/01		40
Santa Clara Office Center II			Santa Clara		CA		—		2,870		16,261		—			971			2,870		17,232		20,102		(1,978	)	1978	07/02/01		40

149

												Costs Capitalized						Gross Amount Carried at
												Subsequent to						Close of Period
								Initial Cost				Acquisition						12/31/05
																											Date of
						Encumbrances				Building and					Building and					Building and				Accumulated			Construction/	Date	Depreciable
Description	Notes		Location	State		at 12/31/05		Land		Improvements		Land			Improvements			Land		Improvements		Total(1)		Depreciation(1)			Renovation	Acquired	Lives(2)
Santa Clara Office Center III			Santa Clara		CA		—		2,031		11,509		—			574			2,031		12,083		14,114		(1,452	)	1980	07/02/01		40
Santa Clara Office Center IV			Santa Clara		CA		—		186		1,057		—			—			186		1,057		1,243		(118	)	1979	07/02/01		40
Lake Marriott Business Park			Santa Clara		CA		—		9,091		84,967		297			10,799			9,388		95,766		105,154		(18,888	)	1981	12/19/97		40
Fountaingrove Center			Santa Rosa		CA		—		2,898		16,424		—			2,927			2,898		19,351		22,249		(2,251	)	1986/1991	07/02/01		40
Fountaingrove I		(3)	Santa Rosa		CA		—		1,820		8,106		—			—			1,820		8,106		9,926		(33	)	2005	10/28/05		54
Oak Valley Business Center		(3)	Santa Rosa		CA		—		3,871		20,623		—			50			3,871		20,673		24,544		(518	)	2001	06/30/05		50
Parkpoint Business Center		(3)	Santa Rosa		CA		7,414		1,265		10,099		—			—			1,265		10,099		11,364		(35	)	1981	11/02/05		36
Parkway Plaza (a.k.a. 3850 & 3880  Brickway)		(3)	Santa Rosa		CA		—		3,791		19,986		—			—			3,791		19,986		23,777		(381	)	2000	06/30/05		55
The Lakes		(3)	Santa Rosa		CA		—		4,911		17,586		—			38			4,911		17,624		22,535		(509	)	1987	07/19/05		18-42
Waterfall Towers		(3)	Santa Rosa		CA		8,081		3,040		14,216		—			1			3,040		14,217		17,257		(165	)	1981	10/11/05		45
Sunnyvale Business Center			Sunnyvale		CA		—		4,890		44,010		—			46			4,890		44,056		48,946		(8,855	)	1990	12/19/97		40
San Francisco Region Totals							366,589		660,884		4,638,743		446			318,538			661,330		4,957,281		5,618,611		(659,750	)
Seattle Region
10700 Building			Bellevue		WA		—		—		15,958		—			102			—		16,060		16,060		(1,790	)	1981	07/02/01		40
110 Atrium Place			Bellevue		WA		—		6,333		35,888		—			2,814			6,333		38,702		45,035		(5,709	)	1981	06/19/00		40
Bellefield Office Park			Bellevue		WA		—		12,232		69,312		(1	)		6,248			12,231		75,560		87,791		(9,539	)	1980	07/02/01		40
Bellevue Gateway I			Bellevue		WA		—		3,593		20,360		—			2,200			3,593		22,560		26,153		(3,094	)	1985	07/02/01		40
Bellevue Gateway II			Bellevue		WA		—		2,016		11,423		—			910			2,016		12,333		14,349		(1,592	)	1988	07/02/01		40
Eastgate Office Park			Bellevue		WA		—		6,468		36,650		3			5,404			6,471		42,054		48,525		(5,617	)	1985	07/02/01		40
Gateway 405 Building			Bellevue		WA		—		1,011		5,727		—			480			1,011		6,207		7,218		(802	)	1986	07/02/01		40
I-90 Bellevue			Bellevue		WA		—		3,725		21,108		—			238			3,725		21,346		25,071		(2,381	)	1986	07/02/01		40
Lincoln Executive Center			Bellevue		WA		—		3,235		18,329		—			1,705			3,235		20,034		23,269		(2,754	)	1983-1985	07/02/01		40
Lincoln Executive Center II & III			Bellevue		WA		—		4,918		27,868		—			3,949			4,918		31,817		36,735		(3,819	)	1983-1985	07/02/01		40
Main Street Building		(4)	Bellevue		WA		—		1,398		7,922		—			(1,931	)		1,398		5,991		7,389		(89	)	1980	07/02/01		40
Plaza Center			Bellevue		WA		—		16,680		94,521		—			5,005			16,680		99,526		116,206		(11,415	)	1978/1983	07/02/01		40
Plaza East			Bellevue		WA		—		4,687		26,561		—			2,553			4,687		29,114		33,801		(3,542	)	1988	07/02/01		40
Sunset North Corporate Campus			Bellevue		WA		—		17,031		79,249		—			14,286			17,031		93,535		110,566		(17,887	)	1999	06/30/00		40
City Center Bellevue			Bellevue		WA		—		10,349		93,142		—			8,334			10,349		101,476		111,825		(19,286	)	1987	01/28/99		40
One Bellevue Center			Bellevue		WA		—		—		56,223		—			9,230			—		65,453		65,453		(13,224	)	1983	12/17/97		40
Symetra Financial Center (a.k.a. Rainier  Plaza)			Bellevue		WA		—		—		79,928		—			14,896			—		94,824		94,824		(18,350	)	1986	12/17/97		40
Key Center			Bellevue		WA		—		—		78,447		—			8,822			—		87,269		87,269		(8,116	)	2000	06/19/00		40
410 17th Street			Denver		CO		—		4,474		40,264		—			9,342			4,474		49,606		54,080		(11,090	)	1978	04/30/98		40
4949 South Syracuse			Denver		CO		—		822		7,401		23			1,492			845		8,893		9,738		(2,012	)	1982	07/15/98		40
Denver Corporate Center II & III			Denver		CO		—		6,059		36,534		4			7,522			6,063		44,056		50,119		(10,838	)	1981/1993-1997	12/20/90		40
Denver Post Tower			Denver		CO		—		—		52,937		—			9,784			—		62,721		62,721		(14,621	)	1984	04/21/98		40
Dominion Plaza			Denver		CO		—		5,990		53,911		—			8,272			5,990		62,183		68,173		(14,380	)	1983	05/14/98		40
Metropoint I			Denver		CO		—		6,375		39,375		—			5,206			6,375		44,581		50,956		(9,504	)	1987	07/15/98		40
Metropoint II			Denver		CO		—		1,777		17,865		—			3,625			1,777		21,490		23,267		(5,629	)	1999	04/10/00		40
U.S. Bank Tower		(3)	Denver		CO		—		6,301		72,274		—			3,397			6,301		75,671		81,972		(8,919	)	1974/2001	08/12/03		35
Tabor Center			Denver		CO		—		12,948		116,536		—			40,350			12,948		156,886		169,834		(29,049	)	1985	04/30/98		40
Trinity Place			Denver		CO		—		1,898		17,085		—			3,419			1,898		20,504		22,402		(4,987	)	1983	04/30/98		40
Millennium Plaza			Englewood		CO		—		7,757		38,314		—			698			7,757		39,012		46,769		(7,422	)	1982	05/19/98		40
Terrace Building			Englewood		CO		—		1,546		13,865		30			2,006			1,576		15,871		17,447		(3,233	)	1982	07/15/98		40
The Quadrant			Englewood		CO		—		4,357		39,215		—			6,431			4,357		45,646		50,003		(10,575	)	1985	12/01/92		40
4000 Kruse Way Place			Lake Oswego		OR		—		4,475		25,360		—			2,292			4,475		27,652		32,127		(3,688	)	1981/1986	07/02/01		40
4004 Kruse Way Place			Lake Oswego		OR		—		1,888		10,698		—			839			1,888		11,537		13,425		(1,633	)	1996	07/02/01		40
4800 Meadows			Lake Oswego		OR		—		—		17,448		—			896			—		18,344		18,344		(2,270	)	1998	07/02/01		40
4900-5000 Meadows			Lake Oswego		OR		—		—		30,528		—			1,582			—		32,110		32,110		(4,184	)	1990	07/02/01		40
4949 Meadows			Lake Oswego		OR		—		—		26,941		—			1,545			—		28,486		28,486		(3,587	)	1997	07/02/01		40
5800 & 6000 Meadows		(3)	Lake Oswego		OR		—		4,810		44,222		—			496			4,810		44,718		49,528		(3,467	)	1999; 2001	09/30/04		42
Kruse Oaks I			Lake Oswego		OR		—		—		14,648		—			4,388			—		19,036		19,036		(2,847	)	2001	07/02/01		40
Kruse Way Plaza I & II			Lake Oswego		OR		—		2,866		16,239		—			1,282			2,866		17,521		20,387		(2,406	)	1984-1986	07/02/01		40
Kruse Woods			Lake Oswego		OR		—		10,812		80,977		—			4,198			10,812		85,175		95,987		(10,843	)	1986-1988	07/02/01		40
Kruse Woods V			Lake Oswego		OR		—		5,478		21,244		—			4,946			5,478		26,190		31,668		(1,911	)	2004	07/02/01		40
Island Corporate Center			Mercer Island		WA		—		2,700		15,300		—			1,515			2,700		16,815		19,515		(2,643	)	1987	06/19/00		40
5550 Macadam Building			Portland		OR		—		870		4,929		—			889			870		5,818		6,688		(779	)	1980	07/02/01		40

150

												Costs Capitalized					Gross Amount Carried at
												Subsequent to					Close of Period
								Initial Cost				Acquisition					12/31/05
																										Date of
						Encumbrances				Building and				Building and					Building and				Accumulated			Construction/	Date	Depreciable
Description	Notes		Location	State		at 12/31/05		Land		Improvements		Land		Improvements			Land		Improvements		Total(1)		Depreciation(1)			Renovation	Acquired	Lives(2)
Umpqua Bank Plaza			Portland		OR		—		7,505		42,529		—		5,412			7,505		47,941		55,446		(6,183	)	1974/1994	07/02/01		40
Lincoln Center			Portland		OR		—		18,760		106,307		—		12,293			18,760		118,600		137,360		(14,669	)	1980/1989	07/02/01		40
One Pacific Square			Portland		OR		—		4,451		25,221		—		9,835			4,451		35,056		39,507		(3,682	)	1983	07/02/01		40
River Forum I & II			Portland		OR		—		4,038		22,881		—		4,467			4,038		27,348		31,386		(4,091	)	1985	07/02/01		40
RiverSide Centre (Oregon)			Portland		OR		—		2,537		12,353		—		1,073			2,537		13,426		15,963		(2,898	)	1947/1979	07/02/01		40
Congress Center			Portland		OR		—		5,383		48,634		—		11,041			5,383		59,675		65,058		(13,447	)	1980	12/17/97		40
Southgate Office Plaza I & II		(4)	Renton		WA		—		4,794		27,163		—		(1,755	)		4,794		25,408		30,202		(608	)	1987/1991	07/02/01		40
Washington Mutual Tower			Seattle		WA		79,250		51,000		289,000		—		3,103			51,000		292,103		343,103		(43,098	)	1988	06/19/00		40
1111 Third Avenue			Seattle		WA		—		9,900		89,571		—		7,215			9,900		96,786		106,686		(21,216	)	1980	12/17/97		40
10833-10845 NE 8th Street			Seattle		WA		—		—		2,000		—		(1,637	)		—		363		363		—		1962,1978,1982,1987	07/02/01		40
Nordstrom Medical Tower			Seattle		WA		—		1,700		15,450		—		1,158			1,700		16,608		18,308		(3,554	)	1986	12/17/97		40
Second and Seneca			Seattle		WA		—		10,922		98,927		—		4,144			10,922		103,071		113,993		(21,869	)	1991	12/17/97		40
Second and Spring Building			Seattle		WA		—		1,968		17,716		—		3,215			1,968		20,931		22,899		(4,300	)	1906/1989	07/29/98		40
Wells Fargo Center			Seattle		WA		—		21,361		193,529		—		14,292			21,361		207,821		229,182		(43,264	)	1983	12/17/97		40
Nimbus Corporate Center			Tigard		OR		—		12,934		73,291		—		11,849			12,934		85,140		98,074		(11,534	)	1991	07/02/01		40
Seattle Region Totals							79,250		345,132		2,697,298		59		297,362			345,191		2,994,660		3,339,851		(495,936	)
Washington, D.C. Region
Polk and Taylor Buildings			Arlington		VA		—		16,943		152,483		—		40,091			16,943		192,574		209,517		(37,136	)	1970	05/22/98		40
Centerpointe I & II			Fairfax		VA		—		8,838		79,540		367		2,283			9,205		81,823		91,028		(17,071	)	1990/1998	12/19/97		40
Fair Oaks Plaza			Fairfax		VA		—		2,412		21,712		35		2,777			2,447		24,489		26,936		(5,525	)	1986	11/24/97		40
Northridge I		(11)	Herndon		VA		12,148		3,225		29,024		—		2,717			3,225		31,741		34,966		(6,045	)	1988	12/19/97		40
American Center		(3)	McLean		VA		—		15,000		42,272		—		6,839			15,000		49,111		64,111		(5,714	)	1985	05/25/04		35
John Marshall I			McLean		VA		—		5,216		46,814		24		1,128			5,240		47,942		53,182		(9,582	)	1981	12/19/97		40
John Marshall III			McLean		VA		—		9,950		29,863		—		3,736			9,950		33,599		43,549		(6,328	)	2000	12/19/97		40
E.J. Randolph		(11)	McLean		VA		13,390		3,937		35,429		7		3,311			3,944		38,740		42,684		(8,428	)	1983	12/19/97		40
E.J. Randolph II			McLean		VA		—		5,770		24,587		—		4,006			5,770		28,593		34,363		(3,238	)	2002	12/19/97		40
Reston Town Center			Reston		VA		111,180		18,175		154,576		83		17,842			18,258		172,418		190,676		(36,812	)	1990	10/22/96		40
Reston Town Center Garage			Reston		VA		—		1,943		9,792		—		1,821			1,943		11,613		13,556		(2,450	)	1999	10/22/96		40
11111 Sunset Hills Road (a.k.a. XO  Building)		(3)	Reston		VA		23,201		9,794		42,254		—		554			9,794		42,808		52,602		(1,527	)	2000	05/04/05		55
1300 North 17th Street			Rosslyn		VA		79,656		9,811		88,296		—		9,963			9,811		98,259		108,070		(19,884	)	1980	12/19/97		40
1616 North Fort Myer Drive			Rosslyn		VA		—		6,961		62,646		—		9,675			6,961		72,321		79,282		(14,342	)	1974	12/19/97		40
Army and Navy Club Building			Washington		D.C.		—		3,773		33,954		—		218			3,773		34,172		37,945		(3,136	)	1986	05/24/02		40
Market Square			Washington		D.C.		—		33,077		187,437		—		6,254			33,077		193,691		226,768		(26,996	)	1990	06/19/00		40
One Lafayette Centre			Washington		D.C.		—		8,262		74,362		—		4,024			8,262		78,386		86,648		(16,700	)	1980/1993	10/17/97		40
Two Lafayette Centre			Washington		D.C.		—		2,642		26,676		—		1,963			2,642		28,639		31,281		(4,200	)	1985	07/11/00		40
Three Lafayette Centre			Washington		D.C.		—		6,871		61,841		—		8,066			6,871		69,907		76,778		(7,734	)	1986	10/17/01		40
Liberty Place			Washington		D.C.		—		5,625		50,625		—		1,889			5,625		52,514		58,139		(4,412	)	1991	09/17/02		40
Washington, D.C. Region Totals							239,575		178,225		1,254,183		516		129,157			178,741		1,383,340		1,562,081		(237,260	)
Subtotal Office Properties							2,164,199		2,666,997		18,701,580		3,559		1,575,485			2,670,556		20,277,065		22,947,621		(3,316,182	)
Development Properties:
Summit at Douglas Ridge II		(12)	Roseville		CA		—		3,597		14,095		—		2,686			3,597		16,781		20,378		(203	)	2005	05/20/05		59
Bridge Pointe Corporate Center III		(12)	San Diego		CA		—		5,250		—		—		6,462			5,250		6,462		11,712		—		N/A	07/02/01		40
Foundry Square I (Barclays)		(12)	San Francisco		CA		—		10,000		—		—		2,481			10,000		2,481		12,481		—		N/A	07/19/00		40
1095 Avenue of the Americas		(3)(12)	New York		NY		—		268,799		237,073		—		9,640			268,799		246,713		515,512		(2,586	)	1972	09/29/05		38
Kruse Oaks II		(12)	Portland		OR		—		—		—		—		4,922			—		4,922		4,922		—		N/A	07/02/01		40
City Center Plaza West		(12)	Bellevue		WA		—		11,420		—		—		1,623			11,420		1,623		13,043		—		N/A	01/28/99		40
Subtotal Development Properties							—		299,066		251,168		—		27,814			299,066		278,982		578,048		(2,789	)
Property Held for Sale:
8-16 Perimeter		(13)	Atlanta		GA		—		1,552		5,693		—		1,033			1,552		6,726		8,278		(1,149	)	1970/1989	11/10/05		40
120 Montgomery		(14)	San Francisco		CA		—		17,564		99,532		—		(51,161	)		17,564		48,371		65,935		(671	)	1956	06/19/00		40
3001 Stender Way		(14)	Santa Clara		CA		—		2,263		12,823		—		(12,177	)		2,263		646		2,909		(91	)	1978	07/02/01		40
Subtotal Property Held for Sale							—		21,379		118,048		—		(62,305	)		21,379		55,743		77,122		(1,911	)

151

													Costs Capitalized				Gross Amount Carried at
													Subsequent to				Close of Period
								Initial Cost					Acquisition				12/31/05
																										Date of
						Encumbrances				Building and					Building and				Building and				Accumulated			Construction/	Date	Depreciable
Description	Notes		Location	State		at 12/31/05		Land		Improvements			Land		Improvements		Land		Improvements		Total(1)		Depreciation(1)			Renovation	Acquired	Lives(2)
Industrial Properties:
San Francisco Region
Benicia Ind II & III			Benicia		CA		—		2,250		12,750			—		505		2,250		13,255		15,505		(1,549	)	1996	07/02/01		40
Independent Road Warehouse			Oakland		CA		—		900		5,100			—		—		900		5,100		6,000		(568	)	1972	07/02/01		40
San Francisco Region Totals							—		3,150		17,850			—		505		3,150		18,355		21,505		(2,117	)
Subtotal Industrial Properties							—		3,150		17,850			—		505		3,150		18,355		21,505		(2,117	)
Land Available for Development		(4)	Various				—		176,868		—			—		3,192		176,868		3,192		180,060		(18	)		Various		N/A
Management Business							—		17		(150	)		84		158,011		101		157,861		157,962		(45,324	)		Various		3-40
Investment in Real Estate		(15)				$	2,164,199	$	3,167,477	$	19,088,496		$	3,643	$	1,702,702	$	3,171,120	$	20,791,198	$	23,962,318	$	(3,368,341	)

(1)	The aggregate cost, net of accumulated tax depreciation, for Federal Income Tax purposes as of December 31, 2005 was $14.9 billion.
(2)	The life to compute depreciation on building is 18-59 years. The life to compute depreciation on building improvements is 3-40 years.
(3)	The initial cost of acquisition recorded for these properties includes intangible assets that are classified in “Deferred leasing costs and other related intangibles” and “Other liabilities” on the consolidated balance sheets. Accumulated depreciation for these properties includes the accumulated amortization for these related intangibles.
(4)	We recorded $65.7 million of impairment charges on these properties during 2005.
(5)	This property was previously under development and has been placed into service during 2005.
(6)	We recorded $38.5 million of impairment charges on these properties during 2004.
(7)	Our interest in this Office Property is attributed to our ownership of indebtedness and was consolidated in 2004 under FIN 46(R).
(8)	Equity Office and an unaffiliated party own this property as tenants-in-common.
(9)	A mortgage note encumbering these properties has cross default and collateralization provisions.

(10)	This Property contains 106 residential units in addition to 226,197 square feet of office space.
(11)	These loans are subject to cross default and collateralization provisions.
(12)	These properties are in development. During the development period certain operating costs, including real estate taxes together with interest incurred during the development stages is capitalized.
(13)	This property was held for sale as of December 31, 2005, pursuant to FAS 144.
(14)	This property was held for sale at December 31, 2005, pursuant to FAS 144 and is reflected at its fair value less costs to sell.
(15)	The encumbrances at December 31, 2005 include a net discount of $5.2 million.

152

A summary of activity of investment in real estate and accumulated depreciation is as follows:

The changes in investment in real estate for the years ended December 31, 2005, 2004, and 2003 are as follows:

			December 31, 2005			December 31, 2004			December 31, 2003
Balance, beginning of the period			$	25,420,675		$	24,334,162		$	25,163,516
	Additions during period:
		Acquisitions		1,318,983			484,566			163,511
		Consolidation of Properties previously accounted for under the equity method		—			819,569			85,870
		Consolidation of SunAmerica Center		—			330,787			—
		Improvements		397,633			430,570			471,638
	Deductions during period:
		Properties disposed of		(2,804,568	)		(709,033	)		(1,545,598	)
		Provision for loss on properties held for sale		(48,038	)		(2,123	)		—
		Impairment		(384,039	)		(275,350	)		(7,667	)
		Write-off of fully depreciated assets which are no longer in service		(22,523	)		(77,816	)		(19,048	)
				23,878,123			25,335,332			24,312,222
		Initial cost of acquisition recorded as intangible assets and classified in “deferred lease costs” on the consolidated balance sheets		84,195			85,343			21,940
Balance, end of period			$	23,962,318		$	25,420,675		$	24,334,162

The changes in accumulated depreciation for the years ended December 31, 2005, 2004, and 2003 are as follows:

			December 31, 2005			December 31, 2004			December 31, 2003
Balance, beginning of the period			$	(3,180,707	)	$	(2,578,361	)	$	(2,077,613	)
	Additions during period:
		Depreciation		(699,259	)		(709,924	)		(663,935	)
		Consolidation of Properties previously accounted for under the equity method		—			(53,110	)		—
		Consolidation of SunAmerica Center		—			(31,219	)		—
	Deductions during period:
		Properties disposed of		335,610			75,123			144,251
		Provision for loss on properties held for sale		10,606			—			—
		Impairment		165,036			46,180			167
		Write-off of fully depreciated assets which are no longer in service		22,523			77,816			19,048
				(3,346,191	)		(3,173,495	)		(2,578,082	)
		Accumulated amortization of initial cost of acquisition recorded as intangible assets and classified in “deferred lease costs” on the consolidated balance sheets		(22,150	)		(7,212	)		(279	)
Balance, end of period			$	(3,368,341	)	$	(3,180,707	)	$	(2,578,361	)

153 EX-10.37 2 c03119exv10w37.htm FORM OF NON-QUALIFIED SHARE OPTION AGREEMENT FOR EMPLOYEES

Exhibit 10.37

EQUITY OFFICE PROPERTIES TRUST
NON-QUALIFIED SHARE OPTION AGREEMENT
FOR EMPLOYEES

     This NON-QUALIFIED SHARE OPTION AGREEMENT (this “Agreement”) is made as of _________ (the “Grant Date”) between Equity Office Properties Trust, a Maryland real estate investment trust (the “Company”), and _________ (the “Optionee”).

W I T N E S S E T H:

     WHEREAS, the Company desires, by affording the Optionee an opportunity to purchase authorized common shares of beneficial interest of the Company, $.01 par value per share (the “Shares”), as hereinafter provided, to carry out the purposes of the Equity Office Properties Trust 2003 Share Option and Share Incentive Plan, as amended (the “Plan”);

     NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements hereinafter contained, the parties hereto mutually covenant and agree as follows:

     1.       Grant of Share Option. The Company hereby grants to the Optionee a non-qualified share option (the “Share Option”) to purchase all or any part of an aggregate _________ Shares, such number being subject to adjustment as provided in Paragraph 5 hereof, on the terms and conditions hereinafter set forth.

     2.       Term of Share Option. The term of the Share Option shall be for a period of ten (10) years, beginning on the Grant Date and ending on _________ (the “Expiration Date”), except as follows:

(a) Notwithstanding any other provision to the contrary, the Share Option shall expire immediately and become null and void if (i) the Optionee violates any agreement covering non-competition with the Company or any Subsidiary (as defined in the Plan), (ii) the Optionee’s Service (as defined below) terminates for cause (as defined below), or (iii) the Chief Legal Counsel determines that the Optionee committed acts or omissions that would have been the basis for a termination of the Optionee’s Service for cause had such acts or omissions been discovered prior to termination.

(A)	an Optionee’s “Service” shall continue until he or she is no longer an employee, officer, trustee, director of the Company or an entity that, at the time such Service terminates, is a Subsidiary (as such term is defined under the Plan); and
(B)	“cause” shall consist of:

(i)	violations of the Company’s drug and alcohol policy;
(ii)	illegal, dishonest or unethical conduct;
(iii)	violations of the Company’s anti-harassment policy;
(iv)	threatening to commit or committing injury or damage to customers, fellow employees, guests or company property; or

(v) any other instance where the Compensation Committee of the Board of Trustees (the “Committee”) deems there is sufficient cause.

(b) Subject to paragraph 2 (a) hereof, if the Optionee’s Service is terminated other than: (i) for cause; (ii) because of the Optionee’s death, Disability (as defined under the Plan) or retirement at or after his or her attainment of age 62; or (iii) as a result of a Change in Control of the Company (as more particularly and specifically defined in the Plan), the Share Option shall be exercisable only with respect to the number of Shares that are vested and exercisable (as determined under Paragraph 4 hereof) on the date such Service terminates and shall expire three (3) months from the date of the termination of the Optionee’s Service. From and after the effective date of the termination of such Service, the Optionee shall be allowed to exercise the Share Option with respect to the Shares that are vested and exercisable as of the effective date of the termination, but only if the Optionee has satisfied any outstanding debts or liabilities to the Company and has returned all Company property in his or her possession. For purposes of this Agreement and the Plan, a “Change in Control” (as more particularly and specifically defined in the Plan) shall be deemed to occur upon:

(A)	the acquisition by any entity, person or group of more than thirty percent (30%) of the combined voting power of the outstanding voting securities of Equity Office;
(B)	approval by shareholders of Equity Office of a merger, consolidation or reorganization of Equity Office with one (1) or more other entities, as a result of which the holders of all outstanding voting securities of Equity Office immediately prior to such transaction hold less than seventy percent (70%) of the combined voting power of the outstanding voting securities of the surviving or resulting corporation in substantially the same relative proportion as their ownership of the outstanding voting securities of Equity Office immediately before the transaction and the incumbent members of the Board of Trustees of Equity Office immediately before the transaction do not constitute at least a majority of the members of the board of the resulting corporation; or
(C)	approval by shareholders of Equity Office of a complete liquidation or dissolution of Equity Office; or
(D)	the rejection by the voting beneficial owners of the outstanding Shares of the entire slate of trustees proposed by the Board at a single election of trustees; or
(E)	the rejection by the voting beneficial owners of the outstanding Shares of one-half or more of the trustees proposed by the Board over any two or more consecutive elections of trustees; or
(F)	approval by shareholders of Equity Office of an agreement for the sale of substantially all of the assets of Equity Office other than to an entity of which Equity Office directly or indirectly owns at least seventy percent (70%) of the voting share.

- 2 -

(c)

If the Optionee’s Service terminates as the result of his or her death, the Share Option shall become fully vested and will expire twelve (12) months following the date of the Optionee’s death, but no later than the Expiration Date. The vested Share Option shall be exercisable by the Optionee’s heirs, legatees or estate that receive the Share Option, as determined by the Committee in accordance with the Plan and Paragraph 6 hereof.

(d)

If the Optionee’s Service is terminated because of his Disability or retirement at or after age 62 or as a result of a Change in Control of the Company, the Share Option shall be immediately exercisable in full and shall expire on the Expiration Date.

     3.       Purchase Price . The per share purchase price of the Shares shall be $_________, subject to adjustment as provided below in Paragraph 5.

     4.       Exercise of Share Option. This Paragraph 4 describes the time and manner in which the Share Option may be exercised.

(a)

The Share Option shall be exercisable in accordance with a vesting schedule under which _________ (_/_) of the Share Options will vest on each of _________. Notwithstanding the foregoing, the Share Option shall become fully vested and immediately exercisable with respect to all of the Shares if the Optionee’s Service is terminated as a result of his or her death, Disability or retirement at or after his or her attainment of age 62 or as a result of a Change in Control.

(b)

Once the Share Option becomes exercisable, the Optionee or such other persons as are entitled to exercise the Share Option (as described in Paragraphs 2(c) and 6 hereof) may exercise the Share Option by providing written notice to exercise prior to the Expiration Date to the attention of Fidelity Investments, or such other broker as the Company shall identify in a written notice to Optionee as the Company’s designated broker for the Plan (the “Designated Broker”). Such written notice to exercise or electronic transmission of notice to exercise shall be in a form acceptable to the Designated Broker and may state that the Share Option is being exercised thereby and the number of Shares in respect of which it is being exercised. Such written notice shall be signed by the person or persons so exercising the Share Option and shall be accompanied by payment in full of the purchase price for such Shares, together with any required state, federal and payroll withholding taxes. Payments under this Paragraph 4 may be made (i) in cash, (ii) in Shares to be valued at the Fair Market Value thereof (as defined under the Plan) on the date of such exercise, (iii) with other consideration deemed to be acceptable by the Committee, or (iv) with a combination of any of the foregoing means. If the Share Option shall be exercised by any person or entity other than the Optionee, such written notice and payment must also be accompanied by appropriate proof of the right of such person or entity to exercise the Share Option. As soon as practicable following its receipt of sufficient written notice, payment and any other required documentation, the Designated Broker shall register, in the name of the person or entity exercising the Share Option, the Shares purchased under the Share Option.

- 3 -

(c) Notwithstanding any provision of this Agreement or the Plan to the contrary, the Optionee or such other persons as are entitled to exercise the Share Option (as described in Paragraphs 2(c) and 6 hereof) will be prohibited from exercising the Share Option to the extent that the Chief Legal Counsel of the Company has determined that purchases and sales of Company securities should be restricted because of the existence or potential existence of material nonpublic information concerning the Company, whether or not such determination has been communicated to the Optionee or such other persons. If the Chief Legal Counsel of the Company has made such a determination and the Optionee or such other persons give notice of an intent to exercise the Share Option (and satisfy all other conditions to the exercise of the Share Option), the Chief Legal Counsel shall advise the Optionee or such other persons concerning such restrictions, and unless such notice is withdrawn, the effective time of the Optionee’s exercise shall be postponed to the earlier of the date that the Chief Legal Counsel determines that such restriction is no longer necessary with respect to exercises of the Share Option or the day before the date that the Share Option expires.

     5.       Adjustment of Shares Subject to the Share Option. In the event of any change in the number of outstanding Shares by reason of any Share dividend, split, recapitalization, merger, consolidation, combination, exchange of Shares or other similar corporate change, the aggregate number and kind of Shares subject to the Share Option shall be proportionately adjusted by the Committee so that the aggregate value of such Shares shall remain unchanged, and the terms of this Agreement may be adjusted by the Committee in such manner as it deems equitable. If the foregoing adjustment results in a fractional number of Shares being subject to the Share Option, the fractional Share will be eliminated by rounding down to the nearest whole Share. All adjustments under this Paragraph 5 shall be made in the sole discretion of the Committee as it deems necessary and appropriate and shall be effective as of the day such action necessitating such adjustment becomes effective. Notwithstanding the foregoing, in no event shall the price per Share provided under this Agreement be adjusted below the par value of any such Share.

     6.       Transferability. The Share Option shall not be transferable other than:

(a)	by will or the laws of descent and distribution;
(b)	pursuant to a “domestic relations order” (as such term is defined under the Internal Revenue Code (the “Code”)), to the extent not inconsistent with the applicable provisions of the Code; or
(c)	pursuant to a transfer made by the Optionee during his or her lifetime to his or her spouse, child or children, grandchild or grandchildren, or other family member or to a trust for the benefit of one (1) or more of such family members, provided that: (i) the transferee thereof shall hold such Share Option subject to all of the conditions and restrictions contained herein and in the Plan; and (ii) as a condition of such transfer, the Company may require the transferee to agree in writing (in a form acceptable to the Committee) that the grant is subject to such conditions and restrictions.

- 4 -

     The Share Option may not be assigned, transferred, pledged or hypothecated in any way, shall not be assignable by operation of law, nor subject to execution, attachment or similar process, except as provided in this Paragraph 6. Any attempted assignment, transfer, pledge, hypothecation or other disposition of the Share Option contrary to the provisions of this Paragraph 6 and of the Plan, and the levy of any execution, attachment or similar process upon the Share Option, shall be null and void and without effect.

     7.       Withholding Taxes. If at any time the Company is required to withhold taxes on ordinary income recognized by the Optionee or other person or entity with respect to Shares received under the Share Option, the Company shall have the right to withhold from amounts payable to such person an amount necessary to satisfy all federal, state and local payroll tax withholding requirements.

     Without limiting the generality of the foregoing:

(a)	the person or entity exercising the Share Option may elect to satisfy all or part of the foregoing tax withholding requirements by delivery of unrestricted Shares having a Fair Market Value (as defined under the Plan) equal to the amount of taxes to be so withheld; and
(b)	the Committee may permit any such delivery of Shares to be made by withholding Shares otherwise issuable pursuant to the Share Option (in which event the date of delivery shall be deemed to be the date the Share Option is exercised) having a Fair Market Value (as defined in the Plan) equal to the amount of taxes to be withheld.

     8.       Service Rights of Optionee. This Agreement shall not constitute a contract of continued Service, and the Optionee’s receipt of the Share Option does not give him or her the right to be retained in the Service of the Company or any Subsidiary.

     9.       Shareholder Rights. The Optionee or other person or entity exercising the Share Option shall have no rights as a shareholder with respect to Shares to be acquired by the exercise of the Share Option until the earlier of the date of issuance of such Shares or the date the Optionee becomes entitled to such Shares. Except as otherwise expressly provided in the Plan, no adjustment shall be made for dividends or other rights for which the record date is prior to the earlier of the date such Shares are issued and the date the Optionee becomes entitled to such Shares. All Shares purchased upon the exercise of the Share Option as provided herein shall be fully paid and non-assessable.

     10.       Availability of Shares. The Company shall at all times during the term of the Share Option reserve and keep available such number of Shares as will be sufficient to satisfy the requirements of this Agreement, pay all original issue taxes, if any, with respect to the issuance of Shares pursuant hereto and all other fees and expenses necessarily incurred by the Company in connection therewith, and, from time to time, use its best efforts to comply with all laws and regulations which, in the opinion of counsel for the Company, shall be applicable thereto.

- 5 -

     11.       Notices. Each notice relating to this Agreement shall be given in writing and shall be sufficiently given if sent by registered or certified mail, or by nationally recognized overnight delivery service, postage or charges prepaid, to the address as hereinafter provided. Any such written notice or communication given by mail shall be deemed to have been given two (2) business days after the date so mailed, and such written notice or communication given by overnight delivery service shall be deemed to have been given one (1) business day after the date so sent. Each written notice to the Company shall be addressed to it at its offices at Two North Riverside Plaza, Suite 2100, Chicago, Illinois 60606, Attention: Chief Legal Counsel (or, in the case of notices pursuant to Paragraph 4(b) hereof, Attention: Fidelity Investments, P.O. Box 770001, Cincinnati, Ohio 45277-0003) or such other address identified in a written notice from the Company to the Optionee delivered in the manner prescribed in this Paragraph 11. Each written notice to the Optionee or other person or entity then entitled to exercise the Share Option shall be addressed to the Optionee or such other person or entity at the Optionee’s last known address on the records of the Company.

     12.       Incorporation of the Plan. Notwithstanding the terms and conditions contained herein, this Agreement shall be subject to and governed by all of the terms and conditions of the Plan (including amendments to the Plan) that are hereby incorporated by reference. In the event of any discrepancy or inconsistency between the terms and conditions of this Agreement and those of the Plan, the terms and conditions of the Plan shall control.

     13.       Interpretation. The interpretation and construction by the Committee of any terms or conditions of the Plan, this Agreement or other matters related to the Plan shall be final and conclusive.

     14.       Enforceability. This Agreement shall be binding upon the Optionee and his or her estate, assignee, transferee, personal representative and beneficiaries.

EQUITY OFFICE PROPERTIES TRUST
By:	Richard Kincaid
	President and Chief Executive Officer
GRANTEE
<<FIRSTNAME>> <<LASTNAME>>

- 6 -

EX-10.37

exv10w37

EX-10.38

Exhibit 10.38

Equity Office Properties Trust
2003 Share Option and Share Incentive Plan

Participant Summary and
Restricted Share Agreement for Employees

INTRODUCTION

Equity Office Properties Trust (“Equity Office”) has established the Equity Office Properties Trust 2003 Share Option and Share Incentive Plan, as amended (the “Plan”). Under the Plan, certain employees, officers, trustees and consultants may receive various rights related to common shares of beneficial interest (“Shares”) of Equity Office.

This Summary and Agreement is intended as a guide to the terms and conditions of the grant of an award of restricted Shares pursuant to the Plan. In addition, this Summary and Agreement is intended to serve as an agreement between you (the “Grantee”) and Equity Office, governing the terms and conditions of the grant of restricted Shares (the “Share Award”) to you on _________.

This Summary and Agreement is subject to and governed by all the terms and conditions of the Plan, which are hereby incorporated by reference. In the event of any discrepancy between the terms and conditions of this Summary and Agreement and those of the Plan, the terms and conditions of the Plan (including amendments to the Plan) will control. Any other rights that may be granted to you under the Plan or rights that may be granted to other individuals will be described in separate documents for those individuals who are eligible to receive them.

This Summary and Agreement includes a Glossary that defines certain words and phrases used in this Summary.

The effective date of the agreement reflected
in this document with respect to the Share Award is _____________.

This Document Constitutes Part of a Prospectus Covering Securities that have been
Registered under the Securities Act of 1933

The date of this Prospectus is _________________

PLAN ADMINISTRATION

The Plan is administered by the Compensation Committee (the “Committee”) of Equity Office’s Board of Trustees (the “Board”), which consists of at least three non-employee members of the Board. The Board selects the Committee members and may remove Committee members at any time.

The Committee designates those individuals eligible to receive awards under the Plan and determines the terms, conditions and restrictions governing the awards.

The Committee has the power, in connection with the administration of the Plan, to interpret the terms, conditions and restrictions of the Plan and this Summary and Agreement and to take any actions it deems necessary to carry out the terms and purpose of the Plan. Any interpretation or action by the Committee with respect to the Plan is final and binding on each participant and his or her heirs and transferees. Members of the Committee can be reached at the address shown below.

ADDITIONAL INFORMATION

If you have any questions about the Plan or if you would like to receive a copy of the Plan, any additional information relating to the Plan or documents that have been filed by Equity Office with the Securities and Exchange Commission (including Equity Office’s latest annual report, the description of the Shares being registered and any other reports filed by Equity Office pursuant to the Securities Exchange Act of 1934, all of which are incorporated by reference herein), which are available without charge, upon written or oral request, you should contact Ms. Robin Mariella in the legal department at:

Equity Office Properties Trust
Two North Riverside Plaza
Suite 1600
Chicago, IL 60606
(312) 466-3646
robin_mariella@equityoffice.com

2

RESTRICTED SHARE AWARDS

Q	What is a restricted Share Award?
A	You were granted ______ Shares as a restricted Share Award. A restricted Share Award is an issuance of Shares that you will forfeit (see page 5 of this Summary and Agreement) if you do not satisfy the vesting conditions established by the Committee (see page 5 of this Summary and Agreement). As of the “Grant Date” (as defined in the Glossary), you will have the right to vote the Shares and to receive an amount equal to dividends as and if declared. Your other rights as an Equity Office shareholder with respect to the awarded Shares will be restricted.   The Committee determines the terms, conditions and restrictions that apply to each Share Award granted under the Plan. In no event, however, may the terms, conditions and restrictions be inconsistent with those of the Plan. Further, the grant of a Share Award does not confer upon you the right to be retained in the “Service” of Equity Office. For purposes of the Plan, your Service ends when you no longer perform services as an employee, officer, trustee of Equity Office or any “Subsidiary” (as defined in the Plan).
Q	Will Share certificates be issued in my name at the time of grant?
A	No. At the time of grant, Equity Office will reflect your ownership by book entry. For a fee, Fidelity will issue Share certificates upon your request after you become vested in the Shares. Those employees who are eligible to participate in the Equity Office Supplemental Retirement Savings Plan (“SERP”) and have elected to defer receipt of their Shares by exchanging them for Phantom Share Units under the SERP also may be issued Share certificates when Shares are distributed from the SERP in exchange for such Phantom Share Units.

3

Q	Can I defer my Shares into the SERP?
A	If you are eligible to participate in the SERP, you will have until December 31 of the year prior to the year in which the Share Award is made to make an election to defer receipt of the Shares into the SERP by exchanging them for Phantom Share Units under the SERP at the time the Shares vest (see page 5 of this Summary and Agreement).
Q	Can I transfer my Share Award?
A	You may not sell, assign or otherwise transfer any non-vested Shares. Any attempt to do so will be void and without effect. However, when you become vested in the awarded Shares, you will have the right to transfer the Shares. If you are eligible to elect to defer receipt of Shares under the SERP, transferability of the Phantom Share Units credited to your account under the SERP will be controlled by the SERP plan document.
Q	Are there times when I cannot transfer my vested Shares?
A	Yes. There may be times when Equity Office’s Chief Legal Counsel imposes a “blackout period” because of the existence or potential existence of significant non-public information, such as a large acquisition or earnings that differ from stock market expectations, or if Equity Office conducts an additional offering to sell more Shares. During these times, you may have to temporarily wait to sell your vested Shares, whether or not such information is communicated to you.
	In addition, while an employee, if you are restricted to trading within the window periods established under Equity Office’s insider trading policy (as determined by the Chief Legal Counsel), you cannot sell any vested Shares (or any other holdings of Equity Office shares) outside of the window periods following the release of quarterly financial information, or otherwise in violation of any trading policy established by Equity Office’s Chief Legal Counsel and applicable to you.
	If you are an “affiliate” of Equity Office under the federal securities laws, your sales of Shares must comply with Rule 144. You will be advised if you are subject to Rule 144.

4

VESTING

Q	When will I become vested in the awarded Shares?
A	You will become vested in ______ percent (___%) of the awarded Shares on ______ and will be vested in an additional ___ percent (___%) of the Shares on _________.
Q	What if there are any fractional Shares at the time of vesting?
A	Any fractional Shares will be rounded down to the next whole Share. The fractional Shares shall remain unvested until, when combined with other fractional Shares that would otherwise be vested, they equal a whole Share.
Q	Are there any other circumstances under which I will vest in the awarded Shares?
A	Yes. You will become fully vested in the Shares if your Service with Equity Office is terminated:

• because of your death or “Disability” (as defined in the Glossary);

• in connection with your retirement at or after age 62;

• as a result of a “Change in Control” (as more particularly and specifically defined in the Plan) of Equity Office; or

• under circumstances that the “Plan Administrator” (as defined in the Glossary) deems to warrant full vesting.

FORFEITURE

Q	What happens if I leave Equity Office before I vest in the awarded Shares?
A	Unless your Service is terminated because of death, Disability or retirement or as a result of a Change in Control of Equity Office or under circumstances the Plan Administrator deems to warrant vesting some or all of your non-vested Shares, you will forfeit to Equity Office any non-vested Shares upon your termination of Service with Equity Office and all Subsidiaries.

5

TAX CONSEQUENCES

Q	When do I pay tax on the restricted Share Award?
A	Normally you do not recognize compensation (ordinary) income at the time you receive a restricted Share Award. As your Shares vest, you will recognize ordinary income in an amount equal to the “Fair Market Value” (as defined in the Glossary) of the vested Shares and you will be subject to income taxes and FICA (Medicare and social security taxes) on that amount. Equity Office’s designated agent for the Plan Administrator (currently Fidelity Investments) will provide you with a calculation of the tax withholding due.
	Alternatively, you may choose one of the following options which means that the amount of tax you pay and the time at which you pay it will differ as explained below:

Option 1

Section 83(b) Election. Under Internal Revenue Service (“IRS”) rules, you may elect to recognize as ordinary income and pay tax on the Fair Market Value of your Shares as of the Grant Date, rather than as of the date(s) your Shares vest. To elect this method of recognizing income for purposes of tax treatment, you must complete and file an election under Section 83(b) of the Internal Revenue Code (“83(b) Election”) with the IRS within thirty (30) days of the restricted Share Grant Date and provide a copy to Equity Office’s human resources department. You will also need to attach a copy of your 83(b) Election to your tax return when you file for the calendar year. You should note that an 83(b) Election is irrevocable upon submission.

If you choose to file an 83(b) Election, you will be required at that time to pay the total applicable tax withholding due, which will include income taxes and FICA, based on the ordinary income recognized under the election. Equity Office will provide you with a calculation of the tax withholding due.

Please be advised: If, under the terms of this Summary and Agreement or the Plan, you fail to vest in your restricted Shares, you will not be eligible to claim any deduction or credit for the taxes paid pursuant to your irrevocable 83(b) Election regarding those Shares.

6

Option 2

SERP Deferment. If you are eligible to participate in the SERP and you elect to defer receipt of your Shares by exchanging them for Phantom Share Units, you will be required to pay FICA when the Shares vest, and Equity Office or its agent will provide you with a calculation of the tax withholding due. You will recognize ordinary income (and be subject to income taxes) in an amount equal to the Fair Market Value of the Shares when the Shares (or their proceeds) are distributed to you.

Q	What is the tax treatment for dividends received under a restricted Share Award?
A	Any dividends received on non-vested Shares will be treated as compensation includable in your gross income reported on IRS Form W-2 (if you did not file an 83(b) Election for the Shares) or Form 1099-DIV (if you filed an 83(b) Election for the Shares) and in either case taxed as ordinary income.
Q	Is any income I recognize with respect to the awarded Shares subject to any withholding taxes and how will I pay my taxes?
A	Yes. Any income you recognize with respect to the awarded Shares is subject to all tax withholding requirements. Payment of part or all of the required withholding taxes may be satisfied as follows:

• you may elect to sell unrestricted Shares through Equity Office’s designated broker (currently Fidelity Investments) to satisfy all tax withholding requirements provided that you are in compliance with Equity Office’s insider trading policy. Executive officers of Equity Office subject to Section 16 of Securities Exchange Act of 1934 must obtain prior approval from the Chief Legal Counsel to sell Shares to satisfy tax withholding requirements.

7

• you may elect to deliver to Equity Office’s designated broker (currently Fidelity Investments) any unrestricted Shares having a Fair Market Value determined as of the date of such delivery equal to the amount required to be withheld;

• Equity Office may permit any delivery of unrestricted Shares to be made by withholding Shares otherwise issuable pursuant to the Share Award equal to the amount required to be withheld; or

• you may remit to Equity Office’s agent for the Plan Administrator (currently Fidelity Investments) an amount sufficient to satisfy payment of the taxes.

ELIGIBILITY

Q	Who is eligible to participate in the Plan?
A	Certain employees, officers, trustees and consultants of Equity Office and its Subsidiaries are eligible to receive awards under the Plan. The Committee designates the individuals who receive awards under the Plan.

SHARES SUBJECT TO THE PLAN

The maximum aggregate number of Shares of Equity Office for which awards may be granted under the Plan shall not exceed 20,000,000 Shares. No more than 10,000,000 Shares may be available for issuance pursuant to awards other than options. To the extent that awards granted under the Plan expire unexercised or are forfeited, terminated, surrendered or canceled, the Shares allocated to such awards shall again become available for future grants under the Plan, unless the Plan has terminated.

In the event of any change in the outstanding Shares due to a Share dividend, split, recapitalization, merger, consolidation, combination, exchange or similar change, the number and kind of Shares reserved for issuance under the Plan and Shares subject to outstanding awards shall be proportionately adjusted by the Committee such that the value of the Shares available for awards under the Plan and the value of Shares subject to outstanding awards remains unchanged.

8

The Committee may make this adjustment in any manner it deems equitable; however, in no event shall:

• the aggregate exercise price payable with respect to Shares subject to an outstanding option or SAR be changed; or

• the exercise price of an option be adjusted below par value of the Shares; or

• any fractional Shares be issued pursuant to any such adjustment.

If the adjustments result in fractional Shares, the fractional Shares will be eliminated by rounding down to the nearest whole Share.

If you receive cash or another security in exchange for a non-vested Share in connection with any of the foregoing, any conditions and restrictions applicable to the Share will continue to apply to the cash or property received until the Share would have vested.

MORE INFORMATION ABOUT SHARES

Equity Office Properties Trust Shares are traded on the New York Stock Exchange under the symbol “EOP.” Like other publicly traded shares, the price for Shares will vary due to many factors, such as:

• general economic and political conditions,

• tax and interest rates,

• actual and expected changes in our earnings as compared to past results,

• comparisons with the earnings of other public companies, and

• other factors over which Equity Office has no control.

9

SECTION 16 TRUSTEES & OFFICERS OF EQUITY OFFICE

Rules promulgated under Section 16 of the Securities Exchange Act of 1934 apply to Plan transactions by executive officers and trustees of Equity Office. Such individuals must consult Equity Office’s Chief Legal Counsel or his designee, prior to selling or transferring any Shares acquired under the Plan.

DURATION, MODIFICATION & TERMINATION OF THE PLAN

Unless terminated earlier, the Plan will expire on March 26, 2013 and no awards may be granted under the Plan after that date. Notwithstanding the foregoing, Equity Office reserves the right to amend or terminate the Plan at any time, subject to the approval of Equity Office’s shareholders as may be required by law. Any amendment or termination of the Plan will not alter or impair any Share Award previously granted to you without your consent.

APPLICABLE LAWS

The Plan is not subject to the Employee Retirement Income Security Act of 1974, as amended, and is not qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended.

NOTICES

All notices under the agreement incorporated in this Summary and Agreement shall be in writing and sent by certified mail or by a nationally recognized overnight delivery service, postage or charges prepaid. All notices to Equity Office should be addressed to the attention of the Chief Legal Counsel and sent to the address provided on page 2 of this Agreement. All notices to you will be sent to your last known address on the records of Equity Office.

Any such written notice or communication given by mail will be deemed to have been given two (2) business days after the date the notice or communication was mailed; or, if sent by an overnight delivery service, it shall be deemed to have been given one (1) business day after the date sent.

10

EQUITY OFFICE PROPERTIES TRUST
By:	Richard Kincaid
	President and Chief Executive Officer
GRANTEE
<<FIRSTNAME>> <<LASTNAME>>

11

GLOSSARY OF TERMS

A Change in Control (as more particularly and specifically defined in the Plan) shall be deemed to occur upon:

• the acquisition by any entity, person or group of more than thirty percent (30%) of the combined voting power of the outstanding voting securities of Equity Office;

• approval by shareholders of Equity Office of a merger, consolidation or reorganization of Equity Office with one (1) or more other entities, as a result of which the holders of all outstanding voting securities of Equity Office immediately prior to such transaction hold less than seventy percent (70%) of the combined voting power of the outstanding voting securities of the surviving or resulting corporation in substantially the same relative proportion as their ownership of the outstanding voting securities of Equity Office immediately before the transaction and the incumbent members of the Board of Trustees of Equity Office immediately before the transaction do not constitute at least a majority of the members of the board of the resulting corporation; or

• approval by shareholders of Equity Office of a complete liquidation or dissolution of Equity Office; or

• the rejection by the voting beneficial owners of the outstanding Shares of the entire slate of trustees proposed by the Board at a single election of trustees; or

• the rejection by the voting beneficial owners of the outstanding Shares of one-half or more of the trustees proposed by the Board over any two or more consecutive elections of trustees; or

• approval by shareholders of Equity Office of an agreement for the sale of substantially all of the assets of Equity Office other than to an entity of which Equity Office directly or indirectly owns at least seventy percent (70%) of the voting shares.

Committee means the Compensation Committee of the Board of Trustees of Equity Office.

Disability means a physical or mental condition that entitles a participant to benefits under the employer-sponsored long-term disability plan in which he or she participates, as determined by the Plan Administrator in its sole and absolute discretion.

Equity Office means Equity Office Properties Trust, the sponsor of the Plan.

The Fair Market Value of a Share means different things for different purposes. Please refer to the Plan document for the applicable definition.

12

Grant Date means the date you receive a Share Award and, for purposes of this Summary and Agreement, is _________.

Phantom Share Unit means a bookkeeping entry representing an obligation of Equity Office to pay the value of Shares that vested and that you elected to defer receipt of by participating in the SERP.

Plan means the Equity Office Properties Trust 2003 Share Option and Share Incentive Plan, as amended from time to time.

Plan Administrator means the President and Chief Executive Officer of Equity Office and any one member of the Committee, or the full Committee. Notwithstanding the foregoing, where the affected Grantee is a “covered employee” for purposes of Section 162(m) of the Code:

• any authority of the Plan Administrator under the Plan may be exercised only if the exercise of such authority would not cause the related Share Award, to fail to constitute performance-based compensation on its Grant Date under Treasury Regulation Section 1.162-27; and

• “Plan Administrator” means the full Committee only if the exercise of such authority by the President and Chief Executive Officer and any one member of the Committee would adversely affect the grant’s status as performance-based compensation and its exercise by the full Committee would not so affect such status.

Service means your performance of services as an employee, officer, trustee for Equity Office or any Subsidiary.

Share Award means the grant of an award of Shares reflected herein.

Shares means common shares of beneficial ownership of Equity Office, having a par value of $.01.

Vested means the Shares are no longer subject to any substantial restrictions, other than those arising under federal securities laws.

13

EX-12.1

Exhibit 12.1

Equity Office Properties Trust
Statement of Earnings to Fixed Charges
(Dollars in thousands)

	For the years ended December 31,
	2005			2004			2003			2002			2001
Income before income taxes, allocation to minority interests, income from investments in unconsolidated joint ventures and gain on sales of real estate	$	99,050		$	205,598		$	340,463		$	440,863		$	342,072
Plus Fixed Charges:
Interest expense		819,868			833,393			806,812			795,179			710,327
Capitalized interest		441			4,648			10,089			21,447			25,871
Loan amortization cost		11,857			15,284			6,492			4,422			14,622
Fixed charges		832,166			853,325			823,393			821,048			750,820
Plus amortization of capitalized interest		1,764			1,790			1,490			1,345			1,165
Plus distributed income of investments in unconsolidated joint ventures		52,690			66,829			87,268			129,753			82,409
Less capitalized interest		(441	)		(4,648	)		(10,089	)		(21,447	)		(25,871	)
Less minority interest in pretax income of subsidiaries that have not incurred fixed charges		(2,263	)		(2,070	)		(2,217	)		(2,345	)		(2,333	)
Total		51,750			61,901			76,452			107,306			55,370
Earnings	$	982,966		$	1,120,824		$	1,240,308		$	1,369,217		$	1,148,262
Fixed charges	$	832,166		$	853,325		$	823,393		$	821,048		$	750,820
Earnings to fixed charges		1.2			1.3			1.5			1.7			1.5

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements and related Prospectuses of Equity Office Properties Trust for the registration of:

• guarantee of $3.0 billion of debt securities and warrants exercisable for debt securities (registration statement no. 333-116202-01);

• 25,000,000 common shares of beneficial interest issuable under the Equity Office Properties Trust Dividend Reinvestment and Share Purchase Plan (registration statement no. 333-81303);

• 328,691 common shares of beneficial interest (registration statement no. 333-72922);

• 16,784,214 common shares of beneficial interest (registration statement no. 333-57526);

• guarantee of $4.0 billion of debt securities and warrants exercisable for debt securities (registration statement no. 333-58976);

• 12,398,803 common shares of beneficial interest (registration statement no. 333-35590);

• 1,012,623 common shares of beneficial interest (registration statement no. 333-88481);

• 21,649,274 common shares of beneficial interest (registration statement no. 333-86079);

• 137,427 common shares of beneficial interest (registration statement no. 333-69619);

• 6,854,451 common shares of beneficial interest (registration statement no. 333-62213);

• 8,205,059 common shares of beneficial shares of beneficial interest (registration statement no. 333-40401-01);

• 20,210,129 common shares of beneficial interest (registration statement no. 333-59069);

• 6,000,000 5.25% Series B convertible, cumulative preferred shares of beneficial interest and 8,403,360 common shares of beneficial interest issuable upon conversion of the 5.25% Series B convertible, cumulative preferred shares of beneficial interest (registration statement no. 333-61105);

• $1.5 billion of common shares of beneficial interest, preferred shares of beneficial interest, common share warrants and preferred share warrants (registration statement no. 333-58729);

• 1,628,009 common shares of beneficial interest (registration statement no. 333-58687);

• the Registration Statements relating to 3,124,774 common shares of beneficial interest issuable under Stock Option Agreements under the Spieker Properties, Inc 1993 Stock Incentive Plan and Directors’ Stock Option Plan (registration statement no. 333-64604);

• 3,681,212 common shares of beneficial interest issuable under the 1995 and 1997 stock option agreements, stock option agreements under the Cornerstone 1998 long-term incentive plan and Cornerstone director stock option agreements (registration statement no. 333-39920);

• 8,449,434 common shares of beneficial interest issuable under the Amended and Restated 1997 Share Option and Share Award Plan (registration statement no. 333-72205);

• 2,000,000 common shares of beneficial interest issuable under the Equity Office Properties Trust 1997 Non-Qualified Employee Share Purchase Plan (registration statement no. 333-72187);

• 4,749,095 common shares of beneficial interest issuable under the Beacon Properties Corporation 1994 Stock Option and Incentive Plan and 1996 Stock Option Plan (registration statement no. 333-42393);

• 2,000,000 common shares of beneficial interest issuable under the Equity Office Properties Trust 1997 Non-Qualified Employee Share Purchase Plan (registration statement no. 333-33503);

• 11,121,786 common shares of beneficial interest issuable under the Amended and Restated 1997 Share Option and Share Award Plan (registration statement no. 333-33501); and

• 20,000,000 common shares of beneficial interest issuable under the Equity Office Properties Trust 2003 Share Option Incentive Plan (registration statement no. 333-106096).

of our report dated March 8, 2006 with respect to the consolidated financial statements and schedule of Equity Office Properties Trust, Equity Office Properties Trust’s management’s assessment of the effectiveness of internal control over financial reporting, and the effectiveness of internal control over financial reporting of Equity Office Properties Trust, included in this Annual Report (Form 10-K) for the year ended December 31, 2005.

/s/  ERNST & YOUNG LLP

Chicago, Illinois
March 14, 2006

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Richard D. Kincaid, President and Chief Executive Officer of Equity Office Properties Trust, certify that:

1.	I have reviewed this annual report on Form 10-K of Equity Office Properties Trust;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 14, 2006	/s/ Richard D. Kincaid
	Richard D. Kincaid
	President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, Marsha C. Williams, Executive Vice President and Chief Financial Officer of Equity Office Properties Trust, certify that:

1.	I have reviewed this annual report on Form 10-K of Equity Office Properties Trust;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 14, 2006	/s/ Marsha C. Williams
	Marsha C. Williams
	Executive Vice President and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. §1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, the Chief Executive Officer and the Chief Financial Officer of Equity Office Properties Trust (the “Company”), each hereby certifies, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to his / her knowledge, on the date hereof:

(a)	the Form 10-K of the Company for the annual period ended December 31, 2005, filed on the date hereof with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(b)	information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 14, 2006	/s/ Richard D. Kincaid
	Richard D. Kincaid
	President and Chief Executive Officer
Date: March 14, 2006	/s/ Marsha C. Williams
	Marsha C. Williams
	Executive Vice President and Chief Financial Officer

EX-99.1

Exhibit 99.1

Equity Office Properties Trust
1997 Non-Qualified Employee Share Purchase Plan

Financial Statements
As of December 31, 2005 and 2004 and for each of the three years in the period
ended December 31, 2005

Contents

	Page
Report of Independent Registered Public Accounting Firm	2
Financial Statements and Notes	3

1

Report of Independent Registered Public Accounting Firm

Compensation and Option Committee of the Board of Trustees
of Equity Office Properties Trust
1997 Non-Qualified Employee Share Purchase Plan

We have audited the accompanying statements of financial condition of the Equity Office Properties Trust 1997 Non-Qualified Share Purchase Plan (“Plan”), as amended, as of December 31, 2005 and 2004, and the related statements of income and changes in plan equity for each of the three years in the period ended December 31, 2005. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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. We were not engaged to perform an audit of the Plan’s control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and 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 condition of the Plan at December 31, 2005 and 2004, and the income and changes plan equity for each of the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

Chicago, Illinois
February 9, 2006	/s/ Ernst & Young, LLP

2

Equity Office Properties Trust
1997 Non-Qualified Employee Share Purchase Plan
Statements of Financial Condition

	December 31,
	2005		2004
ASSETS:
Receivable from Equity Office Properties Trust for participant contributions	$	225,600	$	224,000
Total Plan assets	$	225,600	$	224,000
EQUITY:
Participant contributions	$	225,600	$	224,000
Total Plan equity	$	225,600	$	224,000

See accompanying notes.

3

Equity Office Properties Trust
1997 Non-Qualified Employee Share Purchase Plan
Statements of Income and Changes in Plan Equity

	For the year ended December 31,
	2005			2004			2003
Plan equity at beginning of year	$	224,000		$	152,900		$	144,000
Additions:
Participant contributions, net of refunds		2,246,600			2,013,600			2,108,600
Plan Sponsor contributions		485,900			403,800			475,900
Total additions		2,732,500			2,417,400			2,584,500
Deductions:
Purchase of and distributions to Participants of Common Shares		(2,730,900	)		(2,346,300	)		(2,575,600	)
Total deductions		(2,730,900	)		(2,346,300	)		(2,575,600	)
Plan equity at end of year	$	225,600		$	224,000		$	152,900

See accompanying notes.

4

Equity Office Properties Trust
1997 Non-Qualified Employee Share Purchase Plan
Notes to Financial Statements

NOTE 1 — DESCRIPTION OF PLAN

The following description of the Equity Office Properties Trust 1997 Non-Qualified Employee Share Purchase Plan, as amended, (the “Plan”) provides only general information. Participants should refer to the text of the Plan and the Plan prospectus for a complete description of the Plan’s provisions. Equity Office Properties Trust (“Equity Office”) is the Plan sponsor (the “Sponsor”). The Plan was effective January 1, 1998.

The Plan was adopted by Equity Office in 1997 to encourage eligible employees and eligible trustees (“Participants”) to purchase Equity Office’s common shares of beneficial interest, $0.01 par value per share (“Common Shares”) in the belief that a Participant’s ownership of Common Shares will increase his or her interest in the success of Equity Office. A Participant is eligible to participate in the Plan for a Purchase Period (as defined below) if he or she serves on the Board of Trustees of Equity Office or has been so employed by Equity Office or its subsidiaries, for at least 31 days, and is regularly scheduled to work 20 or more hours each week. Effective December 7, 2004, the 31-day waiting period was eliminated. The minimum amount a Participant can contribute is $10 per pay period. The maximum amount a Participant can contribute is 20% of gross pay per pay period, up to $100,000 per calendar year. Contributions are held by the Sponsor and reported in the participant accounts. All contributions are fully vested.

At the end of each Purchase Period (as defined in Note 3), Participant’s contributions are used to purchase Common Shares. Effective with the December 1, 2003 Purchase Period, each Purchase Period lasts for three months. The price to the Participant for the Common Shares (“Purchase Price”) will be 85% of the lesser of: (i) the Closing Price (as defined below) for a Common Share as of the last business day of the applicable Purchase Period; or (ii) the Average Closing Price (as defined below) of a Common Share during the Purchase Period. The Closing Price is the price reported for the Common Share in the Wall Street Journal, or another publication designated by the Compensation and Option Committee of the Board of Trustees of Equity Office (the “Committee”), for the applicable business day. The Average Closing Price is the average of the Closing Prices for all business days during the Purchase Period. The number of Common Shares purchased is calculated on a per Participant basis by dividing the contributions made by each Participant during the Purchase Period by the Purchase Price. Any amounts that are insufficient to purchase a whole Common Share are applied to purchase shares in the next Purchase Period.

Employer contributions represent the discount or aggregate difference between the market price of the Common Shares on the day the Common Shares are acquired and the discount purchase price established at the end of the purchase period. Such contributions also represent taxable income to the Participant.

The Common Shares purchased on behalf of each Participant are uncertificated and are recorded as a book entry. Accordingly, all Common Shares purchased under the provisions of the Plan are immediately distributed to the Participants.

Any disposition by Participants of his or her Common Shares which were owned for less than one year are subject to the restrictions set forth in the Plan.

Equity Office has reserved 2,000,000 Common Shares for participants under the Plan.

The Plan may be amended or terminated by the Committee or the Board of Trustees of Equity Office at any time. Amounts available in Participants’ accounts would either be used to purchase Common Shares or returned to the Participants.

5

NOTE 2 — SUMMARY OF ACCOUNTING POLICIES

Accounting Method
The accounting records of the Plan are maintained on the accrual basis. Common Shares are purchased after the end of each Purchase Period and accounted for in the respective Purchase Periods.

Expenses
Equity Office pays administrative expenses of the Plan.

Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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. Actual results could differ from those estimates.

NOTE 3 — DISTRIBUTIONS

A summary of the Common Shares purchased and distributed during the years ended December 31, 2005, 2004 and 2003 for each Purchase Period is as follows:

	Participant						Market Value of Common		Common Shares
	Contributions,		Employer				Shares Purchased and		Purchased and
Purchase Period	net of Refunds		Contributions		Total		Distributed per share		Distributed
Fiscal year end 2005:
1/1/05 to 2/28/05	$	287,900	$	108,100	$	396,000	$	29.87		20,759
3/1/05 to 5/31/05		806,400		199,600		1,006,000		33.01		30,477
6/1/05 to 8/31/05		474,500		85,600		560,100		33.42		16,761
9/1/05 to 11/30/05		452,200		92,600		544,800		31.93		17,064
12/1/05 to 12/31/05 (1)		225,600		—		225,600				—
Total	$	2,246,600	$	485,900	$	2,732,500				85,061
Fiscal year end 2004:
1/1/04 to 2/29/04	$	353,300	$	110,200	$	463,500	$	29.54		20,872
3/1/04 to 5/31/04		466,100		82,100		548,200		26.95		20,342
6/1/04 to 8/31/04		495,200		119,100		614,300		28.37		21,651
9/1/04 to 11/30/04		474,900		92,400		567,300		27.87		20,357
12/1/04 to 12/31/04 (1)		224,100		—		224,100				—
Total	$	2,013,600	$	403,800	$	2,417,400				83,222
Fiscal year end 2003:
1/1/03 to 5/31/03	$	1,024,400	$	298,100	$	1,322,500	$	27.07		53,925
6/1/03 to 11/30/03		933,900		177,800		1,111,700		27.98		39,890
12/1/03 to 12/31/03 (1)		150,300		—		150,300				—
Total	$	2,108,600	$	475,900	$	2,584,500				93,815

(1) Because the Purchase Periods do not coincide with the Plan’s fiscal year, the month of December is shown separately for each year. The month of December is included in the Purchase Period ending in February of the following year.

6

NOTE 4 — FEDERAL INCOME TAXES

The Plan is neither a qualified plan under Section 401(a) of the Internal Revenue Code nor is it an employee stock purchase plan under Section 423 of the Internal Revenue Code. Participants are immediately subject to any required tax withholding by Equity Office on the discount/compensation as incurred and earned under the Plan. All such income and tax withholding are reported on the Participant’s annual Form W-2 wages statement.

7

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement on Form S-8 (File No. 333-72187) pertaining to the Equity Office Properties Trust 1997 Non-Qualified Employee Share Purchase Plan of our report dated February 9, 2006, with respect to the financial statements of the Equity Office Properties Trust 1997 Non-Qualified Employee Share Purchase Plan, as amended, included in this Annual Report and included as Exhibit 99.1 in the 2005 Annual Report (Form 10-K) of Equity Office Properties Trust for the year ended December 31, 2005.

/s/ Ernst & Young LLP

Chicago, Illinois
February 28, 2006

8