ARDEN REALTY GROUP INC, S-11/A, 1996-10-01

ARDEN REALTY GROUP INC
S-11/A, 1996-10-01
OPERATORS OF NONRESIDENTIAL BUILDINGS

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 1, 1996

REGISTRATION NO. 333-8163
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------

AMENDMENT NO. 3
TO
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------

ARDEN REALTY, INC.

(Exact Name of Registrant as Specified in its Governing Instruments)
------------------------
9100 Wilshire Boulevard
East Tower, Suite 700
Beverly Hills, California 90212
(310) 271-8600
(Address of principal executive offices)
------------------------

Richard S. Ziman
9100 Wilshire Boulevard
East Tower, Suite 700
Beverly Hills, California 90212
(310) 271-8600
(Name and Address of Agent for Service)
------------------------
COPIES TO:

William J. Cernius J. Warren Gorrell, Jr.
Latham & Watkins Joseph G. Connolly, Jr.
650 Town Center Drive Hogan & Hartson L.L.P.
Suite 2000 Columbia Square
Costa Mesa, California 92626 555 Thirteenth Street, N.W.
(714) 540-1235 Washington, D.C. 20004-1109
(202) 637-5600

-------------------

APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after this Registration Statement becomes
effective.

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ________________.

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ________________.

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
-------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par
value per share....... 21,674,500 $20.00 $433,490,000 $149,479(3)
</TABLE>

(1) Includes 2,827,000 shares which the Underwriters have the option to purchase
solely to cover overallotments, if any.
(2) Estimated solely for the purpose of calculating the registration fee.

(3) This amount was previously paid.

------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.

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- --------------------------------------------------------------------------------
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there by any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>

PROSPECTUS Subject to Completion, dated October 1, 1996

18,847,500 SHARES

G ARDEN REALTY, INC.

COMMON STOCK
----------------

Arden Realty, Inc. (the "Company") is a Maryland corporation which was
formed on May 1, 1996 to continue and expand the real estate business of Arden
Realty Group, Inc., a California corporation, formed on March 22, 1991, and
certain affiliated entities which are engaged in owning, acquiring, managing,
leasing and renovating office properties in Southern California. Upon completion
of the offering (the "Offering"), the Company will own 24 office properties
containing approximately 4.0 million rentable square feet, all of which are
located in Southern California. The Company will be a fully integrated,
self-administered and self-managed real estate company and expects to qualify as
a real estate investment trust ("REIT") for federal income tax purposes.

All of the shares of the Company's common stock (the "Common Stock") offered
hereby are being sold by the Company and will represent approximately 86.69% of
all outstanding shares of the Company's Common Stock (or interests exchangeable
for Common Stock). The remaining approximately 13.31% of the equity will be held
by officers and directors of the Company and certain other parties,
substantially all of which is in the form of limited partnership interests ("OP
Units") of Arden Realty Limited Partnership, a Maryland limited partnership (the
"Operating Partnership"). To assist the Company in complying with certain
qualification requirements applicable to REITs, the Company's charter provides
that no stockholder or group of affiliated stockholders may actually or
constructively own more than 9.0% of the outstanding Common Stock, subject to
certain specified exceptions. See "Capital Stock -- Restrictions on Transfer."

Prior to the Offering, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be between
$19.00 and $21.00 per share. See "Underwriting" for information relating to the
factors to be considered in determining the initial public offering price. The
Common Stock has been approved for listing on the New York Stock Exchange,
subject to official notice of issuance, under the symbol "ARI."
SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK, INCLUDING:
- The possibility that the consideration paid by the Company for the
Properties and other assets contributed to the Company in its formation may
exceed their fair market value; no third-party appraisals were obtained by
the Company regarding these Properties and other assets;
- The possibility that the Company may not be able to refinance outstanding
debt (initially expected to be approximately $104 million) upon maturity,
that indebtedness might be refinanced on less favorable terms, and that
interest rates might increase on variable rate indebtedness (including
amounts drawn under the Company's proposed $100 million credit facility);
and the lack of limitations in the Company's organizational documents on the
amount of indebtedness which the Company may incur;
- Real estate investment and property management risks such as the need to
renew leases or relet space upon lease expirations, the instability of cash
flows and changes in the value of office properties owned by the Company due
to economic and other conditions;
- Concentration of the Properties in Southern California which increases the
risk of the Company being adversely affected by a downturn in the Southern
California economy or office markets;
- Conflicts of interest in connection with the transactions relating to the
formation of the Company and material benefits to officers and directors of
the Company, including receipt of an aggregate of approximately 2,740,718 OP
Units and stock options to purchase an aggregate of 868,500 shares of the
Common Stock, special allocations of interest deductions of approximately
$12.6 million and repayment of approximately $398 million of indebtedness;
- The lack of operating history of the Properties under the management of the
Company; the majority of the Properties have been owned by the Company for
less than one year;
- The possibility that the Board of Directors of the Company may in the future
amend or revise the investment, financing, borrowing, distribution and
conflicts of interest policies of the Company, without a vote of the
Company's stockholders;
- Taxation of the Company as a regular corporation if it fails to qualify as a
REIT, taxation of the Operating Partnership as a corporation if it fails to
qualify as a partnership and the resulting decrease in cash available for
distribution; and
- Risks that certain types of losses, such as from earthquakes, could exceed
the Company's insurance coverage which currently includes earthquake
coverage for all of the Properties.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
Price to Underwriting Discounts Proceeds to
Public and Commissions (1) Company (2)
<S> <C> <C> <C>
Per Share................................... $ $ $
Total (3)................................... $ $ $
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting estimated expenses of $6,224,750 payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
2,827,000 additional shares of Common Stock on the same terms and conditions
as set forth above solely to cover overallotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."
---------------------------

The shares of Common Stock offered by this Prospectus are offered by the
Underwriters subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters
and to certain further conditions. It is expected that delivery of the shares
will be made at the offices of Lehman Brothers Inc., New York, New York on or
about , 1996.

---------------------------
LEHMAN BROTHERS

ALEX.BROWN & SONS
INCORPORATED

DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.

SMITH BARNEY INC.

EVEREN SECURITIES, INC. LEGG MASON WOOD WALKER RAYMOND JAMES & ASSOCIATES, INC.
INCORPORATED

, 1996
<PAGE>
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.

[Graphics--To Come]
<PAGE>
TABLE OF CONTENTS

<TABLE>
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PAGE
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PROSPECTUS SUMMARY........................................................ 1
The Company............................................................. 1
Risk Factors............................................................ 2
Business and Growth Strategies.......................................... 4
The Properties.......................................................... 5
Structure and Formation of the Company.................................. 7
Financing Policies...................................................... 11
Mortgage Financing, CMBS Offering and Credit Facility................... 11
The Offering............................................................ 12
Distributions........................................................... 12
Tax Status of the Company............................................... 12
Summary Selected Combined Financial Data................................ 13

RISK FACTORS.............................................................. 16
Price to be Paid for Properties and Other Assets May Exceed Their Fair
Market Value........................................................... 16
Formation Transactions Not Arm's Length................................. 16
Real Estate Financing Risks............................................. 16
No Limitation on Debt................................................... 17
Real Estate Investment Risks............................................ 17
Concentration of Properties in Southern California...................... 19
Conflicts of Interests in the Formation Transactions and the Business of
the Company............................................................ 19
Risk Associated with the Recent Acquisition of Many of the New
Properties; Lack of Operating History.................................. 20
Potential Risks Regarding Change-of-Control Consents on Ground Leases... 21
Changes in Policies Without Stockholder Approval........................ 21
Risk of Acquisition, Renovation and Development Activities.............. 21
Adverse Consequences of Failure to Qualify as a REIT; Other Tax
Liabilities............................................................ 22
Failure of the Operating Partnership to Qualify as a Partnership for
Federal Income Tax Purposes............................................ 23
Insurance............................................................... 23
Dependence on Key Personnel............................................. 23
Limits on Changes in Control............................................ 23
Historical Losses....................................................... 24
Possible Environmental Liabilities...................................... 25
Effect on Common Stock Price of Shares Available for Future Sale........ 26

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PAGE
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<S> <C>
Effect on Holders of Common Stock of an Issuance of Preferred Stock..... 26
Immediate and Substantial Dilution...................................... 26
Absence of Prior Public Market for Common Stock......................... 26
Influence of Executive Officers, Directors and Principal Stockholders... 26
Risks of Fee Management Business........................................ 27
Effect of Market Interest Rates on Price of Common Stock................ 27

THE COMPANY............................................................... 28

BUSINESS AND GROWTH STRATEGIES............................................ 30
Business Strategies..................................................... 30
Growth Strategies....................................................... 31

USE OF PROCEEDS........................................................... 34
Mortgage Debt to be Repaid.............................................. 35

DISTRIBUTIONS............................................................. 35

CAPITALIZATION............................................................ 40

DILUTION.................................................................. 41

SELECTED COMBINED FINANCIAL DATA.......................................... 42

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................................... 45
Overview................................................................ 45
Results of Operations................................................... 45
Pro Forma Operating Results............................................. 50
Liquidity and Capital Resources......................................... 51
Cash Flows.............................................................. 53
Inflation............................................................... 53

SOUTHERN CALIFORNIA ECONOMY AND OFFICE MARKETS............................ 54
Southern California Economy............................................. 54
Southern California Office Markets...................................... 56

BUSINESS AND PROPERTIES................................................... 59
General................................................................. 59
Properties.............................................................. 59
Tenants................................................................. 61
Tenant Diversification.................................................. 61
Lease Distributions..................................................... 61
Lease Expirations - Portfolio Total..................................... 62
Lease Expirations - Property by Property................................ 63
Tenant Retention and Expansions......................................... 68
</TABLE>

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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Historical Lease Renewals............................................... 68
Historical Tenant Improvements and Leasing Commissions.................. 69
Historical Capital Expenditures......................................... 70
Historical Occupancy.................................................... 70

OFFICE SUBMARKETS AND PROPERTY INFORMATION................................ 70
Los Angeles County Office Market and Properties......................... 71
Los Angeles West Office Market Sector................................... 73
Los Angeles North Office Market Sector.................................. 77
Los Angeles South Office Market Sector.................................. 81
Orange County Office Market and Properties.............................. 84
San Diego County Office Market and Property............................. 86
C&W Market Study........................................................ 88
Competition............................................................. 89
Insurance............................................................... 89
Environmental Regulations............................................... 89
Legal Proceedings....................................................... 90
Employees............................................................... 90

MANAGEMENT................................................................ 91
Directors and Executive Officers........................................ 91
Committees of the Board of Directors.................................... 93
Compensation of Directors............................................... 94
Executive Compensation.................................................. 94
Employment Agreements................................................... 95
Stock Incentive Plan.................................................... 95
401(k) Plan............................................................. 96
Limitation of Liability and Indemnification............................. 96

STRUCTURE AND FORMATION OF THE COMPANY.................................... 97
The Operating Entities of the Company................................... 97
The Formation Transactions.............................................. 98
Consequences of the Offering and the Formation Transactions............. 99
Determination and Valuation of Ownership Interests...................... 99
Benefits of the Formation Transactions and the Offering to Affiliates of
the Company............................................................ 100

POLICIES WITH RESPECT TO CERTAIN ACTIVITIES............................... 101
Investment Policies..................................................... 101
Dispositions............................................................ 102
Financing Policies...................................................... 102
Conflict of Interest Policies........................................... 103
Policies with Respect to Other Activities............................... 104
<CAPTION>
PAGE
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<S> <C>

CERTAIN TRANSACTIONS...................................................... 104
Formation Transactions.................................................. 104
Partnership Agreement; Redemption/ Exchange Rights...................... 104
Registration Rights..................................................... 104
Certain Transactions Involving Director Nominee......................... 104

PARTNERSHIP AGREEMENT..................................................... 105
Management.............................................................. 105
Transferability of Interests............................................ 105
Capital Contributions................................................... 106
Redemption/Exchange Rights.............................................. 106
Issuance of Additional OP Units, Common Stock or Convertible
Securities............................................................. 106
Tax Matters............................................................. 107
Operations.............................................................. 107
Duties and Conflicts.................................................... 107
Certain Voting Rights of Limited Partners............................... 107
Term.................................................................... 107
Indemnification......................................................... 107

PRINCIPAL STOCKHOLDERS.................................................... 108

CAPITAL STOCK............................................................. 109
General................................................................. 109
Common Stock............................................................ 109
Preferred Stock......................................................... 109
Power to Issue Additional Shares of Common Stock and Preferred Stock.... 110
Transfer Agent and Registrar............................................ 110
Restrictions on Transfer................................................ 110

CERTAIN PROVISIONS OF MARYLAND LAW AND THE COMPANY'S CHARTER AND BYLAWS... 112
Board of Directors - Number, Classification, Vacancies.................. 112
Removal of Directors.................................................... 113
Business Combinations................................................... 113
Control Share Acquisitions.............................................. 113
Amendment to the Charter................................................ 114
Dissolution of the Company.............................................. 114
Advance Notice of Director Nominations and New Business................. 114
Anti-takeover Effect of Certain Provisions of Maryland Law and of the
Charter and Bylaws..................................................... 114
Rights to Purchase Securities and Other Property........................ 114
</TABLE>

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<TABLE>
<CAPTION>
PAGE
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<S> <C>
SHARES AVAILABLE FOR FUTURE SALE.......................................... 115
General................................................................. 115
Registration Rights..................................................... 116

FEDERAL INCOME TAX CONSEQUENCES........................................... 116
Taxation of the Company................................................. 116
Failure to Qualify...................................................... 121
Taxation of Taxable U.S. Stockholders Generally......................... 121
Backup Withholding...................................................... 122
Taxation of Tax-Exempt Stockholders..................................... 122
Taxation of Non-U.S. Stockholders....................................... 123
Tax Aspects of the Operating Partnership................................ 125
Other Tax Consequences.................................................. 127
<CAPTION>
PAGE
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<S> <C>

ERISA CONSIDERATIONS...................................................... 127
Employment Benefit Plans, Tax-Qualified Pension, Profit Sharing or Stock
Bonus Plans and IRAs................................................... 128
Status of the Company and the Operating Partnership under ERISA......... 128

UNDERWRITING.............................................................. 130

EXPERTS................................................................... 131

LEGAL MATTERS............................................................. 132

ADDITIONAL INFORMATION.................................................... 132

GLOSSARY.................................................................. 133
</TABLE>

CAUTIONARY STATEMENT

INFORMATION CONTAINED IN THIS PROSPECTUS CONTAINS "FORWARD-LOOKING
STATEMENTS" RELATING TO, WITHOUT LIMITATION, FUTURE ECONOMIC PERFORMANCE, PLANS
AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS AND PROJECTIONS OF REVENUE
AND OTHER FINANCIAL ITEMS, WHICH CAN BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY SUCH AS "MAY," "WILL," "SHOULD," "EXPECT," "ANTICIPATE," "ESTIMATE"
OR "CONTINUE" OR THE NEGATIVE THEREOF OR OTHER VARIATIONS THEREON OR COMPARABLE
TERMINOLOGY. THE CAUTIONARY STATEMENTS SET FORTH UNDER THE CAPTION "RISK
FACTORS" AND ELSEWHERE IN THE PROSPECTUS IDENTIFY IMPORTANT FACTORS WITH RESPECT
TO SUCH FORWARD-LOOKING STATEMENTS, INCLUDING CERTAIN RISKS AND UNCERTAINTIES,
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN SUCH
FORWARD-LOOKING STATEMENTS.

iii
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.
UNLESS INDICATED OTHERWISE, THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES
THAT (I) THE INITIAL PUBLIC OFFERING PRICE IS $20.00 PER SHARE (THE MIDPOINT OF
THE PRICE RANGE SET FORTH ON THE COVER PAGE OF THIS PROSPECTUS), (II) THE
UNDERWRITERS' OVERALLOTMENT OPTION IS NOT EXERCISED, (III) THE TRANSACTIONS
DESCRIBED UNDER "STRUCTURE AND FORMATION OF THE COMPANY" ARE CONSUMMATED AND
(IV) NONE OF THE OP UNITS REDEEMABLE FOR CASH OR, AT THE ELECTION OF THE
COMPANY, EXCHANGEABLE FOR COMMON STOCK HAVE BEEN SO REDEEMED OR EXCHANGED.
ALTHOUGH THE COMPANY AND THE OPERATING PARTNERSHIP ARE SEPARATE ENTITIES, FOR
EASE OF REFERENCE AND UNLESS THE CONTEXT OTHERWISE REQUIRES, ALL REFERENCES IN
THIS PROSPECTUS TO THE "COMPANY" REFER TO THE COMPANY AND THE OPERATING
PARTNERSHIP, COLLECTIVELY. ALL REFERENCES IN THIS PROSPECTUS TO THE HISTORICAL
ACTIVITIES OF THE COMPANY REFER TO THE ACTIVITIES OF THE ARDEN PREDECESSORS. SEE
"GLOSSARY" FOR THE DEFINITIONS OF CERTAIN TERMS USED IN THIS PROSPECTUS.

THE COMPANY

The Company has been formed to continue and expand the real estate business
of Arden Realty Group, Inc., a California corporation ("Arden"), and certain
affiliated entities (collectively, the "Arden Predecessors") which are engaged
in owning, acquiring, managing, leasing and renovating office properties in
Southern California. The Company's founders, Richard S. Ziman and Victor J.
Coleman, along with the other five senior officers at the Company, have an
average of more than 18 years of experience in the real estate industry. Upon
completion of the Offering, the Company will own 24 office properties (the
"Properties") containing approximately 4.0 million rentable square feet. All of
the Properties are located in Southern California, with 21 in suburban Los
Angeles County, two in Orange County and one in San Diego County. As of August
1, 1996, the Properties had a weighted average occupancy rate of approximately
89%. Arden currently manages 22 of the Properties. Upon completion of the
Offering, the Company will manage all of the Properties and four additional
properties containing approximately 325,000 rentable square feet which are
currently managed by Arden for institutional investors and other third-party
owners. The Company will be a fully integrated, self-administered and
self-managed real estate company and expects to qualify as a REIT for federal
income tax purposes.

The Company believes that certain economic fundamentals in Southern
California provide an attractive environment for owning, acquiring and operating
Class A suburban office properties. According to AMERICA'S OFFICE ECONOMY
prepared by Cognetics, Inc., Metropolitan Los Angeles (which includes Los
Angeles and Orange Counties), in which 23 of the Company's 24 Properties are
located, is projected to be the number one market in the United States for
primary office employment growth during the period from 1995 to 2005. In
addition, the Economic Development Corporation of Los Angeles County (the "Los
Angeles EDC") has forecast that economic activity will increase twice as fast in
Los Angeles County than in the nation as a whole during 1996 and 1997, with
inflation-adjusted gross product growing at a rate of 5.2% and 5.0% in Los
Angeles County as compared to 2.5% and 2.4% for 1996 and 1997 for the nation as
a whole. Finally, since 1992, there has been very limited construction of new
office properties in the Southern California region. The Company believes that
this limited construction of office properties coupled with a

1
<PAGE>
growing economy will continue to result in increased demand for office space and
positive net absorption in the Southern California region, and particularly in
the selected submarkets where most of the Properties are located. See "Southern
California Economy and Office Markets."

Richard S. Ziman, the Chairman and Chief Executive Officer of the Company,
has been involved in the real estate business for over 25 years. In 1979, Mr.
Ziman co-founded, as managing general partner, Pacific Financial Group ("PFG"),
whose primary focus was to acquire underperforming office buildings in good
locations and then actively manage, lease and renovate the properties to
increase cash flow and enhance their value. During the early and mid 1980's, PFG
acquired over 4.0 million square feet of commercial office space almost
exclusively in Los Angeles County and Orange County. In order to capitalize on
the escalation of prices for Southern California office properties in the late
1980's, PFG sold substantially all of its interests in its office properties
portfolio at a gain prior to the general downturn in the real estate market in
Southern California.

In 1993, in anticipation of a recovery in the Southern California real
estate market, the Company began to selectively acquire commercial office
properties located in suburban Los Angeles County. In assembling its existing
portfolio and as part of its operating strategy, the Company primarily acquired
office properties that were located in submarkets with growth potential, were
underperforming or needed renovation and which offered opportunities for the
Company to implement its value-added strategy to increase cash flow. This
strategy includes active management and aggressive leasing efforts, a focused
renovation and refurbishment program for underperforming assets, reduction and
containment of operating costs and emphasis on tenant satisfaction (including
efforts to maximize tenant retention at lease expiration and programs to
relocate tenants to other spaces within the Company's portfolio). The Company's
commitment to tenant satisfaction and retention is evidenced by its retention
rate of approximately 82% (based on square feet renewed) from 1993 through
August 1, 1996 and management's on-going relationships with multi-site tenants.

The Company believes that it has been successful in implementing its
value-added strategy as evidenced by increased occupancy rates and rental
revenue at the Properties. As of August 1, 1996, the Properties owned by the
Company for more than one year had a weighted average occupancy rate of
approximately 88%, compared to a weighted average occupancy of approximately 80%
as of the respective dates such Properties were acquired by the Company. In
addition, the Company's occupancy rates at many of its Properties are above
market averages in the applicable submarkets based on information included in a
market study prepared by Cushman & Wakefield of California, Inc. ("C&W") for the
Company (the "C&W Market Study"). As of August 1, 1996, the weighted average
occupancy rate of the 21 Properties located in Los Angeles County was
approximately 90%, compared to weighted average occupancy rates, as of December
31, 1995, of approximately 81% for all office properties throughout Los Angeles
County and approximately 83% for all office properties in the Los Angeles County
submarkets in which such Properties are located (based in each case on the C&W
Market Study).

RISK FACTORS

An investment in the Common Stock involves various risks, and prospective
investors should carefully consider the matters discussed under "Risk Factors"
prior to an investment in the Company. Such risks include, among others:

- the possibility that the consideration to be paid by the Company for the
Properties and the other assets contributed to the Company in its
formation may exceed their fair market value; no third-party appraisals
were obtained by the Company regarding these Properties and other assets;

- the possibility that the Company may not be able to refinance outstanding
indebtedness upon maturity (including the $104 million interim Mortgage
Financing (as defined below) and the proposed $100 million Credit Facility
(as defined below) which will mature in one year and two years,
respectively), that interest rates might increase on variable rate
indebtedness, including any amounts outstanding under the Credit Facility,
and that such indebtedness might be refinanced at higher interest rates or
otherwise on terms less favorable to the Company than existing
indebtedness, which

2
<PAGE>
could adversely affect the Company's ability to make expected
distributions to stockholders and its ability to qualify as a REIT, and
the lack of limitations in the Company's organizational documents on the
amount of indebtedness which the Company may incur;

- real estate investment and property management risks such as the need to
renew leases or relet space upon lease expirations and, at times, to pay
renovation and reletting costs in connection therewith, the effect of
economic and other conditions on office property cash flows and values,
the ability of tenants to make lease payments, the ability of a property
to generate revenue sufficient to meet operating expenses, including
future debt service, and the illiquidity of real estate investments, all
of which may adversely affect the Company's ability to make expected
distributions to stockholders;

- concentration of all of the Properties in Southern California, and the
dependence of the Properties on the conditions of the economy and the
office markets of Southern California and, particularly, Los Angeles
County, which increases the risk of the Company being adversely affected
by a downturn in the Southern California or Los Angeles County economy or
office markets;

- conflicts of interests in connection with the Formation Transactions and
the acquisition and refinancing of the Properties, including conflicts
relating to material benefits to officers, directors and affiliates of the
Company which include receipt of an aggregate of approximately 2,740,718
OP Units and stock options to purchase an aggregate of 868,500 shares of
Common Stock, special allocations of interest deductions of approximately
$12.6 million and repayment of approximately $398 million of indebtedness,
a substantial portion of which represents the repayment of mortgage debt
to an affiliate of the lead managing underwriter of the Offering out of
the net proceeds of the Offering and the Mortgage Financing;

- conflicts of interest involving management of the Company and certain
members of the Board of Directors in business decisions regarding the
Company, including conflicts associated with any prepayment of debt
secured by the Properties that may arise due to the more adverse tax
consequences of such prepayment to certain members of management and of
the Board of Directors as holders of OP Units;

- the risks that, given the Company's recent acquisition of many of the
Properties and the lack of operating history of such Properties under the
Company's management (3 1/2 years or less for all Properties and less than
one year for a majority of the Properties), newly acquired properties may
have characteristics or deficiencies unknown to the Company affecting the
value or revenue potential thereof, may fail to perform as expected, or
may be difficult to integrate into the Company's existing management
operations;

- the possibility that the Board of Directors of the Company may in the
future amend or revise the investment, financing, borrowing, distribution
and conflicts of interest policies of the Company without a vote of the
Company's stockholders;

- taxation of the Company as a corporation if it fails to qualify as a REIT
for federal income tax purposes, treatment of the Operating Partnership as
an association taxable as a corporation if it fails to qualify as a
partnership for federal income tax purposes (and the resulting failure of
the Company to qualify as a REIT), the Company's liability for certain
federal, state and local income taxes in such event and the resulting
decrease in cash available for distribution;

- risks that certain types of losses, such as from earthquakes, could exceed
the Company's insurance coverage which currently includes earthquake
coverage for all of the Properties;

- dependence on certain key personnel;

- anti-takeover effect of limiting actual or constructive ownership of
Common Stock of the Company by a single person to 9.0% of the outstanding
capital stock, subject to certain specified exceptions, and of certain
other provisions contained in the organizational documents of the Company
and the

3
<PAGE>

Operating Partnership, which may have the effect of delaying, deferring or
preventing a transaction or change in control of the Company that might
involve a premium price for the Common Stock or otherwise be in the best
interests of the Company's stockholders;

- existence of net losses of the Arden Predecessors, on a combined basis, of
approximately $2.1 million for the six months ended June 30, 1996 and
approximately $576,000 for the year ended December 31, 1995;

- possible environmental liabilities in connection with the Company's
ownership and/or operation of the Properties;

- effect of shares available for future sale on the price of the Common
Stock;

- immediate and substantial dilution in the net tangible book value per
share of the shares of Common Stock purchased in the Offering; and

- absence of a prior public market for the Common Stock.

BUSINESS AND GROWTH STRATEGIES

The Company's primary business objectives are to maximize growth in cash
flow and to enhance the value of its portfolio in order to maximize total return
to its stockholders. The Company believes it can achieve these objectives by
continuing to implement its business strategies and capitalize on the external
and internal growth opportunities described below. The Company also believes,
based on its evaluation of market conditions, that a number of factors will
enhance its ability to achieve its business objectives, including (i) the
continuing improvement in the Southern California economy; (ii) the limited
construction of new office properties in the Southern California region due to
the substantial cost to develop new office properties compared to current
acquisition prices and substantial building construction limitations in many
submarkets, which provides opportunities to maximize occupancy rates, rental
rates and overall portfolio value; and (iii) the limited availability of
conventional real estate financing for new construction of office properties in
Southern California.

BUSINESS STRATEGIES

The Company's primary business strategies are to (i) acquire and renovate
underperforming office properties or properties which provide attractive yields
with stable cash flow in submarkets where it can utilize its local market
expertise and extensive real estate experience; (ii) actively manage its
portfolio; and (iii) selectively provide real estate management services to
third parties. When market conditions permit, the Company may also develop new
properties in submarkets where it has local market expertise.

Based on its historical activities and its knowledge of the local
marketplace, the Company believes that (i) the Southern California region offers
growth opportunities for companies like the Company that are well-capitalized,
experienced owners of real estate with extensive local market expertise and (ii)
being a public company will enhance its ability to obtain acquisition financing,
to take advantage of opportunities to acquire additional office properties at
attractive prices and to develop office properties, when feasible, at attractive
returns. Through four regional offices, the Company implements its business
strategies by: (i) emphasizing tenant satisfaction and retention and employing
intensive property marketing programs; (ii) utilizing a multidisciplinary
approach to acquisition, management, leasing and renovation activities that is
designed to coordinate decision-making and enhance responsiveness to market
opportunities and tenant needs; and (iii) implementing cost control management
and systems that capitalize on economies of scale arising from the size and
location of the Company's portfolio. The Company believes that the
implementation of these operating practices has led to the increased occupancy
rates and rental revenue of its existing portfolio.

GROWTH STRATEGIES

4
<PAGE>
locations within submarkets which the Company believes have economic growth
potential; and (iii) are underperforming or need renovation, and which therefore
provide opportunities for the Company to increase the cash flow and value of
such properties through active management and aggressive leasing.

The Company intends to continue to acquire office properties within
submarkets in Southern California which the Company believes present
opportunities for long-term stable and rising rental rates due to employment
growth, population movements within the region and restrictions on new
development. The Company generally targets properties which are underperforming
or need renovation and offer opportunities for the Company to implement its
value-added strategy to increase cash flow. For example, as of August 1, 1996,
the Properties owned by the Company for more than one year had a weighted
average occupancy rate of approximately 88%, compared to approximately 80% as of
the respective dates such Properties were acquired by the Company. Upon
completion of the Offering, the Company will have a debt-to-total market
capitalization ratio of approximately 19.3% and expects to finance acquisitions
through its proposed $100 million Credit Facility, although it may employ other
financing alternatives.

In addition, the Company will seek to acquire properties at a significant
discount to replacement cost in the relevant office submarkets. Since the
beginning of 1993, the Company has acquired its Properties in suburban Los
Angeles County at a cost which the Company believes is significantly below
replacement cost based on estimates of replacement costs of Class A office
buildings included in the C&W Market Study. See "Southern California Economy and
Office Markets."

The Company believes it has certain competitive advantages which enhance its
ability to identify and capitalize on acquisition opportunities, including: (i)
management's significant local market expertise, experience and knowledge of
properties, submarkets and potential tenants within the Southern California
region; (ii) management's long-standing relationships with tenants, real estate
brokers and institutional and other owners of commercial real estate; (iii) its
fully integrated real estate operations which allow the Company to respond
quickly to acquisition opportunities and enable it to provide real estate
management services to third parties as a means of identifying such
opportunities; (iv) its access to capital as a public company, including the
Company's proposed $100 million Credit Facility; (v) its ability to acquire
properties in exchange for OP Units or Common Stock if the sellers so desire;
and (vi) management's reputation as an experienced purchaser of office
properties in Southern California which has the ability to effectively close
transactions.

The Company also may seek to take advantage of management's development
expertise to develop office space when market conditions support office building
development. The Company believes, however, that opportunities exist for it to
continue to acquire office properties within selected submarkets in Southern
California at less than replacement cost and, therefore, currently intends to
focus on acquisitions rather than development.

INTERNAL GROWTH: The Company believes that opportunities exist to increase
cash flow from its existing portfolio and that such opportunities will be
enhanced as the Southern California office market continues to improve. The
Company intends to pursue internal growth by (i) continuing to maintain and
improve occupancy rates through active management and aggressive leasing; (ii)
realizing fixed contractual base rental increases or increases tied to indices
such as the Consumer Price Index (the "CPI"); (iii) re-leasing expiring leases
at increasing market rents which are expected to result, over time, from
increased demand for office space in Southern California; (iv) controlling
operating expenses through the implementation of cost control management and
systems; (v) capitalizing on economies of scale arising from the size of its
portfolio; and (vi) increasing revenue generated from parking facilities at
certain Properties where the Company is currently offering free parking as an
amenity or charging below market rates.

THE PROPERTIES

5
<PAGE>
the Company's 24 Properties, 20 Properties have been built since 1980 and 14
Properties, including all four built prior to 1980, have been substantially
renovated within the last three years. The average age of the buildings is
approximately 12.6 years.

Management believes that the location and quality of construction of the
Properties, as well as the Company's reputation for providing a high level of
tenant service, have enabled the Company to attract and retain a diverse tenant
base. As of August 1, 1996, the Properties were leased to over 540 tenants, no
single tenant accounted for more than approximately 3.3% of the aggregate
Annualized Base Rent of the Company's portfolio and only 16 tenants individually
represented more than 1% of such aggregate Annualized Base Rent.

The following table sets forth certain information about each of the
Properties as of August 1, 1996:

<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
APPROXIMATE PORTFOLIO
YEAR BUILT/ RENTABLE RENTABLE PERCENT
SUBMARKET/PROPERTY LOCATION RENOVATED SQUARE FEET SQUARE FEET LEASED
- ---------------------------------------------- -------------------- --------------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
LOS ANGELES COUNTY
- ----------------------------------------------
LOS ANGELES WEST
BEVERLY HILLS/CENTURY CITY
9665 Wilshire Beverly Hills 1972/92-3 158,684 3.9% 95.1%
Beverly Atrium Beverly Hills 1989 61,314 1.5 100.0
Century Park Center Los Angeles 1972/94 243,404 6.0 83.2
WESTWOOD/WEST LOS ANGELES
Westwood Terrace Los Angeles 1988 135,943 3.4 82.3
1950 Sawtelle Los Angeles 1988/95 103,772 2.6 77.5
MARINA AREA/CULVER CITY/LAX
400 Corporate Pointe Culver City 1987 164,598 4.1 90.2
Bristol Plaza Culver City 1982 84,014 2.1 78.6
Skyview Center Los Angeles 1981,87/95(3) 391,675 9.7 86.0
PARK MILE/WEST HOLLYWOOD
The New Wilshire Los Angeles 1986 202,704 5.0 83.9
LOS ANGELES NORTH
SIMI/CONEJO VALLEY
5601 Lindero Canyon Westlake 1989 105,830 2.6 100.0
Calabasas Commerce Center Calabasas 1990 123,121 3.1 100.0
WEST SAN FERNANDO VALLEY
Woodland Hills Financial Center Woodland Hills 1972/95 224,955 5.6 89.8
CENTRAL SAN FERNANDO VALLEY
16000 Ventura Blvd. Encino 1980/96 174,841 4.3 84.1
EAST SAN FERNANDO VALLEY/TRI-CITIES
425 West Broadway Glendale 1984 71,589 1.8 95.9
303 Glenoaks (4) Burbank 1983/96 175,449 4.3 97.4
70 South Lake Pasadena 1982/94 100,133 2.5 81.4
LOS ANGELES SOUTH
LONG BEACH
4811 Airport Plaza Drive Long Beach 1987/95 121,610 3.0 100.0
4900/10 Airport Plaza Drive Long Beach 1987/95 150,403 3.7 100.0
5000 East Spring Long Beach 1989/95 163,358 4.0 89.6
100 West Broadway Long Beach 1987/96 191,727 4.7 90.0
CERRITOS/NORWALK
12501 East Imperial Highway (4) Norwalk 1978/94 122,175 3.0 94.7
ORANGE COUNTY
- ----------------------------------------------
WEST COUNTY
5832 Bolsa Avenue Huntington Beach 1985 49,355 1.2 100.0
TRI-FREEWAY AREA
Anaheim City Centre Anaheim 1986/91 175,391 4.3 93.0
SAN DIEGO COUNTY
- ----------------------------------------------
SAN DIEGO MARKET
Imperial Bank Tower San Diego 1982/96 540,413 13.4 82.2
------------ ----- -----
Total/Weighted Average 4,036,458 100.0% 88.9%
Weighted Average Rent Per Leased Square Foot - All Leases
Weighted Average Rent Per Leased Square Foot - Full Service Gross Leases
Weighted Average Rent Per Leased Square Foot - Net Leases

<CAPTION>
ANNUALIZED
NET EFFECTIVE ANNUALIZED
RENT BASE RENT
PER LEASED PER LEASED
SUBMARKET/PROPERTY SQUARE FOOT (1) SQUARE FOOT (2)
- ---------------------------------------------- ----------------- ---------------
<S> <C> <C>
LOS ANGELES COUNTY
- ----------------------------------------------
LOS ANGELES WEST
BEVERLY HILLS/CENTURY CITY
9665 Wilshire $ 29.34 $ 31.45
Beverly Atrium 18.88 22.83
Century Park Center 19.75 21.38
WESTWOOD/WEST LOS ANGELES
Westwood Terrace 23.22 25.30
1950 Sawtelle 17.69 20.02
MARINA AREA/CULVER CITY/LAX
400 Corporate Pointe 23.42 19.91
Bristol Plaza 16.67 18.10
Skyview Center 15.90 17.01
PARK MILE/WEST HOLLYWOOD
The New Wilshire 18.04 20.35
LOS ANGELES NORTH
SIMI/CONEJO VALLEY
5601 Lindero Canyon 10.49 11.15
Calabasas Commerce Center 15.54 17.14
WEST SAN FERNANDO VALLEY
Woodland Hills Financial Center 20.09 22.29
CENTRAL SAN FERNANDO VALLEY
16000 Ventura Blvd. 18.55 20.21
EAST SAN FERNANDO VALLEY/TRI-CITIES
425 West Broadway 15.79 19.35
303 Glenoaks (4) -- 20.35
70 South Lake 16.28 20.80
LOS ANGELES SOUTH
LONG BEACH
4811 Airport Plaza Drive 9.30 8.64
4900/10 Airport Plaza Drive 8.40 7.80
5000 East Spring 16.61 18.76
100 West Broadway 22.26 20.42
CERRITOS/NORWALK
12501 East Imperial Highway (4) -- 16.27
ORANGE COUNTY
- ----------------------------------------------
WEST COUNTY
5832 Bolsa Avenue 13.38 13.35
TRI-FREEWAY AREA
Anaheim City Centre 13.47 15.07
SAN DIEGO COUNTY
- ----------------------------------------------
SAN DIEGO MARKET
Imperial Bank Tower 19.47 18.31
------ ------
Total/Weighted Average
Weighted Average Rent Per Leased Square Foot - $ 17.86 $ 18.70
Weighted Average Rent Per Leased Square Foot - $ 18.08(5) $ 20.03(5)
Weighted Average Rent Per Leased Square Foot - $ 11.90 $ 11.52
</TABLE>

- -----------------

(1) Annualized Net Effective Rent is calculated for each lease in effect at
August 1, 1996. For leases in effect at the time the relevant Property was
acquired, Annualized Net Effective Rent is calculated by dividing the
remaining lease payments under the lease by the number of months remaining
under the lease and multiplying the result by 12. For leases entered into
after the relevant Property was acquired, Annualized Net Effective Rent is
calculated by dividing all lease payments under the lease by the number of
months in the lease and multiplying the result by 12. The foregoing amounts
were in all cases adjusted for tenant improvements and leasing commissions
paid or payable by the Company.

(2) Annualized Base Rent is the monthly contractual base rent under existing
leases as of August 1, 1996 multiplied by 12.

6
<PAGE>
(3) Skyview Center consists of two Class A 11- and 12-story office towers
completed in 1981 and 1987, respectively, which were both renovated in 1995.

(4) Acquisition Property to be acquired concurrently with the Offering.

(5) The weighted average rent per leased square foot is calculated based only on
rent which is received from tenants under full service gross leases, which
represent approximately 84% of the total portfolio leased square feet.
Excluded are 5601 Lindero Canyon, 4811 Airport Plaza Drive, 4900/10 Airport
Plaza Drive, 5832 Bolsa Avenue, 55.6% of leased space at 400 Corporate
Pointe leased to Pepperdine University, and 48.3% of leased space at
Calabasas Commerce Center leased to two net tenants.

STRUCTURE AND FORMATION OF THE COMPANY

FORMATION TRANSACTIONS

Concurrently with the consummation of the Offering, the Company and the
Operating Partnership, together with the partners and members of the Arden
Predecessors and other parties which hold ownership interests in certain of the
Properties (collectively, the "Participants"), will engage in certain formation
transactions (the "Formation Transactions"). The Formation Transactions have
been designed to (i) enable the Company to raise the necessary capital to
acquire the Properties and repay certain mortgage debt relating thereto, (ii)
provide a vehicle for future acquisitions, (iii) enable the Company to comply
with certain requirements under the federal income tax laws and regulations
relating to REITs, (iv) facilitate potential securitized mortgage financings and
(v) preserve certain tax advantages for certain Arden Predecessors. The
Formation Transactions are as follows:

- The Company will sell shares of Common Stock in the Offering.

- Pursuant to separate option agreements (the "Option Agreements"), the
Company will acquire for cash from certain Participants (not including
Messrs. Ziman and Coleman who will not receive cash in the Formation
Transactions) the interests owned by such Participants in certain of the
Arden Predecessors and in certain of the Properties. The Company will pay
approximately $26.8 million from the net proceeds of the Offering for such
interests which represent 31.7% of the ownership interests in the
Properties to be acquired by the Company.

- The Company will contribute (i) the interests in the Arden Predecessors
and in the Properties acquired pursuant to the Option Agreements and (ii)
the net proceeds from the Offering (after payment of the cash
consideration to certain Participants as described above) to the Operating
Partnership in exchange for a 86.69% general partner interest in the
Operating Partnership.

- Pursuant to separate contribution agreements (the "Contribution
Agreements"), the following additional contributions will be made to the
Operating Partnership in exchange for OP Units representing limited
partner interests: (i) certain Participants will contribute the remaining
interests in the Arden Predecessors and in certain of the Properties
(I.E., all interests not acquired by the Company pursuant to the Option
Agreements) and (ii) Arden will contribute certain of its assets,
including management contracts relating to certain of the Properties and
the contract rights to purchase the Acquisition Properties (303 Glenoaks
and 12501 East Imperial Highway). The Participants making such
contributions (a total of seven individuals and entities including Arden
and Messrs. Ziman and Coleman), will receive an aggregate of 2,889,071 OP
Units, with an estimated value of approximately $57.8 million based on the
assumed initial public offering price of the Common Stock.

- The Company, through the Operating Partnership, will borrow approximately
$104 million aggregate principal amount under a one year interim loan (the
"Mortgage Financing") which will be non-recourse to the Company and the
Operating Partnership and secured by fully cross-collateralized and
cross-defaulted first mortgage liens on nine of the Properties (the
"Mortgage Financing Properties"). The Mortgage Financing will require
monthly payments of interest only, with all principal due on the first
anniversary of the closing of the Mortgage Financing.

- Approximately $35 million of the net proceeds of the Offering will be used
by the Operating Partnership to purchase the Acquisition Properties.

7
<PAGE>
- Approximately $398 million of the net proceeds of the Offering and the
$103 million net proceeds of the Mortgage Financing will be used by the
Operating Partnership to repay certain mortgage debt secured by the
Properties and indebtedness outstanding under lines of credit to be
assumed by the Operating Partnership in the Formation Transactions.

- The Company, through the Operating Partnership, expects to enter into the
proposed $100 million Credit Facility at or shortly after the closing of
the foregoing Formation Transactions.

Additional information regarding the Formation Transactions is set forth
under "Structure and Formation of the Company."

Upon completion of the Formation Transactions, the Operating Partnership
will hold substantially all of the assets of the Company, including 100% of the
interests in all of the Properties. Based on the assumed initial public offering
price of the Common Stock, (i) the purchasers of Common Stock in the Offering
will own substantially all of the outstanding Common Stock (or 86.69% assuming
exchange of all OP Units for shares of Common Stock), (ii) the Company will be
the sole general partner of the Operating Partnership and will own 86.71% of the
interests in the Operating Partnership and (iii) Messrs. Ziman and Coleman will
beneficially own, directly or indirectly through affiliates (including Arden),
2,185,229 OP Units (representing a 10.05% limited partner interest in the
Operating Partnership). Pursuant to the partnership agreement governing the
Operating Partnership (the "Partnership Agreement"), the Participants receiving
OP Units in the Formation Transactions will have certain rights, beginning one
year after consummation of the Offering, to cause the Operating Partnership to
redeem their OP Units for cash or, at the election of the Company, to exchange
their OP Units for shares of Common Stock (on a one-for-one basis). See
"Underwriting" for certain transfer restrictions applicable to the OP Units held
by Messrs. Ziman and Coleman and to shares of Common Stock issued in exchange
for such OP Units.

The aggregate estimated value of the cash and OP Units to be paid by the
Company and the Operating Partnership for the interests in the Arden
Predecessors, the direct interests in certain of the Properties and the assets
of Arden is approximately $84.6 million. The aggregate book value of the
interests and assets to be transferred to the Company and the Operating
Partnership is approximately $14.1 million, of which approximately $2,000
constitutes the aggregate book value of the interests and assets to be
transferred to the Operating Partnership by Messrs. Ziman and Coleman.

No independent third-party appraisals, valuations or fairness opinions have
been obtained by the Company in connection with the Formation Transactions.
Accordingly, there can be no assurance that the value of the OP Units and cash
received by the Participants in the Formation Transactions is equivalent to the
fair market value of the interests and assets acquired by the Company and
contributed to the Operating Partnership. See "Risk Factors -- Price to be Paid
for Properties and Other Assets May Exceed Their Fair Market Value."

STRUCTURE OF THE COMPANY

The Company will be the sole general partner of the Operating Partnership.
The Company will conduct substantially all of its business through the Operating
Partnership, which will hold all of the Company's interests in the Properties.
As the sole general partner of the Operating Partnership, the Company will have
exclusive power to manage and conduct the business of the Operating Partnership,
subject to certain limited exceptions. See "Structure and Formation of the
Company -- The Operating Entities of the Company" and "Partnership Agreement --
Management." In connection with the refinancing of the Mortgage Financing, the
Company expects that it will form financing subsidiaries (as depicted below)
into which the Mortgage Financing Properties will be transferred. See "--
Mortgage Financing and Credit Facility."

8
<PAGE>

The following diagram depicts the ownership structure of the Company and the
Operating Partnership upon completion of the Offering and the Formation
Transactions and assuming the completion of the CMBS Offering (the entities
depicted with dotted lines represent the ownership structure of the financing
subsidiaries which the Company intends to form):

STRUCTURE OF THE COMPANY UPON
COMPLETION OF THE OFFERING AND THE FORMATION TRANSACTIONS
AND ASSUMING THE COMPLETION OF THE CMBS OFFERING

The chart entitled "Structure of the Company Upon Completion of the Offering
and the Formation Transactions" depicts the following:

(i) Arden Realty Group, Inc. (the "Company") is owned 100% by the public
stockholders;

(ii) the Company holds on 86.32% General Partner Interest in Arden Realty
Group Limited Partnership (the "Operating Partnership");

(iii) Richard S. Zimon and Victor J. Coleman collectively hold a 10.28%
Limited Partner Interest in the Operating Partnership; and

(iv) the Other Participants in the Formation Transactions held an aggregate
3.40% Limited Partner Interest in the Operating Partnership.

BENEFITS TO RELATED PARTIES

Certain affiliates of the Company will realize certain material benefits in
connection with the Formation Transactions, including the following:

- In exchange for their respective ownership interests in the Arden
Predecessors and the assets of Arden, Messrs. Ziman and Coleman will
become beneficial owners of a total of 2,185,229 OP Units, with a total
value of approximately $43.7 million based on the assumed initial public
offering price of the Common Stock, which value may differ from the fair
market value of such interests and assets and compares to a book value of
such interests and assets of approximately $2,000 as of June 30, 1996. The
Company does not believe that the book values of the interests and assets
exchanged are equivalent to the fair market values of such interests and
assets.

- Approximately $398 million of indebtedness secured by the Properties and
indebtedness outstanding under lines of credit, and the related additional
and accrued interest thereon, to be assumed by the Operating Partnership
will be repaid in the Formation Transactions.

- Pursuant to the Partnership Agreement, certain Participants who hold OP
Units, including Messrs. Ziman and Coleman, will receive special
allocations of interest deductions of approximately $12.6 million relating
to the repayment of mortgage debt on certain of the Properties.

- Messrs. Ziman and Coleman will serve as directors and officers of the
Company and the Operating Partnership and will enter into employment
agreements providing for annual salaries, bonuses, severance packages,
participation in the Company's Stock Incentive Plan and other benefits for
their services.

- So long as he is Chief Executive Officer, Mr. Ziman will have certain
proportional purchase rights in connection with future issuances of Common
Stock by the Company or OP Units by the Operating Partnership which will
enable him to maintain his overall percentage ownership of the combined
equity of the Company and the Operating Partnership.

- Certain Participants including Messrs. Ziman and Coleman will have
registration rights with respect to shares of Common Stock issued in
exchange for OP Units.

Additional information regarding these and certain other benefits to be
received by affiliates of the Company in connection with the Formation
Transactions is set forth under "Structure and Formation of the Company --
Benefits of the Formation Transactions and the Offering to Affiliates of the
Company," and

9
<PAGE>
"Management -- Employment Agreements." See "Risk Factors -- Conflicts of
Interest in Formation Transactions and the Business of the Company -- Benefits
from the Formation Transactions" and "Certain Transactions."

DETERMINATION AND VALUATION OF OWNERSHIP INTERESTS

The Company's percentage interest in the Operating Partnership was
determined based upon the percentage of estimated Cash Available for
Distribution (as defined herein) required to pay estimated cash distributions
resulting in an annual distribution rate equal to 8% of the assumed initial
public offering price of the Common Stock. The ownership interest in the
Operating Partnership allocated to the Company is equal to this percentage of
estimated Cash Available for Distribution and the remaining interest in the
Operating Partnership will be allocated to the Participants receiving OP Units
in the Formation Transactions. The parameters and assumptions used in deriving
the estimated Cash Available for Distribution are described under
"Distributions."

The Company did not obtain appraisals with respect to the market value of
any of the Properties or other assets that the Company will own immediately
after consummation of the Offering and the Formation Transactions or an opinion
as to the fairness of the allocation of shares to the purchasers in the
Offering. The initial public offering price has been determined based upon the
estimated Cash Available for Distribution and the factors discussed under
"Underwriting," rather than a property-by-property valuation based on historical
cost or current market value. This methodology has been used because management
believes it is appropriate to value the Company as an ongoing business rather
than with a view to values that could be obtained from a liquidation of the
Company or of individual properties owned by the Company.

RESTRICTIONS ON TRANSFER

Under the Partnership Agreement, the Participants in the Formation
Transactions are prohibited from transferring their OP Units, except under
certain limited circumstances. Messrs. Ziman and Coleman have agreed not to sell
any shares of Common Stock acquired by them upon exchange of OP Units for a
period of two years after the completion of the Offering without the consent of
Lehman Brothers Inc. See "Partnership Agreement -- Transferability of Interests"
and "Underwriting."

RESTRICTIONS ON OWNERSHIP OF COMMON STOCK

Due to limitations on the concentration of ownership of stock of a REIT
imposed by the Internal Revenue Code of 1986, as amended (the "Code"), the
charter of the Company (the "Charter") prohibits any stockholder from actually
or constructively owning more than 9.0% of the outstanding shares of Common
Stock (the "Ownership Limit"), except that Mr. Ziman and certain family members
and affiliates may actually and constructively own up to 13.0% of the
outstanding shares of Common Stock. See "Risk Factors -- Limits on Changes in
Control" and "Capital Stock -- Restrictions on Transfer."

FINANCING POLICIES

As a general policy, the Company intends, but is not obligated, to limit its
debt to total market capitalization ratio to no more than 50%. Since such ratio
is based upon market values of equity, it will fluctuate with changes in the
price of the Common Stock; however, the Company believes that this ratio
provides an appropriate indication of leverage for a company whose assets are
primarily real estate. The Company's debt to total market capitalization ratio
at the time of the Offering will be approximately 19.3% (17.6% if the
Underwriters' overallotment option is exercised in full). See "Policies With
Respect To Certain Transactions -- Financing Policies."

MORTGAGE FINANCING, CMBS OFFERING AND CREDIT FACILITY

MORTGAGE FINANCING. The Company has received a commitment for an interim
loan (the "Mortgage Financing") in the amount of $104 million from an affiliate
of Lehman Brothers Inc. The Mortgage Financing is expected to have a maturity of
one year and bear interest at a floating rate equal to one-month LIBOR plus
1.50% for the first six months increasing to one-month LIBOR plus 2.00%
thereafter through maturity. The proceeds of the Mortgage Financing will be used
primarily to refinance a portion of the

10
<PAGE>
Company's existing mortgage indebtedness. The Mortgage Financing will be
non-recourse and secured by fully cross-collateralized and cross-defaulted first
mortgage liens on the nine Mortgage Financing Properties. The Mortgage Financing
will require monthly payments of interest only, with all principal due on the
first anniversary of the closing of the Mortgage Financing.

The Company intends to refinance the Mortgage Financing through an offering
of commercial mortgage-backed securities (the "CMBS Offering") to be made by a
financing subsidiary which the Company intends to form for that purpose in an
amount of approximately $104 million with a term of seven years. The CMBS
offering is expected to bear interest at a floating rate based on one-month
LIBOR. The Company intends to enter into a swap agreement with a major money
center bank in the notional amount of $104 million upon completion of this
Offering and the Formation Transactions or shortly thereafter (the "Swap
Agreement"). The Swap Agreement will result in effective fixed interest payments
equal to the yield on U.S. Treasury Notes with a maturity of seven years plus a
spread which, if determined on the date hereof, would result in an interest rate
of 7.51%. The CMBS Offering is expected to require monthly payments of interest
only with all principal due in a balloon payment at maturity. The Company
expects to pursue the CMBS Offering promptly after the closing of this Offering
and the Formation Transactions, although there can be no assurance that the
Company will complete a CMBS Offering or enter into a Swap Agreement.

THE CREDIT FACILITY. The Company is currently negotiating with a commercial
bank, the terms of a two-year, $100 million revolving credit facility, with a
one-year extension option (the "Credit Facility"). The Credit Facility will be
used, among other things, to finance the acquisition of properties, provide
funds for tenant improvements and capital expenditures, and provide for working
capital and other corporate purposes. The Company intends to enter into the
Credit Facility contemporaneously with the Offering or shortly thereafter,
although there can be no assurance that the Company will enter into the Credit
Facility.

THE OFFERING

All of the shares of Common Stock being offered in the Offering are being
offered by the Company.

Common Stock Offered by the Company... 18,847,500 shares

Common Stock Outstanding After the
Offering (1)........................ 18,852,500 shares

Use of Proceeds....................... Payments to certain Participants (not
including Messrs. Ziman and Coleman
who will not receive cash in the
Formation Transactions) for their
interests in the Arden Predecessors
and in certain of the Properties,
repayment of mortgage debt on the
Properties, including accrued and
additional interest on such mortgage
debt, purchase of the Acquisition
Properties, tenant improvements and
capital expenditure reserves, and for
working capital purposes. See "Use of
Proceeds," "Capitalization," and
"Management's Discussion and Analysis
of Financial Condition and Results of
Operations -- Liquidity and Capital
Resources."

New York Stock Exchange Symbol........ "ARI"

- ------------------------

(1) Assumes no OP Units are exchanged for Common Stock. If all OP Units were
exchanged for Common Stock, there would be 21,741,571 shares of Common Stock
outstanding after the Offering.

11
<PAGE>
DISTRIBUTIONS

The Company intends to make regular quarterly distributions to its
stockholders. The Company intends to pay a PRO RATA distribution with respect to
the period commencing on the closing of the Offering and ending on December 31,
1996, based upon $0.40 per share for a full quarter. On an annualized basis,
this would be $1.60 per share (of which $0.21 may represent a return of capital
for tax purposes), or an annual distribution rate of 8%, based on the assumed
initial public offering price per share of $20.00. The Company intends initially
to distribute annually approximately 94.5% of estimated Cash Available for
Distribution. The Company established this distribution rate based upon an
estimate of Cash Available for Distribution that will be available for
distributions after the Offering. See "Distributions" for information as to how
this estimate was derived. The Company intends to maintain its initial
distribution rate for the twelve-month period following consummation of the
Offering unless actual results of operations, economic conditions or other
factors differ materially from the assumptions used in its estimate.
Distributions by the Company will be determined by the Board of Directors and
will be dependent upon a number of factors. The Company believes that its
estimate of Cash Available for Distribution constitutes a reasonable basis for
setting the initial distribution; however, no assurance can be given that the
estimate will prove accurate, and actual distributions may therefore be
significantly different from the expected distributions. In addition, in order
to maintain its qualification as a REIT under the Code, the Company is required
to distribute currently 95% of its taxable income. See "Distributions." The
Company does not intend to reduce the expected distribution per share if the
Underwriters' overallotment option is exercised.

TAX STATUS OF THE COMPANY

The Company intends to elect to be taxed as a REIT under Sections 856
through 860 of the Code, commencing with its taxable year ending December 31,
1996, and believes its organization and proposed method of operation will enable
it to meet the requirements for qualification as a REIT. To maintain REIT
status, an entity must meet a number of organizational and operational
requirements, including a requirement that it currently distribute at least 95%
of its taxable income to its stockholders. As a REIT, the Company generally will
not be subject to federal income tax on net income it distributes currently to
its stockholders. If the Company fails to qualify as a REIT in any taxable year,
it will be subject to federal income tax at regular corporate rates. See
"Federal Income Tax Considerations" and "Risk Factors -- Adverse Consequences of
Failure to Qualify as a REIT; Other Tax Liabilities." Even if the Company
qualifies for taxation as a REIT, the Company may be subject to certain federal,
state and local taxes on its income and property.

SUMMARY SELECTED COMBINED FINANCIAL DATA

The following sets forth selected combined financial and operating
information on a pro forma basis for the Company and on a combined historical
basis for the Arden Predecessors. The following information should be read in
conjunction with the financial statements and notes thereto of the Company and
of the Arden Predecessors included elsewhere in this Prospectus. The selected
combined historical financial and operating information of the Arden
Predecessors at December 31, 1995 and 1994, and for the years ended December 31,
1995, 1994 and 1993, has been derived from the historical combined financial
statements audited by Ernst & Young LLP, independent auditors, whose report with
respect thereto is included elsewhere in this Prospectus. The selected combined
financial and operating information for the six months ended June 30, 1996 and
June 30, 1995 has been derived from the unaudited combined financial statements
of the Arden Predecessors included elsewhere in this Prospectus.

The unaudited selected pro forma financial and operating information for the
six months ended June 30, 1996 and the year ended December 31, 1995 is presented
as if the Offering, the Formation Transactions (including the purchase of the
Acquisition Properties), and the acquisitions of the Properties acquired during
1996 prior to the Offering (the "1996 Acquired Properties") and the Properties
acquired during 1995 (the "1995 Acquired Properties") had all occurred by June
30, 1996 for the combined balance sheet and at the beginning of the period
presented for the combined statements of operations. The pro forma balance sheet
information also gives effect to the recording of minority interests for OP
Units, as if

12
<PAGE>
these transactions occurred on June 30, 1996. The pro forma financial
information is not necessarily indicative of what the actual financial position
or results of the Company would have been as of and for the periods indicated,
nor does it purport to represent the Company's future financial position or
results of operations.

13
<PAGE>
THE COMPANY (PRO FORMA) AND
ARDEN PREDECESSORS (COMBINED HISTORICAL)

EXPENSES:
Property operating expenses............. 14,124 8,252 934
General and administrative expenses..... 1,900 830 684
Depreciation and amortization........... 5,774 3,036 638
Interest expense........................ 4,058 14,741 1,403
--------- -------- --------
Total expenses........................ 25,856 26,859 3,659
--------- -------- --------
Equity in net income (loss) of noncombined
entities................................ -- (94) 108
--------- -------- --------
Income (loss) before minority interests... 14,781 (2,482) 317
Minority interests........................ (1,964) 344 (7)
--------- -------- --------
Net income (loss)......................... $12,817 $ (2,138) $ 310
--------- -------- --------
--------- -------- --------
Net income per common share............... $ .68
---------
---------

<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
COMBINED HISTORICAL
-------------------------------------------
THE
PERIOD
MARCH
22,
1991
PRO FORMA TO
--------- DECEMBER
1995 1995 1994 1993 1992 31, 1991
--------- --------- -------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenue:
Rental.................................. $66,691 $ 8,832 $ 5,157 $ 3,034 $-- $--
Tenant reimbursements................... 2,910 403 217 35 -- --
Parking................................. 5,895 750 382 279 -- --
Other................................... 3,795 1,707 796 314 324 11
--------- --------- -------- -------- ----- -----
Total revenue......................... 79,291 11,692 6,552 3,662 324 11
EXPENSES:
Property operating expenses............. 30,091 3,339 2,191 1,480 -- --
General and administrative expenses..... 3,800 1,377 689 386 471 7
Depreciation and amortization........... 11,549 1,898 1,143 646 2 --
Interest expense........................ 8,076 5,537 1,673 499 9 --
--------- --------- -------- -------- ----- -----
Total expenses........................ 53,516 12,151 5,696 3,011 482 7
--------- --------- -------- -------- ----- -----
Equity in net income (loss) of noncombined
entities................................ -- (116) 201 4 -- --
--------- --------- -------- -------- ----- -----
Income (loss) before minority interests... 25,775 (575) 1,057 655 (158) 4
Minority interests........................ (3,425) (1) 1 -- -- --
--------- --------- -------- -------- ----- -----
Net income (loss)......................... $22,350 $ (576) $ 1,058 $ 655 $(158) $4
--------- --------- -------- -------- ----- -----
--------- --------- -------- -------- ----- -----
Net income per common share............... $ 1.19
---------
---------
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
JUNE 30, 1996
---------------------- COMBINED HISTORICAL
COMBINED -----------------------------------------
PRO FORMA HISTORICAL 1995 1994 1993 1992 1991
--------- ---------- -------- -------- ------- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
BALANCE SHEET DATA:
Commercial office properties -- net of
accumulated depreciation................... $410,160 $254,749 $160,874 $ 34,977 $25,404 $-- $--
Total assets................................. 436,581 286,165 182,379 46,090 27,911 134 10
Mortgage loans payable and unsecured lines of
credit..................................... 104,000 265,959 168,451 32,944 24,356 250 --
Total liabilities............................ 111,468 277,917 174,163 34,148 25,190 287 5
Minority interest............................ 43,231 718 100 99 -- -- --
Owners'/Stockholders' equity................. 281,882 7,530 8,116 11,843 2,721 (153) 5
</TABLE>

14
<PAGE>
THE COMPANY (PRO FORMA) AND
ARDEN PREDECESSORS (COMBINED HISTORICAL)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------
COMBINED
PRO FORMA HISTORICAL
--------- ------------------
1996 1996 1995
--------- -------- --------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER
SHARE DATA, PERCENTAGES AND
NUMBER OF PROPERTIES)
OTHER DATA:
Funds from Operations (1):
Income (loss) before minority
interests............................. $14,781 $ (2,482) $ 317
Depreciation and amortization........... 5,774 3,036 638
--------- -------- --------
Funds from Operations................... 20,555 554 955
Company's Share Percentage................ 86.69%
Company's Share of Funds from
Operations.............................. 17,819 554 955
--------- -------- --------
Cash flows from operating activities...... -- 2,013 458
Cash flows from investing activities...... -- (96,827) (5,578)
Cash flows from financing activities...... -- 94,937 4,550
Number of Properties owned at period
end..................................... 24 21 10
Gross rentable square feet of Properties
owned at period end..................... 4,036 3,547 1,408
Occupancy at period end of Properties
owned at period end..................... -- 89% 84%

OTHER DATA:
Funds from Operations (1):
Income (loss) before minority
interests............................. $25,775 $ (575) $ 1,057 $ 655 $(158) $4
Depreciation and amortization........... 11,549 1,898 1,143 646 2 --
--------- --------- -------- -------- ----- -----
Funds from Operations................... 37,324 1,323 2,200 1,301 (156) 4
Company's Share Percentage................
Company's Share of Funds from
Operations.............................. 32,356 1,323 2,200 1,301 (156) 4
--------- --------- -------- -------- ----- -----
Cash flows from operating activities...... -- 2,830 834 1,186 (258) 7
Cash flows from investing activities...... -- (123,358) (17,921) (25,965) -- --
Cash flows from financing activities...... -- 120,707 16,845 25,632 250 1
Number of Properties owned at period
end..................................... 24 17 8 3 -- --
Gross rentable square feet of Properties
owned at period end..................... 4,036 2,634 1,130 530 -- --
Occupancy at period end of Properties
owned at period end..................... -- 88% 82% 84% -- --
</TABLE>

- ---------------
(1) The White Paper on Funds from Operations approved by the Board of Governors
of the National Association of Real Estate Investment Trusts ("NAREIT") in
March 1995 (the "White Paper") defines Funds from Operations as net income
(loss) (computed in accordance with GAAP), excluding gains (or losses) from
debt restructuring and sales of property, plus real estate related
depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. Management considers Funds from Operations
an appropriate measure of performance of an equity REIT because it is
predicated on cash flow analyses. The Company computes Funds from Operations
in accordance with standards established by the White Paper which may differ
from the methodology for calculating Funds from Operations utilized by other
equity REITs and, accordingly, may not be comparable to such other REITs.
Funds from Operations should not be considered as an alternative to net
income (determined in accordance with GAAP) as an indicator of the Company's
financial performance or to cash flow from operating activities (determined
in accordance with GAAP) as a measure of the Company's liquidity, nor is it
indicative of funds available to fund the Company's cash needs, including
its ability to make distributions.

15
<PAGE>
RISK FACTORS

An investment in the Common Stock involves various risks. Prospective
investors should carefully consider the following information in conjunction
with the other information contained in this Prospectus before making a decision
to purchase Common Stock in the Offering.

PRICE TO BE PAID FOR PROPERTIES AND OTHER ASSETS MAY EXCEED THEIR FAIR MARKET
VALUE

No independent third-party valuations, appraisals or fairness opinions were
obtained by the Company in connection with the Formation Transactions.
Accordingly, there can be no assurance that the prices paid by the Company will
not exceed the fair market value of the interests in the Arden Predecessors, the
Properties and the other assets to be acquired by the Company in the Formation
Transactions. The initial public offering price has been determined by Messrs.
Ziman and Coleman and the Underwriters based upon a capitalization of estimated
Cash Available for Distribution and the factors discussed under "Structure and
Formation of the Company -- The Formation Transactions -- Determination and
Valuation of Ownership Interests" and "Underwriting," rather than an
asset-by-asset valuation based on historical cost or current market value. In
determining the initial public offering price of the Common Stock certain
assumptions were made concerning the estimate of revenue to be derived from the
Properties. See "Distributions." This methodology has been used because
management believes it is appropriate to value the Company as an ongoing
business, rather than with a view to values that could be obtained from a
liquidation of the Company or of individual assets owned by the Company. There
can be no assurance that there will not be discrepancies between assumed results
and actual results which could lead to a reduction in actual distributions
compared to assumed distributions. It is possible that the initial public
offering price per share of Common Stock may exceed the per share fair market
value of the Company's assets.

FORMATION TRANSACTIONS NOT ARM'S LENGTH

The Formation Transactions are not the result of arm's-length negotiations.
The Participants (including Messrs. Ziman and Coleman, who are founders of Arden
and the Arden Predecessors and executive officers and members of the Board of
Directors of the Company) have preexisting ownership interests in Arden and the
Arden Predecessors. The ownership interests of such individuals differ in
proportion and amount. Messrs. Ziman and Coleman have negotiated the purchase
price for the assets to be acquired by the Company in the Formation Transactions
and each of these individuals will receive substantial economic benefits as a
result of such transactions. There can be no assurance that the fair market
value of the Properties and the other assets to be acquired by the Company will
equal or exceed the sum of the value of the OP Units issued and the amount of
cash paid to the Participants in the Formation Transactions.

REAL ESTATE FINANCING RISKS

INABILITY TO REPAY OR REFINANCE INDEBTEDNESS AT MATURITY. Upon consummation
of this Offering and the Formation Transactions, the Company will enter into the
one-year interim Mortgage Financing in the aggregate principal amount of $104
million. The Company intends to refinance the Mortgage Financing prior to
maturity through the CMBS Offering. The Company also intends to enter into and,
over time, make borrowings under the Credit Facility. The Company will be
subject to risks normally associated with debt financing, including the risk
that the Company's cash flow will be insufficient to meet required payments of
principal and interest, the risk that any indebtedness will not be able to be
refinanced or that the terms of any such refinancing will not be as favorable as
the terms of such indebtedness.

RISK OF FAILURE TO COVER DEBT SERVICE UNDER THE MORTGAGE FINANCING AND CMBS
OFFERING. Concurrently with the Offering, the Company, through the Operating
Partnership, will borrow approximately $104 million in principal amount under
the Mortgage Financing and intends to refinance the Mortgage Financing prior to
maturity through the CMBS Offering. The payment and other obligations under the
Mortgage Financing will be (and under the CMBS Offering are expected to be)
secured by fully cross-collateralized and cross-defaulted first mortgage liens
on the nine Mortgage Financing Properties. The Mortgage Financing will require
monthly payments of interest only, with all principal due on the first
anniversary of the Mortgage Financing. If the Company is unable to meet its
obligations under the Mortgage Financing (or under the CMBS Offering), the
Mortgage Financing Properties securing such debt could be foreclosed on,

16
<PAGE>
which would have a material adverse effect on the Company and its ability to
make expected distributions and could threaten the continued viability of the
Company. See "Policies With Respect to Certain Transactions -- Financing
Policies."

POTENTIAL EFFECT OF RISING INTEREST RATES ON COMPANY'S VARIABLE RATE
DEBT. Upon or shortly after consummation of the Offering and the Formation
Transactions, the Company intends to enter into the proposed $100 million Credit
Facility. See "Policies With Respect to Certain Activities -- Financing
Policies." Advances under the Credit Facility will bear interest at a variable
rate. In addition, the Company may incur other variable rate indebtedness in the
future. Increases in interest rates on such indebtedness would increase the
Company's interest expense (e.g., assuming the entire $100 million available
under the Credit Facility is outstanding, the Company would incur an additional
$250,000 in interest expense for each 0.25% increase in interest rates), which
could adversely affect the Company's cash flow and its ability to pay expected
distributions to stockholders. In addition, although the Mortgage Financing (and
CMBS Offering) will bear interest at a variable rate, the Company expects to
enter into the Swap Agreement or other hedging transactions to further limit its
exposure to rising interest rates as appropriate and cost effective, although
there can be no assurance that it will be able to do so on terms acceptable to
the Company. The Swap Agreement or other hedging transactions also may expose
the Company to the risk that the counter party may not perform, which could
cause the Company to lose the benefits of the hedging transaction. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

NO LIMITATION ON DEBT

Upon completion of the Offering and the Formation Transactions, the
Company's debt to total market capitalization ratio will be approximately 19.3%
(17.6% if the Underwriters' overallotment option is exercised in full). The
Company currently has a policy of incurring debt only if upon such incurrence
the debt to total market capitalization ratio would be 50% or less, but the
organizational documents of the Company do not contain any limitation on the
amount of indebtedness the Company may incur. Accordingly, the Board of
Directors could alter or eliminate this policy. If this policy were changed, the
Company could become more highly leveraged, resulting in an increase in debt
service that could adversely affect the Company's cash flow and, consequently,
the amount available for distribution to stockholders and could increase the
risk of default on the Company's indebtedness.

The Company has established its debt policy relative to the total market
capitalization of the Company rather than relative to the book value of its
assets. The Company has used total market capitalization because it believes
that the book value of its assets (which to a large extent is the depreciated
original cost of real property, the Company's primary tangible assets) does not
accurately reflect its ability to borrow and to meet debt service requirements.
The market capitalization of the Company, however, is more variable than book
value, and does not necessarily reflect the fair market value of the underlying
assets of the Company at all times. The Company also will consider factors other
than market capitalization in making decisions regarding the incurrence of
indebtedness, such as the purchase price of properties to be acquired with debt
financing, the estimated market value of its properties upon refinancing and the
ability of particular properties and the Company as a whole to generate cash
flow to cover expected debt service.

REAL ESTATE INVESTMENT RISKS

REAL ESTATE OWNERSHIP RISKS. Real property investments are subject to
varying degrees of risk. The yields available from equity investments in real
estate depend in large part on the amount of income generated and expenses
incurred. If the Properties do not generate revenue sufficient to meet operating
expenses, including debt service, tenant improvements, leasing commissions and
other capital expenditures, the Company may have to borrow additional amounts to
cover fixed costs and the Company's cash flow and ability to make distributions
to its stockholders will be adversely affected.

The Company's revenue and the value of its properties may be adversely
affected by a number of factors, including the national economic climate; the
local economic climate; local real estate conditions; the perceptions of
prospective tenants of the attractiveness of the property; the ability of the
Company to

17
<PAGE>
manage and maintain the Properties and secure adequate insurance; and increased
operating costs (including real estate taxes and utilities). In addition, real
estate values and income from properties are also affected by such factors as
applicable laws, including tax laws, interest rate levels and the availability
of financing.

RISK THAT COMPANY MAY BE UNABLE TO RETAIN TENANTS OR RENT SPACE UPON LEASE
EXPIRATIONS. The Company will be subject to the risks that upon expiration,
leases may not be renewed, the space may not be relet or the terms of renewal or
reletting (including the cost of required renovations) may be less favorable
than current lease terms. Leases on a total of approximately 13% and 51% of the
occupied space in the Properties will expire through the end of 1997 and 2000,
respectively. During 1997, the re-leasing of the Company's expiring leases may
result in a net decrease in cash flow from the leases due to the number of
leases expected to expire during such period which are above current market
rents. If the Company is unable to promptly relet or renew leases for all or a
substantial portion of this space, if the rental rates upon such renewal or
reletting are significantly lower than expected, the Company's cash flow and
ability to make expected distributions to stockholders could be adversely
affected.

RESTRAINTS ON COMPANY'S FLEXIBILITY TO LIQUIDATE REAL ESTATE. Equity real
estate investments are relatively illiquid. Such illiquidity will tend to limit
the ability of the Company to vary its portfolio promptly in response to changes
in economic or other conditions. In addition, the Code limits a REIT's ability
to sell properties held for fewer than four years, which may affect the
Company's ability to sell properties without adversely affecting returns to
holders of Common Stock.

IMPACT OF COMPETITION ON OCCUPANCY LEVELS AND RENTS CHARGED. Numerous
office properties compete with the Properties in attracting tenants to lease
space. Some of the competing properties may be newer, better located or owned by
parties better capitalized than the Company. The number of competitive
commercial properties in a particular area could have a material adverse effect
on (i) the ability to lease space in the Properties (or at newly acquired or
developed properties) and (ii) the rents charged.

POTENTIAL INCREASES IN CERTAIN TAXES AND REGULATORY COMPLIANCE
COSTS. Because increases in income, service or transfer taxes are generally not
passed through to tenants under leases, such increases may adversely affect the
Company's cash flow and its ability to make distributions to stockholders. The
Properties are also subject to various federal, state and local regulatory
requirements, such as requirements of the Americans with Disabilities Act (the
"ADA") and state and local fire and life safety requirements. Failure to comply
with these requirements could result in the imposition of fines by governmental
authorities or awards of damages to private litigants. The Company believes that
the Properties are currently in substantial compliance with all such regulatory
requirements. However, there can be no assurance that these requirements will
not be changed or that new requirements will not be imposed which would require
significant unanticipated expenditures by the Company and could have an adverse
effect on the Company's cash flow and expected distributions.

IMPACT OF FINANCIAL CONDITION AND SOLVENCY OF TENANTS ON COMPANY'S CASH
FLOW. At any time, a tenant of the Properties may seek the protection of
bankruptcy laws, which could result in rejection and termination of such
tenant's lease and thereby cause a reduction in cash flow available for
distribution by the Company. Although the Company has not experienced material
losses from tenant bankruptcies, no assurance can be given that tenants will not
file for bankruptcy protection in the future or, if any tenants file, that they
will affirm their leases and continue to make rental payments in a timely
manner. In addition, a tenant from time to time may experience a downturn in its
business which may weaken its financial condition and result in the failure to
make rental payments when due. If tenant leases are not affirmed following
bankruptcy or if a tenant's financial condition weakens, the Company's income
may be adversely affected.

AMERICANS WITH DISABILITIES ACT COMPLIANCE COSTS. Under the ADA, all public
accommodations and commercial facilities are required to meet certain federal
requirements related to access and use by disabled persons. These requirements
became effective in 1992. Compliance with the ADA requirements could require
removal of access barriers and non-compliance could result in imposition of
fines by the U.S. government or an award of damages to private litigants.
Although the Company believes that the Properties are substantially in
compliance with these requirements, the Company may incur additional costs to
comply

18
<PAGE>
with the ADA. Although the Company believes that such costs will not have a
material adverse effect on the Company, if required changes involved a greater
expenditure than the Company currently anticipates, the Company's ability to
make expected distributions could be adversely affected.

FINANCIAL DEPENDENCY AND MANAGEMENT CONFLICTS ASSOCIATED WITH PARTNERSHIP
AND JOINT VENTURE PROPERTY OWNERSHIP STRUCTURES. The Company will own its
interests in the Properties through the Operating Partnership. In addition, the
Company may also participate with other entities in property ownership through
joint ventures or partnerships in the future. While the Company currently does
not have any plans to invest in joint ventures or partnerships with affiliates
or promoters of the Company, Mr. Arthur Gilbert, a director of the Company, owns
one office property in Southern California that the Company may consider
acquiring in the future. Partnership or joint venture investments may, under
certain circumstances, involve risks not otherwise present, including the
possibility that the Company's partners or co-venturers might become bankrupt,
that such partners or co-venturers might at any time have economic or other
business interests or goals which are inconsistent with the business interests
or goals of the Company, and that such partners or co-venturers may be in a
position to take action contrary to the Company's instructions or requests or
contrary to the Company's policies or objectives, including the Company's policy
with respect to maintaining its qualification as a REIT. The Company will,
however, seek to maintain sufficient control of such partnerships or joint
ventures to permit the Company's business objectives to be achieved. There is no
limitation under the Company's organizational documents as to the amount of
available funds that may be invested in partnerships or joint ventures.

CONCENTRATION OF PROPERTIES IN SOUTHERN CALIFORNIA

All of the Company's Properties are located in Southern California, with 21
of the 24 Properties located in suburban Los Angeles County. Los Angeles County
just recently began to recover from an economic recession which affected
Southern California generally and Los Angeles County in particular since the
early 1990s. The Company's revenue and the value of its Properties may be
affected by a number of factors, including the local economic climate (which may
be adversely impacted by business layoffs or downsizing, industry slowdowns,
changing demographics and other factors) and local real estate conditions (such
as oversupply of or reduced demand for office and other competing commercial
properties). Therefore, the Company's performance and its ability to make
distributions to stockholders will likely be dependent, to a large extent, on
the economic conditions in this market area.

CONFLICTS OF INTERESTS IN THE FORMATION TRANSACTIONS AND THE BUSINESS OF THE
COMPANY

BENEFITS FROM FORMATION TRANSACTIONS. Participants receiving OP Units in
the Formation Transactions (including Messrs. Ziman and Coleman, who are
executive officers and directors of the Company, and Mr. Arthur Gilbert, who is
a director nominee of the Company, and Ms. Michele Byer, who is an executive
officer of the Company), will realize certain benefits from the Formation
Transactions that will not generally be received by other persons participating
in the formation of the Company, including receipt of an aggregate of
approximately 2,740,718 OP Units, and options to purchase an aggregate of
690,000 shares of Common Stock under the Stock Incentive Plan. Messrs. Ziman and
Coleman will beneficially own, directly or indirectly through affiliates
(including Arden), 2,185,229 OP Units (representing an 10.05% limited partner
interest in the Operating Partnership) in exchange for the transfer of interests
and assets having an aggregate book value of approximately $2,000 to the
Operating Partnership by Messrs. Ziman and Coleman. In addition, Messrs. Ziman
and Coleman will enter into employment agreements with the Company. See
"Structure and Formation of the Company -- Benefits of the Formation
Transactions and the Offering to Affiliates of the Company" and "Management --
Employment Agreements." Because these persons were involved in structuring the
Formation Transactions, they had the ability to influence the type and level of
benefits they received. As such, these persons may have interests that conflict
with the interests of others participating in the Formation Transactions and
with the interests of persons acquiring Common Stock in the Offering. As a
result, the type and level of benefits these persons received may have been
different if they had not participated in structuring the Formation
Transactions.

REPAYMENT OF CERTAIN DEBT. After giving effect to its participation in the
Mortgage Financing, Lehman Brothers Holdings Inc., an affiliate of Lehman
Brothers Inc., the lead managing underwriter for the

19
<PAGE>

Offering (which has also provided financial advisory services to the Company in
respect of the Formation Transactions and the Offering), will receive a net
amount of approximately $202 million of the net proceeds of the Offering as
repayment of indebtedness and related additional and accrued interest expected
to be outstanding upon consummation of the Offering. See "Underwriting."

FAILURE TO ENFORCE TERMS OF FORMATION AGREEMENTS. As partners and members
in the Arden Predecessors (which have owned the Properties), owners of Arden,
and recipients of cash and OP Units in the Formation Transactions, certain
members of the Company management, including Messrs. Ziman, Coleman and Gilbert
and Ms. Byer, will have a conflict of interest with respect to their obligations
as directors or executive officers of the Company in enforcing the terms
(including customary representations and warranties as to ownership and
operation) of the agreements relating to the transfer to the Company of their
interests in the Properties and the Arden assets. The failure to enforce the
material terms of those agreements, particularly the indemnification provisions
for breaches of representations and warranties, could result in a monetary loss
to the Company, which loss could have a material adverse effect on the Company's
financial condition or results of operations. In addition, the aggregate
liability of Messrs. Ziman and Coleman and Arden under those agreements is
limited to approximately $43.7 million (the initial value of the OP Units
received by them in the Formation Transactions based on the assumed initial
offering price of the Common Stock offered hereby), and each such party is
severally liable, up to the initial value of the OP Units received by such
party, only for breaches of such party's respective representations and
warranties. The Company therefore will have no right of recovery as to any
damages in excess of such aggregate or individual amounts that may result from
breaches of such representations and warranties.

TAX CONSEQUENCES UPON ANY PREPAYMENT OF MORTGAGE FINANCING. Certain Limited
Partners, including Messrs. Ziman, Coleman and Gilbert and Ms. Byer, may incur
adverse tax consequences upon the repayment of mortgage indebtedness relating to
the Mortgage Financing Properties which are different from the tax consequences
to the Company and persons who purchase shares of Common Stock in the Offering.
Consequently, such Limited Partners may have different objectives regarding the
appropriate timing of any such repayment. While the Company will have the
exclusive authority under the Partnership Agreement to determine whether, when,
and on what terms to repay such mortgage indebtedness, any such decision would
require the approval of the Board of Directors. Messrs. Ziman, Coleman and
Gilbert and Ms. Byer will have substantial influence with respect to any such
decision, and such influence could be exercised in a manner not consistent with
the interests of some, or a majority, of the Company's stockholders including in
a manner which could prevent repayment of such mortgage indebtedness.

LIMITATION UPON SALE OR REFINANCING OF CENTURY PARK CENTER. Due to the
potential adverse consequences to certain Limited Partners which may result from
a sale of Century Park Center, for a period of seven years following the
Offering, any sale of Century Park Center (other than in connection with the
sale of all or substantially all of the assets of the Company or a merger of the
Company) requires the consent of a majority of the Limited Partners, which may
cause the Company to be unable to sell this Property in circumstances in which
it would be advantageous to do so.

OTHER REAL ESTATE INTERESTS. Messrs. Ziman, Coleman and Gilbert hold
certain real estate interests which are not being contributed to the Company as
part of the Formation Transactions. Except for one property owned by Mr.
Gilbert, none of such real estate interests relate to properties that are office
properties. Subsequent to the consummation of this Offering, the Company may
consider the acquisition of the office property owned by Mr. Gilbert.

RISKS ASSOCIATED WITH THE RECENT ACQUISITION OF MANY OF THE NEW PROPERTIES; LACK
OF OPERATING HISTORY

After giving effect to the Formation Transactions, the Company will own 24
Properties, consisting of approximately 4.0 million rentable square feet. All of
the Properties have been under the Company's management for 3 1/2 years or less
and a majority of the Properties have been owned for less than one year (11
Properties) or will be acquired at the closing of this Offering (2 Properties).
The most recently acquired

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of the Properties may have characteristics or deficiencies unknown to the
Company affecting their valuation or revenue potential, and it is also possible
that the operating performance of the most recently acquired Properties may
decline under the Company's management.

The Company is currently experiencing a period of rapid growth. As the
Company acquires additional properties, the Company will be subject to risks
associated with managing new properties, including lease-up and tenant
retention. In addition, the Company's ability to manage its growth effectively
will require it to successfully integrate its new acquisitions into its existing
management structure. No assurances can be given that the Company will be able
to succeed with such integration or effectively manage additional properties or
that newly acquired properties will perform as expected.

POTENTIAL RISKS REGARDING INABILITY TO OBTAIN CHANGE-OF-CONTROL CONSENTS ON
GROUND LEASES

Three of the Company's properties (4811 Airport Plaza Drive, 4900/4910
Airport Plaza Drive and 5000 East Spring) are subject to ground leases with the
City of Long Beach. These ground leases contain consent provisions which are
triggered by the Formation Transactions. Under the leases, the consents cannot
be unreasonably withheld. The city attorney and the city staff of the City of
Long Beach have advised the Company in writing that they will recommend that the
City Council of the City of Long Beach approve the necessary consents at their
next regular meeting which will occur on October 8, 1996. The Company's title
insurance companies have agreed to cover the risk if the City Council should
fail to approve the consents and such failure is upheld in litigation as
reasonable. Nevertheless, if the City Council should not approve the consent and
should prevail in court regarding the reasonableness of withholding consent in
light of the recommendation of the city attorney and the city staff and if the
title insurance companies prove unable to make the Company whole on the risk,
then the Company's results of operations and financial condition could be
materially and adversely affected.

CHANGES IN POLICIES WITHOUT STOCKHOLDER APPROVAL

The investment, financing, borrowing and distribution policies of the
Company and its policies with respect to all other activities, including growth,
debt, capitalization and operations, will be determined by the Board of
Directors. Although the Board of Directors has no present intention to do so,
these policies may be amended or revised at any time and from time to time at
the discretion of the Board of Directors without a vote of the stockholders of
the Company. In addition, the Board of Directors may change the Company's
policies with respect to conflicts of interest provided that such changes are
consistent with applicable legal requirements. A change in these policies could
adversely affect the Company's financial condition, results of operations or the
market price of the Common Stock. See "Policies with Respect to Certain
Transactions."

RISK OF ACQUISITION, RENOVATION AND DEVELOPMENT ACTIVITIES

The Company intends to continue acquiring office properties. See "Business
and Growth Strategies -- Business Strategies." Acquisitions of office properties
entail risks that investments will fail to perform in accordance with
expectations. Estimates of renovation costs and costs of improvements to bring
an acquired property up to standards established for the market position
intended for that property may prove inaccurate. In addition, there are general
investment risks associated with any new real estate investment.

The Company intends to expand and/or renovate its Properties from time to
time. Expansion and renovation projects generally require expenditure of capital
as well as various government and other approvals, the receipt of which cannot
be assured. While policies with respect to expansion and renovation activities
are intended to limit some of the risks otherwise associated with such
activities, the Company will nevertheless incur certain risks, including
expenditures of funds on, and devotion of management's time to, projects which
may not be completed.

The Company anticipates that future acquisitions and renovations will be
financed through a combination of advances under the Credit Facility, other
lines of credit and other forms of secured or unsecured financing. If new
developments are financed through construction loans, there is a risk that, upon
completion of construction, permanent financing for newly developed properties
may not be available or may be available only on disadvantageous terms.

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While the Company has generally limited its acquisition, renovation,
management and leasing business primarily to the Southern California market, it
is possible that the Company will in the future expand its business to new
geographic markets. The Company will not initially possess the same level of
familiarity with new markets outside of Southern California, which could
adversely affect its ability to acquire, develop, manage or lease properties in
any new localities.

Changing market conditions, including competition from other purchasers of
Class A suburban office properties, may diminish the Company's opportunities for
attractive additional acquisitions.

The Company also intends to review from time to time the possibility of
developing and constructing office buildings and other commercial properties in
accordance with the Company's development and underwriting policies. See
"Business and Growth Strategies -- Business Strategies." Risks associated with
the Company's development and construction activities may include: abandonment
of development opportunities; construction costs of a property exceeding
original estimates, possibly making the property uneconomical; occupancy rates
and rents at a newly completed property may not be sufficient to make the
property profitable; financing may not be available on favorable terms for
development of a property; and construction and lease-up may not be completed on
schedule, resulting in increased debt service expense and construction costs. In
addition, new development activities, regardless of whether they would
ultimately be successful, typically require a substantial portion of
management's time and attention. Development activities would also be subject to
risks relating to the inability to obtain, or delays in obtaining, all necessary
zoning, land-use, building, occupancy, and other required governmental permits
and authorizations.

ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT; OTHER TAX LIABILITIES

TAX LIABILITIES AS A CONSEQUENCE OF FAILURE TO QUALIFY AS A REIT. The
Company intends to operate so as to qualify as a REIT under the Code, commencing
with its taxable year ending December 31, 1996. Although management believes
that it will be organized and will operate in such a manner, no assurance can be
given that the Company will be organized or will be able to operate in a manner
so as to qualify or remain so qualified. Qualification as a REIT involves the
satisfaction of numerous requirements (some on an annual and quarterly basis)
established under highly technical and complex Code provisions for which there
are only limited judicial and administrative interpretations, and involves the
determination of various factual matters and circumstances not entirely within
the Company's control. For example, in order to qualify as a REIT, at least 95%
of the Company's gross income in any year must be derived from qualifying
sources and the Company must pay distributions to stockholders aggregating
annually at least 95% of its REIT taxable income (excluding capital gains). The
complexity of these provisions and of the applicable Treasury Regulations that
have been promulgated under the Code is greater in the case of a REIT that holds
its assets in partnership form. No assurance can be given that legislation, new
regulations, administrative interpretations or court decisions will not
significantly change the tax laws with respect to qualification as a REIT or the
federal income tax consequences of such qualification. The Company is relying on
the opinion of Latham & Watkins, counsel to the Company, regarding various
issues affecting the Company's ability to qualify, and continue to qualify, as a
REIT. See "Federal Income Tax Considerations -- Taxation of the Company." Such
legal opinion is based on various assumptions and factual representations by the
Company regarding the Company's ability to meet the various requirements for
qualification as a REIT, and no assurance can be given that actual operating
results will meet these requirements. Such legal opinion is not binding on the
IRS or any court.

If the Company were to fail to qualify as a REIT in any taxable year, the
Company would be subject to federal income tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate rates.
Moreover, unless entitled to relief under certain statutory provisions, the
Company also would be disqualified from treatment as a REIT for the four taxable
years following the year during which qualification was lost. This treatment
would significantly reduce the net earnings of the Company available for
investment or distribution to stockholders because of the additional tax
liability to the Company for the years involved. In addition, distributions to
stockholders would no longer be required to be made. See "Federal Income Tax
Considerations -- Taxation of the Company -- Requirements for Qualification."

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OTHER TAX LIABILITIES. Even if the Company qualifies for and maintains its
REIT status, it will be subject to certain federal, state and local taxes on its
income and property. If the Company has net income from a prohibited
transaction, such income will be subject to a 100% tax. See "Federal Income Tax
Considerations."

FAILURE OF THE OPERATING PARTNERSHIP TO QUALIFY AS A PARTNERSHIP FOR FEDERAL
INCOME TAX PURPOSES

The Company will receive an opinion of Latham & Watkins, tax counsel to the
Company, at the closing of the Formation Transactions to the effect that the
Operating Partnership is properly treated as a partnership for federal income
tax purposes. Such opinion is not binding on the IRS or the courts. If the IRS
were to successfully challenge the tax status of the Operating Partnership as a
partnership for federal income tax purposes, the Operating Partnership would be
treated as an association taxable as a corporation. In such event, the character
of the Company's assets and income would change, which would preclude the
Company from satisfying the REIT asset tests and possibly the income tests (as
set forth in the Code) and, in turn, would prevent the Company from qualifying
as a REIT. The imposition of a corporate tax on the Operating Partnership would
also reduce the amount of cash available for distribution to the Company and its
stockholders. See "Federal Income Tax Considerations -- Tax Aspects of the
Operating Partnership."

INSURANCE

The Operating Partnership carries comprehensive liability, fire, extended
coverage and rental loss insurance covering all of the Properties, with policy
specifications and insured limits which the Company believes are adequate and
appropriate under the circumstances. The Operating Partnership also carries
earthquake insurance on all of the Properties. There are, however, certain types
of losses that are not generally insured because it is not economically feasible
to insure against such losses. Should an uninsured loss or a loss in excess of
insured limits occur, the Operating Partnership could lose its capital invested
in the property, as well as the anticipated future revenue from the property
and, in the case of debt which is with recourse to the Operating Partnership,
would remain obligated for any mortgage debt or other financial obligations
related to the property. Any such loss would adversely affect the Company.
Moreover, as a general partner of the Operating Partnership, the Company will
generally be liable for any unsatisfied obligations other than non-recourse
obligations. The Company believes that the Properties are adequately insured. In
addition, in light of the California earthquake risk, California building codes
since the early 1970's have established construction standards for all newly
built and renovated buildings, including office buildings, the current and
strictest construction standards having been adopted in 1984. Of the 24
Properties, 13 have been built since January 1, 1985 and the Company believes
that all of the Properties were constructed in full compliance with the
applicable standards existing at the time of construction. While earthquakes
have occurred in Southern California, the only loss the Company has experienced
as a result of earthquakes was minor damage to three of its buildings due to the
Northridge earthquake, which resulted in $601,000 of damage in the year ended
December 31, 1994. No assurance can be given that material losses in excess of
insurance proceeds will not occur in the future.

DEPENDENCE ON KEY PERSONNEL

The Company is dependent on the efforts of its executive officers,
particularly Messrs. Ziman and Coleman. The loss of their services could have a
material adverse effect on the operations of the Company. Prior to the
consummation of the Offering, each of Messrs. Ziman and Coleman will enter into
an employment agreement with the Company. See "Management -- Employment
Agreements."

LIMITS ON CHANGES IN CONTROL

Certain provisions of the Charter and bylaws of the Company (the "Bylaws")
may have the effect of delaying, deferring or preventing a third party from
making an acquisition proposal for the Company and may thereby inhibit a change
in control of the Company. For example, such provisions may (i) deter tender
offers for the Common Stock, which offers may be attractive to the stockholders,
or (ii) deter purchases of

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large blocks of Common Stock, thereby limiting the opportunity for stockholders
to receive a premium for their Common Stock over then-prevailing market prices.
See "Capital Stock" and "Certain Provisions of Maryland Law and the Company's
Charter and Bylaws." These provisions include the following:

LIMITS ON OWNERSHIP OF COMMON STOCK. In order for the Company to maintain
its qualification as a REIT, not more than 50% in value of the outstanding
shares of Common Stock of the Company may be owned, actually or constructively,
by five or fewer individuals (as defined in the Code to include certain
entities) during the last half of a taxable year (other than the first year for
which the election to be treated as a REIT has been made). In addition, if the
Company, or an owner of 10% or more of the Company, actually or constructively
owns 10% or more of a tenant of the Company (or a tenant of any partnership in
which the Company is a partner), the rent received by the Company (either
directly or through any such partnership) from such tenant will not be
qualifying income for purposes of the REIT gross income tests of the Code. See
"Federal Income Tax Considerations -- Taxation of the Company." In order to
protect the Company against the risk of losing REIT status due to the
concentration of ownership among its stockholders, the Ownership Limit included
in the Charter limits actual or constructive ownership of the outstanding shares
of Common Stock by any single stockholder to 9.0% of the total of the then
outstanding shares of Common Stock. See "Capital Stock -- Restrictions on
Transfer." Although the Board of Directors presently has no intention of doing
so (except as described below), the Board of Directors could waive this
restriction with respect to a particular stockholder if it were satisfied, based
upon the advice of tax counsel, that ownership by such stockholder in excess of
the Ownership Limit would not jeopardize the Company's status as a REIT and the
Board of Directors otherwise decided such action would be in the best interests
of the Company. Actual or constructive ownership of shares of Common Stock in
excess of the Ownership Limit will cause the violative transfer or ownership to
be void with respect to the transferee or owner as to that number of shares in
excess of the Ownership Limit and such shares will be automatically transferred
to a trust for the benefit of a qualified charitable organization. Such
transferee or owner shall have no right to vote such shares or be entitled to
dividends or other distributions with respect to such shares. The Board of
Directors has waived the Ownership Limit with respect to Mr. Ziman and certain
family members and affiliates and permitted such parties to actually and
constructively own up to 13.0% of the outstanding shares of Common Stock. See
"Capital Stock -- Restrictions on Transfer" for additional information regarding
the Ownership Limit.

PREFERRED STOCK. The Charter authorizes the Board of Directors to cause the
Company to issue authorized but unissued shares of Common Stock or Preferred
Stock and to classify or reclassify any unissued shares of Common Stock or
Preferred Stock and to set the preferences, rights and other terms of such
classified or unclassified shares. See "Capital Stock -- Preferred Stock."
Although the Board of Directors has no such intention at the present time, it
could establish a series of Preferred Stock that could, depending on the terms
of such series, delay, defer or prevent a transaction or a change in control of
the Company that might involve a premium price for the Common Stock or otherwise
be in the best interest of the stockholders.

STAGGERED BOARD. The Company's Board of Directors is divided into three
classes of directors. The initial terms of the first, second and third classes
will expire in 1997, 1998 and 1999, respectively. Beginning in 1997, directors
of each class will be chosen for three-year terms upon the expiration of their
current terms and each year one class of directors will be elected by the
stockholders. The staggered terms of directors may reduce the possibility of a
tender offer or an attempt to change control of the Company even though a tender
offer or change in control might be in the best interest of the stockholders.
See "Certain Provisions of Maryland Law and the Company's Charter and Bylaws --
Board of Directors - Number, Classification, Vacancies."

HISTORICAL LOSSES

The Arden Predecessors had a combined historical net loss of approximately
$2.1 million for the six months ended June 30, 1996 and approximately $576,000
for the year ended December 31, 1995. These net losses reflect the substantial
interest expense associated with the acquisition financing of the Properties and
certain non-cash charges such as depreciation and amortization. See "Selected
Combined Financial Data"

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and the financial statements and accompanying notes included in this Prospectus.
These historical results may not be indicative of future results. Nonetheless,
there can be no assurance that the Company will not incur net losses in the
future.

POSSIBLE ENVIRONMENTAL LIABILITIES

Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases at such property and may be held liable to a governmental
entity or to third parties for property damage and for investigation and
clean-up costs incurred by such parties in connection with the contamination.
Such laws typically impose clean-up responsibility and liability without regard
to whether the owner knew of or caused the presence of the contaminants, and the
liability under such laws has been interpreted to be joint and several unless
the harm is divisible and there is a reasonable basis for allocation of
responsibility. The costs of investigation, remediation or removal of such
substances may be substantial, and the presence of such substances, or the
failure properly to remediate the contamination on such property, may adversely
affect the owner's ability to sell or rent such property or to borrow using such
property as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances at a disposal or treatment facility also may be
liable for the costs of removal or remediation of a release of hazardous or
toxic substances at such disposal or treatment facility, whether or not such
facility is owned or operated by such person. In addition, some environmental
laws create a lien on the contaminated site in favor of the government for
damages and costs incurred in connection with the contamination. Finally, the
owner of a site may be subject to common law claims by third parties based on
damages and costs resulting from environmental contamination emanating from such
site.

Certain federal, state and local laws, regulations and ordinances govern the
removal, encapsulation or disturbance of asbestos-containing materials ("ACM")
when such materials are in poor condition or in the event of construction,
remodeling, renovation or demolition of a building. Such laws may impose
liability for release of ACM and may provide for third parties to seek recovery
from owners or operators of real properties for personal injury associated with
ACM. In connection with its ownership and operation of the Properties, the
Company may be potentially liable for such costs. ACM has been detected through
sampling by environmental consultants at 70 South Lake, 16000 Ventura Boulevard
and 9665 Wilshire. The non-friable ACM was found in certain floor tiles and pipe
wrappings at 16000 Ventura Boulevard and 70 South Lake and in vinyl floor tiles,
carpet mastic, drywall mud/tape, textured ceiling material, core insulation
material and fireproofing at 9665 Wilshire. The non-friable ACM found at these
Properties is not expected to present a risk as long as it continues to be
properly managed. The environmental consultants recommended no further ACM
sampling or removal action at any of the Properties.

In the past two years, independent environmental consultants have conducted
or updated Phase I Environmental Assessments ("Phase I Assessments") at the
Properties. These Phase I Assessments have included, among other things, a
visual inspection of the Properties and the surrounding area and a review of
relevant state, federal and historical documents. No invasive techniques such as
soil or groundwater sampling were performed.

The Company's Phase I Assessments of the Properties have not revealed any
environmental liability that the Company believes would have a material adverse
effect on the Company's business, assets or results of operations taken as a
whole, nor is the Company aware of any such material environmental liability.
Nevertheless, it is possible that the Company's Phase I Assessments do not
reveal all environmental liabilities or that there are material environmental
liabilities of which the Company is unaware. Moreover, there can be no assurance
that (i) future laws, ordinances or regulations will not impose any material
environmental liability or (ii) the current environmental condition of the
Properties will not be affected by tenants, by the condition of land or
operations in the vicinity of the Properties (such as the presence of
underground storage tanks), or by third parties unrelated to the Company.

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not otherwise aware, of any material noncompliance, liability or claim relating
to hazardous or toxic substances or petroleum products in connection with any of
its present Properties, other than as noted above.

EFFECT ON COMMON STOCK PRICE OF SHARES AVAILABLE FOR FUTURE SALE

Sales of a substantial number of shares of Common Stock, or the perception
that such sales could occur, could adversely affect prevailing market prices of
the Common Stock. In connection with the formation of the Company, 2,889,071 OP
Units, in addition to Common Stock sold by the Company in the Offering, will be
issued. See "Structure and Formation of the Company." Messrs. Ziman and Coleman
have agreed to certain restrictions on the dispositions of the shares of Common
Stock issued upon exchange of OP Units. See "Underwriting." When such
restrictions lapse, Common Stock issued upon the exchange of OP Units may be
sold in the public market pursuant to registration rights that the Company has
granted to the Participants or available exemptions from registration. In
addition, 1,500,000 shares of Common Stock will be reserved for issuance
pursuant to the Company's Stock Incentive Plan, and these shares will be
available for sale in the public markets from time to time pursuant to
exemptions from registration requirements or upon registration. Options to
purchase a total of 868,500 shares of Common Stock will be granted and stock
bonus awards for a total of 5,000 shares have been granted to certain executive
officers, employees and directors upon the closing of the Offering. See
"Management -- Compensation of Directors," "-- Executive Compensation" and "--
Stock Incentive Plan." No prediction can be made about the effect that future
sales of Common Stock will have on the market prices of shares.

EFFECT ON HOLDERS OF COMMON STOCK OF AN ISSUANCE OF PREFERRED STOCK

The Board of Directors is empowered by the Company's Charter to designate
and issue from time to time one or more classes or series of Preferred Stock
without stockholder approval. The Board of Directors may determine the relative
rights, preferences and privileges of each class or series of Preferred Stock so
issued. See "Capital Stock -- Preferred Stock." Because the Board of Directors
has the power to establish the preferences and rights of each class or series of
Preferred Stock, it may afford the holders in any series or class of Preferred
Stock preferences, distributions, powers and rights, voting or otherwise, senior
to the rights of holders of Common Stock. The issuance of Preferred Stock could
also have the effect of delaying, deferring or preventing a change in control of
the Company. See "-- Limits on Changes in Control."

IMMEDIATE AND SUBSTANTIAL DILUTION

As set forth more fully under "Dilution," the pro forma net tangible book
value per share of the assets of the Company after the Offering will be
substantially less than the initial public offering price per share in the
Offering. Accordingly, purchasers of the Common Stock offered hereby will
experience immediate and substantial dilution of $5.24 per share in the net
tangible book value of the Common Stock from the initial public offering price.
See "Dilution."

ABSENCE OF PRIOR PUBLIC MARKET FOR COMMON STOCK

Prior to the Offering, there has been no public market for the Common Stock
and there can be no assurance that an active trading market will develop or be
sustained or that shares of Common Stock will be resold at or above the initial
public offering price. The initial public offering price of the Common Stock has
been determined by agreement among the Company and the Underwriters and may not
be indicative of the market price for the Common Stock after the Offering. See
"Underwriting." The market value of the Common Stock could be substantially
affected by general market conditions, including changes in interest rates.
Moreover, numerous other factors, such as governmental regulatory action and
changes in tax laws, could have a significant impact on the future market price
of the Common Stock.

INFLUENCE OF EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS

Upon completion of the Offering, all directors and executive officers of the
Company as a group will beneficially own approximately 94% of the OP Units
which, commencing one year after consummation of the Offering, will be
redeemable by the holder for cash or, at the option of the Company, exchangeable
for shares of Common Stock on a one-for-one basis. Assuming the exchange of all
of these OP Units for shares of Common Stock, all directors and executive
officers as a group would beneficially own approximately

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<PAGE>
12.61% of the total issued and outstanding shares. Mr. Ziman currently serves as
Chairman and Chief Executive Officer and will be, along with Mr. Coleman, who
currently serves as President and Chief Operating Officer, and Mr. Gilbert (a
director nominee) on the initial Board of Directors of the Company. Accordingly,
such persons will have substantial influence on the Company, which influence
might not be consistent with the interests of other stockholders, and may in the
future have a substantial influence on the outcome of any matters submitted to
the Company's stockholders for approval if all of their OP Units are exchanged
for Common Stock. In addition, although there is no current agreement,
understanding or arrangement for those Participants who received OP Units to act
together on any matter, the Participants could be in a position to exercise
significant influence over the affairs of the Company if they were to act
together in the future. See "Principal Stockholders."

RISKS OF FEE MANAGEMENT BUSINESS

The Company, through the Operating Partnership, intends to pursue
selectively the management of properties owned by third parties. Risks
associated with the management and leasing of properties owned by third parties
include the risk that the management and leasing contracts (which are typically
cancelable upon 15 to 60 days' notice or upon certain events, including sale of
the property) will be terminated by the property owner or will be lost in
connection with a sale of such property, that contracts may not be renewed upon
expiration or may not be renewed on terms consistent with current terms and that
the rental revenues upon which management and leasing fees are based will
decline as a result of general real estate market conditions or specific market
factors affecting properties managed or leased by the Operating Partnership,
resulting in decreased management or leasing fee income.

EFFECT OF MARKET INTEREST RATES ON PRICE OF COMMON STOCK

One of the factors that will influence the market price of the Common Stock
in public markets will be the annual distribution rate on the shares. Increasing
market interest rates may lead prospective purchasers of the Common Stock to
demand a higher annual distribution rate from future distributions. Such an
increase in the required distribution rate may adversely affect the market price
of the Common Stock.

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THE COMPANY

The Company has been formed to continue and expand the real estate business
of Arden and the other Arden Predecessors which are engaged in owning,
acquiring, managing, leasing and renovating office properties in Southern
California. The Company's founders, Richard S. Ziman and Victor J. Coleman,
along with the other five senior officers at the Company, have an average of
more than 18 years of experience in the real estate industry. Upon completion of
the Offering, the Company will own 24 office properties (the "Properties")
containing approximately 4.0 million rentable square feet. All of the Properties
are located in Southern California, with 21 in suburban Los Angeles County, two
in Orange County and one in San Diego County. As of August 1, 1996, the
Properties had a weighted average occupancy rate of approximately 89%. Arden
currently manages 22 of the Properties. Upon completion of the Offering, the
Company will manage all of the Properties and four additional properties
containing approximately 325,000 rentable square feet which are currently
managed by Arden for institutional investors and other third-party owners. The
Company will be a fully integrated, self-administered and self-managed real
estate company and expects to qualify as a REIT for federal income tax purposes.

The Company believes that all of the Properties are located in strong
submarkets which generally have significant rent growth potential due to
employment growth, declining vacancy rates, limited new construction activity
and existing rental rates at levels significantly below those required to make
new construction economically feasible. The Company's portfolio is comprised
primarily of Class A suburban office properties. The Company generally considers
Class A suburban office properties to be those which have desirable locations
and high quality finishes, are well maintained and professionally managed and
are capable of achieving rental and occupancy rates which are typically above
those prevailing in their respective markets although the determination of an
office property's class designation is subjective and consequently others may
have a different view. Of the Company's 24 Properties, 20 Properties have been
built since 1980 and 14 Properties, including all four built prior to 1980, have
been substantially renovated within the last three years. The Properties are
leased to over 540 tenants which engage in a wide variety of businesses,
including financial services, entertainment, health care services, accounting,
law, computer technology, education and publishing. As of August 1, 1996, no
single tenant accounted for more than approximately 3.3% of the aggregate
Annualized Base Rent of the Company's portfolio and only 16 tenants individually
represented more than 1% of such aggregate Annualized Base Rent.

The Company believes that certain economic fundamentals in Southern
California provide an attractive environment for owning, acquiring and operating
Class A suburban office properties:

- According to AMERICA'S OFFICE ECONOMY prepared by Cognetics, Inc.,
Metropolitan Los Angeles (which includes Los Angeles County and Orange
County), in which 23 of the Company's 24 Properties are located, is
projected to be the number one market in the United States for primary
office employment growth during the period from 1995 to 2005;

- According to statistics released by the U.S. Bureau of Labor Statistics,
the unemployment rate in the Los Angeles/Long Beach Primary Metropolitan
Statistical Area (the "Los Angeles PMSA"), in which 21 of the 24
Properties are located, has decreased significantly over the past four
years, falling from an average of 9.8% during 1992 to 7.9% during 1995;

- The Los Angeles EDC has forecast that economic activity will increase
twice as fast in Los Angeles County than in the nation as a whole during
1996 and 1997, with inflation-adjusted gross product growing at a rate of
5.2% and 5% in Los Angeles County as compared to 2.5% and 2.4% in 1996 and
1997 for the nation as a whole; and

- Since 1992, there has been very limited construction of new office
properties in the Southern California region. The Company believes that
this limited construction of office properties coupled with a growing
economy will continue to result in increased demand for office space and
positive net absorption in the Southern California region, and
particularly in the selected submarkets where most of the Properties are
located. See "Southern California Economy and Office Markets."

28
<PAGE>
Richard S. Ziman, the Chairman and Chief Executive Officer of the Company,
has been involved in the real estate business for over 25 years. In 1979, Mr.
Ziman co-founded, as managing general partner, PFG, whose primary focus was to
acquire underperforming office buildings in good locations and then actively
manage, lease and renovate the properties to increase cash flow and enhance
their value. During the early and mid 1980's, PFG acquired over 4.0 million
square feet of commercial office space almost exclusively in Los Angeles County
and Orange County. In order to capitalize on the escalation of prices for
Southern California office properties in the late 1980's, PFG sold substantially
all of its interests in its office properties portfolio at a gain prior to the
general downturn in the real estate market in Southern California.

The Company believes that it has been successful in implementing its
value-added strategy as evidenced by increased occupancy rates and rental
revenue at the Properties. As of August 1, 1996, the Properties owned by the
Company for more than one year had a weighted average occupancy rate of
approximately 88%, compared to a weighted average occupancy of approximately 80%
as of the respective dates such Properties were acquired by the Company. In
addition, the Company's occupancy rates at many of its Properties are above
market averages in the applicable submarkets based on information included in
the C&W Market Study. As of August 1, 1996, the weighted average occupancy rate
of the 21 Properties located in Los Angeles County was approximately 90%,
compared to weighted average occupancy rates, as of December 31, 1995, of
approximately 81% for office properties throughout Los Angeles County and
approximately 83% for office properties in the Los Angeles County submarkets in
which such Properties are located (based in each case on the C&W Market Study).

The Company believes that the submarkets in which the Properties are
located, as well as certain additional submarkets within the Southern California
region, present opportunities for the Company to continue to acquire Class A
suburban office properties at attractive yields and for prices significantly
below replacement costs. To date, the Company has acquired its Properties at a
cost which the Company believes is significantly below replacement cost based on
estimates of replacement costs of Class A office buildings included in the C&W
Market Study. As part of its growth strategy to pursue such acquisitions, the
Company has acquired five properties in 1996 and will use approximately $35
million of the net proceeds from the Offering to acquire the two Acquisition
Properties concurrently with the Offering. The Acquisition Properties contain a
total of approximately 298,000 rentable square feet and are located in suburban
Los Angeles County. The Company believes that these acquisitions demonstrate its
ability, through its local market expertise, to identify and, with respect to
the 1996 acquired properties, to complete acquisitions in selected submarkets
within Southern California at prices significantly below replacement cost based
on estimates of replacement costs of Class A office buildings included in the
C&W Market Study. See "Business and Growth Strategies." To capitalize on future
acquisition opportunities, the Company is negotiating a $100 million Credit
Facility which the Company expects to use for acquiring properties and for
general corporate purposes, although there can be no assurance that the Company
will enter into the Credit Facility.

Upon completion of the Offering, the founders and executive officers of the
Company will beneficially own approximately 12.61% of the Company, assuming the
exchange of all of their OP Units for Common Stock and excluding shares of
Common Stock subject to options granted under the Company's 1996 Stock Incentive
Plan (the "Stock Incentive Plan").

29
<PAGE>
The Company is a Maryland corporation incorporated on May 1, 1996. The
Company's executive offices are located at 9100 Wilshire Boulevard, East Tower,
Suite 700, Beverly Hills, California 90212 and its telephone number is (310)
271-8600.

BUSINESS AND GROWTH STRATEGIES

BUSINESS STRATEGIES

Based on its own historical activities and its knowledge of the local
marketplace the Company believes that (i) the Southern California region offers
opportunities for companies like the Company that are well-capitalized,
experienced owners of real estate with extensive local market expertise and (ii)
being a public company will enhance its ability to take advantage of
opportunities to acquire additional office properties at attractive prices and
develop office properties, when feasible, at attractive returns. Through four
regional offices, the Company implements its business strategies by: (i)
emphasizing tenant satisfaction and retention and employing intensive property
marketing programs; (ii) utilizing a multidisciplinary approach to acquisition,
management, leasing and renovation activities that is designed to coordinate
decision-making and enhance responsiveness to market opportunities and tenant
needs; and (iii) implementing cost control management and systems that
capitalize on economies of scale arising from the size and location of the
Company's portfolio. The Company believes that the implementation of these
operating practices has led to the increased occupancy rates and rental revenue
of its existing portfolio.

AGGRESSIVE LEASING. The Company utilizes its market position and
relationships with a broad array of brokers and tenants to implement its
aggressive leasing efforts and monitor and understand the current and future
space needs of office tenants in its various submarkets. Since the Company
retains several different brokerage companies as leasing agents (at least nine
different companies across the four regions and 24 Properties) to implement its
leasing program, it has a high profile in the brokerage community. This strategy
enables the Company to attract and place tenants throughout all of the
Properties, thereby improving the Company's penetration in the tenant community.
The Company believes that not only does the breadth of its submarket presence
permit it to offer a wide variety of space alternatives to prospective tenants
and to existing tenants whose facility requirements change over time, but also
its leasing agents are given incentives to locate tenants to Properties where
they are not the leasing agent.

INTEGRATED DECISION-MAKING AND RESPONSIVENESS. In addition to the location
and quality of the Properties, management generally credits its ability to
maintain its Properties at above-average market occupancy levels to the
coordination of its decision-making team. Acquisition, renovation and leasing
activities are coordinated to enhance responsiveness to market opportunities and
tenant needs. The Company's renovation and construction executive plays an
integral role in both its leasing and acquisition activities. The acquisition,
leasing and renovation teams work closely with the Company's senior management
from the

30
<PAGE>
initial meetings with prospective tenants or sellers, and throughout the
negotiation process. This integrated approach permits the Company to analyze the
economic terms and costs (including tenant build-out and retrofitting costs) for
each lease on a timely and efficient basis throughout lease negotiations. With
respect to acquisitions, the Company can quickly analyze the costs of upgrades
and lease-up potential. The Company is able to commit to leasing and acquisition
terms quickly, facilitate timely deal execution and build-out of space for
prospective tenants and minimize downtime between lease rollovers.

COST CONTROL OPERATING EFFICIENCIES. The size and geographic location of
the Company's portfolio permit it to enhance portfolio value by lowering
operating costs and expenses, compared to single-site ownership and management.
The Company seeks to capitalize on economies of scale resulting from the
Southern California geographic focus of the portfolio and the maintenance of a
centralized state of the art accounting system for cost control at each of the
Properties. The Company also strives to minimize overhead by controlling
corporate general and administrative expenses and assigning responsibility for
multiple submarkets to its four regional offices.

GROWTH STRATEGIES

EXTERNAL GROWTH: Based on its own historical activities and its knowledge
of the local marketplace, the Company believes that opportunities continue to
exist to acquire additional office properties that: (i) provide attractive
initial yields with significant potential for growth in cash flow; (ii) are in
desirable locations within submarkets which the Company believes have economic
growth potential; and (iii) are underperforming or need renovation, and which
therefore provide opportunities for the Company to increase the cash flow and
value of such properties through active management and aggressive leasing.

The Company intends to continue to acquire office properties within
submarkets in Southern California which the Company believes present
opportunities for long-term stable and rising rental rates due to employment
growth, population movements within the region and restrictions on new
development. Upon or shortly after completion of the Offering the Company will
have a debt-to-total market capitalization ratio of approximately 19.3% and
expects to finance acquisitions through its proposed $100 million Credit
Facility, although it may employ other financial alternatives. The Company
generally targets properties which are underperforming or need renovation and
offer opportunities for the Company to implement its value-added strategy to
increase cash flow. For example, as of August 1, 1996, the Properties owned by
the Company for more than one year had a weighted average occupancy rate of
approximately 88%, compared to approximately 80% as of the respective dates such
Properties were acquired by the Company. The Company also targets properties
which provide attractive yields with stable cash flow.

In addition, the Company will seek to acquire properties at a significant
discount to replacement cost in the relevant submarket. Since the beginning of
1993, the Company has acquired its Properties in suburban Los Angeles County at
a cost which the Company believes is significantly below replacement cost based
on estimates of replacement costs of Class A office buildings included in the
C&W Market Study. See "Southern California Economy and Office Markets."

Recent examples of the Company's ability to identify attractive acquisition
opportunities include the two Acquisition Properties, 303 Glenoaks and 12501
East Imperial Highway. The Property at 303 Glenoaks is a ten-story, 175,449
square foot, Class A building situated in the Burbank Civic Center area. The
Company

31
<PAGE>
believes that the Burbank market, which is adjacent to the very low vacancy
Burbank Media District market, affords it an opportunity to capitalize on the
Burbank market tightness by maximizing rental rates at levels below those
achieved in the Burbank Media District and benefiting from the spill-over of
tenants from the Burbank Media District who either cannot find space there or
who do not wish to pay the full Burbank Media District rents. In addition, the
Company plans a common area renovation in order to become even more attractive
to its existing and potential tenant base. Similarly, the Property at 12501 East
Imperial Highway is a 122,175 square foot, six-story building located
immediately off Interstate 5, the primary central, north-south artery of
California. Located between downtown Los Angeles and Orange County, this
Property is occupied by major tenants, such as IBM, Mead Corporation, which runs
a training facility, and GTE California, which runs a teleconferencing facility
on site. In addition to taking advantage of its portfolio-wide operating
efficiencies, the Company plans to decrease operating expenses at this Property
by furnishing management services from its Property in Anaheim rather than
having an on-site manager.

The Company may also seek to take advantage of management's development
expertise to develop office space when market conditions support office building
development. The Company believes, however, that opportunities exist for it to
continue to acquire office properties within selected submarkets in Southern
California at less than replacement cost and, therefore, currently intends to
focus on acquisitions rather than development.

INTERNAL GROWTH: The Company believes that opportunities exist to increase
cash flow from its existing portfolio and that such opportunities will be
enhanced as the Southern California office market continues to improve. The
Company intends to pursue internal growth by (i) continuing to maintain and
improve occupancy rates through active management and aggressive leasing; (ii)
realizing fixed contractual base rental increases or increases tied to indices
such as the CPI; (iii) re-leasing expiring leases at increasing market rents
which are expected to result, over time, from increased demand for office space
in Southern California; (iv) controlling operating expenses through the
implementation of cost control management and systems; (v) capitalizing on
economies of scale arising from the size of its portfolio; and (vi) increasing
revenue generated from parking facilities at certain Properties where the
Company is currently offering free parking as an amenity or charging below
market rates.

(i) MAINTAINING AND IMPROVING OCCUPANCY RATES: The Company believes that
it has been successful in attracting, expanding and retaining a diverse tenant
base by actively managing its office properties with an emphasis on tenant
retention and satisfaction. The Company strives to be responsive to the needs of
individual tenants through its on-site professional management staff and by
providing tenants with alternative space within the Company's portfolio to
accommodate their changing space requirements. The Company's success in
maintaining and improving occupancy rates is demonstrated, in part, by the
number of existing tenants which have renewed or released their space, leased
additional space to support their extension needs, or moved to other space
within the Company's portfolio. The Company has achieved a tenant retention rate
of approximately 82% (based on square feet renewed) from inception through
August 1, 1996. See "Business and Properties -- Tenant Retention and
Expansions." The Company also seeks to improve occupancies by aggressively
marketing available space within its portfolio. As of August 1, 1996,
approximately 446,000 rentable square feet were unleased within the Company's
portfolio.

(ii) CONTRACTUAL BASE RENTAL INCREASES: The Company expects to achieve
internal growth in cash flow through leases which contain provisions for fixed
contractual rental increases (including increases from free or partial rent to
full rent) or increases which are tied to indices such as the CPI. Between June
30, 1996 and July 31, 1997, the contractual base rents under leases in the
Company's portfolio are expected to increase by an aggregate of approximately
$1.2 million on an annual basis due to fixed contractual rent increases (not
including increases from free or partial rent to full rent or increases which
are tied to indices such as the CPI).

(iii) RE-LEASING EXPIRING LEASES TO INCREASING MARKET RENTS: Although
there can be no assurances in this regard, the Company believes that as the
commercial real estate market in Southern California continues to improve, there
will be increasing demand for office space and declining vacancies which are
expected to

32
<PAGE>
result, over time, in increasing market rents. The Company believes it would
have significant opportunities to increase cash flow during such periods of
increasing market rents by renewing or re-leasing expiring leases at the
increased market rents.

(iv) COST CONTROL MANAGEMENT AND SYSTEMS: The Company seeks to lower
operating expenses by implementing cost control management that capitalizes on
economies of scale opportunities resulting from the size and location of the
Company's portfolio. The Company focuses on cost control in various areas of
operations. For example, the Company is seeking to significantly lower its
utility costs, which constitute over 25% of the operating costs of most of the
Properties, through the portfolio-wide installation of energy enhancement
technologies, which include lighting retrofit, replacement of heating,
ventilation and air conditioning systems, and computer-driven energy management
systems which monitor and react to the climatic requirements of individual
Properties. The energy enhancement program is expected to be implemented
throughout the Properties over the next six months.

(v) CAPITALIZING ON ECONOMIES OF SCALE: In order to capitalize on
economies of scale arising from the size of the Company's portfolio, the
Company's property and asset managers are responsible for several Properties,
which spreads administrative costs over such Properties and reduces per square
foot administrative expense. In addition, the Company believes that insurance
coverage, parking operations, building and other services and tenant
improvements purchased on a portfolio-wide basis will facilitate further
economies of scale savings.

(vi) REVENUE FROM PARKING FACILITIES: The Company owns or leases parking
facilities which are attached or adjacent to many of the Properties. The Company
currently provides free parking to tenants at six of the Properties as an
amenity and charges tenants at the remaining Properties at or below market rates
for parking. If the demand for Southern California office space increases and
occupancy rates rise, which the Company believes is the trend, the Company
believes that there may be opportunities to generate additional revenue from the
parking facilities associated with its Properties by charging for parking which
is currently provided for free, increasing below market rates and maintaining
its arrangements with a limited number of third-party operators of the Company's
parking facilities.

33
<PAGE>
USE OF PROCEEDS

The net proceeds to the Company from the Offering, after deducting the
estimated underwriting discounts and commissions and estimated expenses of the
Offering, are estimated to be approximately $347 million (approximately $400
million if the Underwriters' overallotment option is exercised in full),
assuming a public offering price of $20.00 per share. The net cash proceeds of
the Offering will be used by the Company as follows: approximately $26.8 million
for payments to certain Participants (not including Messrs. Ziman and Coleman
who will not receive any cash in the Formation Transactions) for their interests
in the Arden Predecessors and in certain of the Properties and the balance
(approximately $320.2 million) will be contributed to the Operating Partnership
in exchange for the Company's general partner interest therein. The Operating
Partnership will subsequently use the proceeds received from the Company along
with the net cash proceeds of approximately $103 million from the Mortgage
Financing borrowed concurrently with the Offering and approximately $19.3
million in restricted cash that will be available upon conclusion of the
Formation Transactions, as follows: approximately $398 million for repayment of
mortgage debt on the Properties (which was incurred to acquire the Properties)
and unsecured lines of credit and the related additional and accrued interest
thereon, approximately $35 million for payment of the purchase price for the
Acquisition Properties, and the remaining net proceeds will be used for tenant
improvements, capital expenditure reserves and working capital purposes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

If the Underwriters' overallotment option to purchase 2,827,000 shares of
Common Stock is exercised in full, the Company expects to use the additional net
proceeds (which will be approximately $52.6 million) to acquire additional
office properties and for working capital.

Pending application of net proceeds, the Company will invest such portion of
the net proceeds in interest-bearing accounts and short-term, interest-bearing
securities, which are consistent with the Company's intention to qualify for
taxation as a REIT.

The following table sets forth certain information regarding the debt to be
repaid upon completion of the Offering and the Mortgage Financing, which
consists primarily of mortgage or secured debt encumbering certain of the
Properties. The mortgages and other indebtedness to be repaid upon completion of
the Offering had a weighted average interest rate of approximately 8.541% before
consideration of additional interest and any lenders' participation and a
weighted average remaining term to maturity of approximately 2.86 years as of
June 30, 1996.

34
<PAGE>
MORTGAGE DEBT TO BE REPAID

<TABLE>
<CAPTION>
PRINCIPAL BALANCE
OF DEBT TO BE
REPAID UPON
CONSUMMATION
OF THE OFFERING
AND THE MORTGAGE
FINANCING (1)
-------------------
(IN THOUSANDS)
<S> <C>
PROPERTY
- ----------------------------------------------------------------------
9665 Wilshire......................................................... $ 30,716
Beverly Atrium........................................................ 15,631
Century Park Center................................................... 25,170
Westwood Terrace...................................................... 20,514
1950 Sawtelle......................................................... 10,200
400 Corporate Pointe.................................................. 21,885
Bristol Plaza......................................................... 5,200
Skyview Center........................................................ 40,242
The New Wilshire...................................................... 21,494
5601 Lindero Canyon................................................... 10,161
Calabasas Commerce Center............................................. 11,527
Woodland Hills Financial.............................................. 22,612
16000 Ventura Blvd.................................................... 17,151
425 West Broadway..................................................... 5,000
70 South Lake......................................................... 10,741
4811 Airport Plaza Drive.............................................. 14,261
4910 Airport Plaza Drive.............................................. (2)
5000 East Spring...................................................... 10,922
100 Broadway.......................................................... 20,250
5832 Bolsa............................................................ 4,618
Anaheim City Centre................................................... 9,880
Imperial Bank Tower................................................... 41,451
--------
Total............................................................. $369,626
--------
--------
</TABLE>

- ------------------------

(1) Exact repayment amounts may differ due to amortization. These figures are
estimated as of September 1, 1996 and exclude (a) accrued and additional
interest estimated to be approximately $25 million in the aggregate and (b)
$3.26 million under lines of credit to be assumed by the Operating
Partnership.

(2) Included in amount listed above for 4811 Airport Plaza Drive.

DISTRIBUTIONS

Subsequent to the Offering, the Company intends to make regular quarterly
distributions to the holders of its Common Stock. The Company intends to cause
the Operating Partnership initially to distribute annually approximately 94.5%
of estimated Cash Available for Distribution. The Company intends to pay a pro
rata distribution with respect to the period commencing on the closing of the
Offering and ending on December 31, 1996 based upon $0.40 per share for a full
quarter. On an annualized basis, this would be $1.60 per share (of which $0.21
may represent a return of capital for tax purposes), or an annual distribution
rate of approximately 8% based on the assumed initial public offering price per
share of $20.00. The Company does not intend to reduce the expected distribution
per share if the Underwriters' overallotment option is exercised. The following
discussion and the information set forth in the table and footnotes below should
be read in connection with the financial statements and notes thereto, the pro
forma financial information and notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" included elsewhere in this Prospectus.

35
<PAGE>
The Company's estimate of the Cash Available for Distribution after the
Offering is based upon pro forma Funds from Operations for the 12 months ended
June 30, 1996, with certain adjustments based on the items described below. To
estimate Cash Available for Distribution for the 12 months ended July 31, 1997,
pro forma Funds from Operations for the 12 months ended June 30, 1996 was
adjusted (a) without giving effect to any changes in working capital resulting
from changes in current assets and current liabilities (which changes are not
anticipated to be material) or the amount of cash estimated to be used for (i)
investing activities for development, acquisition and other activities (other
than a reserve for capital expenditures and tenant improvements for renewing
space) and (ii) financing activities, (b) for certain known events and/or
contractual commitments that either occurred subsequent to June 30, 1996 or
during the 12 months ended June 30, 1996 but were not effective for the full 12
months and (c) for certain non-GAAP adjustments consisting of (i) revising
historical rent estimates from a GAAP basis to amounts currently being paid or
due from tenants and (ii) an estimate of amounts anticipated for recurring
tenant improvements, leasing commissions and capital expenditures. The estimate
of Cash Available for Distribution is being made solely for the purpose of
setting the initial distribution and is not intended to be a projection or
forecast of the Company's results of operations or its liquidity, nor is the
methodology upon which such adjustments were made necessarily intended to be a
basis for determining future distributions. Future distributions by the Company
will be at the discretion of the Board of Directors. There can be no assurance
that any distributions will be made or that the estimated level of distributions
will be maintained by the Company.

The Company anticipates that its distributions will exceed earnings and
profits for income tax reporting purposes due to non-cash expenses, primarily
depreciation and amortization, to be incurred by the Company. Therefore,
approximately 12.98% (or $0.21 per share) of the distributions anticipated to be
paid by the Company for the first 12 months subsequent to the Offering are
expected to represent a return of capital for federal income tax purposes and in
such event will not be subject to federal income tax under current law to the
extent such distributions do not exceed a stockholder's basis in his or her
Common Stock. The nontaxable distributions will reduce the stockholder's tax
basis in the Common Stock and, therefore, the gain (or loss) recognized on the
sale of such Common Stock or upon liquidation of the Company will be increased
(or decreased) accordingly. The percentage of stockholder distributions that
represents a nontaxable return of capital may vary substantially from year to
year.

Federal income tax law requires that a REIT distribute annually at least 95%
of its REIT taxable income. See "Federal Income Tax Considerations -- Taxation
of the Company." The amount of distributions on an annual basis necessary to
maintain the Company's REIT status based on pro forma taxable income of the
Operating Partnership for the 12 months ended June 30, 1996 as adjusted for
certain items in the following table would have been approximately $28.8
million. The estimated Cash Available for Distribution is anticipated to be in
excess of the annual distribution requirements applicable to REITs. Under
certain circumstances, the Company may be required to make distributions in
excess of Cash Available for Distribution in order to meet such distribution
requirements. For a discussion of the tax treatment of distributions to holders
of Common Stock see "Federal Income Tax Considerations."

The Company believes that its estimate of Cash Available for Distribution
constitutes a reasonable basis for setting the initial distribution, and the
Company expects to maintain its initial distribution rate for the 12 months
subsequent to the Offering unless actual results of operations, economic
conditions or other factors differ from the assumptions used in the estimate.
The Company's actual results of operations will be affected by a number of
factors, including the revenue received from the Properties, the operating
expenses of the Company, interest expense, the ability of tenants of the
Properties to meet their obligations and unanticipated capital expenditures.
Variations in the net proceeds from the Offering as a result of a change in the
initial public offering price or the exercise of the Underwriters' overallotment
option may affect the Cash Available for Distribution and the payout ratio of
Cash Available For Distribution and available reserves. No assurance can be
given that the Company's estimate will prove accurate. Actual results may vary
substantially from the estimate.

36
<PAGE>
The following table describes the calculation of pro forma Funds from
Operations for the 12 months ended June 30, 1996 and the adjustments to pro
forma Funds from Operations for the 12 months ended June 30, 1996 in estimating
initial Cash Available for Distribution for the 12 months ended July 31, 1997
(amounts in thousands except share data, per share data, square footage data and
percentages):

<TABLE>
<S> <C>
Pro forma income before minority interests for the year ended December
31, 1995............................................................ $25,775
Pro forma income before minority interests for the six months ended
June 30, 1995....................................................... (12,810)
Pro forma income before minority interests for the six months ended
June 30, 1996....................................................... 14,781
-------
Pro forma income before minority interests for the 12 months ended
June 30, 1996....................................................... 27,746
Plus pro forma real estate depreciation for the 12 months ended
June 30, 1996 (1)................................................... 10,461
Plus pro forma amortization of leasing commissions and tenant
improvements for the 12 months ended June 30, 1996 (2).............. 1,053
-------
Pro forma Funds from Operations for the 12 months ended June 30,
1996................................................................ 39,260

Adjustments:
Provision for assumed expiring leases (3)........................... (1,110)
Incremental pro forma lease adjustment (4).......................... 3,554
Net increase in tenant reimbursements (5)........................... 691
Net decrease in property operating expenses (6)..................... 1,914
Contractual net decreases in parking income and other income (7).... (1,425)
-------
Estimated pro forma Funds from Operations for the 12 months ended July
31, 1997............................................................ 42,884
Net effect of straight lining of rents (8).......................... (2,129)
Estimated recurring non-revenue enhancing tenant improvements and
leasing commissions (9)............................................ (3,217)
Estimated recurring non-revenue enhancing capital expenditures
(10)............................................................... (727)
-------
Total estimated Cash Available for Distribution for the 12 months
ended July 31, 1997................................................. $36,811
Total estimated cash distributions.................................... $34,786
Less: Minority interests' share of estimated Cash Available for
Distribution........................................................ 4,627
-------
Estimated cash distributions to stockholders of the Company (11)...... $30,159
Estimated initial cash distribution per share (12).................... $ 1.60
Estimated Cash Available for Distribution payout ratio (13)........... 94.5%
</TABLE>

- ------------------------

(1) Pro forma depreciation for the year ended December 31, 1995 of $10,866 plus
pro forma depreciation for the six months ended June 30, 1996 of $5,021
minus pro forma depreciation for the six months ended June 30, 1995 of
$5,426.

(2) Pro forma amortization of leasing commissions and tenant improvements for
the year ended December 31, 1995 of $683 plus pro forma amortization of
leasing commissions and tenant improvements for the six months ended June
30, 1996 of $753 minus pro forma amortization of leasing commissions and
tenant improvements for the three months ended June 30, 1995 of $383.

(3) The provision for assumed expiring leases represents adjustments for a
possible reduction in occupancy and in rental rates and consists of (i) a
reduction of $763 which represents 30% of the rent payable under all leases
expiring from August 16, 1996 through July 31, 1997 assuming that 30% of
such expiring leases will not be renewed (and for the period that such
leases will not generate rent during the 12 months ended July 31, 1997) and
(ii) a reduction of $347 for the 70% of leases assumed to be renewed between
August 16, 1996 and July 31, 1997 assuming that such leases renew at the
lower of the contractual rental rate of the lease at the time of its
expiration or the Company's analysis of the market rate. The Company's
historical renewal rate, based on square footage, from inception through
August 1, 1996 is 82%. The following table sets forth the total effect on
Funds from Operations and Cash

37
<PAGE>

Available for Distribution (including the incremental difference) and the
Estimated Cash Available for Distribution payout ratio that would be
expected to result for the period between August 16, 1996 and July 31, 1997
if renewal rates are between 60% and 0%, rather than 70% as assumed in the
table above.

<TABLE>
<CAPTION>
ESTIMATED CASH
AVAILABLE FOR
DISTRIBUTION
RENEWAL PERCENTAGE PAYOUT RATIO
- ----------------------- TOTAL EFFECT ON DIFFERENCE -----------------
FUNDS FROM FROM 70%
OPERATIONS AND RENEWAL
CASH AVAILABLE ASSUMPTION
FOR DISTRIBUTION --------------
----------------- (IN THOUSANDS)
(IN THOUSANDS)
<S> <C> <C> <C>
60% $ (1,315) $ (205) 95.0%
40% $ (1,724) $ (614) 96.1%
20% $ (2,134) $ (1,024) 97.2%
0% $ (2,543) $ (1,433) 98.3%
</TABLE>

(4) Reflects rental increases and decreases from 1995 and 1996 completed leasing
transactions relating to the Properties and consists of (i) a net increase
of $2,726 representing additional minimum rent from new leases and renewals
executed between June 30, 1996 and August 16, 1996 to the extent such leases
generate additional minimum rents for the 12 months ended July 31, 1997,
(ii) a decrease of $137 representing the decrease in rental revenue for
leases that expired between June 30, 1996 and August 16, 1996 to the extent
such leases generated rent for the 12 months ended June 30, 1996 and (iii) a
net amount of $965 representing the full year minimum rent in effect for
existing leases on which rent is only partially reflected in the historical
financial statements of the Arden Predecessors for the 12 months ended June
30, 1996 and the decrease in rental revenue for leases expired during the 12
months ended June 30, 1996 to the extent rental revenue was included in
rental revenue for the 12 months ended June 30, 1996.

(5) Represents (i) a $722 contractual increase in tenant reimbursements
attributable to leases executed prior to June 30, 1996 based upon the
estimated expenses to be reimbursed by the tenants for the 12 months ended
July 31, 1997 in excess of the estimated base year amounts, and (ii) a $31
decrease in tenant reimbursements due to the reassessment of property taxes
and changes in insurance and property operating costs.

(6) Represents the estimated net decrease in operating expenses based on (i) an
increase of $267 resulting from the net increase in the occupancy of space
for leases signed during the 12 months ended June 30, 1996, and between June
30, 1996 and August 16, 1996, offset by the decrease in occupancy from
actual lease terminations through June 30, 1996 and for the provision for
expiring leases (See (3) above) as if such increases and decreases were in
effect for the full 12 months ended July 31, 1997, and (ii) a decrease in
property operating costs of $2,181 due to the reassessment of property taxes
and reduction of insurance costs based on current arrangements.

(7) Represents net additional parking revenue of $12 to be received for the 12
months ended July 31, 1997, relating to leases signed subsequent to June 30,
1996 and the increase in management fee revenue of $51 for the 12 months
ending July 31, 1997 relating to three third-party property management
contracts pursuant to which the Company began receiving fees subsequent to
June 30, 1996. The Company believes that it can manage the additional
properties with its existing resources and, accordingly, there will be no
additional increase in its operating expenses attributable to these new
contracts. The management contracts are terminable upon 15 to 60 days'
notice although the Company is not aware of any intention to cancel any of
these management contracts. Also included in this amount is the reduction in
other income of $1,488 to eliminate non-recurring construction and property
management fees which would not have been realized by the Company as a REIT.

(8) Represents the effect of adjusting straight-line rental revenue included in
pro forma net income for the 12 months ended July 31, 1997 from the
straight-line accrual basis to amounts currently being paid or due from
tenants. Following is a table which shows the adjustments to straight-line
revenue for 1997-2001 related to leases in place at August 1, 1996.

38
<PAGE>
(9) Reflects non-revenue enhancing tenant improvements ("TI") and leasing
commissions ("LC") for the Properties for the 12 months ended July 31, 1997
based on the weighted average TI and LC expenditures per square foot for
renewed and re-tenanted space at the Properties since 1993 multiplied by the
average annual square feet of leased space for which leases expire during
the five year period ending December 31, 2001 (400,000 square feet).

<TABLE>
<CAPTION>
JANUARY
1-
YEAR ENDED DECEMBER 31, AUGUST
----------------------- 1, WEIGHTED
1993 1994 1995(I) 1996 AVERAGE
----- ----- ------ ------ ------
<S> <C> <C> <C> <C> <C>
RENEWAL
TI per square foot................................ $3.58 $2.23 $ 4.67 $5.46 $4.19
LC per square foot................................ $ .09 $3.44 $ 1.11 $2.38 $2.37
----- ----- ------ ------ ------
Total TI and LC per square foot............... $3.67 $5.67 $ 5.78 $7.84 $6.56
----- ----- ------ ------ ------
----- ----- ------ ------ ------
RE-TENANTED (ii)
TI per square foot................................ $2.22 $9.04 $ 9.82 $7.04 $8.38
LC per square foot................................ $ .31 $2.72 $ 3.05 $3.66 $3.12
----- ----- ------ ------ ------
Total TI and LC per square foot............... $2.53 $11.76 $12.87 $10.70 $11.50
----- ----- ------ ------ ------
----- ----- ------ ------ ------
</TABLE>

---------------------
(i) Excludes tenant improvement and leasing commission costs relating to
one lease signed at Anaheim City Centre for which the Company
incurred substantial renovation costs in connection with a full floor
retrofit. Tenant improvement costs for all leases renewed in 1995
equaled $8.05 per square foot.

(ii) Does not include shell space build out for 187,703 square feet.
Shell space remaining at the Properties is less than 2% of the
aggregate rentable square footage of the Properties.

<TABLE>
<CAPTION>
THREE YEAR AVERAGE ANNUAL
WEIGHTED SQUARE FOOTAGE RATE OF
AVERAGE TI AND EXPIRING IN RENEWALS/ TOTAL
LC PER SQUARE FOOT 1997-2001 RE-TENANTED COST
------------------ --------------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Renewal................................. $ 6.56 x 400,000 x 70%(i) = $ 1,837
Re-tenanted............................. $11.50 x 400,000 x 30% = 1,380
----------
$ 3,217
----------
----------
</TABLE>

---------------------
(i) The historical weighted average renewal rate for the Company from
January 1, 1993 is 82%.

(10) The reserve for recurring non-revenue enhancing capital expenditures for
the 12 months ended July 31, 1997 was based upon an annual cost per square
foot of $.18. The Company has calculated this reserve based upon its
estimates of replacement or renovation costs and actual lives of: parking
lots, roofs, heating, ventilation and air conditioning systems, elevators
and mechanical systems, lobbies, restrooms and corridors.

(11) The Company's share of estimated cash distributions is based on its
approximately 86.71% ownership of the aggregate equity capitalization of the
Operating Partnership.

(12) Based on a total of 18,852,500 shares to be outstanding following
consummation of the Offering. The Company estimates that approximately
12.98% of the estimated cash distributions for the 12 months ended July 31,
1997 will represent a return of capital for federal income tax purposes.

(13) Calculated as the total estimated cash distributions divided by the total
estimated Cash Available for Distribution for the 12 months ended July 31,
1997. The payout ratio of estimated pro forma Funds from Operations equals
81.1%.

39
<PAGE>
CAPITALIZATION

The following table sets forth the combined historical capitalization of the
Arden Predecessors and the pro forma combined capitalization of the Company as
of June 30, 1996, as adjusted to give effect to the Formation Transactions, the
Offering and use of the net proceeds from the Offering and from the concurrent
Mortgage Financing as set forth under "Use of Proceeds." The information set
forth in the table should be read in connection with the financial statements
and notes thereto, the pro forma financial information and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------
PRO FORMA
COMBINED AS
HISTORICAL ADJUSTED
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Mortgage Loans (1).................................................. $263,492 $104,000
Line of Credit...................................................... 2,467 --
Minority interests in Operating Partnership........................... 718 43,231
Stockholders' equity:
Preferred Stock, $.01 par value, 20,000,000 shares authorized; none
issued and outstanding............................................. -- --
Common Stock, $.01 par value; 100,000,000 shares authorized;
18,852,500 issued and outstanding (2).............................. -- 189
Additional Paid-in Capital.......................................... -- 281,693
Owners' Equity...................................................... 7,530 --
-------- ---------
Total Owners'/Stockholders' Equity................................ 7,530 281,882
-------- ---------
Total Capitalization............................................ $274,207 $429,113
-------- ---------
-------- ---------
</TABLE>

- ------------------------
(1) See note 4 of the notes to the combined financial statements of the Arden
Predecessors for information relating to the indebtedness.

(2) Includes shares of Common Stock to be issued in the Offering and 5,000
shares issued to employees of the Company as a stock bonus. See "Management
-- Executive Compensation." Does not include (i) 2,889,071 shares of Common
Stock that may be issued upon the exchange of OP Units issued in connection
with the Formation Transactions, (ii) 2,827,000 shares of Common Stock
subject to the Underwriters' overallotment option or (iii) 868,500 shares of
Common Stock subject to options granted under the Company's Stock Incentive
Plan.

40
<PAGE>
DILUTION

At June 30, 1996, the Company had a net tangible book value of approximately
$6.6 million. After giving effect to (i) the sale of the shares of Common Stock
offered hereby (at an assumed initial public offering price of $20.00 per share)
and the receipt by the Company of approximately $347 million in net proceeds
from the Offering, after deducting underwriting discounts and commissions and
estimated Offering expenses, (ii) the repayment of approximately $398 million of
indebtedness under mortgage debt and unsecured lines of credit (including
approximately $25 million of accrued, deferred and additional interest, of which
approximately $17.9 million was not accrued as of June 30, 1996 on the combined
balance sheet of the Arden Predecessors), the pro forma net tangible book value
at June 30, 1996 would have been $321 million, or $14.76 per share of Common
Stock. This amount represents an immediate increase in net tangible book value
of $12.48 per share to the existing holders of OP Units and an immediate
dilution in pro forma net tangible book value of $2.28 per share of Common Stock
to new investors. The following table illustrates this dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share....................... $20.00
Net tangible book value per share prior to the Offering (1)......... $2.28
Increase in net tangible book value per share attributable to the
Offering (2)....................................................... $12.48
Pro forma net tangible book value after the Offering (3).............. $14.76
------
Dilution in net tangible book value per share of Common Stock to new
investors (4)....................................................... $ 5.24
------
------
</TABLE>

- ------------------------
(1) Net tangible book value per share prior to the Offering is determined by
dividing net tangible book value of the Company (based on the June 30, 1996
net book value of the assets less net book value of prepaid financing and
leasing costs to be contributed in connection with the Formation
Transactions, net of liabilities to be assumed) by the number of shares of
Common Stock issuable upon the exchange of all OP Units to be issued to the
Participants in connection with the Formation Transactions.
(2) Based on an assumed initial public offering price of $20.00 per share of
Common Stock and after deducting Underwriters' discounts and commissions and
estimated Offering expenses.
(3) Based on total pro forma net tangible book value of $321 million divided by
the total number of shares of Common Stock. There is no impact on dilution
attributable to the issuance of Common Stock in exchange for OP Units to be
issued to the Participants since such OP Units would be exchanged for Common
Stock on a one-for-one basis.
(4) Dilution is determined by subtracting net tangible book value per share of
Common Stock after the Offering from the assumed initial public offering
price for a share of Common Stock.

The following table summarizes, on a pro forma basis giving effect to the
Offering and the Formation Transactions, the number of shares of Common Stock to
be sold by the Company in the Offering and the number of OP Units to be issued
to the Participants in connection with the Formation Transactions, the net
tangible book value as of June 30, 1996 of the assets contributed in the
Formation Transactions and the net tangible book value of the average
contribution per share based on total contributions.

<TABLE>
<CAPTION>
COMMON SHARES/ BOOK VALUE OF BOOK VALUE OF
OP UNITS ISSUED CONTRIBUTIONS AVG.
--------------- ----------------- CONTRIBUTION
SHARES PERCENT $ PERCENT PER SHARE/UNIT
------ ------- -------- ------- --------------
(IN THOUSANDS EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C>
New investors in the Offering......................................... 18,848 86.69% $376,950 98.28% $20.00(3)
OP Units and Common Shares issued to Continuing Investors (1)......... 2,894 13.31% $ 6,589(2) 1.72% $ 2.28
------ ------- -------- -------
Total............................................................... 21,742 100.00% $383,539 100.00%
------ ------- -------- -------
------ ------- -------- -------
</TABLE>

- ------------------------
(1) Common Shares represents 5,000 shares to be issued upon completion of the
Offering as a Common Stock Bonus to two officers of the Company.
(2) Based on the June 30, 1996 net book value of the assets less net book value
of prepaid financing and leasing costs to be contributed in connection with
the Formation Transactions, net of liabilities to be assumed.
(3) Before deducting underwriting discounts and commissions and estimated
expenses of the Offering.

41
<PAGE>
SELECTED COMBINED FINANCIAL DATA

The unaudited pro forma financial and operating information for the six
months ended June 30, 1996 and the year ended December 31, 1995 is presented as
if the Offering, the Formation Transactions (including the purchase of the
Acquisition Properties), and the acquisitions of the 1996 Acquired Properties
and the 1995 Acquired Properties had all occurred by June 30, 1996 for the
combined balance sheet and at the beginning of the period presented for the
combined statements of operations. The pro forma balance sheet information also
gives effect to the recording of minority interest for OP Units, as if these
transactions occurred on June 30, 1996. The pro forma financial information is
not necessarily indicative of what the actual financial position or results of
the Company would have been as of and for the periods indicated, nor does it
purport to represent the Company's future financial position or results of
operations.

42
<PAGE>
THE COMPANY (PRO FORMA) AND
ARDEN PREDECESSORS (COMBINED HISTORICAL)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------
COMBINED
PRO FORMA HISTORICAL
--------- ------------------
1996 1996 1995
--------- -------- --------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
OPERATING DATA:
Revenue:
Rental.................................. $33,493 $ 19,404 $ 2,822
Tenant reimbursements................... 2,049 1,425 177
Parking................................. 3,090 2,121 220
Other................................... 2,005 1,521 649
--------- -------- --------
Total revenue......................... 40,637 24,471 3,868
EXPENSES:
Property operating expenses............. 14,124 8,252 934
General and administrative expenses..... 1,900 830 684
Depreciation and amortization........... 5,774 3,036 638
Interest expense........................ 4,058 14,741 1,403
--------- -------- --------
Total Expenses........................ 25,856 26,859 3,659
--------- -------- --------
Equity in net income (loss) of noncombined
entities................................ -- (94) 108
--------- -------- --------
Income (loss) before minority interests... 14,781 (2,482) 317
Minority interests........................ (1,964) 344 (7)
--------- -------- --------
Net income (loss)......................... $12,817 $ (2,138) $ 310
--------- -------- --------
--------- -------- --------
Net income per common share............... $ .68
---------
---------

OPERATING DATA:
Revenue:
Rental.................................. $66,691 $ 8,832 $ 5,157 $ 3,034 $-- $--
Tenant reimbursements................... 2,910 403 217 35 -- --
Parking................................. 5,895 750 382 279 -- --
Other................................... 3,795 1,707 796 314 324 11
--------- --------- -------- -------- ----- -----
Total revenue......................... 79,291 11,692 6,552 3,662 324 11
EXPENSES:
Property operating expenses............. 30,091 3,339 2,191 1,480 -- --
General and administrative expenses..... 3,800 1,377 689 386 471 7
Depreciation and amortization........... 11,549 1,898 1,143 646 2 --
Interest expense........................ 8,076 5,537 1,673 499 9 --
--------- --------- -------- -------- ----- -----
Total Expenses........................ 53,516 12,151 5,696 3,011 482 7
--------- --------- -------- -------- ----- -----
Equity in net income (loss) of noncombined
entities................................ -- (116) 201 4 -- --
--------- --------- -------- -------- ----- -----
Income (loss) before minority interests... 25,775 (575) 1,057 655 (158) 4
Minority interests........................ (3,425) (1) 1 -- -- --
--------- --------- -------- -------- ----- -----
Net income (loss)......................... $22,350 $ (576) $ 1,058 $ 655 $(158) $4
--------- --------- -------- -------- ----- -----
--------- --------- -------- -------- ----- -----
Net income per common share............... $ 1.19
---------
---------
</TABLE>

43
<PAGE>
THE COMPANY (PRO FORMA) AND
ARDEN PREDECESSORS (COMBINED HISTORICAL)

<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
------------------------------
COMBINED
PRO FORMA HISTORICAL
--------- ------------------
1996 1996 1995
--------- -------- --------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER
SHARE DATA, PERCENTAGES AND
NUMBER OF PROPERTIES)
OTHER DATA:
Funds from Operations (1):
Income (loss) before minority
interests.............................. $14,781 $ (2,482) $ 317
Depreciation and amortization........... 5,774 3,036 638
--------- -------- --------
Funds from Operations................. 20,555 554 955
Company's Share Percentage................ 86.69%
Company's Share of Funds from
Operations.............................. 17,819 554 955
--------- -------- --------
Cash flows from operating activities...... -- 2,013 458
Cash flows from investing activities...... -- (96,827) (5,578)
Cash flows from financing activities...... -- 94,937 4,550
Number of Properties owned at period
end..................................... 24 21 10
Gross rentable square feet of Properties
owned at period end..................... 4,036 3,547 1,408
Occupancy at period end of Properties
owned at period end..................... -- % 89% 84%

OTHER DATA:
Funds from Operations (1):
Income (loss) before minority
interests.............................. $25,775 $ (575) $ 1,057 $ 655 $(158) $4
Depreciation and amortization........... 11,549 1,898 1,143 646 2 --
--------- --------- -------- -------- ----- -----
Funds from Operations................. 37,324 1,323 2,200 1,301 (156) 4
Company's Share Percentage................
Company's Share of Funds from
Operations.............................. 32,356 1,323 2,200 1,301 (156) 4
--------- --------- -------- -------- ----- -----
Cash flows from operating activities...... -- 2,830 834 1,186 (258) 7
Cash flows from investing activities...... -- (123,358) (17,921) (25,965) -- --
Cash flows from financing activities...... -- 120,707 16,845 25,632 250 1
Number of Properties owned at period
end..................................... 24 17 8 3 -- --
Gross rentable square feet of Properties
owned at period end..................... 4,036 2,634 1,130 530 -- --
Occupancy at period end of Properties
owned at period end..................... -- % 88% 82% 84% -- --
</TABLE>

44
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The following discussion should be read in conjunction with Selected
Financial Data and the financial statements appearing elsewhere in this
Prospectus. Where appropriate, the following discussion includes analysis of the
effects of the Formation Transactions and the Offering, including the Mortgage
Financing and the purchase of the Acquisition Properties. These effects are
reflected in the pro forma condensed combined financial statements located
elsewhere in this Prospectus.

The Company receives income primarily from rental revenue (including tenant
reimbursements) and parking revenue from commercial office properties, and to a
lesser extent, from the management of certain properties owned by third parties.
The Company has acquired its current portfolio over the last three years, with
approximately 16% of the Properties (as a percentage of pro forma rental revenue
for the six months ended June 30, 1996) acquired in calendar year 1993,
approximately 13% of the Properties acquired in 1994, approximately 39% acquired
in 1995, and the balance (32%) acquired as of June 30, 1996. As a result of the
Company's aggressive acquisition program, the financial data shows significant
increases in total revenue from year to year, largely attributable to the
acquisitions during each such year and the benefit of a full period of effective
rental and other revenue for Properties acquired in the preceding year. For the
foregoing reasons, the Company does not believe its year to year and quarter to
quarter financial data are comparable.

The Company expects that the more significant part of its revenue growth in
the next one to two years will come from additional acquisitions and contractual
rent increases rather than from occupancy and market rent increases in its
current portfolio. On the other hand, the Company believes that if the Southern
California office rental market continues to improve, then rental rate increases
will become a more substantial part of its revenue growth over time. See
"Business and Growth Strategies -- Growth Strategies."

RESULTS OF OPERATIONS

COMPARISON OF SIX MONTHS ENDED JUNE 30, 1996 TO SIX MONTHS ENDED JUNE 30,
1995. During the first half of 1996, the Arden Predecessors purchased four
Properties resulting in an increase in real estate investments of approximately
$95 million.

Rental revenue increased by $16.6 million or 588% for the six months ended
June 30, 1996 compared to the six months ended June 30, 1995. The increase in
rental revenue resulted principally from a full six months of rental revenue
from Properties acquired during calendar year 1995, six of which were acquired
after June 30, 1995, and rental revenue from Properties acquired during the six
months ended June 30, 1996. Rental revenue from the calendar year 1995 acquired
Properties increased to $10.0 million for the six months ended June 30, 1996,
representing a full six months of rental revenue, from $83,000 in the prior
period. Rental revenue associated with the 1996 acquired Properties added an
additional approximately $6.7 million to rental revenue during the six months
ended June 30, 1996.

Tenant reimbursements and other revenue increased by $2.1 million or 257%
for the six months ended June 30, 1996 compared to the six months ended June 30,
1995. The increase in tenant reimbursements and other revenue resulted
principally from a full six months of tenant reimbursements from Properties
acquired during calendar year 1995 and tenant reimbursements from Properties
acquired during the six months ended June 30, 1996. Tenant reimbursements from
the calendar year 1995 acquired Properties added an additional $745,000 for the
six months ended June 30, 1996, representing a full six months of tenant
reimbursements. Tenant reimbursements associated with the 1996 acquired
Properties added an additional $457,000 to revenue during the six months ended
June 30, 1996. Other revenue, representing primarily management fees from
third-party owned properties, increased by 134% for the six months ended June
30, 1996 compared to the prior period.

Parking revenue increased by $1.9 million or 864% for the six months ended
June 30, 1996 compared to the six months ended June 30, 1995. The increase
resulted principally from a full six months of parking revenue from Properties
acquired during calendar year 1995 and parking revenue from Properties acquired
during the six months ended June 30, 1996. Parking revenue from the calendar
year 1995 acquisition

45
<PAGE>
Properties increased to $1.3 million for the six months ended June 30, 1996,
representing a full six months of parking revenue, from $0 in the prior period.
Parking revenue associated with the 1996 acquired Properties added an additional
$597,000 to parking revenue during the six months ended June 30, 1996.

The Arden Predecessors hold noncontrolling investments in various entities,
the noncombined entities, which own commercial office properties. These entities
are accounted for in the financial statements of the Arden Predecessors using
the equity method. Equity in net income of noncombined entities decreased by
$202,000 for the six months ended June 30, 1996 compared to the six months ended
June 30, 1995. This 215% decrease is due principally to significant large
tenants vacating space in the first quarter of 1996 at two of the properties.

The following is a comparison of certain expenses of the Arden Predecessors
for the six months ended June 30, 1996 to the six months ended June 30, 1995:

<TABLE>
<CAPTION>
DOLLAR PERCENT
JUNE 30, 1996 JUNE 30, 1995 CHANGE CHANGE
------------- --------------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Certain Expenses
Property operating and maintenance......... $ 4,998 $ 754 $ 4,244 563%
Real estate taxes.......................... 1,291 138 1,153 836%
Insurance.................................. 1,503 42 1,461 3,479%
Ground rent................................ 460 -- 460 --
------ ----- --------- -----
Total certain expenses................... $ 8,252 $ 934 $ 7,318 784%
------ ----- --------- -----
------ ----- --------- -----
</TABLE>

For the six months ended June 30, 1996 and 1995, total certain expenses were
$8.3 million, or 40% of rental revenue and tenant reimbursements, and $934,000,
or 31% of rental revenue and tenant reimbursements, respectively. The increase
in total certain expenses is primarily attributable to the Properties acquired
during calendar year 1995 and during the six months ended June 30, 1996 and the
expenses associated with the absorption of vacant rentable space. The increase
in total certain expenses from the six months ended June 30, 1995 to the six
months ended June 30, 1996 resulting from the acquisition of Properties during
the six months ended June 30, 1996 was approximately $3.1 million. In addition,
total certain expenses increased by $4.2 million as a result of a full six
months of operations for the Properties acquired in 1995, and the
above-described increase in occupancy at the Properties owned at both June 30,
1996 and 1995. Total certain expenses related to Properties owned by the Company
for the entire six months ended June 30, 1995 and 1996 decreased 4.2% or
$20,000.

General and administrative expenses increased by $146,000 or 21% for the six
months ended June 30, 1996 compared to the six months ended June 30, 1995.
However, general and administrative expenses during the 1996 period fell to 3.4%
of total revenue compared to 17.7% of total revenue during the 1995 period due
to the economies of scale associated with adding additional properties. The
Company believes that because it will not need to hire significant new staff to
manage its current portfolio and to acquire new properties, general and
administrative expenses as a percentage of total revenue should continue to
fall.

Interest expense includes interest at the contractual current pay rate of
the mortgage loans, amortization of the loan fees paid at origination, and
accrual of additional interest due upon the retirement of the debt. Interest
expense for the six months ended June 30, 1996 was approximately $14.7 million,
including interest payable upon the retirement of certain mortgage loans.
Interest expense increased by approximately $13.3 million or 951% for the six
months ended June 30, 1996 compared to the six months ended June 30, 1995,
primarily as a result of the increase in mortgage loans payable to fund the
calendar year 1995 acquisitions and the acquisitions that occurred during the
six months ended June 30, 1996. The interest expense associated with the
mortgage loans originated during the six months ended June 30, 1996 was
approximately $4.7 million. In addition, the six months ended June 30, 1996
included a full six months of interest expense for Properties acquired during
calendar year 1995, which increased interest expense by approximately $8.5
million.

46
<PAGE>
Depreciation and amortization increased by $2.4 million or 376% primarily
due to the calendar year 1995 acquisitions and the acquisitions during the six
months ended June 30, 1996.

As a result of the foregoing, the Company had a net loss of $2.1 million for
the six months ended June 30, 1996 compared to net income of $310,000 for the
prior period.

The following is a comparison of property operating data for the Properties
("Same Store Properties") that were owned for the entire six months ended June
30, 1995 and June 30, 1996:

<TABLE>
<CAPTION>
JUNE 30, 1996 JUNE 30, 1995
-------------- --------------
<S> <C> <C>
Revenue:
Rental.............................................................. $2,713,000 $2,739,000
Tenant reimbursements............................................... 224,000 176,000
Parking............................................................. 246,000 220,000
Other............................................................... 87,000 26,000
-------------- --------------
Total revenue..................................................... $3,270,000 $3,161,000
-------------- --------------
-------------- --------------

Expenses:
Property operating, taxes, insurance and ground rent................ $ 900,000 $ 919,000
-------------- --------------
-------------- --------------
</TABLE>

Rental revenues decreased during the six months ended June 30, 1996 compared
to the same period in 1995 due primarily to a net decrease in rental rate for
leases that renewed or were retenanted. For the six months ended June 30, 1996,
tenant reimbursements and other income increased by $109,000 over the same
period in 1995. In addition, operating expenses including taxes, insurance,
ground rent for these Same Store Properties decreased by $19,000 for the six
months ended June 30, 1996 over the same period in the prior year due to the
economies of scale that the Company achieved by owning a larger portfolio of
properties and the reassessment of property taxes. The Company was able to
obtain certain discounts by utilizing its greater purchasing power.

COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31,
1994. During 1995, the Arden Predecessors purchased seven Properties resulting
in an increase in real estate investments of approximately $126 million.

Rental revenue increased by $3.7 million or 71% for the year ended December
31, 1995 compared to the year ended December 31, 1994. The increase in rental
revenue resulted principally from a full year of rental revenue from the
property acquired in 1994 and partial year rental revenue from Properties
acquired in 1995. Rental revenue from the 1994 acquisition property increased to
$1.2 million for the year ended December 31, 1995, representing a full year of
rental revenue, from $977,000 for such property in the prior year. Rental
revenue associated with the 1995 acquisition Properties added an additional
approximately $3.2 million to rental revenue in 1995.

Tenant reimbursements and other revenue increased by $1.1 million or 108%
for the year ended December 31, 1995 compared to the year ended December 31,
1994. Other revenue increased by $911,000, primarily representing management
fees from third party-owned properties. The increase in tenant reimbursements
and other revenue resulted principally from a full year of tenant reimbursements
from the property acquired during 1994 and partial year tenant reimbursements
from Properties acquired during the year ended December 31, 1995 as well as the
addition of one new third party property management agreement during 1995.
Tenant reimbursements from the calendar year 1994 acquisition property increased
to $239,000 for the year ended December 31, 1995, representing a full year of
tenant reimbursements, from $182,000 in the prior year. Tenant reimbursements
associated with the 1995 acquisition Properties added an additional
approximately $150,000 to tenant reimbursements during the year ended December
31, 1995.

Parking revenue increased by $368,000 or 96% for the year ended December 31,
1995 compared to the year ended December 31, 1994. The increase resulted
principally from a full year of parking revenue from

47
<PAGE>
the property acquired during calendar year 1994 and partial year parking revenue
from Properties acquired during the year ended December 31, 1995. Parking
revenue associated with the 1995 acquisition properties, added an additional
$319,000 to parking revenue during the year ended December 31, 1995.

At December 31, 1994 the Arden Predecessors held noncontrolling investments
in various entities, the noncombined entities, which own commercial office
properties. During 1995, the Arden Predecessors made an investment in an
additional entity which owns commercial office properties. These entities are
accounted for in the financial statements of the Arden Predecessors using the
equity method. Equity in net income of noncombined entities decreased by
$317,000 for the year ended December 31, 1995 compared to the year ended
December 31, 1994. This 273% decrease is due principally to significant tenant
losses in the 1995 investment.

The following is a comparison of certain expense of the Arden Predecessors
for the year ended December 31, 1995 to the year ended December 31, 1994:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DOLLAR PERCENT
1995 1994 CHANGE CHANGE
------------- ------------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Certain Expenses
Property operating and maintenance......... $ 2,539 $ 1,869 $ 670 36%
Real estate taxes.......................... 502 272 230 85%
Insurance.................................. 279 50 229 458%
Ground rent................................ 19 -- 19 --
------ ------ --------- ---
Total certain expenses................... $ 3,339 $ 2,191 $ 1,148 52%
------ ------ --------- ---
------ ------ --------- ---
</TABLE>

Total certain expenses were $3.3 million, or 36% of rental revenue and
tenant reimbursements, and $2.2 million, or 41% of rental revenue and tenant
reimbursements, for the years ended December 31, 1995 and December 31, 1994,
respectively. The increase in total certain expenses is primarily attributable
to a full year of operations for the 1994 acquisition property, the partial year
of operations for the 1995 Acquisition Properties and the expenses associated
with the absorption of vacant rentable space across the portfolio. The increase
in total certain expenses from 1994 to 1995 resulting from the 1995 acquisitions
was approximately $1.4 million. In addition, total certain expenses increased by
$1.9 million for the year ended December 31, 1995 as a result of a full year of
operations for the property acquired in 1994, and the above-described increase
in occupancy at the Properties owned at both December 31, 1994 and 1995.

General and administrative expenses increased by $688,000 or 100% for the
year ended December 31, 1995, compared to the year ended December 31, 1994,
primarily due to additional employees required to manage the increased portfolio
of Properties. General and administrative expenses as a percentage of total
revenue was 12% and 11% during 1995 and 1994, respectively. The Company believes
that because it will not need to hire significant new staff to manage its
current portfolio and to acquire new properties, general and administrative
expenses as a percentage of total revenue should begin to fall in subsequent
years.

Interest expense includes interest at the contractual current pay rate of
the mortgage loans, amortization of the loan fees paid at origination, and
accrual of additional interest due upon the retirement of the debt. Interest
expense for the year ended December 31, 1995 was approximately $5.5 million,
including interest payable of $2.5 million upon the retirement of certain
mortgage loans. Interest expense increased by $3.9 million, or 231% for the year
ended December 31, 1995 compared to the year ended December 31, 1994 primarily
as a result of the increase in mortgage loans incurred to fund the 1995
acquisitions. The interest expense associated with the 1995 mortgage loans was
$2.7 million. In addition, 1995 included a full year of interest expense for
debt incurred to acquire the property in 1994, which increased interest expense
by approximately $466,000.

Depreciation and amortization increased by $755,000 or 66% primarily due to
the 1995 acquisitions and the full year effect of the 1994 acquisitions.

As a result of the foregoing, the Company had a net loss of $576,000 for the
year ended December 31, 1995 compared to net income of $1.1 million for the
prior year.

48
<PAGE>
The following is a comparison of the property operating data for the Same
Store Properties that were owned for the entire year ended December 31, 1994 and
December 31, 1995:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
Revenue:
Rental.............................................................. $ 4,417,000 $4,180,000
Tenant reimbursements............................................... 15,000 36,000
Parking............................................................. 431,000 382,000
Other............................................................... 152,000 108,000
------------ ------------
Total revenue..................................................... 5,015,000 4,706,000
------------ ------------
------------ ------------
Certain expenses:
Property operating, taxes, insurance and ground rent................ $ 1,724,000 $1,985,000
------------ ------------
------------ ------------
</TABLE>

For the year ended December 31, 1995, occupancy increased from 84% at
December 31, 1994 to 92% at December 31, 1995 and substantially all of the
revenue increase was due to this occupancy increase. Operating expenses before
depreciation and amortization, and interest including taxes, insurance, ground
rent expenses for these Same Store Properties decreased by $261,000 for the year
ended December 31, 1995 over the prior year due to the economies of scale that
the Company obtained by owning a larger portfolio of Properties. The Company was
able to allocate its personnel among more of its Properties and obtain certain
discounts by utilizing its greater purchasing power.

COMPARISON OF YEAR ENDED DECEMBER 31, 1994 TO YEAR ENDED 1993. During 1994,
the Arden Predecessors purchased one Property resulting in an increase in
investments in Properties of approximately $8.7 million.

Rental revenue increased by $2.1 million 70% for the year ended December 31,
1994 compared to the year ended December 31, 1993. The increase in rental
revenue resulted principally from a full year of rental revenue from the
property acquired in 1993 and partial year rental revenue from the property
acquired in 1994. Rental revenue from the 1993 acquisition property increased to
$4.2 million for the year ended December 31, 1994, representing a full year of
rental revenue from that property, from $3.0 million in the prior year. Rental
revenue associated with the 1994 acquisition property added an additional
$977,000 to rental revenue in 1994.

Tenant reimbursements and other revenue increased by $664,000 or 191% for
the year ended December 31, 1994 compared to the year ended December 31, 1993.
Tenant reimbursement increases represented $182,000 of this increase, and other
revenue, primarily representing management fees from third party-owned
properties, represented $482,000 of this increase. The increase in tenant
reimbursements resulted principally from a full year of tenant reimbursements
from the property acquired during 1993 and partial year tenant reimbursements
from the property acquired during 1994. Tenant reimbursements from the calendar
year 1993 acquisition property increased to $36,000 for the year ended December
31, 1994, representing a full year of such revenue, from $35,000 in the prior
year. Tenant reimbursements associated with the 1994 acquisition Properties
added an additional approximately $182,000 to such revenue during 1994. The
increase in property management fees resulted primarily from a full year of
property management fees in 1994 for third party-owned properties managed for
part of the year in the prior period.

Parking revenue increased by $103,000 or 37% for the year ended December 31,
1994 compared to the year ended December 31, 1993. The increase resulted
primarily from a full year of parking revenue from the property acquired during
calendar year 1993 and partial year parking revenue from the property acquired
during the year ended December 31, 1994. Parking revenue from the calendar year
1993 acquisition property increased to $382,000 for the year ended December 31,
1994, representing a full year of such revenue, from $279,000 in the prior year.

At December 31, 1993, the Arden Predecessors held a noncontrolling
investment in one joint venture which owns two commercial office properties.
During 1994, the Arden Predecessors made investments in two additional
noncombined entities which own commercial office properties. These entities are
accounted

49
<PAGE>
for in the financial statements of the Arden Predecessors using the equity
method. Equity in net income of noncombined entities increased by $197,000, from
$4,000 to $201,000, for the year ended December 31, 1994 compared to the year
ended December 31, 1993. This increase is due principally to significant income
generated from the additional properties.

The following is a comparison of certain expenses of the Arden Predecessors
for the year ended December 31, 1994 to the year ended December 31, 1993:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DOLLAR PERCENT
1994 1993 CHANGE CHANGE
------------- ------------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Certain Expenses
Property operating and maintenance......... $ 1,869 $ 1,324 $ 545 41%
Real estate taxes.......................... 272 107 165 154%
Insurance.................................. 50 49 1 2%
Ground rent................................ -- -- -- --
------ ------ --------- ---
Total certain expenses................... $ 2,191 $ 1,480 $ 711 48%
------ ------ --------- ---
------ ------ --------- ---
</TABLE>

Total certain expenses were $2.2 million, or 41% of rental revenue and
tenant reimbursements, and $1.5 million, or 48% of rental revenue and tenant
reimbursements, for the years ended December 31, 1994 and 1993, respectively.
The increase in total certain expenses is primarily attributable to the addition
of the 1994 acquisition property and the expenses associated with the absorption
of vacant rentable space across the portfolio. The increase in total certain
expenses from 1993 to 1994 resulting from the 1994 acquisition was approximately
$206,000. In addition, total certain expenses increased by $451,000 as a result
of a full year of operations for the property acquired in 1993, and the
increases in the occupancy at such property. In addition, as a result of the
Northridge earthquake, the Company had some minor damage to three of its
buildings, resulting in $136,000 of property operating and maintenance expenses.

General and administrative expenses increased $303,000 or 79% in 1994
compared to 1993 primarily due to an increase in payroll of $210,000 required by
the Company to manage its increased portfolio. General and administrative
expenses as a percentage of total revenue remained unchanged at 11% from 1994
and 1993.

Interest expense in 1994 increased by $1.0 million, or 159%, compared to
1993. The increase was primarily due to a full year of interest on debt incurred
in 1993, as well as the interest due on a $6.7 million loan used to fund the
1994 acquisition. The interest expense associated with the 1994 property
acquisition debt was approximately $491,000. Interest expense increased by
$516,000 as a result of a full year of interest expense for debt incurred to
acquire the property in 1993.

Depreciation and amortization increased by $644,000 or 129% primarily due to
the 1994 acquisition and the full year effect of the 1993 acquisition.

As a result of the foregoing, the Company had net income of $1.1 million for
the year ended December 31, 1994 compared to net income of $655,000 for the
prior year.

PRO FORMA OPERATING RESULTS

SIX MONTHS ENDED JUNE 30, 1996. On a pro forma basis, combined income
(before deduction of minority interests) would have been $14.8 million for the
six months ended June 30, 1996, or $13.3 million combined net income of the
Company (after deduction of minority interests), comparing positively to the
historical net loss of $2.1 million for the six months ended June 30, 1996. This
positive comparison results from a significant reduction in interest expense
based on the effects of the proposed Offering as well as a substantial increase
in total revenue, due to the benefit of a pro forma full six months of revenue
from the Properties acquired (and to be acquired) in 1996.

50
<PAGE>

Pro forma total revenue is $40.6 million representing a $16.1 million
increase over historical 1996, resulting primarily from an increase of $6.0
million in rental revenue associated with Properties acquired (and to be
acquired) in 1996. Pro forma revenue from tenant reimbursements and parking is
$5.1 million, representing a $1.5 million increase over historical results.

The historical 1996 interest expense of $14.7 million decreased
substantially to $4.1 million on a pro forma basis. Correspondingly, interest
expense as a percentage of total revenue dropped substantially, from 60% of
total revenue in historical 1996 to 10% of total revenue on a pro forma basis.

YEAR ENDED DECEMBER 31, 1995. On a pro forma basis, combined income (before
deduction of minority interests) would have been $25.8 million for the year
ended December 31, 1995, or $22.4 million combined net income of the Company
(after deduction of minority interests), comparing positively to the historical
net loss of $(576,000) for the year ended December 31, 1995. This positive
comparison results from a significant reduction in interest expense as well as a
substantial increase in total revenue, due to the benefit of a pro forma full
year of revenue from the Properties acquired in 1995, and pro forma revenue from
the 1996 acquisitions.

Pro forma total revenue is $78.0 million representing a $66.3 million
increase over historical 1995, resulting primarily from an increase of $23.7
million in rental revenue associated with Properties acquired (and to be
acquired) in 1996, combined with a full year of rental revenue from the
Properties acquired in 1995 totaling $16.6 million. Revenue from tenant
reimbursements and parking also increased on a pro forma basis over historical
1995 primarily due to $3.0 million of such revenue generated at the Properties
acquired or to be acquired in 1996.

LIQUIDITY AND CAPITAL RESOURCES

MORTGAGE FINANCING. The Company is currently negotiating an interim loan
(the "Mortgage Financing") in the amount of $104 million with an affiliate of
Lehman Brothers. The Mortgage Financing will have a maturity of one year and
bear interest at a floating rate equal to one month LIBOR plus 1.50% for the
first six months increasing to 2.00% through maturity. The proceeds of the
Mortgage Financing will be used primarily to refinance a portion of the
Company's existing mortgage indebtedness. The Mortgage Financing will be
non-recourse and secured by fully cross-collateralized and cross-defaulted first
mortgage liens on the nine Mortgage Financing Properties. The Mortgage Financing
will require monthly payments of interest only, with all principal due on the
first anniversary of the closing of the Mortgage Financing.

The Company intends to refinance the Mortgage Financing through an offering
of commercial mortgage-backed securities (the "CMBS Offering") to be made by a
financing subsidiary which the Company intends to form for that purpose in an
amount of approximately $104 million with a term of seven years. The CMBS
Offering is expected to bear interest at a floating rate based on one-month
LIBOR. The Company intends to enter into a swap agreement with a major money
center bank in the notional amount of $104 million upon completion of this
Offering and the Formation Transactions or shortly thereafter (the "Swap
Agreement"). The Swap Agreement will result in effective fixed interest payments
equal to the yield on U.S. Treasury Notes with a maturity of seven years plus a
spread which, if determined on the date hereof, would result in an interest rate
of 7.51%. The CMBS Offering is expected to require monthly payments of interest
only with all principal due in a balloon payment at maturity. The Company
expects to pursue the CMBS Offering promptly after the closing of this Offering
and the Formation Transactions, although there can be no assurance that the
Company will complete a CMBS Offering or enter into the Swap Agreement.

THE CREDIT FACILITY. The Company is currently negotiating with a commercial
bank, the terms of a two-year, $100 million revolving credit facility, with a
one-year extension option (the "Credit Facility"). The Credit Facility will be
used, among other things, to finance the acquisition of properties, provide
funds for tenant improvements and capital expenditures and provide for working
capital and other corporate purposes. The Company intends to enter into the
Credit Facility contemporaneously with the Offering or shortly thereafter.

The Credit Facility will have two tranches: an unsecured tranche of up to
$50 million, subject to the Company's ownership of an unencumbered pool of
qualifying properties with values (calculated as provided

51
<PAGE>
in the Credit Facility) of at least 100% of the Company's unsecured liabilities,
and a secured tranche of up to $100 million, subject to a borrowing base.
Aggregate outstanding loans may not exceed $100 million. The lenders must
approve the properties securing the facility and qualifying properties which are
included in the unencumbered pool. Outstanding loans will bear interest based on
the LIBOR rate or the bank's base rate, at the Company's option. The Credit
Facility will be subject to customary conditions to closing and borrowing, and
contain representations and warranties and defaults customary in REIT
financings. The Credit Facility is also anticipated to contain financial
covenants, including requirements for a minimum tangible net worth, maximum
liabilities to asset values, and minimum interest, unsecured interest and fixed
charge coverage ratios (all calculated as defined in the Credit Facility) and
requirements to maintain a pool of unencumbered properties approved by the
lenders and meeting certain defined characteristics. The Credit Facility will
also contain restrictions on, among other things, indebtedness, investments,
distributions, liens, and mergers, and will require Mr. Ziman to maintain
certain ownership interests and management roles in the Company. There can be no
assurance that the Company will be able to enter into the Credit Facility on
terms satisfactory to it. If it is not able to enter into the Credit Facility it
will have to find alternative means to finance its future acquisitions of
Properties.

ANALYSIS OF LIQUIDITY AND CAPITAL RESOURCES. The Company believes the
Offering and the Formation Transactions will improve its financial performance
through changes to its capital structure, principally the substantial reduction
in its overall debt and its debt to equity ratio. Through the Formation
Transactions, the Company will repay all of its existing mortgage debt and
replace it with secured floating rate debt in the principal amount of $104
million pursuant to the Mortgage Financing. Thus, total secured debt after the
Formation Transactions (assuming no advances under the Credit Facility) will be
reduced by approximately $266 million in principal. This will result in a
significant reduction of annual mortgage interest expense as a percentage of
total revenue (10.4% on a pro forma basis as compared to 47% for the historical
year ended December 31, 1995). Thus, cash from operations required to fund
interest expenses will decrease substantially, although such reduction will be
offset by the use of cash from operations to meet annual REIT distribution
requirements. In addition, the Offering and Formation Transactions, together
with the Mortgage Financing and the Credit Facility, will produce a lower
leveraged capital structure. The market capitalization of the Company, based on
the assumed initial public offering price of the issued and outstanding shares
of Common Stock and OP Units (assuming all OP Units are exchanged for shares of
Common Stock) and the debt outstanding at the completion of the Offering, is
expected to be approximately $538.8 million with total debt (exclusive of
accounts payable and accrued expenses) of approximately $104 million. As a
result, the Company's debt to total market capitalization ratio will be
approximately 19.3% (17.6% if the Underwriters' overallotment option is
exercised in full). The Credit Facility combined with this lower leveraged
capital structure should enhance the Company's ability to take advantage of
acquisition opportunities as well as provide, if necessary, working capital for
funding commitments to construct tenant leasehold improvements and payment of
leasing commissions associated with new leasing activity.

After the Offering, the Company expects to have approximately $100 million
available under the Credit Facility. The Company anticipates that the Credit
Facility will be used primarily to acquire additional properties and for general
working capital needs.

The Mortgage Financing matures in 1997. Since the Company anticipates that
none of the principal of its mortgage indebtedness will be amortized prior to
maturity and the Company will not have sufficient funds on hand to repay such
indebtedness at maturity, it will be necessary for the Company to refinance such
debt either through additional debt financings secured by individual properties
or groups of properties, by unsecured private or public debt offerings or
additional equity offerings. See "Risk Factors -- Real Estate Financing Risks."
The Company currently expects to refinance the Mortgage Financings through the
CMBS Offering.

The Company expects to make distributions from Cash Available for
Distribution, which the Company believes will exceed Cash Available for
Distribution historically available as a result of the reduction in debt service
expected to result from the repayment of indebtedness described above. Amounts
accumulated for

52
<PAGE>
distribution will be invested by the Company primarily in short-term investments
that are collateralized by securities of the United States government or any of
its agencies, high-grade commercial paper and bank deposits. See
"Distributions."

The Company expects to meet its short-term liquidity requirements generally
through its initial working capital and net cash provided by operations. The
Company believes that its net cash provided by operations will be sufficient to
allow the Company to make any distributions necessary to enable the Company to
continue to qualify as a REIT. The Company also believes that the foregoing
sources of liquidity will be sufficient to fund its short-term liquidity needs
for the foreseeable future, including recurring non-revenue enhancing capital
expenditures, tenant improvements and leasing commissions.

The Company expects to meet certain long-term liquidity requirements such as
property acquisitions, scheduled debt maturities, renovations, expansions and
other non-recurring capital improvements through long-term secured and unsecured
indebtedness and the issuance of additional equity securities. The Company also
expects to use funds available under the Credit Facility to fund acquisitions,
development activities and capital improvements on an interim basis.

CASH FLOWS

COMPARISON FOR THE SIX MONTHS ENDED JUNE 30, 1996 TO THE SIX MONTHS ENDED
JUNE 30, 1995. The increase in cash and cash equivalents of $872 from June 30,
1995 to June 30, 1996 is due to the excess of cash provided by financing
activities over cash used in operating activities and investing activities. Net
cash provided by operating activities increased by $1.6 million from $458,000 to
$2.0 million primarily due to an increase in rental revenue offset by higher
mortgage interest. Net cash used in investing activities increased by $91.2
million from $5.6 million to $96.8 million mainly due to an increase in the
amount of real estate assets purchased during 1996 compared to 1995. Net cash
provided by financing activities increased by $90.3 million from $4.6 million to
$94.9 million due primarily to proceeds received on mortgage loans.

COMPARISON FOR THE YEAR ENDED DECEMBER 31, 1995 TO THE YEAR ENDED DECEMBER
31, 1994. The increase in cash and cash equivalents of $179,000 from December
31, 1994 to December 31, 1995 is due to the excess of cash provided by operating
and financing activities over cash used in investing activities. Net cash
provided by operating activities increased by $2.0 million from $834,000 million
to $2.8 million primarily due to the additional cash flow generated by the
increase in the number of Properties owned. Net cash used in investing
activities increased by $105.5 million from $17.9 million to $123.4 million
mainly due to an increase in the amount of real estate assets purchased during
1995 compared to 1994. Net cash provided by financing activities increased by
$103.9 million from $16.8 million to $120.7 million due to proceeds received on
mortgage notes offset in part by increases in mortgage loans repaid and
restricted cash.

COMPARISON FOR THE YEAR ENDED DECEMBER 31, 1994 TO THE YEAR ENDED DECEMBER
31, 1993. The decrease in cash and cash equivalents of $242,000 from December
31, 1993 to December 31, 1994 is due to distributions from one Arden Predecessor
to its owners of $1.4 million and the acquisition of improvements and Properties
in excess of financing activities. These uses were partially offset by owner
contributions. Net cash provided by operating activities decreased by $352,000
from $1.2 million to $834,000 primarily due to an increase in rents and other
receivables, deferred rents prepaid financing and leasing costs and prepaid
expenses and other assets offset by an increase in depreciation and amortization
and net income. Net cash used in investing activities decreased by $8.1 million
from $26.0 million to $17.9 million mainly due to a decrease in the value of
real estate assets purchased during 1994 compared to 1993. Net cash provided by
financing activities decreased by $8.8 million from $25.6 million to $16.8
million due to a decrease in the amount proceeds received on mortgage notes
incurred to finance real estate acquisitions offset in part by an increase in
owners' contributions.

INFLATION

Substantially all of the office leases provide for separate escalations of
real estate taxes and operating expenses over a base amount. In addition, many
of the office leases provide for fixed base rent increases or indexed
escalations (based on the CPI or other measures). The Company believes that
inflationary increases in expenses will be offset by the expense reimbursements
and contractual rent increases described above.

53
<PAGE>
The Credit Facility is expected to bear interest at a variable rate, which
will be influenced by changes in short-term interest rates, and will be
sensitive to inflation.

SOUTHERN CALIFORNIA ECONOMY AND OFFICE MARKETS

The Company believes that current and forecast trends affecting Southern
California have created and will continue to create a favorable economic
environment in the suburban Southern California office markets where
substantially all of the Company's Properties are located. First, the Company
believes that the supply of Class A office space in Southern California has
stabilized and is unlikely to increase over the short term in large part because
it is not economically feasible to develop new Class A office space based on
rental rates currently attainable in Southern California office markets as set
forth in the C&W Market Study. Second, the recent economic restructuring of many
of Southern California's primary office-using sectors including the
entertainment, export/import, managed health care, high technology,
telecommunications, and civilian and military aerospace and defense industries
has caused growth in demand for office space. Third, demand for Class A office
space relative to the level of supply has led to higher occupancy rates and a
trend towards higher rental rates which are supportable in the office markets
where the Company's Properties are located. Finally, patterns of residential
relocation to suburban areas due in part to the public perception of greater
personal security and to the availability of greater recreational and
residential amenities in suburban areas, coupled with a heightened preference
for living in close proximity to work and employers' resultant access to a
broader, more skilled local labor force have fueled growth of suburban office
property demand. The Company believes that these factors and other specific
economic indicators discussed below suggest a general strengthening of the
Southern California economy. Given the quality and location of its Properties,
the Company believes it is competitively positioned to capitalize on these
economic trends and the resulting demand for suburban Class A office space. In
addition, the Company believes that the suburban Los Angeles County submarkets
in which its Properties are located will outperform the Downtown/CBD, which has
not begun to recover from the real estate downturn.

SOUTHERN CALIFORNIA ECONOMY

OVERVIEW. The Company believes that the office markets in Southern
California, and particularly suburban Los Angeles County, have improved and will
be excellent markets in which to own and operate office properties over the long
term.

The three-county region in which the Company's Properties are located
includes Los Angeles, Orange and San Diego counties which collectively comprise
approximately 45% of the statewide population and employment base in California.
Data from the U.S. Bureau of Labor Statistics indicates that the unemployment
rate in these counties peaked in 1993 during the height of the 1990 to 1993
recessionary period in Southern California. Recently, however, these counties
experienced a gradual economic recovery marked by falling unemployment rates
beginning in 1994 which, according to THE 1995 ECONOMIC REPORT OF THE GOVERNOR
OF CALIFORNIA (the "1995 ECONOMIC REPORT"), was precipitated by growth in the
services and trade employment sectors, among others, and a less pronounced rate
of decline in defense related activities in Southern California. For instance,
the unemployment rate for the Los Angeles PMSA has been declining since 1993 and
dropped below 8% in 1995 for the first time since 1990. Similar trends of
decreasing unemployment rates were also experienced in Orange and San Diego
counties. The graph below illustrates unemployment trends for the United States,
California and the three counties in which the Company's Properties are located.

54
<PAGE>
HISTORICAL ANNUAL AVERAGE UNEMPLOYMENT RATES

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
UNEMPLOYMENT RATE
<S> <C> <C> <C> <C> <C>
California Los Angeles County Orange County San Diego County U.S.
1991 7.7% 8.2% 5.2% 6.2% 6.7%
1992 9.3% 9.8% 6.6% 7.3% 7.4%
1993 9.4% 9.8% 6.7% 7.8% 6.8%
1994 8.6% 9.4% 5.8% 7.2% 6.1%
1995 7.8% 7.9% 5.3% 6.5% 5.6%
</TABLE>

- ------------------------
Source: U.S. Bureau of Labor Statistics

The U.S. Bureau of Economic Analysis has forecast a total increase in
non-farm employment for the period from 1993 to 2005 of 14.2% for Los Angeles
County, 35.3% for Orange County and 30.7% for San Diego County, representing
average annual growth rates of 1.1%, 2.5% and 2.3%, respectively.

A driving factor in the forecast employment growth within the three counties
in which the Company operates is strong population growth, which, over the next
five years is expected to outpace the population growth in the United States as
shown below:

<TABLE>
<CAPTION>
POPULATION
POPULATION GROWTH
GROWTH 1995-2000
AREA 1990-1995(1) PROJECTED(2)
- -------------------------------------------------- ---------- -----------
<S> <C> <C>
Los Angeles County................................ 3.1% 5.8%
Orange County..................................... 6.4% 11.1%
San Diego County.................................. 5.8% 12.1%
California........................................ 6.2% 9.1%
United States..................................... 5.6% 5.1%
</TABLE>

- ------------------------
(1) Source: U.S. Bureau of the Census. 1990 population from 1990 Census and 1995
population from July 1, 1995 estimate of the U.S. Bureau of the Census.

(2) Source: 1995 population--U.S. Bureau of the Census. 2000 projected
population--Bureau of Economic Analysis (U.S. Department of Commerce).

As primary office employment grows, office demand is expected to increase.
According to AMERICA'S OFFICE ECONOMY prepared by Cognetics, Inc., Metropolitan
Los Angeles (which includes Los Angeles County and Orange County), in which 23
of the Company's 24 Properties are located, is projected to be the number one
market in the United States for primary office employment growth from 1995 to
2005, and San Diego is ranked 18th.

55
<PAGE>

TOP 20 MARKETS FOR PRIMARY OFFICE
EMPLOYMENT GROWTH (1995-2005)

<TABLE>
<C> <S>
1. LOS ANGELES
2. Atlanta
3. San Francisco-Oakland-San Jose
4. Washington, DC-MD-VA
5. Dallas-Ft. Worth
6. Chicago
7. Phoenix
8. New York
9. Houston-Galveston
10. Tampa-St. Petersburg
11. Minneapolis-St. Paul
12. Denver-Boulder
13. Boston
14. Orlando
15. Seattle
16. Philadelphia
17. Miami-Ft. Lauderdale
18. SAN DIEGO
19. Detroit
20. Kansas City
</TABLE>

- ------------------------

Source: Cognetics, Inc.

A significant factor affecting primary office employment growth in Los
Angeles, Orange and San Diego counties is a trend within these local economies
to become more services-oriented. Data from the U.S. Bureau of Labor Statistics
indicates a trend over the past six years of growth in the services and
government sector (large office space users), and a decline in the
manufacturing, finance, insurance and real estate (FIRE) and trade sectors, with
the other employment sectors remaining stable in proportion to total non-farm
employment. Employment in the service sector in the Los Angeles PMSA increased
to 32% of total non-farm employment in 1995 from 29% in 1990. Both Orange County
and San Diego County experienced a similar trend in the employment shift towards
services.

In addition to becoming a more diversified economy with a stronger emphasis
on the services and government sectors, according to the Los Angeles EDC, Los
Angeles County ranked number one in the nation in the number of business
establishments by county in 1992 and is a major center of international trade.
According to the 1995 ECONOMIC REPORT, Los Angeles County is also the nation's
leading manufacturing center. Los Angeles County comprises over 40% of the
nondurable manufacturing employment, 95% of the motion picture employment and
56% of the aerospace employment in California. The Los Angeles PMSA is the
largest PMSA in the United States (larger than both the New York City PMSA and
the Chicago PMSA) and accounts for approximately 28% of California's population
and employment base. Demand for office space in Los Angeles County is expected
to remain strong as a result of these characteristics.

International trade is another major component of the Los Angeles economy
and while growth in international trade is difficult to attribute to specific
employment sectors, it is an indicator of the general strength of the local
economy. In 1994 the Los Angeles Customs District (which is primarily comprised
of the Los Angeles/Long Beach port complex and the Los Angeles International
Airport) surpassed New York/ New Jersey as the nation's leading port. According
to the California Department of Finance, from 1987 to 1995 international trade
passing through the Los Angeles Customs District has increased from
approximately $77.6 billion in 1987 to approximately $164.2 billion in 1995.

SOUTHERN CALIFORNIA OFFICE MARKETS

OVERVIEW. The Company believes that the Los Angeles, Orange and San Diego
County office markets are attractive markets in which to own and operate office
properties. Specifically, the Los Angeles County market, in which 21 of the 24
Properties are located, has the following favorable market characteristics
according to the C&W Market Study: (i) the Los Angeles County suburban
submarkets have experienced three years of positive net absorption and five
years of declining direct vacancy rates; (ii) there has been virtually no new
additions to supply to the Los Angeles County suburban office market since 1992;
and (iii) new speculative office development is unlikely at the current time,
primarily because new construction is not economically feasible given current
market rental rates and also because of governmental constraints and zoning
restrictions in certain markets.

56
<PAGE>
INCREASING DEMAND FOR OFFICE SPACE. In the past three years the underlying
fundamentals of supply and demand in the suburban Los Angeles County, Orange
County and downtown San Diego office markets have improved. The peak in
available supply occurred near the midpoint of the recession. Since that time,
the local economies have been recovering and the relationship between supply and
demand has resulted in declining direct vacancy rates and positive net
absorption in these markets. According to the C&W Market Study, as of December
31, 1995, the direct vacancy rate for the suburban Los Angeles County office
market, the Orange County office market and the downtown San Diego office market
was 17.0%, 15.5% and 17.9%, respectively, as compared to 19.2%, 19.5% and 19.4%
as of December 31, 1991, respectively.

HISTORICAL YEAR-END DIRECT VACANCY RATES

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
DIRECT VACANCY RATE
<S> <C> <C> <C> <C>
U.S. Los Angeles County (suburban) Orange County Downtown San Diego
1991 17.5% 19.2% 19.5% 19.4%
1992 18.2% 18.9% 19.1% 20.7%
1993 17.2% 18.4% 17.1% 19.4%
1994 15.3% 17.3% 17.2% 19.8%
1995 14.0% 17.0% 15.5% 17.9%
</TABLE>

- ------------------------
Source: C&W Market Study
Note: U.S. vacancy is the weighted average of 44 markets.

PROJECTED DECLINING DIRECT VACANCY RATES. The C&W Market Study projects
that aggregate direct vacancy rates in the suburban Los Angeles County office
market would decline to 14.4% as of December 31, 1998 assuming (i) no additions
to the supply of office space inventory that existed in such office markets as
of December 3, 1995 and (ii) annual positive net absorption of direct
availabilities of 1,000,000 square feet. C&W's projection of such absorption and
declining direct vacancy rates was based on recent historical positive net
absorption experienced in the suburban Los Angeles County office market. No
assurance can be made that such absorption of direct availabilities will occur
in the future or that the current supply of office space inventory will not
increase, and therefore that direct vacancy rates will decline as outlined in
the graph below.

PROJECTED DIRECT VACANCY RATES

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
DIRECT VACANCY %
<S> <C>
1995 (A) 17.0%
1996 (P) 16.1%
1997 (P) 15.2%
1998 (P) 14.4%
</TABLE>

- ------------------------
Source: C&W Market Study

NO NEW SUPPLY OF OFFICE SPACE. According to the C&W Market Study, there has
been virtually no new office development in Los Angeles County and Orange County
since 1992. Similarly, there has been no new office development in downtown San
Diego since 1991. Based on the C&W Market Study, the addition of

57
<PAGE>
any new speculative office space to these markets is unlikely at the current
time, primarily because speculative new construction is not economically
feasible given current market rental rates and also because of governmental
constraints and zoning restrictions in certain markets.

POTENTIAL REVENUE INCREASE AT REPLACEMENT COST RENTS. The Company believes
that all of its Properties have been purchased at a substantial discount from
replacement cost and have the potential for significant internal revenue growth
as rental rates for office properties in their respective submarkets recover to
levels ("Replacement Cost Rents") that would provide a reasonable return on
investment to a developer of a new Class A multi-tenant office building.
According to the C&W Market Study, market rental rates in Los Angeles County are
currently below the levels required to justify new Class A office development.
Based on estimates provided in the C&W Market Study, Replacement Cost Rents
required to justify new construction would be equal to approximately $35 per
square foot for excellent quality Class A office buildings and $24 per square
foot for average quality Class A office buildings. By comparison, the current
weighted average annual base rental rate (full service gross leases only,
excluding leases subject to net lease provisions) received by the Company in
each of its Properties which ranges from $15.07 per square foot to $31.45 per
square foot with a total weighted average annual base rental rate of $20.03 per
square foot and the weighted average annual asking rents for competitive office
properties in their respective submarkets are substantially below Replacement
Cost Rents. This is confirmed by the fact that according to the C&W Market Study
there has been extremely limited office development (375,000 square feet out of
a total 83,533,998 square feet in the submarkets where the Company's Properties
are located) and no speculative office development in the Los Angeles submarkets
where the Company operates Properties in the past four years.

The costs and implied Replacement Cost Rents outlined above exclude any
value attributable to underlying land, which, if purchased in connection with a
new development would imply that higher Replacement Cost Rents would be required
to justify the increased costs of development resulting from the land
acquisition costs. There can be no assurance as to when, if, and the extent to
which the Properties owned and operated by the Company will experience an
increase in rental rates.

58
<PAGE>
BUSINESS AND PROPERTIES

GENERAL

Upon completion of the Offering, the Company will own 24 office properties
containing approximately 4.0 million rentable square feet. The Properties
consist primarily of Class A suburban office properties and individually range
from approximately 49,000 to 540,000 rentable square feet. All of the Properties
are located in Southern California, with 21 located in suburban Los Angeles
County, two in Orange County, and one in San Diego County. The Company believes
that the Properties have desirable locations within established business
communities and are well-maintained. Of the Company's 24 Properties, 20
Properties have been built since 1980 and 14 Properties, including all four
built prior to 1980, have been substantially renovated within the last three
years. The average age of the buildings is approximately 12 years. The
Properties offer an array of various amenities including security, parking,
conference facilities, on-site management, food services and health clubs.
Management believes that the location, quality of construction and building
amenities, as well as the Company's reputation for providing a high level of
tenant service, have enabled the Company to attract and retain a diverse tenant
base. As of August 1, 1996, the Properties had a weighted average occupancy rate
of approximately 89% (compared to the C&W Peer Group weighted average occupancy
rate of approximately 83% as of April 30, 1996) and were leased to over 540
tenants. Major tenants, based on square feet leased, include McDonnell Douglas,
GTE California, Pepperdine University, Merrill Lynch, Earth Technology, Grey
Advertising, The Hearst Corporation, Smith Barney and Deloitte & Touche. As of
August 1, 1996, no one tenant represented more than approximately 3.3% of the
aggregate Annualized Base Rent of the Company's portfolio and only 16 tenants
individually represented more than 1% of such Annualized Base Rent.

The Properties are leased to a variety of local, national and foreign
businesses. Leases are typically structured for terms of three, five or 10
years. Most of the Company's leases are full service, gross leases under which
tenants typically pay for all real estate taxes and operating expenses above
those for an established base year or expense stop. Leases typically contain
provisions permitting tenants to renew at prevailing market rates. Under the
leases, the landlord is generally responsible for structural repairs. Most
leases do not permit early termination; however, certain leases permit the
tenant to terminate upon six months' notice after the third year of a five-year
lease or the fifth year of a 10-year lease, subject to the tenant's obligation
to pay all unamortized tenant improvements and leasing commissions, a penalty of
three to six months of additional rent, and any rent concessions provided,
depending on the lease terms. Finally, tenants generally pay directly (without
regard to a base year or expense stop) for overtime use of air conditioning and
for onsite monthly employee and visitor parking.

Although the Company primarily utilizes gross leases (which represented
approximately 84% of the total portfolio leased square feet as of August 1,
1996), it also has triple net leases with a number of tenants. In general, the
triple net leases require the tenants to pay all real property taxes, insurance
and expenses of maintaining the leased space or Property and have renewal and
termination provisions similar to those described above.

The Company's Properties are regionally managed under active central
control. All administration (including the formation and implementation of
policies and procedures), leasing, capital expenditures and construction
decisions are centrally administered at the Company's corporate office. The
Company employs asset managers to oversee and direct the day-to-day operations
of the Properties, as well as the on-site personnel, which may include a
manager, assistant manager and other necessary staff. Asset managers communicate
daily with the Company's corporate offices to implement the Company's policies
and procedures.

The on-site staffing of each Property is dictated by each Property's size,
tenant profile, number of tenants and location. The Company contracts with third
parties for cleaning services, day porters, engineers and any other personnel
necessary to operate each Property.

PROPERTIES

The following table sets forth certain information regarding each of the
Properties as of August 1, 1996:

59
<PAGE>

<TABLE>
<CAPTION>
PERCENTAGE OF PERCENT
TOTAL LEASED
APPROXIMATE PORTFOLIO (AS OF ANNUALIZED
YEAR BUILT/ RENTABLE RENTABLE AUG. 1, BASE RENT
SUBMARKET/PROPERTY LOCATION RENOVATED SQUARE FEET SQUARE FEET 1996) ($000S)
- ---------------------------------------- ---------------- ------------- ----------- ------------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
LOS ANGELES COUNTY
- ----------------------------------------
LOS ANGELES WEST
BEVERLY HILLS/CENTURY CITY
9665 Wilshire Beverly Hills 1972/92-3 158,684 3.9% 95.1% $ 4,745
Beverly Atrium Beverly Hills 1989 61,314 1.5 100.0 1,400
Century Park Center Los Angeles 1972/94 243,404 6.0 83.2 4,331
WESTWOOD/WEST LOS ANGELES
Westwood Terrace Los Angeles 1988 135,943 3.4 82.3 2,829
1950 Sawtelle Los Angeles 1988/95 103,772 2.6 77.5 1,609
MARINA AREA/CULVER CITY/LAX
400 Corporate Pointe Culver City 1987 164,598 4.1 90.2 2,954
Bristol Plaza Culver City 1982 84,014 2.1 78.6 1,195
Skyview Center Los Angeles 1981,87/95(4) 391,675 9.7 86.0 5,730
PARK MILE/WEST HOLLYWOOD
The New Wilshire Los Angeles 1986 202,704 5.0 83.9 3,458

<CAPTION>
LOS ANGELES NORTH
<S> <C> <C> <C> <C> <C> <C>
SIMI/CONEJO VALLEY
5601 Lindero Canyon Westlake 1989 105,830 2.6 100.0 1,180
Calabasas Commerce Center Calabasas 1990 123,121 3.1 100.0 2,111
WEST SAN FERNANDO VALLEY
Woodland Hills Financial Center Woodland Hills 1972/95 224,955 5.6 89.8 4,501
CENTRAL SAN FERNANDO VALLEY
16000 Ventura Blvd. Encino 1980/96 174,841 4.3 84.1 2,970
EAST SAN FERNANDO VALLEY/TRI-CITIES
425 West Broadway Glendale 1984 71,589 1.8 95.9 1,328
303 Glenoaks(5) Burbank 1983/96 175,449 4.3 97.4 3,477
70 South Lake Pasadena 1982/94 100,133 2.5 81.4 1,695
<CAPTION>
LOS ANGELES SOUTH
<S> <C> <C> <C> <C> <C> <C>
LONG BEACH
4811 Airport Plaza Drive Long Beach 1987/95 121,610 3.0 100.0 1,051
4900/10 Airport Plaza Drive Long Beach 1987/95 150,403 3.7 100.0 1,173
5000 East Spring Long Beach 1989/95 163,358 4.0 89.6 2,747
100 West Broadway Long Beach 1987/96 191,727 4.7 90.0 3,523
CERRITOS/NORWALK
12501 East Imperial Highway (5) Norwalk 1978/94 122,175 3.0 94.7 1,882
<CAPTION>
ORANGE COUNTY
- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
WEST COUNTY
5832 Bolsa Avenue Huntington Beach 1985 49,355 1.2 100.0 659
TRI-FREEWAY AREA
Anaheim City Centre Anaheim 1986/91 175,391 4.3 93.0 2,458
<CAPTION>
SAN DIEGO COUNTY
- ----------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SAN DIEGO MARKET
Imperial Bank Tower San Diego 1982/96 540,413 13.4 82.2 8,136
----------- ------ ------- ----------
Total/Weighted Average 4,036,458 100.0% 88.9% $67,142
Weighted Average Rent Per Leased Square Foot - All Leases
Weighted Average Rent Per Leased Square Foot - Gross Leases
Weighted Average Rent Per Leased Square Foot - Net Leases

<CAPTION>
ANNUAL
NET
EFFECTIVE
PERCENTAGE OF RENT PER ANNUALIZED
PORTFOLIO LEASED BASE RENT PER C&W PEER GROUP
ANNUALIZED NUMBER SQUARE LEASED RENT PER
SUBMARKET/PROPERTY BASE RENT OF LEASES FOOT (1) SQUARE FOOT (2) SQUARE FOOT(3)
- ---------------------------------------- ------------- ---------- --------- --------------- --------------
<S> <C> <C> <C> <C> <C>
LOS ANGELES COUNTY
- ----------------------------------------
LOS ANGELES WEST
BEVERLY HILLS/CENTURY CITY
9665 Wilshire 7.1% 18 29$.34 $31.45 $28.32
Beverly Atrium 2.1 11 18.88 22.83 28.32
Century Park Center 6.5 80 19.75 21.38 22.80
WESTWOOD/WEST LOS ANGELES
Westwood Terrace 4.2 21 23.22 25.30 27.19
1950 Sawtelle 2.4 30 17.69 20.02 18.42
MARINA AREA/CULVER CITY/LAX
400 Corporate Pointe 4.4 14 23.42 19.91 17.52
Bristol Plaza 1.8 19 16.67 18.10 17.54
Skyview Center 8.5 49 15.90 17.01 19.23
PARK MILE/WEST HOLLYWOOD
The New Wilshire 5.2 31 18.04 20.35 21.97
LOS ANGELES NORTH
<S> <C> <C> <C> <C> <C>
SIMI/CONEJO VALLEY
5601 Lindero Canyon 1.8 2 10.49 11.15 19.03
Calabasas Commerce Center 3.1 11 15.54 17.14 19.16
WEST SAN FERNANDO VALLEY
Woodland Hills Financial Center 6.7 59 20.09 22.29 22.74
CENTRAL SAN FERNANDO VALLEY
16000 Ventura Blvd. 4.4 39 18.55 20.21 21.33
EAST SAN FERNANDO VALLEY/TRI-CITIES
425 West Broadway 2.0 13 15.79 19.35 20.11
303 Glenoaks(5) 5.2 22 -- 20.35 21.57
70 South Lake 2.5 10 16.28 20.80 24.38
LOS ANGELES SOUTH
<S> <C> <C> <C> <C> <C>
LONG BEACH
4811 Airport Plaza Drive 1.6 1 9.30 8.64 24.54
4900/10 Airport Plaza Drive 1.7 1 8.40 7.80 24.54
5000 East Spring 4.1 26 16.61 18.76 24.67
100 West Broadway 5.2 26 22.26 20.42 19.55
CERRITOS/NORWALK
12501 East Imperial Highway (5) 2.8 4 -- 16.27 18.40
ORANGE COUNTY
- ----------------------------------------
<S> <C> <C> <C> <C> <C>
WEST COUNTY
5832 Bolsa Avenue 1.0 1 13.38 13.35 16.06
TRI-FREEWAY AREA
Anaheim City Centre 3.7 13 13.47 15.07 19.29
SAN DIEGO COUNTY
- ----------------------------------------
<S> <C> <C> <C> <C> <C>
SAN DIEGO MARKET
Imperial Bank Tower 12.1 42 19.47 18.31 21.71
------ --- --------- ------- -------
Total/Weighted Average 100.0% 543
Weighted Average Rent Per Leased Square 17$.86 $18.70
Weighted Average Rent Per Leased Square 18$.08(6) $20.03(6) $21.61
Weighted Average Rent Per Leased Square 11$.90 $11.52
</TABLE>

- ----------------------------------------

(2) Annualized Base Rent is the monthly contractual base rent under existing
leases as of August 1, 1996 and multiplied by 12.

(3) Represents the mid-point of the range of the weighted average annual asking
rents (for full service gross leases only, excluding leases subject to net
lease provisions) for the respective C&W Peer Group properties as of April
30, 1996. It should be noted for purposes of the Peer Group analyses
appearing in this Prospectus that reported asking rents do not purport to
necessarily reflect the rental rates at which properties may actually be
rented. In many instances, asking rents and actual rental rates differ
significantly.

(4) Skyview Center consists of two Class A 11- and 12-story office towers
completed in 1981 and 1987, respectively.

(5) Acquisition Property to be acquired concurrently with the Offering.

(6) The weighted average rent per leased square foot is calculated based only on
rent which is received from tenants under gross leases, which represent
approximately 84% of the total portfolio leased square feet. Excluded are
5601 Lindero Canyon, 4811 Airport Plaza Drive, 4900/10 Airport Plaza Drive,
5832 Bolsa Avenue, 55.6% of leased space at 400 Corporate Pointe leased to
Pepperdine University, and 48.3% of leased space at Calabasas Commerce
Center leased to two tenants.

60
<PAGE>
TENANTS

The Properties are leased to over 540 tenants which are engaged in a variety
of businesses, including financial services, entertainment, health care
services, accounting, law, computer technology, education and publishing. The
following table sets forth information regarding the Company's leases with its
20 largest tenants based upon Annualized Base Rent as of August 1, 1996:

TENANT DIVERSIFICATION

<TABLE>
<CAPTION>
PERCENTAGE OF
PERCENTAGE OF AGGREGATE
NUMBER REMAINING AGGREGATE AGGREGATE ANNUALIZED PORTFOLIO
OF LEASE TERM IN RENTABLE LEASED SQUARE BASE RENT ANNUALIZED
LEASES MONTHS SQUARE FEET FEET ($000S) BASE RENT
------ ------------- ----------- ------------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
McDonnell Douglas....................... 2 111 272,013 7.58% $ 2,224 3.31%
GTE California.......................... 2 38 113,127 3.15% 1,653 2.46%
Pepperdine University................... 2 75 82,441 2.30% 1,628 2.42%
Logicon, Inc............................ 1 71 74,174 2.07% 1,575 2.35%
Merrill Lynch........................... 2 51 47,818 1.33% 1,317 1.96%
Imperial Bank Realty Co................. 2 46 38,855 1.08% 1,275 1.90%
Earth Techonology....................... 2 80 44,122 1.23% 1,138 1.70%
Latham & Watkins........................ 1 91 56,425 1.57% 1,045 1.56%
Grey Advertising........................ 2 111 50,152 1.40% 993 1.48%
DiC Entertainment....................... 1 76 51,708 1.44% 993 1.48%
The Hearst Corporation.................. 1 45 25,731 0.72% 932 1.39%
NME Hospitals........................... 1 41 24,069 0.67% 829 1.24%
Gruntal & Company....................... 1 10 15,321 0.43% 739 1.10%
Intracorp............................... 1 24 54,179 1.51% 691 1.03%
Smith Barney, Inc....................... 2 66 24,736 0.69% 678 1.01%
XIRCOM, Inc............................. 1 11 46,321 1.29% 673 1.00%
Crawford & Company...................... 1 19 20,347 0.57% 623 0.93%
Candle Corporation...................... 1 74 52,130 1.45% 601 0.89%
JB Oxford Holdings...................... 1 74 18,796 0.52% 595 0.89%
Deloitte & Touche....................... 1 53 30,279 0.84% 581 0.87%
--
--- ----------- ----- ---------- -----
TOTAL/WEIGHTED AVERAGE.............. 28 71 (1) 1,142,744 31.83% $ 20,782 30.95%
</TABLE>

- ------------------------------
(1) Weighted average calculation based on aggregate rentable square footage
leased by each tenant.

LEASE DISTRIBUTIONS

The following table sets forth information relating to the distribution of
the Company's leases, based on rentable square feet under lease, as of August 1,
1996:

<TABLE>
<CAPTION>
PERCENT OF
AGGREGATE PERCENTAGE OF
PORTFOLIO AGGREGATE
NUMBER PERCENT LEASED ANNUALIZED PORTFOLIO
SQUARE FEET OF OF ALL TOTAL LEASED SQUARE BASE RENT ANNUALIZED
UNDER LEASE LEASES LEASES SQUARE FEET FEET ($000S) BASE RENT
- ---------------------------------------- ------ ------- ------------ ------------ ---------- ------------------
<S> <C> <C> <C> <C> <C> <C>
2,500 or Less........................... 252 46.41 % 337,740 9.41% $ 6,350 9.46%
2,501--5,000............................ 114 20.99 % 400,329 11.15% 7,608 11.33%
5,001--7,500............................ 51 9.39 % 322,644 8.99% 6,382 9.51%
7,501--10,000........................... 39 7.18 % 340,700 9.49% 6,870 10.23%
10,001--20,000.......................... 54 9.94 % 777,549 21.66% 16,400 24.43%
20,001--40,000.......................... 20 3.68 % 508,278 14.16% 10,940 16.29%
40,001+................................. 13 2.39 % 903,137 25.15% 12,592 18.75%
------ ------- ------------ ------ ---------- ------
TOTAL............................... 543 100.00 % 3,590,377 100.00% $ 67,142 100.00%
</TABLE>

61
<PAGE>
LEASE EXPIRATIONS -- PORTFOLIO TOTAL

The following table sets forth a summary schedule of the lease expirations
for the Properties for leases in place as of August 1, 1996, assuming that none
of the tenants exercise renewal options or termination rights, if any, at or
prior to the scheduled expirations:

<TABLE>
<CAPTION>
YEAR OF NUMBER OF SQUARE FOOTAGE PERCENTAGE OF ANNUALIZED BASE PERCENTAGE OF
LEASE LEASES OF EXPIRING TOTAL LEASED RENT OF EXPIRING ANNUALIZED BASE RENT OF
EXPIRATION EXPIRING LEASES SQUARE FEET LEASES ($000S) EXPIRING LEASES
- --------------- --------------- -------------- --------------- ----------------- -------------------------
<S> <C> <C> <C> <C> <C>
1996 (1) 53 128,941 3.59% $ 2,514 3.74%
1997 93 336,683 9.38% 7,851 11.69%
1998 101 440,697 12.27% 8,561 12.75%
1999 89 429,673 11.97% 7,972 11.87%
2000 79 484,401 13.49% 10,290 15.33%
2001 55 310,952 8.66% 5,651 8.42%
2002 24 588,165 16.38% 10,601 15.79%
2003 13 132,428 3.69% 2,711 4.04%
2004 13 195,075 5.43% 3,595 5.35%
2005 14 416,441 11.60% 4,708 7.01%
2006 5 91,279 2.54% 1,973 2.94%
2008 3 28,238 0.79% 535 0.80%
2010 1 7,404 0.21% 179 0.27%
--- -------------- ------ ------- ------
TOTAL 543 3,590,377 100.00% $ 67,142 100.00%
</TABLE>

- ------------------------------
(1) Represents lease expirations data from August 1, 1996 to December 31, 1996.

62
<PAGE>
LEASE EXPIRATIONS - PROPERTY BY PROPERTY

The following table sets forth detailed lease expiration information for
each of the Properties for leases in place as of August 1, 1996, assuming that
none of the tenants exercise renewal options or termination rights, if any, at
or prior to the scheduled expirations.
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002 2003
- ---------------------------------------- -------- ---------- -------- -------- ---------- ---------- -------- --------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
9665 WILSHIRE
Square Footage of Expiring Leases....... 1,151 33,586 8,362 19,296 35,869 1,296 34,117
Percentage of Total Leased Sq. Ft....... 0.76% 22.26% 5.54% 12.79% 23.77% 0.86% 22.61%
Annualized Base Rent of Expiring
Leases................................. $ 31,077 $1,457,826 $228,195 $489,933 $1,061,873 $ 33,437 $1,064,071
Percentage of Total Annualized Base
Rent................................... 0.65% 30.72% 4.81% 10.32% 22.38% 0.70% 22.42%
Number of Leases Expiring............... 1 3 2 2 6 1 2

BEVERLY ATRIUM
Square Footage of Expiring Leases....... 4,800 2,608 13,015 4,290 6,261 18,489
Percentage of Total Leased Sq. Ft....... 7.83% 4.25% 21.23% 7.00% 10.21% 30.15%
Annualized Base Rent of Expiring
Leases................................. $ 97,920 $ 63,739 $250,027 $124,317 $ 159,511 $399,362
Percentage of Total Annualized Base
Rent................................... 7.00% 4.55% 17.86% 8.88% 11.40% 28.53%
Number of Leases Expiring............... 1 1 2 2 2 1

CENTURY PARK CENTER
Square Footage of Expiring Leases....... 13,341 24,615 28,060 26,623 46,782 6,963 32,298 8,754
Percentage of Total Leased Sq. Ft....... 6.59% 12.15% 13.85% 13.14% 23.09% 3.44% 15.94% 4.32%
Annualized Base Rent of Expiring
Leases................................. $275,282 $ 532,553 $545,857 $553,555 $1,242,862 $ 88,212 $539,718 $167,702
Percentage of Total Annualized Base
Rent................................... 6.36% 12.30% 12.60% 12.78% 28.69% 2.04% 12.46% 3.87%
Number of Leases Expiring............... 14 16 15 13 8 5 3 3

WESTWOOD TERRACE
Square Footage of Expiring Leases....... 186 6,307 7,123 25,940 58,623 5,128 8,524
Percentage of Total Leased Sq. Ft....... 0.17% 5.64% 6.37% 23.20% 52.42% 4.59% 7.62%
Annualized Base Rent of Expiring
Leases................................. $ 2,902 $ 119,425 $144,011 $525,439 $1,743,193 $ 99,780 $194,347
Percentage of Total Annualized Base
Rent................................... 0.10% 4.22% 5.09% 18.57% 61.62% 3.53% 6.87%
Number of Leases Expiring............... 1 3 2 6 6 2 1

1950 SAWTELLE
Square Footage of Expiring Leases....... 4,150 24,457 40,032 775 7,624 1,853
Percentage of Total Leased Sq. Ft....... 5.16% 30.43% 49.81% 0.96% 9.49% 2.31%
Annualized Base Rent of Expiring
Leases................................. $ 87,230 $ 501,323 $792,397 $ 13,950 $ 150,955 $ 29,087
Percentage of Total Annualized Base
Rent................................... 5.42% 31.17% 49.26% 0.87% 9.38% 1.81%
Number of Leases Expiring............... 4 9 9 1 4 2

<CAPTION>
YEAR OF LEASE EXPIRATION 2004 2005 2006 2008 2010 TOTAL
- ---------------------------------------- ---------- ------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
9665 WILSHIRE
Square Footage of Expiring Leases....... 17,222 150,899
Percentage of Total Leased Sq. Ft....... 11.41% 100%
Annualized Base Rent of Expiring
Leases................................. $ 379,005 $4,745,417
Percentage of Total Annualized Base
Rent................................... 7.99% 100%
Number of Leases Expiring............... 1 18
BEVERLY ATRIUM
Square Footage of Expiring Leases....... 4,447 7,404 61,314
Percentage of Total Leased Sq. Ft....... 7.25% 12.08% 100%
Annualized Base Rent of Expiring
Leases................................. $ 125,405 $179,400 $1,399,681
Percentage of Total Annualized Base
Rent................................... 8.96% 12.82% 100%
Number of Leases Expiring............... 1 1 11
CENTURY PARK CENTER
Square Footage of Expiring Leases....... 11,938 3,207 202,581
Percentage of Total Leased Sq. Ft....... 5.89% 1.58% 100%
Annualized Base Rent of Expiring
Leases................................. $ 310,504 $75,044 $4,331,289
Percentage of Total Annualized Base
Rent................................... 7.17% 1.73% 100%
Number of Leases Expiring............... 2 1 80
WESTWOOD TERRACE
Square Footage of Expiring Leases....... 111,831
Percentage of Total Leased Sq. Ft....... 100%
Annualized Base Rent of Expiring
Leases................................. $2,829,097
Percentage of Total Annualized Base
Rent................................... 100%
Number of Leases Expiring............... 21
1950 SAWTELLE
Square Footage of Expiring Leases....... 1,476 80,367
Percentage of Total Leased Sq. Ft....... 1.84% 100%
Annualized Base Rent of Expiring
Leases................................. $ 33,653 $1,608,595
Percentage of Total Annualized Base
Rent................................... 2.09% 100%
Number of Leases Expiring............... 1 30
</TABLE>

- ----------------------------------
(1) Represents lease expirations data from August 1, 1996 to December 31, 1996.

63
<PAGE>
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002
- ----------------------------------------------- --------- --------- --------- --------- --------- --------- ---------

<S> <C> <C> <C> <C> <C> <C> <C>
400 CORPORATE POINTE
Square Footage of Expiring Leases.............. 1,994 8,856 23,544 4,328 14,253 81,708
Percentage of Total Leased Sq. Ft.............. 1.34% 5.97% 15.87% 2.92% 9.61% 55.07%
Annualized Base Rent of Expiring Leases........ $ 39,349 $ 131,377 $ 675,670 $ 61,459 $ 217,783 $1,614,521
Percentage of Total Annualized Base Rent....... 1.33% 4.45% 22.87% 2.08% 7.37% 54.66%
Number of Leases Expiring...................... 2 3 3 2 2 1

BRISTOL PLAZA
Square Footage of Expiring Leases.............. 1,565 3,909 23,874 14,027 12,113 10,527
Percentage of Total Leased Sq. Ft.............. 2.37% 5.92% 36.16% 21.25% 18.35% 15.95%
Annualized Base Rent of Expiring Leases........ $ 22,800 $ 91,442 $ 470,786 $ 221,947 $ 187,246 $ 200,820
Percentage of Total Annualized Base Rent....... 1.91% 7.65% 39.39% 18.57% 15.67% 16.80%
Number of Leases Expiring...................... 1 3 6 3 5 1

SKYVIEW CENTER
Square Footage of Expiring Leases.............. 4,878 26,259 22,447 14,481 16,989 20,939 95,753
Percentage of Total Leased Sq. Ft.............. 1.45% 7.79% 6.66% 4.30% 5.04% 6.21% 28.42%
Annualized Base Rent of Expiring Leases........ $ 83,556 $ 452,873 $ 355,775 $ 209,263 $ 217,936 $ 314,404 $1,886,193
Percentage of Total Annualized Base Rent....... 1.46% 7.90% 6.21% 3.65% 3.80% 5.49% 32.92%
Number of Leases Expiring...................... 3 9 11 8 4 4 2

THE NEW WILSHIRE
Square Footage of Expiring Leases.............. 24,056 25,219 28,415 6,652 25,452
Percentage of Total Leased Sq. Ft.............. 14.15% 14.84% 16.72% 3.91% 14.98%
Annualized Base Rent of Expiring Leases........ $ 338,570 $ 527,241 $ 724,442 $ 119,830 $ 564,201
Percentage of Total Annualized Base Rent....... 9.79% 15.25% 20.95% 3.47% 16.32%
Number of Leases Expiring...................... 4 11 7 3 3

5601 LINDERO CANYON
Square Footage of Expiring Leases.............. 105,830
Percentage of Total Leased Sq. Ft.............. 100.00%
Annualized Base Rent of Expiring Leases........ $1,180,498
Percentage of Total Annualized Base Rent....... 100.00%
Number of Leases Expiring...................... 2

<CAPTION>
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 2008 2010 TOTAL

- ----------------------------------------------- --------- --------- --------- --------- --------- --------- ---------

<S> <C> <C> <C> <C> <C> <C> <C>
400 CORPORATE POINTE
Square Footage of Expiring Leases.............. 13,696 148,379

Percentage of Total Leased Sq. Ft.............. 9.23% 100%

Annualized Base Rent of Expiring Leases........ $ 213,658 $2,953,817

Percentage of Total Annualized Base Rent....... 7.23% 100%

Number of Leases Expiring...................... 1 14

BRISTOL PLAZA
Square Footage of Expiring Leases.............. 66,015

Percentage of Total Leased Sq. Ft.............. 100%

Annualized Base Rent of Expiring Leases........ $1,195,041

Percentage of Total Annualized Base Rent....... 100%

Number of Leases Expiring...................... 19

SKYVIEW CENTER
Square Footage of Expiring Leases.............. 34,603 40,089 34,145 26,334 336,917

Percentage of Total Leased Sq. Ft.............. 10.27% 11.90% 10.13% 7.82% 100%

Annualized Base Rent of Expiring Leases........ $ 651,495 $ 486,983 $ 446,617 $ 624,816 $5,729,911

Percentage of Total Annualized Base Rent....... 11.37% 8.50% 7.79% 10.90% 100%

Number of Leases Expiring...................... 3 2 1 2 49

THE NEW WILSHIRE
Square Footage of Expiring Leases.............. 12,513 47,652 169,959

Percentage of Total Leased Sq. Ft.............. 7.36% 28.04% 100%

Annualized Base Rent of Expiring Leases........ $ 240,250 $ 943,510 $3,458,044

Percentage of Total Annualized Base Rent....... 6.95% 27.28% 100%

Number of Leases Expiring...................... 2 1 31

5601 LINDERO CANYON
Square Footage of Expiring Leases.............. 105,830

Percentage of Total Leased Sq. Ft.............. 100%

Annualized Base Rent of Expiring Leases........ $1,180,498

Percentage of Total Annualized Base Rent....... 100%

Number of Leases Expiring...................... 2

</TABLE>

- ----------------------------------
(1) Represents lease expirations data from August 1, 1996 to December 31, 1996.

64
<PAGE>
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002
- --------------------------------------------- --------- --------- --------- --------- --------- --------- ---------

<S> <C> <C> <C> <C> <C> <C> <C>
CALABASAS COMMERCE CENTER
Square Footage of Expiring Leases............ 9,128 59,477 4,413 18,249 11,770 10,841
Percentage of Total Leased Sq. Ft............ 7.41% 48.31% 3.58% 14.82% 9.56% 8.81%
Annualized Base Rent of Expiring Leases...... $ 228,930 $ 863,606 $ 110,798 $ 325,385 $ 196,357 $ 208,147
Percentage of Total Annualized Base Rent..... 10.85% 40.92% 5.25% 15.42% 9.30% 9.86%
Number of Leases Expiring.................... 1 2 1 3 2 1

WOODLAND HILLS FINANCIAL CENTER
Square Footage of Expiring Leases............ 13,903 14,718 39,969 33,534 37,245 33,454
Percentage of Total Leased Sq. Ft............ 6.89% 7.29% 19.80% 16.61% 18.45% 16.57%
Annualized Base Rent of Expiring Leases...... $ 266,048 $ 327,937 $ 875,336 $ 703,753 $ 946,244 $ 684,216
Percentage of Total Annualized Base Rent..... 5.91% 7.29% 19.45% 15.64% 21.02% 15.20%
Number of Leases Expiring.................... 6 9 12 13 10 6

16000 VENTURA BLVD.
Square Footage of Expiring Leases............ 12,374 45,342 29,564 35,411 3,478 20,783
Percentage of Total Leased Sq. Ft............ 8.42% 30.85% 20.12% 24.10% 2.37% 14.14%
Annualized Base Rent of Expiring Leases...... $ 294,056 $1,062,848 $ 576,922 $ 561,993 $ 63,710 $ 410,569
Percentage of Total Annualized Base Rent..... 9.90% 35.78% 19.42% 18.92% 2.15% 13.82%
Number of Leases Expiring.................... 5 10 8 8 2 6

425 WEST BROADWAY
Square Footage of Expiring Leases............ 5,749 22,259 29,540 4,308 6,780
Percentage of Total Leased Sq. Ft............ 8.38% 32.43% 43.04% 6.28% 9.88%
Annualized Base Rent of Expiring Leases...... $ 106,546 $ 434,241 $ 573,892 $ 90,468 $ 123,209
Percentage of Total Annualized Base Rent..... 8.02% 32.69% 43.20% 6.81% 9.28%
Number of Leases Expiring.................... 2 4 4 1 2

303 GLENOAKS
Square Footage of Expiring Leases............ 739 2,700 8,570 5,418 35,045 54,527 51,708
Percentage of Total Leased Sq. Ft............ 0.43% 1.58% 5.01% 3.17% 20.51% 31.91% 30.26%
Annualized Base Rent of Expiring Leases...... $ 8,868 $ 55,053 $ 192,508 $ 105,280 $ 708,116 $1,164,262 $ 992,794
Percentage of Total Annualized Base Rent..... 0.26% 1.58% 5.54% 3.03% 20.37% 33.49% 28.55%
Number of Leases Expiring.................... 1 1 3 2 7 5 1

<CAPTION>
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006 2008 2010 TOTAL
- --------------------------------------------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CALABASAS COMMERCE CENTER
Square Footage of Expiring Leases............ 9,243 123,121
Percentage of Total Leased Sq. Ft............ 7.51% 100%

Annualized Base Rent of Expiring Leases...... $ 177,466 $2,110,689
Percentage of Total Annualized Base Rent..... 8.41% 100%

Number of Leases Expiring.................... 1 11
WOODLAND HILLS FINANCIAL CENTER
Square Footage of Expiring Leases............ 19,600 489 8,983 201,895
Percentage of Total Leased Sq. Ft............ 9.71% 0.24% 4.45% 100%

Annualized Base Rent of Expiring Leases...... $ 505,680 $ 36,600 $ 155,226 $4,501,040
Percentage of Total Annualized Base Rent..... 11.23% 0.81% 3.45% 100%

Number of Leases Expiring.................... 1 1 1 59
16000 VENTURA BLVD.
Square Footage of Expiring Leases............ 146,952
Percentage of Total Leased Sq. Ft............ 100%

Annualized Base Rent of Expiring Leases...... $2,970,098
Percentage of Total Annualized Base Rent..... 100%

Number of Leases Expiring.................... 39
425 WEST BROADWAY
Square Footage of Expiring Leases............ 68,636
Percentage of Total Leased Sq. Ft............ 100%

Annualized Base Rent of Expiring Leases...... $1,328,356
Percentage of Total Annualized Base Rent..... 100%

Number of Leases Expiring.................... 13
303 GLENOAKS
Square Footage of Expiring Leases............ 1,039 11,142 170,888
Percentage of Total Leased Sq. Ft............ 0.61% 6.52% 100%

Annualized Base Rent of Expiring Leases...... $ 19,949 $ 229,971 $3,476,801
Percentage of Total Annualized Base Rent..... 0.57% 6.61% 100%

Number of Leases Expiring.................... 1 1 22
</TABLE>

- ----------------------------------

(1) Represents lease expiration data from August 1, 1996 to December 31, 1996.

65
<PAGE>
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002 2003
- ------------------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
70 SOUTH LAKE
Square Footage of Expiring Leases.......... 8,394 31,886 40,054 1,150
Percentage of Total Leased Sq. Ft.......... 10.30% 39.13% 49.16% 1.41%
Annualized Base Rent of Expiring Leases.... $ 151,092 $ 736,461 $ 783,166 $ 24,150
Percentage of Total Annualized Base Rent... 8.91% 43.45% 46.21% 1.42%
Number of Leases Expiring.................. 1 4 4 1

4811 AIRPORT PLAZA DRIVE
Square Footage of Expiring Leases..........
Percentage of Total Leased Sq. Ft..........
Annualized Base Rent of Expiring Leases....
Percentage of Total Annualized Base Rent...
Number of Leases Expiring..................

4900/10 AIRPORT PLAZA DRIVE
Square Footage of Expiring Leases..........
Percentage of Total Leased Sq. Ft..........
Annualized Base Rent of Expiring Leases....
Percentage of Total Annualized Base Rent...
Number of Leases Expiring..................

5000 EAST SPRING
Square Footage of Expiring Leases.......... 13,269 4,843 2,877 29,199 49,931 23,521 6,654 13,588
Percentage of Total Leased Sq. Ft.......... 9.06% 3.31% 1.96% 19.94% 34.10% 16.06% 4.54% 9.28%
Annualized Base Rent of Expiring Leases.... $ 289,048 $ 113,326 $ 51,786 $ 600,554 $ 948,059 $ 311,328 $ 128,555 $ 255,998
Percentage of Total Annualized Base Rent... 10.52% 4.13% 1.88% 21.86% 34.51% 11.33% 4.68% 9.32%
Number of Leases Expiring.................. 4 1 2 5 6 5 1 1

100 WEST BROADWAY
Square Footage of Expiring Leases.......... 1,725 8,147 17,012 8,434 4,806 17,222 47,184 20,385
Percentage of Total Leased Sq. Ft.......... 1.00% 4.72% 9.86% 4.89% 2.79% 9.98% 27.35% 11.82%
Annualized Base Rent of Expiring Leases.... $ 26,910 $ 231,712 $ 278,539 $ 140,105 $ 70,104 $ 270,081 $ 829,892 $ 463,465
Percentage of Total Annualized Base Rent... 0.76% 6.58% 7.91% 3.98% 1.99% 7.67% 23.56% 13.16%
Number of Leases Expiring.................. 1 2 5 5 2 3 3 2

<CAPTION>
YEAR OF LEASE EXPIRATION 2004 2005 2006 2008 2010 TOTAL
- ------------------------------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
70 SOUTH LAKE
Square Footage of Expiring Leases.......... 81,484
Percentage of Total Leased Sq. Ft.......... 100%
Annualized Base Rent of Expiring Leases.... $1,694,869
Percentage of Total Annualized Base Rent... 100%
Number of Leases Expiring.................. 10
4811 AIRPORT PLAZA DRIVE
Square Footage of Expiring Leases.......... 121,610 121,610
Percentage of Total Leased Sq. Ft.......... 100.00% 100%
Annualized Base Rent of Expiring Leases.... $1,050,710 $1,050,710
Percentage of Total Annualized Base Rent... 100.00% 100%
Number of Leases Expiring.................. 1 1
4900/10 AIRPORT PLAZA DRIVE
Square Footage of Expiring Leases.......... 150,403 150,403
Percentage of Total Leased Sq. Ft.......... 100.00% 100%
Annualized Base Rent of Expiring Leases.... $1,173,143 $1,173,143
Percentage of Total Annualized Base Rent... 100.00% 100%
Number of Leases Expiring.................. 1 1
5000 EAST SPRING
Square Footage of Expiring Leases.......... 2,532 146,414
Percentage of Total Leased Sq. Ft.......... 1.73% 100%
Annualized Base Rent of Expiring Leases.... $ 48,614 $2,747,268
Percentage of Total Annualized Base Rent... 1.77% 100%
Number of Leases Expiring.................. 1 26
100 WEST BROADWAY
Square Footage of Expiring Leases.......... 37,494 3,352 6,730 172,491
Percentage of Total Leased Sq. Ft.......... 21.74% 1.94% 3.90% 100%
Annualized Base Rent of Expiring Leases.... $1,034,834 $ 60,336 $ 117,000 $3,522,978
Percentage of Total Annualized Base Rent... 29.37% 1.71% 3.32% 100%
Number of Leases Expiring.................. 1 1 1 26
</TABLE>

- ----------------------------------

(1) Represents lease expirations data from August 1, 1996 to December 31, 1996.

66
<PAGE>
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1996(1) 1997 1998 1999 2000 2001 2002 2003
- ---------------------------------------- --------- --------- --------- --------- ---------- --------- ---------- ---------

<S> <C> <C> <C> <C> <C> <C> <C> <C>
12501 EAST IMPERIAL HIGHWAY
Square Footage of Expiring Leases....... 27,913 63,772 23,986
Percentage of Total Leased Sq. Ft....... 24.13% 55.13% 20.74%
Annualized Base Rent of Expiring
Leases................................. $ 497,410 $ 993,778 $ 390,593
Percentage of Total Annualized Base
Rent................................... 26.43% 52.81% 20.76%
Number of Leases Expiring............... 1 1 2

5832 BOLSA AVENUE
Square Footage of Expiring Leases....... 49,355
Percentage of Total Leased Sq. Ft....... 100.00%
Annualized Base Rent of Expiring
Leases................................. $ 658,830
Percentage of Total Annualized Base
Rent................................... 100.00%
Number of Leases Expiring............... 1

ANAHEIM CITY CENTRE
Square Footage of Expiring Leases....... 4,732 56,397 48,768 12,477 32,373
Percentage of Total Leased Sq. Ft....... 2.90% 34.59% 29.91% 7.65% 19.85%
Annualized Base Rent of Expiring
Leases................................. $ 79,480 $ 730,269 $ 777,623 $ 212,144 $ 408,922
Percentage of Total Annualized Base
Rent................................... 3.23% 29.71% 31.64% 8.63% 16.64%
Number of Leases Expiring............... 2 2 4 2 2

IMPERIAL BANK TOWER
Square Footage of Expiring Leases....... 21,682 35,159 28,457 15,702 43,243 34,053 73,527 35,498
Percentage of Total Leased Sq. Ft....... 4.88% 7.91% 6.40% 3.53% 9.73% 7.66% 16.55% 7.99%
Annualized Base Rent of Expiring
Leases................................. $ 421,572 $1,133,019 $ 475,210 $ 253,268 $ 723,785 $ 522,359 $1,361,766 $ 666,911
Percentage of Total Annualized Base
Rent................................... 5.18% 13.93% 5.84% 3.11% 8.90% 6.42% 16.74% 8.20%
Number of Leases Expiring............... 4 6 5 3 4 4 5 3

PORTFOLIO TOTALS
Square Footage of Expiring Leases....... 128,941 336,683 440,697 429,673 484,401 310,952 588,165 132,428
Percentage of Total Leased Sq. Ft....... 3.59% 9.38% 12.27% 11.97% 13.49% 8.66% 16.38% 3.69%
Annualized Base Rent of Expiring
Leases................................. $2,514,118 $7,851,326 $8,561,271 $7,971,955 $10,290,028 $5,650,999 $10,600,639 $2,711,251
Percentage of Total Annualized Base
Rent................................... 3.74% 11.69% 12.75% 11.87% 15.33% 8.42% 15.79% 4.04%
Number of Leases Expiring............... 53 93 101 89 79 55 24 13

<CAPTION>
YEAR OF LEASE EXPIRATION 2004 2005 2006 2008 2010 TOTAL
- ---------------------------------------- --------- --------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
12501 EAST IMPERIAL HIGHWAY
Square Footage of Expiring Leases....... 115,671
Percentage of Total Leased Sq. Ft....... 100%
Annualized Base Rent of Expiring
Leases................................. $1,881,781
Percentage of Total Annualized Base
Rent................................... 100%
Number of Leases Expiring............... 4
5832 BOLSA AVENUE
Square Footage of Expiring Leases....... 49,355
Percentage of Total Leased Sq. Ft....... 100%
Annualized Base Rent of Expiring
Leases................................. $ 658,830
Percentage of Total Annualized Base
Rent................................... 100%
Number of Leases Expiring............... 1
ANAHEIM CITY CENTRE
Square Footage of Expiring Leases....... 8,310 163,057
Percentage of Total Leased Sq. Ft....... 5.10% 100%
Annualized Base Rent of Expiring
Leases................................. $ 249,300 $2,457,738
Percentage of Total Annualized Base
Rent................................... 10.14% 100%
Number of Leases Expiring............... 1 13
IMPERIAL BANK TOWER
Square Footage of Expiring Leases....... 78,838 56,641 21,508 444,308
Percentage of Total Leased Sq. Ft....... 17.74% 12.75% 4.84% 100%
Annualized Base Rent of Expiring
Leases................................. $1,155,718 $1,004,432 $ 418,116 $8,136,156
Percentage of Total Annualized Base
Rent................................... 14.20% 12.35% 5.14% 100%
Number of Leases Expiring............... 3 3 2 42
PORTFOLIO TOTALS
Square Footage of Expiring Leases....... 195,075 416,441 91,279 28,238 7,404 3,590,377
Percentage of Total Leased Sq. Ft....... 5.43% 11.60% 2.54% 0.79% 0.21% 100%
Annualized Base Rent of Expiring
Leases................................. $3,594,665 $4,708,227 $1,972,852 $ 535,116 $ 179,400 $67,141,847
Percentage of Total Annualized Base
Rent................................... 5.35% 7.01% 2.94% 0.80% 0.27% 100%
Number of Leases Expiring............... 13 14 5 3 1 543
</TABLE>

- ----------------------------------------

(1) Represents lease expirations data from August 1, 1996 to December 31, 1996.

67
<PAGE>
TENANT RETENTION AND EXPANSIONS

The Company believes that its relationship with tenants contributes in large
part to its success in attracting, expanding and retaining its quality and
diverse tenant base. The Company strives to develop and maintain good
relationships with tenants through its active management style and by being
responsive to individual tenants' needs. The Company services tenants primarily
through its on site, professional management staff. Management believes that
tenant satisfaction fosters long-term tenant relationships and creates expansion
opportunities, which, in turn, enhance the Company's ability to maintain and
increase occupancy rates. The Company's success in this area is demonstrated in
part by the number of existing tenants which have re-leased their space, leased
additional space to support their expansion needs or moved to other space within
the Company's portfolio. During 1994 and 1995, the Company expanded 10 tenants
by a total of over 12,400 square feet. Recently, the Company was able to expand
and move California Pizza Kitchen from approximately 17,224 square feet in
Westwood Terrace to approximately 21,579 square feet in Skyview Center. Another
example of the Company's ability to capitalize on relocation and expansion
opportunities is the relocation of Stanford Business Systems from 400 Corporate
Pointe to expanded space with its new parent company at Skyview Center, which
also allowed the Company to accommodate a 7,311 square foot expansion at 400
Corporate Pointe by Pepperdine University, the largest tenant at 400 Corporate
Pointe.

HISTORICAL LEASE RENEWALS

The following table sets forth certain historical information regarding
tenants at the Properties who renewed an existing lease at or prior to the
expiration of the existing lease:

<TABLE>
<CAPTION>
TOTAL/
JAN. 1 WEIGHTED
TO AUGUST 1 AVERAGE
1993 1994 1995 1996 1993-1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Number of leases expired during calendar year........... 3 28 33 47 111
Number of lease renewals................................ 3 20 21 39 83
Percentage of leases renewed............................ 100% 71% 64% 83% 75%
Aggregate rentable square footage of expiring leases.... 2,870 112,539 99,577 134,520 349,506
Aggregate rentable square footage of lease renewals..... 2,870 92,057 75,213 116,699 286,839
Percentage of expiring rentable square footage
renewed............................................... 100% 82% 76% 87% 82%
</TABLE>

<PAGE>
HISTORICAL TENANT IMPROVEMENTS AND LEASING COMMISSIONS

The following table sets forth certain historical information regarding
Tenant Improvement ("TI") and Leasing Commission ("LC") costs for tenants at the
Properties. Based on square footage, the majority of leases signed relate to
Renewals and Re-tenanted Space (72%), while leases signed relating to Shell
Space comprised 28%. Shell Space remaining at the Properties is less than 2% of
the aggregate rentable square footage of the Properties.

<TABLE>
<CAPTION>
JANUARY 1 TOTAL/
TO AUGUST 1 WEIGHTED
1993 1994 1995 1996 AVERAGE
--------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
RENEWALS
Number of Leases 3 20 20(i) 39 82
Square Feet of Renewals 2,870 92,057 57,181(i) 116,699 268,807
TI per square foot.............................. $ 3.58 $ 2.23 $ 4.67(i) $ 5.46 $ 4.19
LC per square foot.............................. $ 0.09 $ 3.44 $ 1.11(i) $ 2.38 $ 2.37
--------- --------- --------- ----------- -----------
Total TI and LC per square foot............. $ 3.67 $ 5.67 $ 5.78(i) $ 7.84 $ 6.56
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
RE-TENANTED SPACE (II)
Number of Leases 7 13 47 33 100
Square Feet of Re-tenanted Space 9,910 22,265 108,430 81,367 221,972
TI per square foot.............................. $ 2.22 $ 9.04 $ 9.82 $ 7.04 $ 8.38
LC per square foot.............................. $ 0.31 $ 2.72 $ 3.05 $ 3.36 $ 3.12
--------- --------- --------- ----------- -----------
Total TI and LC per square foot............. $ 2.53 $11.76 $12.87 $10.70 $11.50
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
SHELL SPACE (III)
Number of Leases 5 8 10 17 40
Square Feet of Shell Space 17,389 16,130 53,876 100,308 187,703
TI per square foot.............................. $31.22 $36.25 $26.29 $21.17 $24.87
LC per square foot.............................. $ 3.65 $ 7.19 $ 4.83 $ 6.17 $ 5.64
--------- --------- --------- ----------- -----------
Total TI and LC per square foot............. $34.87 $43.44 $31.12 $27.34 $30.51
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
TOTAL
Number of Leases 15 41 77 89 222
Square Feet 30,169 130,452 219,487 298,374 678,482
TI per square foot.............................. $19.06 $ 7.60 $12.52 $11.17 $11.30
LC per square foot.............................. $ 2.22 $ 3.78 $ 2.98 $4.01 $ 3.54
--------- --------- --------- ----------- -----------
Total TI and LC per square foot............. $21.28 $11.38 $15.50 $15.18 $14.84
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
</TABLE>

- ------------------------
(i)
Excludes tenant improvement and leasing commission costs relating to one
lease signed at Anaheim City Centre for which the Company incurred
substantial renovation costs in connection with a full floor retrofit.

(ii)
Does not include Shell Space build-out for 187,703 square feet.

(iii)
Shell Space remaining at the Properties is less than 2% of the aggregate
rentable space footage of the Properties.

69
<PAGE>
HISTORICAL CAPITAL EXPENDITURES
The following table sets forth information relating to the historical
capital expenditures of the Company's Properties:

<TABLE>
<CAPTION>
1993 1994 1995
--------- ---------- ----------
<S> <C> <C> <C>
Number of Properties (1)..................................................... 3 8 10
Number of Square Feet........................................................ 529,673 1,129,855 2,634,057
Capital Expenditures Incurred................................................ $ 9,470 $ 51,592 $ 200,848
Weighted Average Capital Expenditures per square foot (2).................... $ 0.02 $ 0.06 $ 0.15
Three Year Weighted Average per square foot.................................. $ 0.10
</TABLE>

- ------------------------
(1) Represents the actual number of Properties for which capital expenditures
were incurred during the year.

(2) For those Properties owned less than a full year, computes the per square
foot amount by annualizing the capital expenditures amount to a pro forma
full year cost.

HISTORICAL OCCUPANCY

The table below sets forth the weighted average occupancy rates, based on
square feet leased, of the Properties owned by the Company at the indicated
dates:

<TABLE>
<CAPTION>
APPROXIMATE AGGREGATE PERCENTAGE OF RENTABLE
DATE RENTABLE SQUARE FEET SQUARE FEET OCCUPIED
- ------------------------------------------------ --------------------- -------------------------
<S> <C> <C>
December 31, 1993............................... 529,673 84%
June 30, 1994................................... 635,503 87%
December 31, 1994............................... 1,129,855 82%
June 30, 1995................................... 1,408,468 84%
December 31, 1995............................... 2,634,057 88%
June 30, 1996................................... 3,547,107 89%
</TABLE>

OFFICE SUBMARKETS AND PROPERTY INFORMATION

The Company owns and operates 24 Properties comprising approximately 4.0
million rentable square feet in suburban Los Angeles County, Orange County and
San Diego County. The following map shows the relative geographic location of
Los Angeles County, Orange County and San Diego County.

Map depicting Los Angeles County, Orange County and San Diego County.

70
<PAGE>
The Properties are located in a number of office market sectors and
submarkets within these counties as outlined in the table below:

PROPERTY MARKET SECTORS AND SUBMARKETS
PROPERTY STATISTICS
AT DECEMBER 31, 1995

<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE
TOTAL OF
APPROXIMATE PORTFOLIO ADJUSTED PORTFOLIO
NUMBER OF RENTABLE RENTABLE BASE RENT ANNUALIZED
PROPERTIES SQUARE FEET SQUARE FEET ($000S) BASE RENT
---------- ----------- ------------- ---------- -----------
<S> <C> <C> <C> <C> <C>
LOS ANGELES COUNTY
LOS ANGELES WEST OFFICE MARKET SECTOR
West Los Angeles and Adjacent Submarkets...... 6 905,821 22.4% 18,372 27.4%
Culver City/Century Blvd. Submarkets.......... 3 640,287 15.9 9,879 14.7
LOS ANGELES NORTH OFFICE MARKET SECTOR
Simi/Conejo Valley Submarkets................. 2 228,951 5.7 3,291 4.9
West and Central San Fernando Valley
Submarkets................................... 2 399,796 9.9 7,471 11.1
East San Fernando Valley/Tri Cities
Submarkets................................... 3 347,171 8.6 6,500 9.7
LOS ANGELES SOUTH OFFICE MARKET SECTOR
Long Beach and Cerritos/Norwalk Submarkets.... 5 749,273 18.6 10,376 15.5

ORANGE COUNTY
Anaheim Submarket............................. 1 175,391 4.3 2,458 3.7
Huntington Beach Submarket.................... 1 49,355 1.2 659 1.0

SAN DIEGO COUNTY
Central City (downtown San Diego) Submarket... 1 540,413 13.4 8,136 12.1
--
----------- ----- ---------- -----
TOTAL......................................... 24 4,036,458 100.0% $ 67,142 100.0%
--
--
----------- ----- ---------- -----
----------- ----- ---------- -----
</TABLE>

71
<PAGE>
LOS ANGELES COUNTY OFFICE MARKET AND PROPERTIES

According to the C&W Market Study, the Los Angeles County office market
contained office space inventory of approximately 168 million rentable square
feet which, as of December 31, 1995, had a direct vacancy rate of 18.7%. The Los
Angeles County office market is divided by C&W into the following four sectors:
Los Angeles West, Los Angeles North, Los Angeles South/South Bay and Los Angeles
Central/ Downtown, with each of the sectors in turn composed of numerous
submarkets as illustrated on the map below.

Map of Los Angeles County showing location
of Los Angeles North, Los Angeles West, Los Angeles Central and
Los Angeles South office market sectors.

During 1995, 272,154 square feet of office space was absorbed on a net basis
in the four Los Angeles County sectors inclusive of the Los Angeles
Central/Downtown sector which had net negative absorption of 711,752 square
feet. Excluding the net negative absorption of the Los Angeles Central/Downtown
sector, the remaining three sectors absorbed approximately 984,000 square feet.
The direct vacancy rate for Los Angeles County excluding the Los Angeles
Central/Downtown sector was 17.0% as of December 31, 1995, as compared to 17.3%
in 1994. Set forth below is detailed market information regarding the four
sectors within the Los Angeles County office market:

LOS ANGELES COUNTY
OFFICE MARKET STATISTICS
AT DECEMBER 31, 1995

<TABLE>
<CAPTION>
DIRECT NET WTD. AVG.
NUMBER DIRECT VACANCY ABSORPTION ASKING
MARKET INVENTORY OF BLDGS AVAILABILITIES* RATE YTD 1995 RENTAL RATE
- ---------------------------------------- ----------- -------- --------------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
LOS ANGELES WEST........................ 50,014,880 367 9,289,766 18.6% 419,123 $20.93
LOS ANGELES NORTH....................... 39,355,810 467 5,682,217 14.4% 196,129 $20.80
LOS ANGELES SOUTH/SOUTH BAY............. 27,336,900 240 4,813,583 17.6% 368,654 $18.14
LOS ANGELES CENTRAL/ DOWNTOWN........... 51,544,706 243 11,610,517 22.5% (711,752) $18.44
----------- -------- --------------- ------- ---------- -----------
TOTAL............................... 168,252,296 1,317 31,396,083 18.7% 272,154 $19.56
----------- -------- --------------- ------- ---------- -----------
----------- -------- --------------- ------- ---------- -----------
</TABLE>

- ------------------------
Source: C&W Market Study

* Does not include currently leased but available sublease space.

72
<PAGE>
LOS ANGELES WEST OFFICE MARKET SECTOR

The Los Angeles West office market sector contains several distinct office
submarkets, including, among others, the Beverly Hills, Century City, Westwood,
West Los Angeles, Marina Area, Culver City, LAX, Hollywood and West Hollywood
office submarkets. According to the C&W Market Study, there are approximately
50,014,880 square feet of office space inventory in the Los Angeles West office
market sector which comprises approximately 31% of the office space inventory in
Los Angeles County. As of December 31, 1995, the direct vacancy rate in the Los
Angeles West office market sector was 18.6%. Collectively, the office submarkets
within the Los Angeles West office market sector had weighted average asking
rents of $20.93 per square foot as of December 31, 1995.

Map of Los Angeles West office market sector.

<TABLE>
<S> <C>
1. 9665 WILSHIRE 6. 400 CORPORATE POINTE
2. BEVERLY ATRIUM 7. BRISTOL PLAZA
3. CENTURY PARK CENTER 8. SKYVIEW CENTER
4. WESTWOOD TERRACE 9. THE NEW WILSHIRE
5. 1950 SAWTELLE
</TABLE>

Several of the office submarkets in the Los Angeles West office market
sector, including Westwood, Beverly Hills, and Century City are considered among
the most prestigious and desirable office locations in Los Angeles County and
command premium rental rates, with average annual asking rents, as of December
31, 1995, of $28.32, $25.08 and $23.28 per square foot, respectively. The Golden
Triangle area of Beverly Hills has quoted annual asking rents ranging from
$19.80 to $42.00 with a predominant range of $24.00 to $36.00 per square foot.
The tenant base of office space users in the Los Angeles West office market
sector is primarily composed of firms in the entertainment, advertising,
professional and financial services, legal, accounting, insurance and real
estate industries.

The Company owns nine Properties located in the Los Angeles West office
market sector that collectively contain approximately 1,546,108 net rentable
square feet which represents approximately 38% of the total rentable square
footage of the Properties. The Properties are located in the office submarkets
of Beverly Hills, Century City, Westwood, West Los Angeles, Culver
City/Westchester, LAX and the 6000 Block of Wilshire Boulevard (a segment of the
Miracle Mile office submarket adjacent to Beverly Hills). No new development of
mid-rise or high-rise properties is permitted in the Beverly Hills office
submarket as the City of Beverly Hills has enacted zoning limitations that
impose a three-story height limit for all new commercial development. Set forth
below is detailed submarket information regarding the Los Angeles West sector:

73
<PAGE>
LOS ANGELES WEST
OFFICE SUBMARKET STATISTICS
AT DECEMBER 31, 1995

<TABLE>
<CAPTION>
DIRECT NET WTD. AVG.
NUMBER DIRECT VACANCY ABSORPTION ASKING
SUBMARKET INVENTORY OF BLDGS AVAILABILITIES(1) RATE YTD 1995 RENTAL RATE
- ---------------------------------------- ---------- -------- ----------------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
BEVERLY HILLS/CENTURY CITY.............. 14,351,740 89 2,340,143 16.3% 317,263 $24.12
Beverly Hills....................... 5,499,685 63 1,100,405 20.0% 143,812 $25.08
Century City........................ 8,852,055 26 1,239,738 14.0% 173,451 $23.28
WESTWOOD/WEST LOS ANGELES............... 17,304,111 139 2,924,088 16.9% 67,888 $23.88
Westwood............................ 4,084,735 21 579,241 14.2% 172,706 $28.32
West Los Angeles.................... 3,798,977 34 821,453 21.6%(2) (120,211) $18.84
Brentwood........................... 3,254,337 23 399,587 12.3% 148,907 $24.84
Santa Monica........................ 6,005,655 58 1,087,661 18.1% (141,470) $25.20
Pacific Palisades................... 160,407 3 36,146 22.5% 7,956 $20.64
MARINA AREA/CULVER CITY/ LAX............ 8,959,927 63 1,912,170 21.3% 223,275 $14.85
Culver City/Westchester............. 3,643,649 32 537,237 14.7% 52,844 $17.28
Los Angeles Airport (LAX)........... 4,211,847 20 1,232,354 29.3%(3) 77,496 $13.20
Marina Del Rey/Venice/MarVista...... 1,104,431 11 142,579 12.9% 92,935 $19.92
PARK MILE/WEST HOLLYWOOD................ 9,399,102 76 2,113,365 22.5% (189,303) $18.80
Miracle Mile........................ 4,444,716 20 1,140,562 25.7% (242,985) $19.47
Park Mile........................... 1,079,452 11 252,993 23.4% 23,958 $16.23
Hollywood........................... 2,576,475 30 488,686 19.0% 43,438 $15.72
West Hollywood...................... 1,298,459 15 231,124 17.8% (13,714) $24.84
TOTAL............................... 50,014,880 367 9,289,766 18.6% 419,123 $20.93
</TABLE>

- ------------------------
Source: C&W Market Study

(1) Does not include currently leased but available sublease space.

(2) The marginally higher vacancy in this office submarket is partially
attributable to the loss of a major tenant (Aurora, formerly Executive Life)
which previously occupied over 300,000 square feet in two properties.

(3) The 29.3% direct vacancy rate for the LAX office submarket compared to other
office submarkets in the Los Angeles West office market sector reflects the
fact that of the 20 buildings in such submarket, only seven buildings
comprising 22.2% of such submarket's rentable square feet are classified in
the C&W Market Study as Class A office properties (all of which were
completed between 1981 and 1987), with the remaining 13 properties
classified as Class B or Class C properties. The Class B and Class C
properties do not directly compete with the newer and higher quality Skyview
Centers I and II and the other Class A properties in the LAX office
submarket. The direct vacancy level for Class A properties in the LAX office
submarket was 25.0% as of December 31, 1995.

PROPERTIES LOCATED IN THE BEVERLY HILLS OFFICE SUBMARKET:

9665 WILSHIRE. 9665 Wilshire is a ten-story office tower located in the
Golden Triangle of Beverly Hills completed in 1972 and substantially renovated
in 1992 and 1993. The Property contains 158,684 rentable square feet and 444
parking spaces. As of August 1, 1996 the Property was 95.1% leased with an
average Annualized Base Rent per leased square foot of $31.45. According to the
C&W Market Study, as of April 30, 1996, the 9665 Wilshire Boulevard Peer Group
(the term "Peer Group" as used herein with respect to each of the Properties has
the meaning set forth in the Glossary) contained approximately 1,807,958 square
feet of office space inventory in 17 buildings and had weighted average annual
asking rental rates ranging from $27.14 to $29.49 per square foot with a direct
vacancy rate of 28.7%. Primary tenants at this Property include Sotheby's, Inc.
(17,222 square feet), Merrill Lynch (15,363 square feet), Smith Barney (15,321
square feet), Gruntal & Co. (15,321 square feet), J.B. Oxford Holdings (15,321
square feet) and Sutro & Co. (11,437 square feet). Aggregate square footage of
leases expiring in 1996, 1997, and 1998 represent 0.8%, 22.3% and 5.5% of the
Property's occupied square footage, respectively.

74
<PAGE>
BEVERLY ATRIUM. Beverly Atrium is a 3-story office complex completed in
1989 of steel frame construction with a stone and brick exterior. The Property
contains 61,314 rentable square feet and 245 parking spaces. The Property is
located immediately south of the Golden Triangle area. As of August 1, 1996, the
Property was 100% leased with an average Annualized Base Rent per leased square
foot of $22.83. According to the C&W Market Study, as of April 30, 1996, the
Beverly Atrium Peer Group contained approximately 1,807,958 square feet of
office space inventory in 17 buildings and had weighted average annual asking
rental rates ranging from $27.14 to $29.49 per square foot with a direct vacancy
rate of 28.7%. Primary tenants at this Property include GE Commercial Finance
(18,489 square feet), Islands Restaurant (7,404 square feet) and Unigem
International (10,281 square feet). Aggregate square footage of leases expiring
in 1996, 1997, and 1998 represent 7.8%, 4.3% and 21.2% of the Property's
occupied square footage, respectively.

PROPERTY LOCATED IN THE CENTURY CITY OFFICE SUBMARKET:

CENTURY PARK CENTER. Century Park Center contains a 15-story office tower
and an adjacent three story office building completed in 1972. The Property
contains approximately 243,404 rentable square feet with 674 parking spaces. The
building was renovated during 1994, which included redesigning the full-length
glass facade, refilming all of the curtain wall spandrels and installing tenemic
metal to highlight the exterior window frames. In addition, the building's
security and energy management systems and facilities were upgraded, lighting
was retrofitted, and all common areas were renovated. As of August 1, 1996, the
Property was 83.2% leased with an average Annualized Base Rent per leased square
foot of $21.38. According to the C&W Market Study, as of April 30, 1996, the
Century Park Center Peer Group contained approximately 3,649,937 square feet of
office space inventory in 11 buildings and had weighted average annual asking
rental rates ranging from $20.64 to $24.96 per square foot with a direct vacancy
rate of 21.8%. The Property is primarily tenanted with numerous professional and
medical related tenants ranging predominantly in size from 1,000 square feet to
3,000 square feet. The largest tenant at this Property is NME Hospitals (24,069
square feet) which occupies approximately 10% of the rentable square feet.
Aggregate square footage of leases expiring in 1996, 1997, and 1998 represent
6.6%, 12.2% and 13.9% of the Property's occupied square footage, respectively.

PROPERTY LOCATED IN THE WESTWOOD OFFICE SUBMARKET:

WESTWOOD TERRACE. Westwood Terrace is a 5-story office building completed
in 1988 of steel frame construction with a white precast concrete panel and
blue-green continuous ribbon glass exterior with layered terraces on each story.
The Property contains approximately 135,943 rentable square feet and 450 parking
spaces. As of August 1, 1996, the Property was 82.3% leased with an average
Annualized Base Rent per leased square foot of $25.30. According to the C&W
Market Study, as of April 30, 1996, the Westwood Terrace Peer Group contained
approximately 1,004,079 square feet of office space inventory in six buildings
and had weighted average annual asking rental rates ranging from $22.50 to
$31.87 per square foot with a direct vacancy rate of 11.2%. Primary tenants at
this Property include The Hearst Corporation (25,731 square feet) and Blue Cross
of California (15,261 square feet). Aggregate square footage of leases expiring
in 1996, 1997, and 1998 represent 0.2%, 5.6% and 6.4% of the Property's occupied
square footage, respectively.

PROPERTY LOCATED IN THE WEST LOS ANGELES OFFICE SUBMARKET:

1950 SAWTELLE. 1950 Sawtelle is a three-story, office building completed in
1988, of steel frame construction with a brick exterior. The Property, which was
renovated in 1995, contains approximately 103,772 rentable square feet and has
254 parking spaces. As of August 1, 1996, the Property was 77.5% leased with an
average Annualized Base Rent per leased square foot of $20.02. According to the
C&W Market Study, as of April 30, 1996, the 1950 Sawtelle Peer Group contained
approximately 1,814,375 square feet of office space inventory in 10 buildings
and had weighted average annual asking rental rates ranging from $17.74 to
$19.09 per square foot with a direct vacancy rate of 25.8%. The Property's
tenant base is largely comprised of numerous small and medium sized service,
medical and other professional tenants who occupy tenant suites that
predominantly range in size from 1,500 square feet to 3,000 square feet. The
largest tenant at this Property, Integrated Decisions (10,635 square feet),
occupies approximately 10% of the Property's aggregate rentable square feet.
Aggregate square footage of leases expiring in 1996, 1997, and 1998 represent
5.2%, 30.4% and 49.8% of the Property's occupied square footage, respectively.

75
<PAGE>
PROPERTIES LOCATED IN THE CULVER CITY/WESTCHESTER OFFICE SUBMARKET:

400 CORPORATE POINTE. 400 Corporate Pointe is an eight-story office
building completed in 1987 of steel-framed construction with a dark glass and
concrete panel exterior. The Property contains approximately 164,598 rentable
square feet with 588 parking spaces. The Property is within 1/2 mile of the
I-405 and I-90 Freeways and La Cienega Boulevard, a major north-south artery. As
of August 1, 1996, the Property was 90.2% leased with an average Annualized Base
Rent per leased square foot of $19.91. According to the C&W Market Study, as of
April 30, 1996, the 400 Corporate Pointe Peer Group contained approximately
1,792,632 square feet of office space inventory in 14 buildings and had weighted
average annual asking rental rates ranging from $17.22 to $17.81 per square foot
with a direct vacancy rate of 26.9%. Primary tenants at this Property include
Pepperdine University (89,752 square feet) which is subject to a triple net
lease expiring in the year 2002, and Crawford & Co. (20,347). Aggregate square
footage of leases expiring in 1996, 1997, and 1998 represent 1.3%, 6.0% and
15.9% of the Property's occupied square footage, respectively.

BRISTOL PLAZA. Bristol Plaza is a four-story office building completed in
1982 of steel-frame construction with a brushed aluminum and reflective glass
exterior. The Property contains 84,014 rentable square feet and 320 parking
spaces. The Property is within 1/2 mile of the I-405 and I-90 Freeways and La
Cienega Boulevard, a major north-south artery. As of August 1, 1996, the
Property was 78.6% leased with an average Annualized Base Rent per leased square
foot of $18.10. According to the C&W Market Study, as of April 30, 1996, the
Bristol Plaza Peer Group contained approximately 1,873,463 square feet of office
space inventory in 14 buildings and had weighted average annual asking rental
rates ranging from $17.24 to $17.83 per square foot with a direct vacancy rate
of 25.6%. Primary tenants at this Property include Bristol A/R (12,163 square
feet) and the State of California (10,527 square feet). No other tenant
comprises more than 8% of the Property's aggregate square footage. Aggregate
square footage of leases expiring in 1996, 1997, and 1998 represent 2.4%, 5.9%
and 36.2% of the Property's occupied square footage, respectively.

PROPERTY LOCATED IN THE LAX OFFICE SUBMARKET:

SKYVIEW CENTER. Skyview Center consists of two 11-and 12-story office
towers completed in 1981 and 1987, respectively, of steel frame construction
with a reflective glass and painted metal mullions exterior. The buildings were
renovated in 1995. The Property contains approximately 391,675 rentable square
feet with 393 parking spaces. Adjacent to the Property is a 14.4 acre surface
parking lot containing approximately 2,000 parking spaces that are utilized as
short and long term airport parking. Each building comprises approximately 50%
of the total rentable area. As of August 1, 1996, the Property was 86.0% leased
with an average Annualized Base Rent per leased square foot of $17.01. According
to the C&W Market Study, as of April 30, 1996, the Skyview Center Peer Group
contained approximately 2,449,177 square feet of office space inventory in 10
buildings located along the Century Boulevard and in El Segundo with weighted
average annual asking rental rates ranging from $17.70 to $20.75 per square foot
with a direct vacancy rate of 13.8%. Primary tenants at this Property include
Logicon, Inc. (74,174 square feet), Learning Tree International (34,145 square
feet) and American Tours International (32,586 square feet). Aggregate square
footage of leases expiring in 1996, 1997, and 1998 represent 1.4%, 7.8% and 6.7%
of the Property's occupied square footage, respectively.

76
<PAGE>
PROPERTY LOCATED IN THE 6000 BLOCK OF WILSHIRE BOULEVARD OFFICE MICROMARKET(1):

THE NEW WILSHIRE. The New Wilshire is a 16-story office tower completed in
1986 of steel frame construction with a tempered vision and spandrel glass
curtain wall exterior. The Property contains approximately 202,704 rentable
square feet and 398 parking spaces. As of August 1, 1996 the Property was
83.9% leased with an average Annualized Base Rent per leased square foot of
$20.35. According to the C&W Market Study, as of April 30, 1996, The New
Wilshire Peer Group contained approximately 3,098,886 square feet of office
space inventory in seven buildings and had weighted average annual asking
rental rates ranging from $20.04 to $23.90 per square foot with a direct
vacancy rate of 19.9%. Primary tenants at this Property include Grey
Advertising (50,152 square feet), Muse Cordero (15,551 square feet) and
Hallmark Entertainment (12,453 square feet). Aggregate square footage of
leases expiring in 1996, 1997, and 1998 represent 14.2%, 14.8% and 16.7% of
the Property's occupied square footage, respectively.
- ------------------------
(1) The Company defines the geographical location where this Property is
located as a separate office micromarket. While the C&W Market Study
defines this location as a segment of the Miracle Mile office submarket,
the Company believes that this location functions as a separate office
micromarket which is independent of the overall Miracle Mile office
submarket. The Company further believes that the 6000 Block of Wilshire
Boulevard office micromarket is primarily influenced by, and is a
peripheral or satellite micromarket of, the adjacent Beverly Hills office
submarket.

LOS ANGELES NORTH OFFICE MARKET SECTOR

The Los Angeles North office market sector, as defined by the C&W Market
Study, encompasses four market areas located primarily in the San Fernando
Valley, Santa Clarita Valley, and Conejo Valley areas of Los Angeles County, and
portions of southeastern Ventura County. The four primary markets in the Los
Angeles North office market sector include: Simi/Conejo Valley, West San
Fernando Valley, Central San Fernando Valley, and East San Fernando Valley/Tri
Cities, with each of these office markets in turn composed of several office
submarkets.

Map of Los Angeles North office market sector.

<TABLE>
<S> <C>
10. 5601 LINDERO CANYON 14. 425 WEST BROADWAY
11. CALABASAS COMMERCE CENTER 15. 303 GLENOAKS
12. WOODLAND HILLS FINANCIAL
CENTER 16. 70 SOUTH LAKE
13. 16000 VENTURA BLVD.
</TABLE>

The distinct office submarkets within the Los Angeles North sector are
indicated in the table below. According to the C&W Market Study, there are
approximately 39,400,000 square feet of office space inventory in the Los
Angeles North office market sector which comprise approximately 23% of the
office space inventory in Los Angeles County. As of December 31, 1995 the
collective submarkets within the Los Angeles North office market sector had a
direct vacancy rate of 14.4%, with weighted average annual asking rents of
$20.80 per square foot.

The Company owns seven Properties located in the Los Angeles North office
market sector that collectively contain approximately 975,918 rentable square
feet which represents approximately 24% of the total rentable square footage of
the Properties. The Properties are located in the office submarkets of Westlake
Village, Calabasas, Woodland Hills, Encino, Glendale, Burbank City Center and
Pasadena. Set forth below is detailed submarket information regarding the Los
Angeles North sector.

77
<PAGE>
LOS ANGELES NORTH
OFFICE SUBMARKET STATISTICS
AT DECEMBER 31, 1995

<TABLE>
<CAPTION>
DIRECT NET WTD. AVG.
NUMBER DIRECT VACANCY ABSORPTION ASKING
SUBMARKET INVENTORY OF BLDGS AVAILABILITIES(1) RATE YTD 1995 RENTAL RATE
- ------------------------------ ---------- -------- ------------------ ------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
SIMI/CONEJO VALLEY............ 4,537,562 87 510,332 11.2% 243,948 $18.36
Simi Valley................. 196,326 6 28,401 14.5% 32,363 $14.64
Thousand Oaks/Newbury
Park....................... 701,607 14 239,761 34.2% (597) $19.80
Westlake Village............ 1,735,399 32 149,247 8.6% 176,534 $17.16
Agoura Hills................ 497,672 10 40,588 8.2% (7,747) $15.48
Calabasas................... 1,406,558 25 52,335 3.7% 43,395 $19.32
WEST SAN FERNANDO VALLEY...... 8,487,933 96 1,404,681 16.5% 209,106 $21.60
Northridge/Reseda........... 266,000 5 14,408 5.4% 110,394 $16.92
Tarzana..................... 508,929 10 95,615 18.8% 11,998 $19.08
Canoga Park/Chatsworth...... 1,316,333 24 279,918 21.3% (109,904) $16.32
Warner Center............... 5,325,021 39 887,559 16.7% 164,899 $23.88
Woodland Hills.............. 1,071,650 18 127,181 11.9% 31,719 $18.84
CENTRAL SAN FERNANDO VALLEY... 8,525,170 111 1,528,178 17.9% (181,315) $19.68
Encino...................... 3,910,209 39 627,549 16.0% (90,048) $21.36
Sherman Oaks................ 2,264,136 27 429,972 19.0% (7,327) $20.40
Van Nuys.................... 1,442,363 27 293,101 20.3% (38,627) $17.16
Park City/Granada/Mission
Hills...................... 386,090 7 64,839 16.8% (27,904) $15.84
Valencia/Newhall............ 522,372 11 112,717 21.6% (17,409) $17.04
EAST SAN FERNANDO VALLEY/TRI-
CITIES....................... 17,805,145 173 2,239,026 12.6% (75,610) $21.61
Burbank-Media District...... 2,043,350 15 31,937 1.6% 87,406 $28.43
Burbank-City Center......... 1,710,879 23 242,563 14.2% (26,003) $18.83
Glendale.................... 5,052,071 44 799,750 15.8% (151,308)(2) $23.16
Pasadena.................... 5,542,296 57 732,964 13.2% (105,482) $21.47
Pasadena East............... 574,421 6 206,210 35.9% (4,418) $18.69
Studio City/Universal
City....................... 1,763,500 15 79,999 4.5% 56,744 $25.20
North Hollywood............. 1,118,628 13 145,603 13.0% 67,451 $19.08
---------- --- ---------- ------- ------------ -----------
TOTAL..................... 39,355,810 467 5,682,217 14.4% 196,129 $20.80
---------- --- ---------- ------- ------------ -----------
---------- --- ---------- ------- ------------ -----------
</TABLE>

- ------------------------
Source: C&W Market Study

(1) Does not include currently leased but available sublease space.

(2) The negative absorption in the Glendale office submarket during 1995
primarily reflects the activity of one building, where the Bank of America
vacated approximately 200,000 square feet, and is in contrast to the
positive absorption experienced in 1993 and 1994. During the first quarter
of 1996 two major entertainment tenants, Walt Disney and Turner Animation,
entered into leases in the Glendale office submarket of 150,000 square feet
and 70,000 square feet, respectively, both of which are located in the
premises vacated in 1995 by Bank of America.

PROPERTY LOCATED IN THE WESTLAKE VILLAGE OFFICE SUBMARKET:

5601 LINDERO CANYON. 5601 Lindero Canyon is a two-story office building
completed in 1989 of tilt up concrete construction with a white concrete and
black glass facade. The Property contains approximately 105,830 rentable
square feet and 415 parking spaces. As of August 1, 1996, the building was
100% triple net leased with an average Annualized Base Rate per leased
square foot of $11.15. According to the C&W Market Study, as of April 30,
1996, the 5601 Lindero Canyon Peer Group

78
<PAGE>
contained approximately 630,451 square feet of office space inventory in 9
buildings and had a weighted average annual asking rental rate of $19.03 per
square foot with a direct vacancy rate of 4.7%. The Property has two
tenants, Hewlett-Packard (53,700 square feet) and Candle Corporation (52,130
square feet), both of which operate under triple net leases that expire in
2002.

PROPERTY LOCATED IN THE CALABASAS OFFICE SUBMARKET:

CALABASAS COMMERCE CENTER. Calabasas Commerce Center is comprised of four,
one- and two-story office buildings completed in 1990. The Property contains
approximately 123,121 rentable square feet and 464 surface parking spaces.
As of August 1, 1996, the Property was 100% leased with an average
Annualized Base Rent per leased square foot of $17.14. According to the C&W
Market Study, as of April 30, 1996, the Calabasas Commerce Center Peer Group
contained approximately 371,634 square feet of office space inventory in
five buildings and had a weighted average annual asking rental rate of
$19.16 per square foot with a direct vacancy rate of 5.4%. Primary tenants
at this Property include the City of Calabasas (9,243 square feet), Wyle
Laboratories (10,841 square feet), Novalogic Inc.(13,932 square feet), Fort
Dearborn Life Insurance (9,128 square feet) and Breath Assure (8,613 square
feet). One tenant, XIRCOM, Inc. leases an entire building comprising
approximately 46,321 square feet. XIRCOM, Inc. vacated the property in 1994
in order to relocate to another office building that could accommodate its
expansion requirements. To date, XIRCOM, Inc. has continued to meet all of
its rental payment obligations under its lease, which expires in 1997, and
is currently attempting to sublease its space. Aggregate square footage of
leases expiring in 1996, 1997 and 1998 represent 7.4%, 48.3% and 3.6% of the
Property's occupied square footage, respectively.

PROPERTY LOCATED IN THE WOODLAND HILLS OFFICE SUBMARKET:

WOODLAND HILLS FINANCIAL CENTER. Woodland Hills Financial Center is a
12-story office tower with an adjacent four-story office building completed
in 1972 and renovated in 1995. The Property contains approximately 224,955
rentable square feet and 510 parking spaces. As of August 1, 1996, the
building was 89.8% leased with an average Annualized Base Rent per leased
square foot of $22.29. According to the C&W Market Study, as of April 30,
1996, the Woodland Hills Financial Center Peer Group contained approximately
854,004 square feet of office space inventory in six buildings and had
weighted average annual asking rental rates ranging from $22.50 to $22.97
per square foot with a direct vacancy rate of 10.0%. Primary tenants at this
Property include Presidential Mortgage (19,600 square feet), Dennison,
Bennet & Press (14,386 square feet), Pacific Homes (13,989 square feet) and
Wells Fargo Bank (8,983 square feet). Aggregate square footage of leases
expiring in 1996, 1997 and 1998 represent 6.9%, 7.3%, and 19.8% of the
Property's occupied square footage, respectively.

PROPERTY LOCATED IN THE ENCINO OFFICE SUBMARKET:

16000 VENTURA BOULEVARD. 16000 Ventura Boulevard is a 12-story office tower
completed in 1980 of steel reinforced concrete with a blue glass exterior.
The building was renovated in 1996. The Property contains approximately
174,841 rentable square feet and 630 parking spaces. As of August 1, 1996,
the building was 84.1% leased with an average Annualized Base Rent per
leased square foot of $20.21. According to the C&W Market Study, as of April
30, 1996, the 16000 Ventura Boulevard Peer Group contained approximately
2,418,206 square feet of office space inventory in 12 buildings and had
weighted average annual asking rental rates ranging from $20.21 to $22.45
per square foot with a direct vacancy rate of 15.0%. Primary tenants at this
Property include Barrister Executive Suites (16,142 square feet),
Information Technology (8,638 square feet), Greenberg & Bass (8,814 square
feet) and Cohen & Steinbrech (8,199 square feet). Aggregate square footage
of leases expiring in 1996, 1997 and 1998 represent 8.4%, 30.9% and 20.1% of
the Property's occupied square footage, respectively.

PROPERTY LOCATED IN THE GLENDALE OFFICE SUBMARKET:

425 WEST BROADWAY. 425 West Broadway is a four story office building
completed in 1984 of steel reinforced concrete with a concrete panel and
reflective glass exterior. The building was renovated in 1996. The Property
contains approximately 71,589 rentable square feet with 205 parking spaces.
As of August 1, 1996, the Property was 95.9% leased with an average
Annualized Base Rent per leased square foot of $19.35. According to the C&W
Market Study, as of April 30, 1996, the 425 West Broadway Peer

79
<PAGE>
Group contained approximately 409,078 square feet of office space inventory
in four buildings and had weighted average annual asking rental rates
ranging from $19.78 to $20.43 per square foot with a direct vacancy rate of
11.0%. Primary tenants at this Property include Glendale News (18,189 square
feet) and TIB Insurance (14,075 square feet). No leases expire in 1996 and
the aggregate square footage of leases expiring in 1997 and 1998 represent
8.4% and 32.4% of the Property's occupied square footage, respectively.

PROPERTY LOCATED IN THE BURBANK CITY CENTER OFFICE SUBMARKET:

303 GLENOAKS. 303 Glenoaks is a 10-story office tower completed in 1983 of
steel frame construction with a black glass curtain wall exterior. The
Property, which was renovated in 1996, contains approximately 175,449
rentable square feet with 526 parking spaces. As of August 1, 1996, the
Property was 97.4% leased with an average Annualized Base Rent per leased
square foot of $20.35. According to the C&W Market Study, as of April 30,
1996, the 303 Glenoaks Peer Group contained approximately 452,850 square
feet of office space inventory in 6 buildings and had weighted average
annual asking rental rates ranging from $21.28 to $21.85 per square foot
with a direct vacancy rate of 17.5%. Primary tenants at this Property
include DiC Entertainment (51,708 square feet), Insurance Company of the
West (23,450 square feet), New Wave Entertainment (18,639 square feet), NCI
(11,142 square feet) and Lockheed Finance Corporation (10,319 square feet).
Aggregate square footage of leases expiring in 1996, 1997 and 1998 represent
0.4%, 1.6% and 5.0% of the Property's occupied square footage, respectively.

PROPERTY LOCATED IN THE PASADENA OFFICE SUBMARKET:

70 SOUTH LAKE. 70 South Lake is an 11-story office tower completed in 1982
of steel frame construction with concrete panelled curtain wall, aluminum
spandrel and glass exterior. The building was renovated in 1994. The
Property contains approximately 100,133 rentable square feet and 329 parking
spaces. As of August 1, 1996, the Property was 81.4% leased with an average
Annualized Base Rent per leased square foot of $20.80. According to the C&W
Market Study, as of April 30, 1996, the 70 South Lake Peer Group contained
approximately 1,651,840 square feet of office space inventory in eight
buildings and had weighted average annual asking rental rates ranging from
$23.04 to $25.71 per square foot with a direct vacancy rate of 9.2%. Primary
tenants at this Property include Countrywide Funding Corporation (16,726
square feet), Union Bank (14,326 square feet) and Smith Barney (9,415 square
feet). No leases expire in 1996 or 1997 and 10.3% of the Property's occupied
square footage expires in 1998.

80
<PAGE>
LOS ANGELES SOUTH OFFICE MARKET SECTOR

The Los Angeles South office market sector, as defined by the C&W Market
Study, encompasses three market areas located primarily in the South Bay area of
Los Angeles County and is the smallest office market sector in Los Angeles
County. The Los Angeles South office market sector is composed of three primary
office markets: El Segundo, Torrance and Long Beach, with each of the office
markets in turn composed of a number of submarkets.

[LOGO]

<TABLE>
<S> <C>
17. 4811 AIRPORT PLAZA DRIVE 20. 100 WEST BROADWAY
18. 4900/10 AIRPORT PLAZA 21. 12501 EAST IMPERIAL
DRIVE HIGHWAY
19. 5000 EAST SPRING
</TABLE>

The Los Angeles South office market sector contains nine distinct office
submarkets as outlined in the table below. According to the C&W Market Study,
there are approximately 27,336,900 square feet of office space inventory in the
Los Angeles South office market sector which comprise approximately 16% of the
office space inventory in Los Angeles County. As of December 31, 1995 the
collective office submarkets within the Los Angeles South office market sector
had a direct vacancy rate of 17.6%, with weighted average annual asking rents of
$18.14 per square foot.

The Company owns five Properties located in the Los Angeles South office
market sector that collectively contain approximately 749,273 rentable square
feet, which represents approximately 19% of the total rentable square footage of
the Properties. The Properties within the Los Angeles South office market sector
are all located in the Long Beach office market. The Long Beach office market is
located south of El Segundo and Torrance and north of Huntington Beach. The Long
Beach office market is composed of five office submarkets: Long Beach Airport/
I-405 Freeway Corridor, North Long Beach, Downtown Long Beach, Long Beach
Marina, and Cerritos/Norwalk. The Long Beach market is one of the more
prestigious office markets in the Los Angeles South office market sector.
According to the C&W Market Study, as of December 31, 1995 the Long Beach office
market had an office space inventory of approximately 10,500,161 square feet in
89 buildings with a direct vacancy rate of 17.6% and weighted average annual
asking rents of $18.64, down from a direct vacancy rate of 17.3% with weighted
average annual asking rents of $19.20 per square foot as of December 31, 1994.
Set forth below is detailed submarket information regarding the Los Angeles
South sector:

81
<PAGE>
LOS ANGELES SOUTH
OFFICE SUBMARKET STATISTICS
AT DECEMBER 31, 1995

- ------------------------
Source: C&W Market Study
(1) Does not include currently leased but available sublease space.

PROPERTIES LOCATED IN THE LONG BEACH AIRPORT/I-405 FREEWAY CORRIDOR OFFICE
SUBMARKET:

4811 AIRPORT PLAZA DRIVE. 4811 Airport Plaza Drive is a six-story office
building completed in 1987 of steel frame construction and red granite and
reflective glass exterior. The building was renovated in 1995. The Property
contains approximately 121,610 rentable square feet with 707 parking spaces
and is subject to a ground lease with the City of Long Beach which expires
in 2055. As of August 1, 1996, the building was 100% triple net leased to
McDonnell Douglas at an Annualized Base Rent per leased square foot of
$8.64. According to the C&W Market Study, as of April 30, 1996, the 4811
Airport Plaza Drive Peer Group contained approximately 1,230,855 square feet
of office space inventory in 9 buildings and had weighted average annual
asking rental rates ranging from $22.81 to $26.26 per square foot with a
direct vacancy rate of 4.9%. The McDonnell Douglas lease expires in 2005.

4900 AND 4910 AIRPORT PLAZA DRIVE. 4900 and 4910 Airport Plaza Drive are
two three-story, connected office buildings completed in 1987 of steel frame
construction with granite and reflective glass exteriors. The buildings were
renovated in 1995. The Property contains approximately 150,403 rentable
square feet. The Property has the use of 520 parking spaces and is subject
to a ground lease with the City of Long Beach which expires in 2055. As of
August 1, 1996, the Property was 100% triple net leased to McDonnell Douglas
at an Annualized Base Rent per leased square foot of $7.80. According to the
C&W Market Study, as of April 30, 1996, the 4900 and 4910 Airport Plaza
Drive Peer Group contained approximately 1,202,062 square feet of office
space inventory in nine buildings and had weighted average annual asking
rental rates ranging from $22.81 to $26.26 per square foot with a direct
vacancy rate of 5.1%. The McDonnell Douglas lease expires in 2005.

5000 EAST SPRING. 5000 East Spring is an eight-story office building
completed in 1989 of steel framed construction with a travertine marble and
reflective glass exterior. The building was renovated in 1995. The Property
contains 163,358 net rentable square feet and 2,504 parking spaces. The
Property is subject to a long term ground lease with the City of Long Beach
(master lessor) which expires in 2032. As of August 1, 1996, the building
was 89.6% leased with an average Annualized Base Rent per leased square foot
of $18.76. According to the C&W Market Study, as of April 30, 1996, the 5000
East Spring Peer Group contained approximately 1,189,107 square feet of
office space inventory in nine buildings and had weighted average annual
asking rental rates ranging from $22.74 to $26.60 per square foot with a
direct vacancy rate of 4.6%. Primary tenants at this Property include PSI
Engineers, Inc. (13,896 square feet), Medical Eye Service (13,588 square
feet), Coast Federal Bank (11,646 square feet), Auto Insurance Specialists
(10,583 square feet), Sea-Land Service (9,112 square feet), Payless
Shoesource

82
<PAGE>
(9,680 square feet) and IDS Financial Services (7,486 square feet).
Aggregate square footage of leases expiring in 1996, 1997 and 1998 represent
9.1%, 3.3% and 2.0% of the Property's occupied square footage, respectively.

PROPERTY LOCATED IN THE DOWNTOWN LONG BEACH OFFICE SUBMARKET:

100 WEST BROADWAY. 100 West Broadway is a six-story office building
completed in 1987 of steel frame construction with a concrete and reflective
glass exterior. The building was renovated in 1996. The Property contains
approximately 191,727 rentable square feet and 645 parking spaces. As of
August 1, 1996 the Property was 90.0% leased with an average Annualized Base
Rent per leased square foot of $20.42. According to the C&W Market Study, as
of April 30, 1996, the 100 West Broadway Peer Group contained approximately
1,561,223 square feet of office space inventory in 10 buildings and had a
weighted average annual asking rental rates ranging from $18.77 to $20.32
per square foot with a direct vacancy rate of 34.4%. Primary tenants at this
Property include Earth Technology Corporation (44,122 square feet), Inchcape
(28,925 square feet), the General Services Administration (16,738 square
feet) and Pacific Maritime (15,338 square feet). Aggregate square footage of
leases expiring in 1996, 1997 and 1998 represent 1.0%, 4.7% and 9.9% of the
Property's occupied square footage, respectively.

PROPERTY LOCATED IN THE CERRITOS/NORWALK OFFICE SUBMARKET:

12501 EAST IMPERIAL HIGHWAY. 12501 East Imperial Highway is a six-story
office building completed in 1978. The building was renovated in 1994. The
Property contains approximately 122,175 rentable square feet and 515 parking
spaces. As of August 1, 1996, the Property was 94.7% leased with an average
Annualized Base Rent per leased square foot of $16.27. According to the C&W
Market Study, as of April 30, 1996, the 12501 East Imperial Highway Peer
Group contained approximately 1,889,992 square feet of office space
inventory in 16 buildings and had a weighted average annual asking rental
rates ranging from $18.32 to $18.47 per square foot with a direct vacancy
rate of 18.5%. Primary tenants at this Property include GTE California
(63,772 square feet), Mead Corporation (27,913 square feet) and IBM (20,620
square feet). No leases expire in 1996 and 1997 and 24.1% of the Property's
occupied square footage expires in 1998.

83
<PAGE>
ORANGE COUNTY OFFICE MARKET AND PROPERTIES

The Orange County office market contains several distinct office markets,
including, among others, the West County, Tri-Freeway Area, Central County,
Greater Airport Area, South County, and North County office markets, which are
in turn, composed of numerous submarkets. According to the C&W Market Study,
there are approximately 52,668,350 square feet of office space inventory in the
Orange County office market. As of December 31, 1995 the collective submarkets
within the Orange County office market had a direct vacancy rate of 15.5%, with
weighted average annual asking rents of $17.28 per square foot.

[LOGO]

22. 5832 BOLSA AVENUE, HUNTINGTON BEACH
23. ANAHEIM CITY CENTRE

The Orange County office market is currently in the midst of a recovery from
the recent real estate recession. Direct vacancy levels, which were in excess of
19.5% in 1991, have declined to 15.5% as of December 31, 1995. The Orange County
office market is driven by the Greater Airport Area office market which
comprises approximately 48% of the office space inventory in Orange County. The
Company owns two Properties in Orange County in the Huntington Beach and Anaheim
Stadium Area office submarkets that collectively contain 224,746 rentable square
feet representing approximately 6% of the total rentable square footage of the
Properties. Set forth below is detailed market information regarding the Orange
County office market.

84
<PAGE>
ORANGE COUNTY
OFFICE MARKET AND SUBMARKET STATISTICS
AT DECEMBER 31, 1995

<TABLE>
<CAPTION>
DIRECT NET WTD. AVG.
NUMBER DIRECT VACANCY ABSORPTION ASKING
SUBMARKET INVENTORY OF BLDGS AVAILABILITIES(1) RATE YTD 1995 RENTAL RATE
- ------------------------------ ---------- -------- ------------------ ------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
WEST COUNTY................... 3,901,199 64 696,122 17.8% (93,203) $15.12
Seal Beach.................. 295,019 4 17,646 6.0% 4,077 $24.96
Westminster................. 205,700 4 29,638 14.4% (11,482) $15.00
Huntington Beach............ 1,014,519 18 219,035 21.6% 21,131 $15.48
Fountain Valley............. 549,912 9 80,134 14.6% (11,189) $15.84
Garden Grove................ 893,809 12 213,168 23.8% (54,632) $14.28
Los Alamitos/Stanton........ 266,502 5 85,580 32.1% (20,233) $12.36
Cypress..................... 675,738 12 50,921 7.5% (20,875) $17.04
TRI-FREEWAY AREA.............. 9,523,392 107 2,023,109 21.2% 85,793 $16.56
Parkcenter Area............. 2,598,284 41 444,188 17.1% 72,936 $14.40
Anaheim Stadium Area........ 2,472,409 36 414,147 16.8% (45,422) $15.48
The City Area............... 2,291,191 15 627,817 27.4% 9,677 $17.16
Main Place Area............. 2,161,508 15 536,957 24.8% 48,602 $18.36
CENTRAL COUNTY................ 5,656,141 102 1,049,902 18.6% 8,065 $14.04
GREATER AIRPORT AREA.......... 24,992,997 252 3,333,179 13.3% 235,485 $19.32
SOUTH COUNTY.................. 4,979,988 100 595,528 12.0% 71,259 $18.12
NORTH COUNTY.................. 3,614,633 54 442,671 12.2% 27,940 $16.20
---------- --- ---------- ------- ------------ -----------
TOTAL..................... 52,668,350 679 8,140,511 15.5% 335,339 $17.28
---------- --- ---------- ------- ------------ -----------
---------- --- ---------- ------- ------------ -----------
</TABLE>

- ------------------------
Source: C&W Market Study
* Does not include currently leased but available sublease space.

PROPERTY LOCATED IN THE HUNTINGTON BEACH OFFICE SUBMARKET:

5832 BOLSA AVENUE. 5832 Bolsa Avenue is a two-story office building
completed in 1985 of steel frame construction with a concrete and glass
panel exterior. The Property contains approximately 49,355 rentable square
feet and 380 parking spaces. As of August 1, 1996, the building was 100%
leased to GTE California at an Annualized Base Rent per leased square foot
of $13.35. According to the C&W Market Study, as of April 30, 1996, the 5832
Bolsa Avenue Peer Group contained approximately 860,277 square feet of
office space inventory in 12 buildings and had weighted average annual
asking rental rates ranging from $15.68 to $16.43 per square foot with a
direct vacancy rate of 21.8%. The GTE California lease expires on April 30,
2000.

PROPERTY LOCATED IN THE ANAHEIM STADIUM AREA OFFICE SUBMARKET:

ANAHEIM CITY CENTRE. Anaheim City Centre is a 10-story office tower
completed in 1986 of steel reinforced concrete construction with a red
travertine marble and black reflective glass exterior. The building was
renovated in 1991. The Property contains approximately 175,391 rentable
square feet and 679 parking spaces. The parking structure is subject to a
long term ground lease with the City of Anaheim that expires in 2034. As of
August 1, 1996, the Property was 93.0% leased with an average Annualized
Base Rent per leased square foot of $15.07. According to the C&W Market
Study, as of April 30, 1996, the Anaheim City Centre Peer Group contained
approximately 3,165,279 square feet of office space inventory in 10
buildings and had weighted average annual asking rental rates ranging from
$19.26 to $19.32 per square foot with a direct vacancy rate of 12.1%.
Primary tenants at this Property include Intracorp (54,179 square feet),
Computer Learning (22,042 square feet) and McGladrey Pullen (18,032 square
feet). No leases expire in 1996 and the aggregate square footage of leases
expiring in 1997 and 1998 represent 2.9% and 34.6% of the Property's
occupied square footage, respectively.

85
<PAGE>
SAN DIEGO COUNTY OFFICE MARKET AND PROPERTY

The San Diego County office market contains eight distinct office
submarkets, including South Bay, Central City (which includes Downtown San
Diego), East County, Mission Valley/Kearny Mesa, La Jolla/ Morena, North City
(which includes the University Towne Center), the I-15 Corridor and the North
Coast. According to the C&W Market Study, there is approximately 58,325,238
square feet of office space inventory in the San Diego County office market. As
of December 31, 1995 the collective submarkets within the San Diego County
office market had a direct vacancy rate of 14.6%. The San Diego County office
market is recovering from an office market recession, having experienced five
straight years of positive absorption and increasing occupancy, with the direct
vacancy rate decreasing 4.8% over this period from the 1991 direct vacancy rate
of 19.4%.

[LOGO]

24. IMPERIAL BANK TOWER

The two focal points of the San Diego County office market are Downtown San
Diego, which is considered to be the primary component of the Central City
office submarket, and University Towne Center which is the most significant
component of the North City office submarket. Each of the office submarkets in
San Diego County has developed along the path of the San Diego County's freeway
system. Each office submarket's building type and tenant appeal has generally
corresponded to its proximity to Downtown San Diego and University Towne Center,
with predominantly mid-rise and high-rise office buildings within a 15 mile
radius of Downtown San Diego and low rise office buildings in business parks in
the outlying submarkets. Historically, most development moved east and north
from these focal points. The Downtown San

86
<PAGE>
Diego portion of the Central City office submarket is considered to be the
primary office submarket in San Diego County, with its main competition being
the La Jolla and North City (University Towne Center) office submarkets. Set
forth below is detailed submarket information regarding the San Diego County
submarket:

SAN DIEGO COUNTY
OFFICE SUBMARKET STATISTICS
AT DECEMBER 31, 1995

<TABLE>
<CAPTION>
DIRECT
DIRECT VACANCY NET ABSORPTION
SUBMARKET INVENTORY AVAILABILITIES* RATE YTD 1995
- ------------------------------------------------------------ ---------- --------------- ------- --------------
<S> <C> <C> <C> <C>
SAN DIEGO MARKET
South Bay................................................. 2,176,580 195,528 9.0% (41,224)
Central City (includes Downtown San Diego)................ 16,059,577 2,689,327 16.7% 270,856
East County............................................... 2,143,941 284,809 13.3% 11,990
Mission Valley/Kearny Mesa................................ 12,558,657 2,160,842 17.2% (38,105)
La Jolla/Morena........................................... 2,400,630 334,533 13.9% 87,849
North City (University Towne Center)...................... 12,801,915 1,584,187 12.4% 98,473
I-15 Corridor............................................. 4,768,885 669,841 14.0% 25,512
North Coast............................................... 5,415,053 622,373 11.5% 73,735
---------- --------------- ------- -------
TOTAL................................................... 58,325,238 8,541,440 14.6% 489,086
---------- --------------- ------- -------
---------- --------------- ------- -------
</TABLE>

- ------------------------
Source: C&W Market Study
* Does not include currently leased but available sublease space.

PROPERTY LOCATED IN THE DOWNTOWN SAN DIEGO PORTION OF THE CENTRAL CITY OFFICE
SUBMARKET:

IMPERIAL BANK TOWER. Imperial Bank Tower is a 24-story office building
completed in 1982 and renovated in 1996. As of March 31, 1996, Imperial Bank
Tower had a book value equal to or greater than 10% of the total assets of
the Company. The Property contains approximately 540,413 rentable square
feet and 382 parking spaces in an adjacent parking structure. The Property
is located in downtown San Diego's financial district approximately 1/2 mile
from Interstate 5. The building is situated on approximately 30,056 square
feet of land and includes a five-story atrium located on a 4,792 square foot
parcel subject to a ground lease expiring in 2069. The Company has an option
to purchase this parcel at fair market value. The adjacent 382-stall parking
garage is situated on a 24,829 square foot parcel subject to a ground lease
expiring in 2076, which may be purchased by the Company after 2032 at fair
market value. Additional parking is provided on a lot east of the building
that is subject to a ground lease expiring in the year 2000. The average
occupancy rate of the building was 89.4%, 89.4%, 85.5%, 81.9% and 83.0% for
the years 1991 to 1995, respectively. The net effective annual rent per
square foot of the building for the same period, from 1991 to 1995, was
$18.26, $15.96, $19.00, $18.76 and $17.72, respectively. As of August 1,
1996, the building was 82.2% leased with an average Annualized Base Rent per
leased square foot of $18.31. According to the C&W Market Study, as of April
30, 1996, the Imperial Bank Tower Peer Group contained approximately
4,087,971 square feet of office space inventory in 11 buildings and had
weighted average annual asking rental rates ranging from $18.53 to $24.89
per square foot with a direct vacancy rate of 11.9%. Primary tenants include
Latham & Watkins (56,425 square feet), Imperial Bank Realty Corp. (38,855
square feet), Merrill Lynch (32,455 square feet), Deloitte & Touche (30,279
square feet), Arthur Anderson & Co. (18,754 square feet) and three agencies
of the United States government. Latham & Watkins, a law firm, is the only
tenant which occupies ten percent or more of the rentable square footage of
the building. Pursuant to the terms of its lease, Latham & Watkins pays
annual base rent of approximately $1.05 million increasing to approximately
$1.33 million in 1999 for the remainder of the lease term which expires in
2004. In addition, Latham & Watkins has two renewal options of five years
each, three options to expand and two termination options exercisable on
December 31, 1998 and May 1, 2001, respectively. Aggregate square footage of
leases expiring in 1996, 1997 and 1998 represent 4.9%, 7.9%, 6.4% of the
Property's occupied square footage, respectively.

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The following table sets forth a schedule of lease expirations as of August
1, 1996 for Imperial Bank Tower, assuming no tenants elect to renew their leases
at their scheduled expirations or elect to terminate their leases prior to their
scheduled expirations:

<TABLE>
<CAPTION>
SQUARE FOOTAGE PERCENTAGE OF ANNUALIZED BASE PERCENTAGE OF
NUMBER OF OF EXPIRING AGGREGATE PORTFOLIO RENT OF EXPIRING AGGREGATE PORTFOLIO
YEAR OF LEASE EXPIRATION LEASES EXPIRING LEASES LEASED SQUARE FEET LEASES ANNUALIZED BASE RENT
- ------------------------ --------------- -------------- ------------------- ------------------- ----------------------
<S> <C> <C> <C> <C> <C>
1996(1)................. 4 21,682 0.60% $ 421,572 0.6%
1997.................... 6 35,159 0.98 1,133,019 1.7
1998.................... 5 28,457 0.79 475,210 0.7
1999.................... 3 15,702 0.44 253,268 0.4
2000.................... 4 43,243 1.20 723,785 1.1
2001.................... 4 34,053 0.95 522,359 0.8
2002.................... 5 73,527 2.05 1,361,766 2.0
2003.................... 3 35,498 0.99 666,911 1.0
2004.................... 3 78,838 2.20 1,155,718 1.7
2005.................... 3 56,641 1.58 1,004,432 1.5
2008 and thereafter..... 2 21,508 0.60 418,116 0.6
--
------- ----- ------------------- -----
TOTAL............... 42 444,308 12.37% $ 8,136,154 12.12%
--
--
------- ----- ------------------- -----
------- ----- ------------------- -----
</TABLE>

- ------------------------
(1) Represents lease expirations data from August 1, 1996 to December 31, 1996.

C&W MARKET STUDY

The C&W Market Study was prepared for the Company by Cushman & Wakefield of
California, Inc., which is a real estate service firm with significant
experience and expertise relating to the Southern California office markets and
the various submarkets therein. The information in the C&W Market Study reflects
data available at December 31, 1995 and does not reflect data or changes
subsequent to that date (except that C&W Peer Group information reflects data
available as of April 30, 1996). The information contained in the C&W Market
Study has been gathered by C&W from sources assumed to be reliable, including
publicly available records. Because records of all transactions are not readily
available, the information contained in the C&W Market Study may not reflect all
transactions occurring in the geographic area discussed in the C&W Market Study.
In addition, transactions that are reported may not be described accurately or
completely in the publicly available records.

In connection with the C&W Market Study, C&W made numerous assumptions with
respect to industry performance, general business and economic conditions, and
other matters. Any estimates or approximations contained therein could
reasonably be subject to different interpretations by other parties. Because
predictions of future events are inherently subject to uncertainty, none of C&W,
the Company or any other person can assume that such predicted rental rates,
absorption, or other events will occur as outlined or predicted in the C&W
Market Study. Reported asking rental rates of properties, Replacement Cost Rents
or estimated replacement costs do not purport to necessarily reflect the rental
rates at which properties may actually be rented, actual rents required to
support new development or the actual cost of replacement. In many instances,
asking rents and actual rental rates differ significantly.

Changes in local, national and international economic conditions will affect
the markets described in the C&W Market Study. Therefore, C&W can give no
assurance that occupancy and absorption levels and rental rates as of the date
of the C&W Market Study will continue or that such occupancy levels and rental
rates will be attained at any time in the future. Forecasts of absorption rates,
rental activity, Replacement Cost Rents and replacement costs are C&W's
estimates as of the date of the C&W Market Study. Actual future market
conditions may differ materially from the forecasts and projections contained
therein.

C&W is a part of a national network of affiliated companies providing real
estate services. As such, from time to time, C&W and its affiliates have
provided and in the future may provide real estate related services, including
brokerage and leasing agent services, to the Company or its principals, or may
represent the Company, its principals or others doing business with the Company.
C&W received compensation of approximately $39,000 from the Company in
connection with C&W's preparation of the C&W Market Study.

88
<PAGE>
COMPETITION

The Company may be competing with other owners and developers that have
greater resources and more experience than the Company. Additionally, the number
of competitive properties in any particular market in which the Company's
Properties are located could have a material adverse effect on both the
Company's ability to lease space at the Properties or any newly-acquired
property and on the rents charged at the Properties. The Company believes that
the Offering, the Credit Facility and its access as a public company to the
capital markets to raise funds during periods when conventional sources of
financing may be unavailable or prohibitively expensive will provide the Company
with substantial competitive advantages. Further, the Company believes that the
number of real estate developers has decreased as a result of the recessionary
market conditions and tight credit markets during the early 1990's as well as
the reluctance on the part of more conventional financing sources to fund
development and acquisition projects.

INSURANCE

The Operating Partnership carries comprehensive liability, fire, extended
coverage and rental loss insurance covering all of the Properties, with policy
specifications and insured limits which the Company believes are adequate and
appropriate under the circumstances. The Operating Partnership also carries
earthquake insurance on all of the Properties. There are, however, certain types
of losses that are not generally insured because they are either uninsurable or
not economically feasible to insure. Should an uninsured loss or a loss in
excess of insured limits occur, the Operating Partnership could lose its capital
invested in the Property, as well as the anticipated future revenues from the
Property and, in the case of debt which is with recourse to the Operating
Partnership, would remain obligated for any mortgage debt or other financial
obligations related to the Property. Any such loss would adversely affect the
Company. Moreover, as a general partner of the Operating Partnership, the
Company will generally be liable for any unsatisfied obligations other than
non-recourse obligations. The Company believes that the Properties are
adequately insured. In addition, in light of the California earthquake risk,
California building codes since the early 1970's have established construction
standards for all newly built and renovated buildings, including office
buildings, the current and strictest construction standards having been adopted
in 1984. Of the 24 Properties, 13 have been built since January 1, 1985 and the
Company believes that all of the Properties were constructed in full compliance
with the applicable standards existing at the time of construction. While
earthquakes have occurred in Southern California, the only loss the Company has
experienced as a result of earthquakes was minor damage to three of its
buildings due to the Northridge earthquake, which resulted in $601,000 of damage
in the year ended December 31, 1994. No assurance can be given that material
losses in excess of insurance proceeds will not occur in the future.

ENVIRONMENTAL REGULATIONS

Under various federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real estate may be
required to investigate and clean up hazardous or toxic substances or petroleum
product releases at such property and may be held liable to a governmental
entity or to third parties for property damage and for investigation and
clean-up costs incurred by such parties in connection with the contamination.
Such laws typically impose clean-up responsibility and liability without regard
to whether the owner knew of or caused the presence of the contaminants, and the
liability under such laws has been interpreted to be joint and several unless
the harm is divisible and there is a reasonable basis for allocation of
responsibility. The costs of investigation, remediation or removal of such
substances may be substantial, and the presence of such substances, or the
failure to properly remediate the contamination on such property, may adversely
affect the owner's ability to sell or rent such property or to borrow using such
property as collateral. Persons who arrange for the disposal or treatment of
hazardous or toxic substances at a disposal or treatment facility also may be
liable for the costs of removal or remediation of a release of hazardous or
toxic substances at such disposal or treatment facility, whether or not such
facility is owned or operated by such person. In addition, some environmental
laws create a lien on the contaminated site in favor of the government for
damages and costs incurred in connection with the contamination. Finally, the
owner of a site may be subject to common law claims by third parties based on
damages and costs resulting from environmental contamination emanating from such
site.

Certain federal, state and local laws, regulations and ordinances govern the
removal, encapsulation or disturbance of ACM when such materials are in poor
condition or in the event of construction, remodeling,

89
<PAGE>
renovation or demolition of a building. Such laws may impose liability for
release of ACM and may provide for third parties to seek recovery from owners or
operators of real properties for personal injury associated with ACM. In
connection with its ownership and operation of the Properties, the Company may
be potentially liable for such costs. ACM has been detected through sampling by
environmental consultants at 70 South Lake, 16000 Ventura Boulevard and 9665
Wilshire. The non-friable ACM was found in certain floor tiles and pipe
wrappings at 16000 Ventura Boulevard and 70 South Lake and in vinyl floor tiles,
carpet mastic, drywall mud/tape, textured ceiling material, core insulation
material and fireproofing at 9665 Wilshire. The non-friable ACM found at these
Properties is not expected to present a risk as long as it continues to be
properly managed. The environmental consultants recommended no further ACM
sampling or removal action at any of the Properties.

In the past two years, independent environmental consultants have conducted
or updated Phase I Assessments at the Properties. These Phase I Assessments have
included, among other things, a visual inspection of the Properties and the
surrounding area and a review of relevant state, federal and historical
documents. No invasive techniques such as soil or groundwater sampling were
performed. The environmental consultants who conducted the Phase I Assessment at
the Imperial Bank Tower recommended that a Phase II study be conducted with
respect to the possible presence of an underground storage tank situated under
the Property's adjacent parking garage, which is leased by the Company. The
Company does not believe that the environmental consultants' findings support
its recommendation and, therefore, has elected not to conduct a Phase II study
at the Imperial Bank Tower. While the Company is not aware of any release of
hazardous materials or environmental contamination at the Property's adjacent
parking garage relating to the possible previous or current presence thereunder
of underground storage tanks, or otherwise, if such a release of environmental
contamination has occurred or were to occur, and the lessor, who has primary
environmental liability as owner of the underlying land, has insufficient
financial resources to satisfy its potential environmental liability or any
indemnification obligations it owes the Company under the Company's lease of the
Property, the Company may incur remediation expenses that could adversely affect
the Company's ability to make expected distributions.

The Company believes that the Properties are in compliance in all material
respects with all federal, state and local laws, ordinances and regulations
regarding hazardous or toxic substances or petroleum products, except as noted
above. The Company has not been notified by any governmental authority, and is
not otherwise aware, of any material noncompliance, liability or claim relating
to hazardous or toxic substances or petroleum products in connection with any of
its present Properties, other than as noted above.

LEGAL PROCEEDINGS

As a result of its acquisition of the Properties, the Company will become a
successor party-in-interest to certain legal proceedings arising in the ordinary
course of business of the Arden Predecessors. The Company does not expect that
these proceedings, in the aggregate, will have a material adverse effect on the
Company.

EMPLOYEES

Upon consummation of the Offering and the Formation Transactions, the
Company will employ approximately 50 persons, including 7 senior officers and
personnel in the areas of acquisition and business development (3), property
management (27), financial services (11) and legal affairs (1).

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<PAGE>
MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The Board of Directors of the Company will be expanded immediately following
the consummation of the Offering to include the director nominees named below,
each of whom has been nominated for election and consented to serve. Upon
election of the director nominees, there will be a majority of directors who are
not employees or affiliates of the Company. Pursuant to the Charter, the Board
of Directors is divided into three classes of directors. The initial terms of
the first, second and third classes will expire in 1997, 1998 and 1999,
respectively. Beginning in 1997, directors of each class will be chosen for
three-year terms upon the expiration of their current terms and each year one
class of directors will be elected by the stockholders. The Company believes
that classification of the Board of Directors will help to assure the continuity
and stability of the Company's business strategies and policies as determined by
the Board of Directors. Holders of shares of Common Stock will have no right to
cumulative voting in the election of directors. Consequently, at each annual
meeting of stockholders, the holders of a majority of the shares of Common Stock
will be able to elect all of the successors of the class of directors whose
terms expire at that meeting.

The following table sets forth certain information with respect to the
directors, director nominees and executive officers of the Company immediately
following the consummation of this Offering:

<TABLE>
<CAPTION>
NAME AGE POSITION TERM
- -------------------- --- ------------------------------------------------------------------- ---------
<S> <C> <C> <C>
Richard S. Ziman 53 Chairman of the Board and Chief Executive Officer 1999

Victor J. Coleman 35 President, Chief Operating Officer and Director 1999

Diana M. Laing 41 Chief Financial Officer

Michele Byer 50 Chief Accounting Officer and Secretary

Brigitta B. Troy 56 Executive Vice President and Director of Acquisitions

Andrew J. Sobel 37 Executive Vice President and Director of Leasing

Herbert L. Porter 58 Senior Vice President and Director of Construction and Capital
Improvements

Arthur Gilbert 83 Director Nominee 1998

Steven C. Good 54 Director Nominee 1998

Jerry Asher 62 Director Nominee 1997

Carl D. Covitz 57 Director Nominee 1997

Kenneth B. Roath 60 Director Nominee 1997
</TABLE>

The following is a biographical summary of the experience of the directors,
director nominees and executive officers of the Company:

RICHARD S. ZIMAN. Mr. Ziman has served as the Chairman and Chief Executive
Officer of the Company and as a Director of the Company since its formation. He
has been involved in the real estate industry for over 25 years. In 1990, Mr.
Ziman formed Arden and has served as its Chairman of the Board and Chief
Executive Officer since its inception. In 1979 he co-founded Pacific Financial
Group, a diversified real estate investment and development firm headquartered
in Beverly Hills, of which he was the Managing General Partner. Mr. Ziman
received his Bachelor's Degree and his Juris Doctor Degree from the University
of Southern California and practiced law as a partner of the law firm of Loeb &
Loeb from 1971 to 1980, specializing in transactional and financing aspects of
real estate.

VICTOR J. COLEMAN. Mr. Coleman has served as the President and Chief
Operating Officer of the Company and as a Director of the Company since its
formation. He is also the President, Chief Operating

91
<PAGE>
Officer and co-founder of Arden. From 1987 to 1989, Mr. Coleman was Vice
President of Los Angeles Realty Services, Inc. and earlier in his career from
1985 to 1987 was Director of Marketing/Investment Advisor of Development Systems
International and an associate at Drexel Burnham Lambert specializing in private
placements with institutional and individual investors. Mr. Coleman received his
Bachelor's Degree from the University of California at Berkeley and received his
Master of Business Administration from Golden Gate University.

DIANA M. LAING. Ms. Laing will serve as Chief Financial Officer of the
Company. Prior to joining the Company, Ms. Laing served, from 1985 to 1996, as
Executive Vice President and Chief Financial Officer of South West Property
Trust, Inc., a publicly traded apartment properties real estate investment
trust, and its predecessor Southwest Realty, Ltd. Ms. Laing also served from
1982 to 1985 as Controller, Treasurer and Vice President-Finance of Southwest
Realty, Ltd. From 1981 to 1982, Ms. Laing was Controller of Crawford Energy,
Inc. and she served as a member of the audit staff of Arthur Andersen & Company
from 1978 to 1981. Ms. Laing is a Certified Public Accountant and a member of
the American Institute of CPAs and the Texas Society of Public Accountants. She
is also a Director of Sterling House Corporation, a publicly traded operator of
assisted living centers. Ms. Laing received her Bachelor of Science in
Accounting from Oklahoma State University.

MICHELE BYER. Ms. Byer has served as Chief Accounting Officer and Secretary
of the Company since its formation. Ms. Byer has 28 years of experience in the
real estate industry, of which the last 13 have been with Arden and Pacific
Financial Group. Prior to joining Pacific Financial Group and the Company, Ms.
Byer was a practicing CPA with the firm Kenneth Leventhal & Company which
specialized in real estate. She received her Bachelor's Degree from the
University of California at Los Angeles.

BRIGITTA B. TROY. Ms. Troy has served as Executive Vice President and
Director of Acquisitions of the Company since its formation. She joined Arden in
1993 and was Director of Acquisitions for Pacific Financial Group from 1982 to
1989. During the period from 1989 to 1993, she was a principal of Esquire
Investment Partners, a real estate advisory company. A graduate of Radcliffe
College, Ms. Troy received her Juris Doctor Degree from the University of
Southern California Law School and a Master of Business Administration from UCLA
Graduate School of Management. Ms. Troy has over 15 years experience in the
commercial real estate business.

ANDREW J. SOBEL. Mr. Sobel has served as Executive Vice President and
Director of Leasing of the Company since its formation. He joined Arden in 1992.
Mr. Sobel is an attorney admitted to the State Bar of California in 1985 with 11
years of experience in the practice of real estate law. From 1990 to 1992, Mr.
Sobel was a sole practitioner. From 1987 to 1990 he was an attorney with the law
firm of Pircher, Nichols & Meeks specializing in all aspects of its real estate
transactional practice including acquisitions, leasings and financings. Mr.
Sobel received his Bachelor's Degree from State University of New York at Oswego
and his Juris Doctor Degree from the University of California at Berkeley (Boalt
Hall).

HERBERT L. PORTER. Mr. Porter is a Senior Vice President and Director of
Construction and Capital Improvements of the Company. He joined Arden in 1993.
Prior to joining Arden from 1973 to 1992, Mr. Porter was a partner/owner in his
own real estate development and property management company specializing in
medium to high-rise commercial office buildings. Mr. Porter's 23 years in
commercial office development include planning, financing, acquisition,
entitlements and approvals, design, construction, marketing, leasing, tenant
improvements and outright sale. Mr. Porter received his Bachelor's Degree from
the University of Southern California.

ARTHUR GILBERT. Mr. Gilbert has agreed to serve as a member of the Board of
Directors of the Company commencing upon the consummation of the Offering. Mr.
Gilbert has been involved in the real estate business for over 50 years and has
developed over 6 million square feet of office, industrial and retail properties
located primarily in Southern California. He is an Honorary Trustee of the
National Board of Directors of American Technion Society.

STEVEN C. GOOD. Mr. Good has agreed to serve as a member of the Board of
Directors of the Company commencing upon the consummation of the Offering. Mr.
Good is the senior partner in the firm of Good

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<PAGE>

Swartz & Berns, an accountancy corporation which evolved from the firm of Block,
Good and Gagerman which he founded in 1976. Prior to 1976, Mr. Good was a
partner first at Laventhol & Horwath, a national accounting firm, and later at
Horowitz & Good. Mr. Good is a founder and past Chairman of CU Bancorp where he
directed the bank's operations from 1982 through 1989. For the past seven years
he has been a member of the Board of Directors of Opto Sensors, Incorporated.
Mr. Good received his Bachelor of Science in Business Administration from the
University of California at Los Angeles and attended UCLA's Graduate School.

JERRY ASHER. Mr. Asher has agreed to serve as a member of the Board of
Directors of the Company commencing upon the consummation of the Offering. For
the past 27 years, Mr. Asher has been employed by CB Commercial Real Estate
Group, Inc. ("CB Commercial") where he has served in various capacities
involving the Southern California real estate industry. Most recently, since
1994, Mr. Asher has served as Executive Vice President, Director of Business
Development of CB Commercial with responsibility for implementing its business
development and marketing activities in both domestic and international markets.
Mr. Asher has also served in the following capacities, among others, since he
joined CB Commerical in 1969: Executive Vice President, Regional Manager for
Southern California (1991 to 1994); Southern California Regional Manager and
Senior Vice President (1984 to 1991); and National Director of Investment
Properties (1983 to 1984). Mr. Asher is currently the Chairman of the Cedars
Sinai Medical Center - Real Estate Industry Division. He received his Bachelor
of Science in Real Estate and Finance from the University of Southern
California.

CARL D. COVITZ. Mr. Covitz has agreed to serve as a member of the Board of
Directors of the Company commencing upon the consummation of the Offering. For
18 of the past 23 years, Mr. Covitz has served as the owner and President of
Landmark Capital, Inc., a national real estate development and investment
company involved in the construction, financing, ownership and management of
commercial, residential, and warehouse properties. Mr. Covitz has also
previously served, from 1990 to 1993, as Secretary of the Business,
Transportation & Housing Agency of the State of California as well as Under
Secretary and Chief Operating Officer of the U.S. Department of Housing and
Urban Development from 1987 to 1989. Mr. Covitz is currently the Chairman of the
Board of Directors of Century Housing Corporation and is the past Chairman of
the Board of several organizations including the Federal Home Loan Bank of San
Francisco and the Los Angeles City Housing Authority. Mr. Covitz received his
Bachelor's Degree from the Wharton School at the University of Pennsylvania and
his Master of Business Administration from the Columbia University Graduate
School of Business.

KENNETH B. ROATH. Mr. Roath has agreed to serve as a member of the Board of
Directors of the Company commencing upon the consummation of the Offering. Mr.
Roath is currently Chairman, President and Chief Executive Officer of Health
Care Property Investors, Inc., a leader in the health care REIT industry. Prior
to joining Health Care Property Investors, Inc. at its inception in 1985, Mr.
Roath was employed for 17 years by Pacific Holding Corporation of Los Angeles,
the last four of which he served as President and Chief Operating Officer. Mr.
Roath is the immediate past Chairman of NAREIT and also serves as a member of
the Board of Governors and Executive Committee of NAREIT. He is a director of
Franchise Finance Corporation of America. Mr. Roath received his Bachelor's
Degree in accounting from San Diego State University.

COMMITTEES OF THE BOARD OF DIRECTORS

AUDIT COMMITTEE. Promptly following the consummation of the Offering, the
Board of Directors will establish an Audit Committee. The Audit Committee will
make recommendations concerning the engagement of independent public
accountants, review with the independent public accountants the scope and
results of the audit engagement, approve professional services provided by the
independent public accountants, review the independence of the independent
public accountants, consider the range of audit and non-audit fees and review
the adequacy of the Company's internal accounting controls. The Audit Committee
will initially consist of two or more non-employee directors.

EXECUTIVE COMMITTEE. Promptly following the consummation of the Offering,
the Board of Directors will establish an Executive Committee. Subject to the
Company's conflict of interest policies, the Executive

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<PAGE>
Committee will be granted the authority to acquire and dispose of real property
and the power to authorize, on behalf of the full Board of Directors, the
execution of certain contracts and agreements, including those related to the
borrowing of money by the Company (and, consistent with the Partnership
Agreement of the Operating Partnership, to cause the Operating Partnership to
take such actions). The Executive Committee will include at least two
non-employee directors.

COMPENSATION COMMITTEE. Promptly following the consummation of the
Offering, the Board of Directors will establish a Compensation Committee to
establish remuneration levels for executive officers of the Company and
implement the Company's Stock Incentive Plan and any other incentive programs.
The Compensation Committee will initially consist of two or more non-employee
directors.

The Board of Directors may from time to time establish certain other
committees to facilitate the management of the Company.

COMPENSATION OF DIRECTORS

The Company intends to pay its non-employee directors annual compensation of
$18,000 for their services. In addition, non-employee directors will receive a
fee of $1,000 for each Board of Directors meeting attended. Non-employee
directors attending any committee meetings will receive an additional fee of
$1,000 for each committee meeting attended, unless the committee meeting is held
on the day of a meeting of the Board of Directors. Non-employee directors will
also be reimbursed for reasonable expenses incurred to attend director and
committee meetings. Officers of the Company who are directors will not be paid
any directors' fees. Non-employee directors will receive, upon initial election
to the Board of Directors, an option to purchase 10,000 shares of Common Stock
which will vest over four years.

EXECUTIVE COMPENSATION

Prior to the Offering, the Company did not pay any compensation to its
officers. The following table below sets forth the annual base salary rates and
other compensation expected to be paid in 1996 to the Company's Chief Executive
Officer and each of the Company's five other most highly compensated executive
officers (the "Named Executive Officers").

<TABLE>
<CAPTION>
1996 BASE OPTIONS STOCK
NAME TITLE SALARY RATE ALLOCATED(1) BONUS
- -------------------- ----------------------------------------------------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Richard S. Ziman Chairman of the Board and Chief Executive Officer $ 300,000 400,000 --

Victor J. Coleman President, Chief Operating Officer and Director 250,000 250,000 --

Diana M. Laing Chief Financial Officer 195,000 50,000 --

Michele Byer Chief Accounting Officer and Secretary 125,000 40,000 --

Herbert L. Porter Senior Vice President and Director of Construction
and Capital Improvements 120,000 30,000 1,250(2)

Andrew J. Sobel Executive Vice President and Director of Leasing 110,000 40,000 3,750(2)
</TABLE>

- ------------------------
(1) All options will vest over three years (i.e., one-third of each executive's
options will vest and be exercisable on the first, second and third
anniversaries, respectively, of the closing of the Offering) and will be
exercisable at a price per share equal to the initial public offering price
per share of Common Stock offered hereby.

(2) Represents a one time Common Stock bonus.

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<PAGE>
EMPLOYMENT AGREEMENTS

Each of Messrs. Ziman and Coleman will enter into an employment agreement
with the Company which will be effective as of the consummation of the Offering.
The employment agreements of Messrs. Ziman and Coleman will have an initial term
of three years and will be subject to automatic one-year extensions following
the expiration of the initial term. For the first year of the term, the
employment agreements of Messrs. Ziman and Coleman provide for an initial annual
base compensation in the amounts set forth in the Executive Compensation table
with the amount of any initial bonus to be determined by the Compensation
Committee. For subsequent years, both the amount of the base compensation and
any bonus will be determined by the Compensation Committee.

In addition, Ms. Laing has entered into an employment agreement with the
Company effective August 1, 1996 which has an initial term of one year and is
subject to automatic one-year extensions following the expiration of the initial
term. Ms. Laing's employment agreement provides for an initial annual base
compensation in the amount set forth in the Executive Compensation table and
entitles her to an initial cash bonus in an amount to be determined by the
Compensation Committee but not to exceed 20% of her initial annual base
compensation. For any subsequent years in which the employment agreement is
extended beyond the initial term, the amount of Ms. Laing's base compensation
and any bonus will be determined by the Compensation Committee.

The employment agreements of Messrs. Ziman and Coleman and Ms. Laing entitle
the executives to participate in the Company's Stock Incentive Plan (each
executive will initially be allocated the number of stock options set forth in
the Executive Compensation table) and to receive certain other insurance and
pension benefits. In addition, in the event of a termination by the Company
without "cause," a termination by the executive for "good reason," or a
termination pursuant to a "change in control" of the Company (as such terms are
defined in the respective employment agreements), the terminated executive will
be entitled to (i) a single severance payment (the "Severance Amount") and (ii)
continued receipt of certain benefits including medical insurance, life and
disability insurance and participation in all pension, 401(k) and other employee
plans and benefits established by the Company for its executive employees for a
specified period of time following the date of termination (collectively, the
"Severance Benefits"). The Severance Amount of Messrs. Ziman and Coleman is
equal to the sum of two times the executive's average annual base compensation
and two times the highest annual bonus received during the preceding thirty-six
month period. The Severance Amount of Ms. Laing is equal to the executive's
annual base compensation for the preceding 12 month period. Receipt of the
Severance Benefits shall continue for two years commencing on the date of
termination in the case of Messrs. Ziman and Coleman and for one year commencing
on the date of termination in the case of Ms. Laing.

As part of their employment agreements, each of Messrs. Ziman and Coleman
will be bound by a non-competition covenant with the Company which prohibits
them from engaging in (i) the acquisition, renovation, management or leasing of
any office properties in the Los Angeles, Orange and San Diego counties of
Southern California and (ii) any active or passive investment in or reasonably
relating to the acquisition, renovation, management or leasing of office
properties in the Los Angeles, Orange and San Diego counties of Southern
California for a period of one year following the date of such executive's
termination, unless such termination was without cause.

STOCK INCENTIVE PLAN

Prior to the consummation of the Offering, the Company intends to adopt the
Stock Incentive Plan for the purpose of attracting and retaining executive
officers, directors and employees.

The Stock Incentive Plan will be qualified under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Stock
Incentive Plan will be administered by the Compensation Committee and provide
for the granting of stock options, stock appreciation rights or restricted stock
with respect to up to 1,500,000 shares of Common Stock to executive or other key
employees of the Company. Stock options may be granted in the form of "incentive
stock options," as defined in Section 422 of the Code,

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or non-statutory stock options and are exercisable for up to 10 years following
the date of grant. The exercise price of each option will be set by the
Compensation Committee; provided, however, that the price per share must be
equal to or greater than the fair market value of the Common Stock on the grant
date.

The Stock Incentive Plan also provides for the issuance of stock
appreciation rights which will generally entitle a holder to receive cash or
stock, as determined by the Compensation Committee, at the time of exercise
equal to the difference between the exercise price and the fair market value of
the Common Stock. In addition, the Stock Incentive Plan permits the Company to
issue shares of restricted stock to executive or other key employees upon such
terms and conditions as shall be determined by the Compensation Committee.

401(K) PLAN

Effective upon the consummation of the Offering, the Company intends to
establish the Arden Realty Group Section 401(k) Savings/Retirement Plan (the
"401(k) Plan") to cover eligible employees of the Company and any designated
affiliate.

The 401(k) Plan will permit eligible employees of the Company to defer up to
15% of their annual compensation, subject to certain limitations imposed by the
Code. The employees' elective deferrals are immediately vested and
non-forfeitable upon contribution to the 401(k) Plan. The Company currently does
not intend to make matching contributions to the 401(k) Plan; however, it
reserves the right to make matching contributions or discretionary profit
sharing contributions in the future.

The 401(k) Plan is designed to qualify under Section 401 of the Code so that
contributions by employees or by the Company to the 401(k) Plan, and income
earned on plan contributions, are not taxable to employees until withdrawn from
the 401(k) Plan, and so that contributions by the Company, if any, will be
deductible by the Company when made.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Charter contains
such a provision which eliminates such liability to the maximum extent permitted
by the MGCL.

The Charter authorizes the Company, to the maximum extent permitted by
Maryland law, to obligate itself to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to (a) any present or
former director or officer or (b) any individual who, while a director of the
Company and at the request of the Company, serves or has served another
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise as a director, officer, partner or trustee of such corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise
from and against any claim or liability to which such persons may incur by
reason of his status as a present or former stockholder, director or officer of
the Company. The Bylaws obligate the Company, to the maximum extent permitted by
Maryland law, to indemnify and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to (a) any present or former
director or officer who is made a party to the proceeding by reason of his
service in that capacity or (b) any individual who, while a director of the
Company and at the request of the Company, serves or has served another
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise as a director, officer, partner or trustee of such corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise and
who is made a party to the proceeding by reason of his service in that capacity
against any claim or liability to which he may become subject by reason of such
service. The Charter and the Bylaws also permit the Company to indemnify and
advance expenses to any person who served a predecessor of the Company in any of
the capacities described above and to any employee or agent of the Company or a
predecessor of the Company.

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defense of any proceeding to which he is made a party by reason of his service
in that capacity. The MGCL permits a corporation to indemnify its present and
former directors and officers, among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that (a) the
act or omission of the director or officer was material to the matter giving
rise to the proceeding and (i) was committed in bad faith or (ii) was the result
of active and deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services or (c) in
the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation. In addition, the MGCL requires the Company, as a
condition to advancing expenses, to obtain (a) a written affirmation by the
director or officer of his good faith belief that he has met the standard of
conduct necessary for indemnification by the Company as authorized by the Bylaws
and (b) a written statement by or on his behalf to repay the amount paid or
reimbursed by the Company if it shall ultimately be determined that the standard
of conduct was not met.

The Partnership Agreement also provides for indemnification and advance of
expenses of the Company and its officers and directors to the same extent
indemnification and advance of expenses is provided to officers and directors of
the Company in the Charter and Bylaws, and limits the liability of the Company
and its officers and directors to the Operating Partnership and its partners to
the same extent liability of officers and directors of the Company to the
Company and its stockholders is limited under the Charter. See "Partnership
Agreement -- Indemnification."

STRUCTURE AND FORMATION OF THE COMPANY

THE OPERATING ENTITIES OF THE COMPANY

Following the consummation of the Offering and the Formation Transactions,
the operations of the Company will be carried on through the Operating
Partnership. The Formation Transactions were designed to (i) enable the Company
to raise the necessary capital to acquire the Properties and repay certain
mortgage debt relating thereto, (ii) provide a vehicle for future acquisitions,
(iii) enable the Company to comply with certain requirements under the federal
income tax code and regulations relating to REITs, (iv) facilitate potential
securitized mortgage financings and (v) preserve certain tax advantages for
certain Arden Predecessors.

THE OPERATING PARTNERSHIP

Following the closing of the Offering and the Formation Transactions,
substantially all of the Company's assets will be held by, and its operations
conducted through, the Operating Partnership, of which the Company will be the
sole general partner. The Company's interest in the Operating Partnership will
entitle it to share in cash distributions from, and in the profits and losses
of, the Operating Partnership in proportion to the Company's percentage
ownership, which initially will be approximately 86.69%. Certain Participants,
including Messrs. Ziman, Coleman and Gilbert, Ms. Byer and Arden, will own the
remaining OP Units. Beginning one year after the consummation of the Offering,
any holder of OP Units may cause the Operating Partnership to redeem such OP
Units for cash or, at the election of the Company, exchange such OP Units for
shares of Common Stock of the Company (on a one-for-one basis), subject to
certain limitations. See "Partnership Agreement -- Redemption/Exchange Rights."
With each redemption or exchange of OP Units, the Company's percentage interest
in the Operating Partnership will increase.

As the sole general partner of the Operating Partnership, the Company will
generally have the exclusive power under the Partnership Agreement to manage and
conduct the business of the Operating Partnership, subject to certain limited
exceptions. See "Partnership Agreement -- Management." The Board of Directors
will manage the affairs of the Company by directing the affairs of the Operating
Partnership. The Operating Partnership cannot be terminated (except in
connection with a sale of all or substantially all of the assets of the Company,
a business combination or as the result of judicial decree or the redemption of
all of the OP Units held by the limited partners) until the year 2096 without a
vote of the partners of the Operating Partnership. For further information
regarding the Operating Partnership, see "Partnership Agreement."

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THE FORMATION TRANSACTIONS

OWNERSHIP OF THE PROPERTIES PRIOR TO THE FORMATION TRANSACTIONS

The Arden Predecessors own 16 of the Properties directly through fee simple
interests and four Properties which are subject to long term ground leases and
hold an undivided tenancy in common interest in two other Properties, which are
also partially owned by unrelated third parties who will participate in the
Formation Transactions. The two Acquisition Properties are owned by unrelated
third parties who have entered into agreements to sell the respective
Acquisition Properties to Arden. Each of the Arden Predecessors was formed at
various times over the last 3 1/2 years, generally in connection with the
initial acquisition of a Property or an interest in the Property by such Arden
Predecessor. The Arden Predecessors, which directly own the Properties or
interests in the Properties, are comprised primarily of partnerships and limited
liability companies which are owned by Messrs. Ziman and Coleman, and certain of
their relatives and affiliates and by other third parties. In addition, all of
the properties are managed by Messrs. Ziman and Coleman directly or through
affiliates of the Arden Predecessors.

Arden has been engaged in the property management, leasing and renovation
business for over five years and, in connection therewith, has provided services
to 22 of the Properties and to properties owned by third parties. After the
consummation of the Offering and the Formation Transactions, the Operating
Partnership will continue to carry on the property management, leasing and
renovation business with respect to the Properties carried on by Arden prior
thereto.

PRE-FORMATION TRANSACTIONS

- The Company filed Articles of Incorporation with the State Department of
Assessments and Taxation of Maryland on May 1, 1996.

- The Operating Partnership was formed effective May 20, 1996 with the
Company as the sole general partner and Mr. Coleman as the sole limited
partner.

- All of the Participants have entered into an Option Agreement with the
Company and/or a Contribution Agreement with the Operating Partnership to
transfer their ownership interests in the Arden Predecessors, in certain
of the Properties or, with respect to Arden, in certain of its assets, to
the Operating Partnership in exchange for OP Units or to the Company for
cash. See "Risk Factors -- Conflicts of Interests in the Formation
Transactions and the Business of the Company."

FORMATION TRANSACTIONS

Concurrently with the consummation of the Offering, the Company, the
Operating Partnership and the Participants will engage in the following
Formation Transactions.

- The Company will sell shares of Common Stock in the Offering.

- Pursuant to the Option Agreements, the Company will acquire for cash from
certain Participants (other than Messrs. Ziman and Coleman who will
receive no cash from the Formation Transactions) the interests owned by
such Participants in certain of the Arden Predecessors and in certain of
the Properties. The Company will pay approximately $26.8 million from the
net proceeds of the Offering for such interests which represent 31.7% of
the ownership interests in the Properties to be acquired by the Company.

- Pursuant to the Contribution Agreements, the following additional
contributions will be made to the Operating Partnership in exchange for OP
Units representing limited partners interests: (i) certain Participants
will contribute the remaining interests in the Arden Predecessors and in
certain of the Properties ( I.E., all interests not acquired by the
Company pursuant to the Option Agreements) and (ii) Arden will contribute
certain of its assets, including management contracts relating to certain
of

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the Properties and the contract rights to purchase the Acquisition
Properties. The Participants making such contributions (a total of seven
individuals and entities including Messrs. Ziman, Coleman and Gilbert and
Ms. Byer) will receive an aggregate of 2,889,071 OP Units, with an
estimated value of approximately $57.8 million based on the assumed
initial public offering price of the Common Stock. The aggregate book
value of the interests and assets to be transferred to the Company and the
Operating Partnership is approximately $14.1 million of which $2,000
constitutes the aggregate book value of the interest and assets to be
transferred to the Operating Partnership by Messrs. Ziman and Coleman.

- The Company, through the Operating Partnership, will borrow approximately
$104 million aggregate principal amount pursuant to the Mortgage Financing
which will be secured by fully cross-collateralized, cross-defaulted first
mortgage liens on the Mortgage Financing Properties.

- Approximately $35 million of the net proceeds of the Offering will be used
by the Operating Partnership to purchase the Acquisition Properties.

- Approximately $398 million of the net proceeds of the Offering and the
$103 million net proceeds of the Mortgage Financing will be used by the
Operating Partnership to repay certain mortgage debt secured by the
Properties and indebtedness outstanding under lines of credit, and the
related additional and accrued interest thereon, to be assumed by the
Operating Partnership in the Formation Transactions.

- The Company, through the Operating Partnership, is expected to enter into
the $100 million Credit Facility at or shortly after the closing of the
foregoing Formation Transactions.

CONSEQUENCES OF THE OFFERING AND THE FORMATION TRANSACTIONS

The Offering and the Formation Transactions will result in the following
consequences:

- The Operating Partnership will directly or indirectly own all of the
Properties by virtue of the Operating Partnership's acquisition of 100% of
the interests in the Arden Predecessors, the Property interests
contributed by certain Participants and the assets contributed by Arden.
In connection with the CMBS Offering it is expected that the Operating
Partnership will transfer the Mortgage Financing Properties to a financing
subsidiary.

- The purchasers of the Common Stock offered in the Offering will own all of
the outstanding Common Stock.

- The Company will be the sole general partner of, and own 86.71% of the
ownership interests in, the Operating Partnership.

If all limited partners of the Operating Partnership were to exchange their
OP Units for Common Stock immediately after completion of the Offering
(notwithstanding the provision of the Partnership Agreement which prohibits such
exchange prior to the first anniversary of the consummation of the Offering),
but subject to the Common Stock Ownership Limit, then the Participants would
beneficially own approximately 13.29% of the outstanding Common Stock (of which
6.57%, 3.48%, 2.32% and 0.23% would be beneficially owned by Messrs. Ziman,
Coleman, Gilbert and Ms. Byer, respectively).

See "Risk Factors -- Conflicts of Interests in the Formation Transactions
and the Business of the Company; Benefits from Formation Transactions,"
"Partnership Agreement -- Redemption/Exchange Rights" and "Principal
Stockholders."

DETERMINATION AND VALUATION OF OWNERSHIP INTERESTS

The Company's percentage interest in the Operating Partnership was
determined based upon the percentage of estimated Cash Available for
Distribution required to pay expected cash distributions on the shares of Common
Stock to be issued in the Offering resulting in an annual distribution rate,
assuming one annual distribution period, equal to 8% of the assumed initial
public offering price of the Common Stock. The ownership interest in the
Operating Partnership allocated to the Company is equal to this percentage of
estimated Cash Available for Distribution and the remaining interest in the
Operating Partnership was

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allocated to the Participants receiving OP Units in the Formation Transactions.
The parameters and assumptions used in deriving the estimated Cash Available for
Distribution are described under "Distributions."

Based on the issuance of 18,847,500 shares of Common Stock in the Offering,
the Company will hold a 86.71% ownership interest in the Operating Partnership
and the Participants will hold a 13.29% ownership interest in the Operating
Partnership. If the Underwriters' overallotment option is exercised in full, the
Company will hold a 88.24% ownership interest in the Operating Partnership and
the Participants will hold a 11.76% ownership interest in the Operating
Partnership.

The Company did not obtain appraisals with respect to the market value of
any of the assets that the Company will own immediately after the consummation
of the Offering and the Formation Transactions or an opinion as to the fairness
of the allocation of shares to the purchasers in the Offering. The initial
public offering price of the Company has been determined based primarily upon
the estimated Cash Available for Distribution of the Company and the factors
discussed under "Underwriting," rather than a property-by-property valuation
based on historical cost, book value or current market value. This methodology
has been used because management believes it is appropriate to value the Company
as an ongoing business rather than with a view to values that could be obtained
from a liquidation of the Company or of individual properties owned by the
Company. See "Underwriting."

BENEFITS OF THE FORMATION TRANSACTIONS AND THE OFFERING TO AFFILIATES OF THE
COMPANY

Certain affiliates of the Company will realize certain material benefits in
connection with the Formation Transactions, including the following:

- In exchange for their respective ownership interests in the Arden
Predecessors and the assets of Arden, Messrs. Ziman, Coleman and Gilbert
and Ms. Byer will become beneficial owners of a total of 2,740,718 OP
Units, with a total value of $54.8 million based on the assumed initial
public offering price of the Common Stock, which value may differ from the
fair market values of such interests and assets and compares to a book
value of such interests and assets of approximately $6.8 million as of
June 30, 1996. The Company does not believe that the book values of the
interests and assets exchanged (which reflects the depreciated historical
cost of such interests and assets) are equivalent to the fair market
values of such interests and assets based on the valuation criteria
described under "-- Determination and Valuation of Ownership Interests."

- The Participants will realize an immediate accretion in the net tangible
book value of their investment in the Company of $12.48 per share of
Common Stock representing an aggregate accretion amount of $36.1 million.

- The Participants will own interests in the Operating Partnership which
will be more liquid after restrictions on transfer expire than their
current interests in the Arden Predecessors which own the Properties prior
to consummation of the Formation Transactions.

- Approximately $398 million of indebtedness secured by the Properties and
indebtedness outstanding under lines of credit to be assumed by the
Operating Partnership will be repaid in the Formation Transactions.

- Pursuant to the Partnership Agreement, certain Participants who hold OP
Units, including Messrs. Ziman, Coleman, Gilbert and Ms. Byer, will
receive special allocations of interest deduction of approximately $12.6
million in the aggregate relating to the repayment of mortgage debt on
certain of the Properties.

- Messrs. Ziman and Coleman will serve as directors and officers of the
Company and the Operating Partnership and will enter into agreements
providing for annual salaries, bonuses, participation in the Company's
Stock Incentive Plan and other benefits for their services.

- So long as he is Chief Executive Officer, Mr. Ziman will have certain
proportional purchase rights which will enable him to maintain his overall
percentage ownership, assuming the exchange of all OP Units for Common
Stock, of the combined equity of the Company and the Operating Partnership
in

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the event there are future issuances of Common Stock or any convertible
securities by the Company or future issuances of OP Units by the Operating
Partnership. In each event, Mr. Ziman's proportional purchase rights may
be exercised at a price per share or other trading unit of such Common
Stock, convertible securities, or OP Units, as the case may be, to be
received by the Company or the Operating Partnership in such issuance,
less any underwriting discounts and commissions, and otherwise on the same
terms as may be applicable to such issuance. These proportional purchase
rights will not apply to transactions under any Company stock plan (such
as the Stock Incentive Plan), pursuant to an exchange of an OP Unit for a
share of Common Stock or in connection with any issuance of Common Stock
or OP Units incident to an acquisition of properties, assets or a
business.

- Commencing on the first anniversary of the Offering certain Participants
including Messrs. Ziman, Coleman and Gilbert and Ms. Byer will have
registration rights with respect to shares of Common Stock issued in
exchange for OP Units.

See "Risk Factors -- Conflicts of Interests in the Formation Transactions
and the Business of the Company," "Dilution," "Partnership Agreement --
Redemption/Exchange Rights," "Management" and "Certain Transactions."

POLICIES WITH RESPECT TO CERTAIN ACTIVITIES

The following is a discussion of certain investment, financing and other
policies of the Company. These policies have been determined by the Company's
Board of Directors and may be amended or revised from time to time by the Board
of Directors without a vote of the stockholders, except that (i) the Company
cannot change its policy of holding its assets and conducting its business only
through the Operating Partnership and its affiliates without the consent of the
holders of OP Units as provided in the Partnership Agreement, and (ii) changes
in certain policies with respect to conflicts of interest must be consistent
with legal requirements.

INVESTMENT POLICIES

INVESTMENT IN REAL ESTATE OR INTERESTS IN REAL ESTATE. The Company will
conduct all of its investment activities through the Operating Partnership and
its affiliates. The Company's investment objectives are to provide quarterly
cash distributions and achieve long-term capital appreciation through increases
in the value of the Company. For a discussion of the Properties and the
Company's acquisition and other strategic objectives, see "Business and
Properties" and "Business and Growth Strategies."

The Company expects to pursue its investment objectives primarily through
the direct ownership by the Operating Partnership of the Properties and other
acquired office properties. The Company currently intends to invest primarily in
existing improved properties but may, if market conditions warrant, invest in
development projects as well. Furthermore, the Company currently intends to
invest in or develop commercial properties in Southern California, and primarily
in suburban Los Angeles County. However, future investment or development
activities will not be limited to any geographic area or product type or to a
specified percentage of the Company's assets. While the Company intends to
diversify in terms of property locations, size and market, the Company does not
have any limit on the amount or percentage of its assets that may be invested in
any one property or any one geographic area. The Company intends to engage in
such future investment or development activities in a manner which is consistent
with the maintenance of its status as a REIT for federal income tax purposes. In
addition, the Company may purchase or lease income-producing commercial and
other types of properties for long-term investment, expand and improve the real
estate presently owned or other properties purchased, or sell such real estate
properties, in whole or in part, when circumstances warrant.

The Company may also participate with third parties in property ownership,
through joint ventures or other types of co-ownership. Such investments may
permit the Company to own interests in larger assets without unduly restricting
diversification and, therefore, add flexibility in structuring its portfolio.
While the Company currently does not have any plans to invest in joint ventures
or partnerships with affiliates or

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promoters of the Company, Mr. Gilbert, a director of the Company, owns one
office property in Southern California that the Company may consider in the
future. The Company will not, however, enter into a joint venture or partnership
to make an investment that would not otherwise meet its investment policies.

Equity investments may be subject to existing mortgage financing and other
indebtedness or such financing or indebtedness as may be incurred in connection
with acquiring or refinancing these investments. Debt service on such financing
or indebtedness will have a priority over any distributions with respect to the
Common Stock. Investments are also subject to the Company's policy not to be
treated as an investment company under the Investment Company Act of 1940, as
amended (the "1940 Act").

INVESTMENTS IN REAL ESTATE MORTGAGES. While the Company's current portfolio
consists of, and the Company's business objectives emphasize, equity investments
in commercial real estate, the Company may, in the discretion of the Board of
Directors, invest in mortgages and other types of equity real estate interests
consistent with the Company's qualification as a REIT. The Company does not
presently intend to invest in mortgages or deeds of trust, but may invest in
participating or convertible mortgages if the Company concludes that it may
benefit from the cash flow or any appreciation in value of the property.
Investments in real estate mortgages run the risk that one or more borrowers may
default under such mortgages and that the collateral securing such mortgages may
not be sufficient to enable the Company to recoup its full investment.

SECURITIES OR INTERESTS IN PERSONS PRIMARILY ENGAGED IN REAL ESTATE
ACTIVITIES AND OTHER ISSUERS. Subject to the percentage of ownership
limitations and gross income tests necessary for REIT qualification, the Company
also may invest in securities of other REITs, other entities engaged in real
estate activities or securities of other issuers, including for the purpose of
exercising control over such entities.

DISPOSITIONS

The Company does not currently intend to dispose of any of the Properties,
although it reserves the right to do so if, based upon management's periodic
review of the Company's portfolio, the Board of Directors determines that such
action would be in the best interests of the Company. The tax consequences of
the disposition of the Properties may, however, influence the decision of
certain directors and executive officers of the Company who hold OP Units as to
the desirability of a proposed disposition. See "Risk Factors -- Conflicts of
Interests in the Formation Transactions and the Business of the Company."

Any decision to dispose of a Property will be made by the Company and
approved by a majority of the Board of Directors. In addition, under the
Partnership Agreement, the consent of a majority of the Limited Partners of the
Operating Partnership must approve any sale of Century Park Center (other than
in connection with the sale of all or substantially all of the assets of the
Company or a merger of the Company) for a period of seven years from the closing
of the Offering.

FINANCING POLICIES

As a general policy, the Company intends to limit its total consolidated
indebtedness incurred so that at the time any debt is incurred, the Company'
debt to total market capitalization ratio does not exceed 50%. Upon completion
of the Offering and the Formation Transactions, the debt to total market
capitalization ratio of the Company will be approximately 19.3% (17.6% if the
Underwriters' overallotment option is exercised in full). The Charter and Bylaws
do not, however, limit the amount or percentage of indebtedness that the Company
may incur. In addition, the Company may from time to time modify its debt policy
in light of current economic conditions, relative costs of debt and equity
capital, market values of its Properties, general conditions in the market for
debt and equity securities, fluctuations in the market price of its Common
Stock, growth and acquisition opportunities and other factors. Accordingly, the
Company may increase or decrease its debt to total market capitalization ratio
beyond the limits described above. If these policies were changed, the Company
could become more highly leveraged, resulting in an increased risk of default on
its obligations and a related increase in debt service requirements that could
adversely affect the financial condition and results of operations of the
Company and the Company's ability to make distributions to stockholders.

The Company has established its debt policy relative to the total market
capitalization of the Company computed at the time the debt is incurred, rather
than relative to the book value of such assets, a ratio that is

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frequently employed, because it believes that the book value of its assets
(which to a large extent is the depreciated value of real property, the
Company's primary tangible asset) does not accurately reflect its ability to
borrow and to meet debt service requirements. Total market capitalization,
however, is subject to greater fluctuation than book value, and does not
necessarily reflect the fair market value of the underlying assets of the
Company at all times. Moreover, due to fluctuations in the value of the
Company's portfolio of Properties over time, and since any measurement of the
Company's total consolidated indebtedness to total market capitalization is made
only at the time debt is incurred, the debt to total market capitalization ratio
could exceed the 50% level.

The Company has not established any limit on the number or amount of
mortgages that may be placed on any single property or on its portfolio as a
whole.

Although the Company will consider factors other than total market
capitalization in making decisions regarding the incurrence of debt (such as the
purchase price of properties to be acquired with debt financing, the estimated
market value of properties upon refinancing, and the ability of particular
properties and the Company as a whole to generate sufficient cash flow to cover
expected debt service), there can be no assurance that the debt to total market
capitalization ratio, or any other measure of asset value, at the time the debt
is incurred or at any other time will be consistent with any particular level of
distributions to stockholders. See "Risk Factors -- No Limitations on Debt,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

CONFLICT OF INTEREST POLICIES

The Company has adopted certain policies and entered into agreements with
Messrs. Ziman and Coleman designed to eliminate or minimize potential conflicts
of interest. These agreements include non-competition provisions that generally
prohibit Messrs. Ziman and Coleman from engaging in the acquisition, management,
leasing or renovation of any office properties in the Los Angeles, Orange and
San Diego counties of Southern California and from engaging in any active or
passive investment in or reasonably relating to the acquisition, renovation,
management or leasing of any office properties in the Los Angeles, Orange and
San Diego counties of Southern California for a period of one year following the
date of termination of such executive's employment. See "Management --
Employment Agreements." The Company's Board of Directors is subject to certain
provisions of Maryland law, which are designed to eliminate or minimize certain
potential conflicts of interest. However, there can be no assurance that these
policies always will be successful in eliminating the influence of such
conflicts, and if they are not successful, decisions could be made that might
fail to reflect fully the interests of all stockholders.

POLICIES APPLICABLE TO ALL DIRECTORS. The Company has adopted a policy
that, without the approval of a majority of the non-employee directors, it will
not (i) acquire from or sell to any director, officer or employee of the
Company, or any entity in which a director, officer or employee of the Company
beneficially owns more than a 1% interest, or acquire from or sell to any
affiliate of any of the foregoing, any of the assets or other property of the
Company, (ii) make any loan to or borrow from any of the foregoing persons or
(iii) engage in any other transaction with any of the foregoing persons.

Pursuant to Maryland law, each director will be subject to restrictions on
misappropriation of corporate opportunities. In addition, under Maryland law, a
contract or other transaction between the Company and a Director or between the
Company and any other corporation or other entity in which a Director is a
director or has a material financial interest is not void or voidable solely on
the grounds of such common directorship or interest, the presence of the
Director at the meeting at which the contract or transaction is authorized,
approved or ratified the Director's vote in favor thereof if (a) the transaction
or contract is authorized, approved or ratified by the board of directors or a
committee of the board, after disclosure of the common directorship or interest,
by the affirmative vote of a majority of disinterested directors, even if the
disinterested directors constitute less than a quorum, or by a majority of the
votes cast by disinterested stockholders, or (b) the transaction or contract is
fair and reasonable to the Company.

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POLICIES WITH RESPECT TO OTHER ACTIVITIES

The Company has authority to offer Common Stock, Preferred Stock or options
to purchase stock in exchange for property and to repurchase or otherwise
acquire its Common Stock or other securities in the open market or otherwise and
may engage in such activities in the future. As described under "The Partnership
Agreement -- Redemption/Exchange Rights," the Company expects (but is not
obligated) to issue Common Stock to holders of OP Units in the Operating
Partnership upon exercise of their redemption/ exchange rights. Except in
connection with the Formation Transactions, the Company has not issued Common
Stock, OP Units or any other securities in exchange for property or any other
purpose, and the Board of Directors has no present intention of causing the
Company to repurchase any Common Stock. The Company may issue Preferred Stock
from time to time, in one or more series, as authorized by the Board of
Directors without the need for stockholder approval. See "Capital Stock --
Preferred Stock." The Company has not engaged in trading, underwriting or agency
distribution or sale of securities of other issuers other than the Operating
Partnership, nor has the Company invested in the securities of other issuers
other than the Operating Partnership for the purposes of exercising control, and
does not intend to do so. At all times, the Company intends to make investments
in such a manner as to qualify as a REIT, unless because of circumstances or
changes in the Code (or the Treasury Regulations), the Board of Directors
determines that it is no longer in the best interest of the Company to qualify
as a REIT and such determination is approved by a two thirds vote of the
Company's stockholders as required by the Charter. The Company has not made any
loans to third parties, although it may in the future make loans to third
parties, including, without limitation, to joint ventures in which it
participates. The Company intends to make investments in such a way that it will
not be treated as an investment company under the 1940 Act. The Company's
policies with respect to such activities may be reviewed and modified or amended
from time to time by the Company's Board of Directors without a vote of the
stockholders.

CERTAIN TRANSACTIONS

FORMATION TRANSACTIONS

The terms of the acquisitions of interests in the Properties and in Arden by
the Operating Partnership are described in "Structure and Formation of the
Company -- The Formation Transactions."

PARTNERSHIP AGREEMENT; REDEMPTION/EXCHANGE RIGHTS

The Company will enter into the Partnership Agreement with the Participants
receiving OP Units. Among other things, the Partnership Agreement provides such
holders of OP Units with the right to cause the Operating Partnership to redeem
OP Units for cash or, at the election of the Company, exchange such OP Units for
shares of Common Stock of the Company (on a one-for-one basis). See "Risk
Factors -- Conflicts of Interests in the Formation Transactions and the Business
of the Company; Benefits from Formation Transactions," "Policies With Respect to
Certain Transactions -- Conflict of Interest Policies" and "Partnership
Agreement -- Redemption/Exchange Rights."

REGISTRATION RIGHTS

For a description of certain registration rights held by the Participants,
see "Shares Available for Future Sale -- Registration Rights."

CERTAIN TRANSACTIONS INVOLVING DIRECTOR NOMINEE

Mr. Jerry Asher, one of the Company's director nominees, is employed by CB
Commercial which has provided, from time to time, third-party leasing brokerage
services to the Company with respect to certain of its Properties. As of July
31, 1996, the Company had paid approximately $293,000 in leasing commissions to
CB Commercial for leasing brokerage services rendered during 1995 and 1996.
While the Company may engage CB Commercial in the future to provide additional
leasing brokerage services, it is not currently under any contractual obligation
to do so. Furthermore, Mr. Asher, as Director of Business Development at CB
Commercial, has no direct involvement in CB Commercial's leasing brokerage
services and does not have any personal interest in any leasing commissions
received by CB Commercial from the Company.

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PARTNERSHIP AGREEMENT

THE FOLLOWING SUMMARY OF THE PARTNERSHIP AGREEMENT, INCLUDING THE
DESCRIPTIONS OF CERTAIN PROVISIONS SET FORTH ELSEWHERE IN THIS PROSPECTUS, IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PARTNERSHIP AGREEMENT, WHICH IS
FILED AS AN EXHIBIT TO THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A
PART.

MANAGEMENT

The Operating Partnership has been organized as a Maryland limited
partnership pursuant to the terms of the Partnership Agreement. Generally,
pursuant to the Partnership Agreement, the Company, as the sole general partner
of the Operating Partnership, will have full, exclusive and complete
responsibility and discretion in the management and control of the Operating
Partnership, subject to certain limited exceptions. The limited partners of the
Operating Partnership (the "Limited Partners") will have no authority in such
capacity to transact business for, or participate in the management activities
or decisions of, the Operating Partnership. See
"-- Certain Voting Rights of Limited Partners."

TRANSFERABILITY OF INTERESTS

Except for a transaction described in the following two paragraphs the
Partnership Agreement provides that the Company may not voluntarily withdraw
from the Operating Partnership, or transfer or assign its interest in the
Operating Partnership, without the consent of the holders of 60% of the OP Units
representing limited partner interests. Pursuant to the Partnership Agreement,
the Limited Partners have agreed not to transfer, assign, sell, encumber or
otherwise dispose of, without the consent of the Company, their interest in the
Operating Partnership, other than to Affiliates (as defined in the Partnership
Agreement) who agree to assume the obligations of the transferor under the
Partnership Agreement. Messrs. Ziman and Coleman and certain other Participants
are subject to additional restrictions on their ability to transfer shares of
Common Stock. See "Underwriting."

The Company may not engage in any merger, consolidation or other combination
with or into another person, sale of all or substantially all of its assets or
any reclassification, recapitalization or change of its outstanding equity
interests ("Termination Transaction"), unless the Termination Transaction has
been approved by holders of at least 66 2/3% of the OP Units (including OP Units
held by the Company which will represent 86.69% of all OP Units outstanding upon
consummation of the Offering) and in connection with which all Limited Partners
either will receive, or will have the right to elect to receive, for each OP
Unit an amount of cash, securities, or other property equal to the product of
the number of shares of Common Stock into which each OP Unit is then
exchangeable and the greatest amount of cash, securities or other property paid
to the holder of one share of Common Stock in consideration of one share of
Common Stock at any time during the period from and after the date on which the
Termination Transaction is consummated. If, in connection with the Termination
Transaction, a purchase, tender or exchange offer shall have been made to and
accepted by the holders of more than 50% of the outstanding shares of Common
Stock, each holder of OP Units will receive, or will have the right to elect to
receive, the greatest amount of cash, securities, or other property which such
holder would have received had it exercised its right to redemption and received
shares of Common Stock in exchange for its OP Units immediately prior to the
expiration of such purchase, tender or exchange offer and had thereupon accepted
such purchase, tender or exchange offer. In addition, unless a consent from
holders of 50% of the OP Units representing limited partner interests has been
obtained, no more than 49% of the equity securities of the acquired person in
such Termination Transaction may be owned, after consummation of such
Termination Transaction, by the Company or affiliates of the Operating
Partnership or the Company immediately prior to the date of which the
Termination Transaction is consummated.

Notwithstanding the foregoing paragraph, the Company may merge, or otherwise
combine its assets, with another entity if, immediately after such merger or
other combination, substantially all of the assets of the surviving entity,
other than OP Units held by the Company, are contributed to the Operating
Partnership as a capital contribution in exchange for OP Units with a fair
market value, as reasonably determined by the Company, equal to the agreed value
of the assets so contributed.

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<PAGE>
In respect of any transaction described in the preceding two paragraphs, the
Company is required to use its commercially reasonable efforts to structure such
transaction to avoid causing the Limited Partners to recognize gain for federal
income tax purposes by virtue of the occurrence of or their participation in
such transaction.

CAPITAL CONTRIBUTIONS

If the Operating Partnership requires additional funds at any time or from
time to time in excess of funds available to the Operating Partnership from
borrowings or capital contributions, and the Company borrows such funds from a
financial institution or other lender then the Company will lend such funds to
the Operating Partnership on comparable terms and conditions as are applicable
to the Company's borrowing of such funds. The Company may contribute the amount
of any required funds not loaned to the Operating Partnership as an additional
capital contribution to the Operating Partnership. If the Company so contributes
additional capital to the Operating Partnership, the Company's partnership
interest in the Operating Partnership will be increased on a proportionate basis
based upon the amount of such additional capital contributions and the value of
the Operating Partnership at the time of such contributions. Conversely, the
partnership interests of the Limited Partners will be decreased on a
proportionate basis in the event of additional capital contributions by the
Company. The Company's rights to make loans or additional capital contributions
to the Operating Partnership are generally subject to Mr. Ziman's right to
receive notice thereof and to fund the loan or capital contribution on a pro
rata basis so long as Mr. Ziman is the Company's Chief Executive Officer.

REDEMPTION/EXCHANGE RIGHTS

Limited Partners will receive rights which will enable them to require the
Operating Partnership to redeem part or all of their OP Units for cash (based
upon the fair market value of an equivalent number of shares of Common Stock at
the time of such redemption) or, at the election of the Company, exchange such
OP Units for shares of Common Stock (on a one-for-one basis, subject to
adjustment in the event of stock splits, stock dividends, issuance of certain
rights, certain extraordinary distributions and similar events) from the
Company, subject to the Ownership Limit and certain limitations on resale of
shares. The Company presently anticipates that it will elect to issue Common
Stock in exchange for OP Units in connection with each such redemption request,
rather than having the Operating Partnership pay cash. With each such redemption
or exchange, the Company's percentage ownership interest in the Operating
Partnership will increase. This redemption/exchange right may be exercised by
Limited Partners from time to time, in whole or in part, subject to the
limitations that such right may not be exercised (i) prior to the expiration of
one year following the consummation of the Offering or (ii) at any time to the
extent such exercise would result in such Limited Partner actually or
constructively owning common stock in excess of the Common Stock Ownership
Limit, assuming Common Stock was issued in such exchange.

ISSUANCE OF ADDITIONAL OP UNITS, COMMON STOCK OR CONVERTIBLE SECURITIES

As general partner of the Operating Partnership, the Company has the ability
to cause the Operating Partnership to issue additional OP Units. In addition,
the Company may, from time to time, issue additional shares of Common Stock or
convertible securities. In each event, Mr. Ziman will have proportional purchase
rights which will enable him to maintain his overall percentage ownership of the
combined equity of the Company and the Operating Partnership, assuming the
exchange of all OP Units for Common Stock. Mr. Ziman's proportional purchase
rights may be exercised, in his sole discretion, at a price per share or other
trading unit of such OP Units, Common Stock or convertible securities, as the
case may be, to be received by the Company or the Operating Partnership in such
issuance, less any underwriting discounts and commissions, and otherwise on the
same terms as may be applicable to such issuances. These proportional purchase
rights will not apply to transactions under any Company stock plan (such as the
Stock Incentive Plan), pursuant to an exchange of an OP Unit for a share of
Common Stock or in connection with any issuance of Common Stock or OP Units
incident to an acquisition of properties, assets or a business.

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<PAGE>
TAX MATTERS

Pursuant to the Partnership Agreement, the Company will be the tax matters
partner of the Operating Partnership and, as such, will have authority to make
tax elections under the Code on behalf of the Operating Partnership.

The net income or net loss of the Operating Partnership will generally be
allocated to the Company and the Limited Partners in accordance with their
respective percentage interests in the Operating Partnership, subject to special
allocations to certain Limited Partners of interest deductions and income from
the discharge of indebtedness attributable to loans transferred by Arden
Predecessors to the Operating Partnership and to compliance with the provisions
of Sections 704(b) and 704(c) of the Code and the regulations promulgated
thereunder. See "Federal Income Tax Considerations -- Tax Aspects of the
Operating Partnership."

OPERATIONS

The Partnership Agreement requires that the Operating Partnership be
operated in a manner that will enable the Company to satisfy the requirements
for being classified as a REIT and to avoid any federal income tax liability.

The Partnership Agreement provides that the net operating cash revenues of
the Operating Partnership, as well as the net sales and refinancing proceeds,
will be distributed from time to time (but at least quarterly) as determined by
the Company pro rata in accordance with the partners' percentage interests.

Pursuant to the Partnership Agreement, subject to certain exceptions, the
Operating Partnership will also assume and pay when due, or reimburse the
Company for payment of all costs and expenses relating to the operations of the
Company.

DUTIES AND CONFLICTS

The Partnership Agreement provides that all business activities of the
Company, including all activities pertaining to the acquisition and operation of
office properties, must be conducted through the Operating Partnership.

CERTAIN VOTING RIGHTS OF LIMITED PARTNERS

So long as the Limited Partners own at least 5% of the outstanding OP units,
the Company shall not, on behalf of the Operating Partnership, take any of the
following actions without the prior consent of holders of at least 50% of the OP
Units representing limited partner interests: (1) dissolve the Operating
Partnership, other than incident to a merger or sale of substantially all of the
Company's assets; or (2) prior to the expiration of seven years from the
completion of the Offering, sell Century Park Center, other than incident to a
merger or sale of substantially all of the Company's assets.

TERM

The Operating Partnership will continue in full force and effect until
December 31, 2096, or until sooner dissolved upon the bankruptcy, dissolution,
withdrawal or termination of the Company as general partner (unless the Limited
Partners other than the Company elect to continue the Operating Partnership),
the election of the Company and the Limited Partners, on entry of decree of
judicial dissolution, or the sale or other disposition of all or substantially
all the assets of the Operating Partnership or redemption of all OP Units.

INDEMNIFICATION

To the extent permitted by law, the Partnership Agreement provides for
indemnification and advance of expenses of the Company and its officers and
directors to the same extent indemnification and advance of expenses is provided
to officers and directors of the Company in its Charter and Bylaws, and limits
the liability of the Company and its officers and directors to the Operating
Partnership and its partners to the same extent liability of officers and
directors of the Company is limited under the Charter. See "Management --
Limitation of Liability and Indemnification."

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PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of Common Stock (or Common Stock for which OP Units are exchangeable)
by each director and director nominee, by each Named Executive Officer
identified on the table on page 94, by all directors (including director
nominees) and officers of the Company as a group and by each person who is
expected to be the beneficial owner of 5% or more of the outstanding shares of
Common Stock immediately following the completion of the Offering. Except as
indicated below, all of such Common Stock is owned directly, and the indicated
person has sole voting and investment power.

<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK,
ASSUMING FULL
EXCHANGE OF OP PERCENTAGE OF COMMON
NAME AND ADDRESS(1) UNITS(2) STOCK OUTSTANDING(2)
- ---------------------------------------------------------------------- ------------------- ---------------------
<S> <C> <C>
Richard S. Ziman...................................................... 1,914,856(3) 7.04%

Victor J. Coleman..................................................... 1,308,812(4) 3.86%

Diane M. Laing........................................................ -- --

Michele Byer.......................................................... 51,032 *

Andrew J. Sobel....................................................... 3,750 *

Herbert L. Porter..................................................... 1,250 *

Arthur Gilbert........................................................ 517,319(5) 2.42%

Steven C. Good........................................................ -- --

Jerry Asher........................................................... -- --

Carl D. Covitz........................................................ -- --

Kenneth B. Roath...................................................... -- --

All directors and officers as a group (11 persons).................... 2,708,575 12.56%
</TABLE>

- ------------------------------
* Less than one percent.
(1) The address for each of the persons listed is 9100 Wilshire Boulevard, East
Tower, Suite 700, Beverly Hills, California 90212.

(2) Except for Messrs. Sobel and Porter, who hold shares of Common Stock,
beneficial ownership of Common Stock is currently held 100% in the form of
OP Units. In addition, amounts for individuals assume that all OP Units held
by the person are exchanged for shares of Common Stock and that none of the
OP Units held by other persons are exchanged for shares of Common Stock.
Amounts for all directors and officers as a group assume all OP Units are
exchanged for shares of Common Stock. See "Capital Stock -- Restrictions on
Transfer."

(3) Includes (a) 855,562 shares held by entities in which Messrs. Ziman and
Coleman have shared voting and investment power, of which shares Mr. Ziman
disclaims beneficial ownership in the 40% of such shares in which he has no
pecuniary interest, (b) 322,429 shares owned by entities directly and
indirectly owned 100% by Mr. Ziman, (c) 136,675 shares owned by a family
partnership of Mr. Ziman, in which Mr. Ziman has shared voting and
investment power and of which Mr. Ziman is a 20% general partner and
disclaims beneficial ownership of the remaining 80% in which he has no
pecuniary interest, and (d) 43,200 shares owned by an entity in which
Messrs. Ziman, Coleman and Gilbert have shared voting and investment power,
of which shares Mr. Ziman disclaims beneficial ownership of the 82% of such
shares in which he has no pecuniary interest.

(4) Includes (a) 855,562 shares held by entities in which Messrs. Ziman and
Coleman have shared voting and investment power, of which shares Mr. Coleman
disclaims beneficial ownership of the 60% of such shares in which he has no
pecuniary interest, (b) 84,108 shares owned by an entity owned 100% by Mr.
Coleman and (c) 43,200 shares owned by an entity in which Messrs. Ziman,
Coleman and Gilbert have shared voting and investment power, of which shares
Mr. Coleman disclaims beneficial ownership of the 88% of such shares in
which he has no pecuniary interest.

(5) Includes (a) 436,601 shares owned by the Arthur Gilbert and Rosalinde
Gilbert 1982 Trust, of which Mr. Gilbert is a trustee, (b) 43,200 shares
owned by an entity in which Messrs. Ziman, Coleman and Gilbert have shared
voting and investment power, of which shares Mr. Gilbert disclaims
beneficial ownership of the 30% of such shares in which he has no pecuniary
interest and (c) 37,518 shares owned by an entity in which Mr. Gilbert and
the Gilbert Foundation (of which Mr. Gilbert is the trustee) have shared
voting and investment power of which shares Mr. Gilbert disclaims beneficial
ownership of the 99% of such shares in which he has no pecuniary interest.

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CAPITAL STOCK

The following summary of the terms of the stock of the Company does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Charter and Bylaws, copies of which are exhibits to the
Registration Statement of which this Prospectus is a part. See "Additional
Information."

GENERAL

The Charter provides that the Company may issue up to 100,000,000 shares of
Common Stock and 20,000,000 shares of preferred stock, $.01 par value per share
("Preferred Stock"). Upon completion of the Offering, 18,852,500 shares of
Common Stock will be issued and outstanding and no shares of Preferred Stock
will be issued and outstanding. Under Maryland law, stockholders generally are
not liable for the corporation's obligations solely as a result of their status
as stockholders.

COMMON STOCK

All shares of Common Stock offered hereby will be duly authorized, validly
issued, fully paid and nonassessable. Subject to the preferential rights of any
other shares or series of stock and to the provisions of the Charter regarding
the restrictions on transfer of stock, holders of shares of Common Stock are
entitled to receive dividends on such stock if, as and when authorized and
declared by the Board of Directors of the Company out of assets legally
available therefor and to share ratably in the assets of the Company legally
available for distribution to its stockholders in the event of its liquidation,
dissolution or winding up after payment of or adequate provision for all known
debts and liabilities of the Company.

Subject to the provisions of the Charter regarding the restrictions on
transfer of stock, each outstanding share of Common Stock entitles the holder to
one vote on all matters submitted to a vote of stockholders, including the
election of directors and, except as provided with respect to any other class or
series of stock, the holders of such shares will possess the exclusive voting
power. There is no cumulative voting in the election of directors, which means
that the holders of a majority of the outstanding shares of Common Stock can
elect all of the directors then standing for election and the holders of the
remaining shares will not be able to elect any directors.

Holders of shares of Common Stock have no preference, conversion, exchange,
sinking fund, redemption or appraisal rights and, with the exception of Mr.
Ziman's proportional purchase rights, have no preemptive rights to subscribe for
any securities of the Company. Subject to the provisions of the Charter
regarding the restrictions on transfer of stock, shares of Common Stock will
have equal dividend, liquidation and other rights.

Under the MGCL, a corporation generally cannot dissolve, amend its charter,
merge, sell all or substantially all of its assets, engage in a share exchange
or engage in similar transactions outside the ordinary course of business unless
approved by the affirmative vote of stockholders holding at least two-thirds of
the votes entitled to be cast on the matter unless a greater or lesser
percentage (but not less than a majority of all of the votes to be cast on the
matter) is set forth in the corporation's charter. The Company's Charter does
not provide for a lesser percentage in such situations except that the
provisions of the Charter relating to authorized capital and the classification
and reclassification of shares of Common Stock and Preferred Stock may be
amended by the affirmative vote of the holders of not less than a majority of
the votes entitled to be cast on the matter.

PREFERRED STOCK

The Charter authorizes the Board of Directors to classify any unissued
shares of Preferred Stock and to reclassify any previously classified but
unissued shares of any series, as authorized by the Board of Directors. Prior to
issuance of shares of each series, the Board is required by the MGCL and the
Charter of the Company to set, subject to the provisions of the Charter
regarding the restrictions on transfer of stock, the terms, preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications and terms or conditions of
redemption for each such series. Thus, the Board could authorize the issuance of
shares of Preferred Stock with terms and conditions which could have the effect
of delaying, deferring or preventing a transaction or a change in control of the
Company that might

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involve a premium price for holders of Common Stock or otherwise be in their
best interest. As of the date hereof, no shares of Preferred Stock are
outstanding and the Company has no present plans to issue any Preferred Stock.

POWER TO ISSUE ADDITIONAL SHARES OF COMMON STOCK AND PREFERRED STOCK

The Company believes that the power of the Board of Directors to issue
additional authorized but unissued shares of Common Stock or Preferred Stock and
to classify or reclassify unissued shares of Common Stock and Preferred Stock
and thereafter to cause the Company to issue such classified or reclassified
shares of stock will provide the Company with increased flexibility in
structuring possible future financings and acquisitions and in meeting other
needs which might arise. The additional classes or series, as well as the Common
Stock, will be available for issuance without further action by the Company's
stockholders, unless such action is required by applicable law or the rules of
any stock exchange or automated quotation system on which the Company's
securities may be listed or traded. Although the Board of Directors has no
intention at the present time of doing so, it could authorize the Company to
issue a class or series that could, depending upon the terms of such class or
series, delay, defer or prevent a transaction or a change in control of the
Company that might involve a premium price for holders of Common Stock or
otherwise be in their best interest.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is The Bank of New
York.

RESTRICTIONS ON TRANSFER

For the Company to qualify as a REIT under the Code, no more than 50% in
value of its outstanding shares of stock may be owned, actually or
constructively, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of a taxable year (other than the first
year for which an election to be treated as a REIT has been made). In addition,
if the Company, or an owner of 10% or more of the Company, actually or
constructively owns 10% or more of a tenant of the Company (or a tenant of any
partnership in which the Company is a partner), the rent received by the Company
(either directly or through any such partnership) from such tenant will not be
qualifying income for purposes of the REIT gross income tests of the Code. A
REIT's stock must also be beneficially owned by 100 or more persons during at
least 335 days of a taxable year of twelve months or during a proportionate part
of a shorter taxable year (other than the first year for which an election to be
treated as a REIT has been made).

Because the Company expects to qualify as a REIT, the Charter contains
restrictions on the ownership and transfer of Common Stock which are intended to
assist the Company in complying with these requirements. The Charter provides
that, subject to certain specified exceptions, no person or entity may own, or
be deemed to own by virtue of the applicable constructive ownership provisions
of the Code, more than 9.0% (by number or value, whichever is more restrictive)
of the outstanding shares of Common Stock (the "Ownership Limit"). The
constructive ownership rules of the Code are complex, and may cause shares of
Common Stock owned actually or constructively by a group of related individuals
and/or entities to be owned constructively by one individual or entity. As a
result, the acquisition of less than 9.0% of the shares of Common Stock (or the
acquisition of an interest in an entity that owns, actually or constructively,
Common Stock) by an individual or entity, could, nevertheless cause that
individual or entity, or another individual or entity, to own constructively in
excess of 9.0% of the outstanding Common Stock and thus subject such shares to
the Ownership Limit. The Board of Directors may, but in no event will be
required to, waive the Ownership Limit with respect to a particular stockholder
if it determines that such ownership will not jeopardize the Company's status as
a REIT. As a condition of such waiver, the Board of Directors may require
opinions of counsel satisfactory to it and/or undertakings or representations
from the applicant with respect to preserving the REIT status of the Company.
The Board of Directors has obtained such undertakings and representations from
Mr. Ziman and, as a result, has waived the Ownership Limit with respect to the
Ziman family and certain affiliated entities, including the Operating
Partnership. The Ziman family and such entities will be permitted to own in the
aggregate, actually or constructively, up to 13% (by number of shares or by
value, whichever is more restrictive) of the Common Stock.

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The Charter further prohibits (a) any person from actually or constructively
owning shares of stock of the Company that would result in the Company being
"closely held" under Section 856(h) of the Code or otherwise cause the Company
to fail to qualify as a REIT and (b) any person from transferring shares of
stock of the Company if such transfer would result in shares of stock of the
Company being owned by fewer than 100 persons. Any person who acquires or
attempts or intends to acquire actual or constructive ownership of shares of
stock of the Company that will or may violate any of the foregoing restrictions
on transferability and ownership is required to give notice immediately to the
Company and provide the Company with such other information as the Company may
request in order to determine the effect of such transfer on the Company's
status as a REIT. The foregoing restrictions on transferability and ownership
will not apply if the Board of Directors determines that it is no longer in the
best interest of the Company to attempt to qualify, or to continue to qualify,
as a REIT and such determination is approved by a two thirds vote of the
Company's stockholders as required by the Charter.

If any purported transfer of Common Stock of the Company or any other event
would otherwise result in any person violating the Ownership Limit or the
Charter, then any such purported transfer will be void and of no force or effect
with respect to the purported transferee (the "Prohibited Transferee") as to
that number of shares in excess of the Ownership Limit and the Prohibited
Transferee shall acquire no right or interest (or, in the case of any event
other than a purported transfer, the person or entity holding record title to
any such shares in excess of the Ownership Limit (the "Prohibited Owner") shall
cease to own any right or interest) in such excess shares. Any such excess
shares described above will be transferred automatically, by operation of law,
to a trust, the beneficiary of which will be a qualified charitable organization
selected by the Company (the "Beneficiary"). Such automatic transfer shall be
deemed to be effective as of the close of business on the Business Day (as
defined in the Charter) prior to the date of such violative transfer. Within 20
days of receiving notice from the Company of the transfer of shares to the
trust, the trustee of the trust (who shall be designated by the Company and be
unaffiliated with the Company and any Prohibited Transferee or Prohibited Owner)
will be required to sell such excess shares to a person or entity who could own
such shares without violating the Ownership Limit, and distribute to the
Prohibited Transferee an amount equal to the lesser of the price paid by the
Prohibited Transferee for such excess shares or the sales proceeds received by
the trust for such excess shares. In the case of any excess shares resulting
from any event other than a transfer, or from a transfer for no consideration
(such as a gift), the trustee will be required to sell such excess shares to a
qualified person or entity and distribute to the Prohibited Owner an amount
equal to the lesser of the fair market value of such excess shares as of the
date of such event or the sales proceeds received by the trust for such excess
shares. In either case, any proceeds in excess of the amount distributable to
the Prohibited Transferee or Prohibited Owner, as applicable, will be
distributed to the Beneficiary. Prior to a sale of any such excess shares by the
trust, the trustee will be entitled to receive in trust for the Beneficiary, all
dividends and other distributions paid by the Company with respect to such
excess shares, and also will be entitled to exercise all voting rights with
respect to such excess shares. Subject to Maryland law, effective as of the date
that such shares have been transferred to the trust, the trustee shall have the
authority (at the trustee's sole discretion) (i) to rescind as void any vote
cast by a Prohibited Transferee prior to the discovery by the Company that such
shares have been transferred to the trust and (ii) to recast such vote in
accordance with the desires of the trustee acting for the benefit of the
Beneficiary. However, if the Company has already taken irreversible corporate
action, then the trustee shall not have the authority to rescind and recast such
vote. Any dividend or other distribution paid to the Prohibited Transferee or
Prohibited Owner (prior to the discovery by the Company that such shares had
been automatically transferred to a trust as described above) will be required
to be repaid to the trustee upon demand for distribution to the Beneficiary. In
the event that the transfer to the trust as described above is not automatically
effective (for any reason) to prevent violation of the Ownership Limit, then the
Charter provides that the transfer of the excess shares will be void.

In addition, shares of stock of the Company held in the Trust shall be
deemed to have been offered for sale to the Company, or its designee, at a price
per share equal to the lesser of (i) the price per share in the transaction that
resulted in such transfer to the Trust (or, in the case of a devise or gift, the
Market Price at the time of such devise or gift) and (ii) the Market Price on
the date the Company, or its designee, accepts such offer. The Company shall
have the right to accept such offer until the Trustee has sold the shares of

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stock held in the Trust. Upon such a sale to the Company, the interest of the
Charitable Beneficiary in the shares sold shall terminate and the Trustee shall
distribute the net proceeds of the sale to the Prohibited Owner.

All certificates representing shares of Common Stock will bear a legend
referring to the restrictions described above.

Under the Charter, every owner of a specified percentage (or more) of the
outstanding shares of Common Stock must file a completed questionnaire with the
Company containing information regarding their ownership of such shares, as set
forth in the Treasury Regulations. Under current Treasury Regulations, the
percentage will be set between 0.5% and 5.0%, depending upon the number of
record holders of the Company's shares. In addition, each stockholder shall upon
demand be required to disclose to the Company in writing such information as the
Company may request in order to determine the effect, if any, of such
stockholder's actual and constructive ownership of Common Stock on the Company's
status as a REIT and to ensure compliance with the Ownership Limit.

These ownership limits could delay, defer or prevent a transaction or a
change in control of the Company that might involve a premium price for the
Common Stock or otherwise be in the best interest of stockholders.

CERTAIN PROVISIONS OF MARYLAND LAW AND THE COMPANY'S CHARTER AND BYLAWS

THE FOLLOWING SUMMARY OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE
CHARTER AND BYLAWS OF THE COMPANY DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT
TO AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO MARYLAND LAW AND THE CHARTER
AND BYLAWS OF THE COMPANY, COPIES OF WHICH ARE EXHIBITS TO THE REGISTRATION
STATEMENT OF WHICH THIS PROSPECTUS IS A PART.

The Charter and the Bylaws of the Company contain certain provisions that
could make more difficult the acquisition of the Company by means of a tender
offer, a proxy contest or otherwise. These provisions are expected to discourage
certain types of coercive takeover practices and inadequate takeover bids and to
encourage persons seeking to acquire control of the Company to negotiate first
with the Board of Directors. The Company believes that the benefits of these
provisions outweigh the potential disadvantages of discouraging such proposals
because, among other things, negotiation of such proposals might result in an
improvement of their terms. The description set forth below is intended as a
summary only and is qualified in its entirety by reference to the Charter and
the Bylaws, which have been filed as exhibits to the Registration Statement of
which this Prospectus is a part. See also "Capital Stock -- Restrictions on
Transfer."

BOARD OF DIRECTORS - NUMBER, CLASSIFICATION, VACANCIES

The Bylaws provide that the number of directors of the Company may be
established by the Board of Directors but may not be fewer than five nor more
than 11. Any vacancy will be filled, at any regular meeting or at any special
meeting called for that purpose, by a majority of the remaining directors,
except that a vacancy resulting from an increase in the number of directors must
be filled by a majority of the entire Board of Directors.

The Company's Board of Directors is divided into three classes of directors.
The initial terms of the first, second and third classes will expire in 1997,
1998 and 1999, respectively. Beginning in 1997, directors of each class will be
chosen for three-year terms upon the expiration of their current terms and each
year one class of directors will be elected by the stockholders. The staggered
terms of directors may reduce the possibility of a tender offer or an attempt to
change control of the Company even though a tender offer or change in control
might be in the best interest of the stockholders.

The classified board provision could have the effect of making the
replacement of incumbent directors more time consuming and difficult. At least
two annual meetings of stockholders, instead of one, will generally be required
to effect a change in a majority of the Board of Directors. Thus, the classified
board provision could increase the likelihood that incumbent directors will
retain their positions. The staggered terms of directors may reduce the
possibility of a tender offer or an attempt to change control of the Company,
even though a tender offer or change in control might be in the best interest of
the stockholders.

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REMOVAL OF DIRECTORS

The Charter provides that subject to the rights of one or more classes or
series of Preferred Stock to elect one or more directors, any director may be
removed only for cause (as defined in the Charter) and only by the affirmative
vote of at least two-thirds of the votes entitled to be cast in the election of
directors. This provision, when coupled with the provision in the Bylaws
authorizing the Board of Directors to fill vacant directorships, precludes
stockholders from removing incumbent directors, except upon the existence of
cause for removal and a substantial affirmative vote, and filling the vacancies
created by such removal with their own nominees.

BUSINESS COMBINATIONS

Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer or
issuance or reclassification of equity securities) between a Maryland
corporation and any person who beneficially owns ten percent or more of the
voting power of the corporation's shares or an affiliate of the corporation who,
at any time within the two-year period prior to the date in question, was the
beneficial owner of ten percent or more of the voting power of the
then-outstanding voting stock of the corporation (an "Interested Stockholder")
or an affiliate of such an Interested Stockholder are prohibited for five years
after the most recent date on which the Interested Stockholder becomes an
Interested Stockholder. Thereafter, any such business combination must be
recommended by the board of directors of such corporation and approved by the
affirmative vote of at least (a) 80% of the votes entitled to be cast by holders
of outstanding shares of voting stock of the corporation and (b) two-thirds of
the votes entitled to be cast by holders of voting stock of the corporation
other than shares held by the Interested Stockholder with whom (or with whose
affiliate) the business combination is to be effected, unless, among other
conditions, the corporation's common stockholders receive a minimum price (as
defined in the MGCL) for their shares and the consideration is received in cash
or in the same form as previously paid by the Interested Stockholder for its
shares. These provisions of Maryland law do not apply, however, to business
combinations that are approved or exempted by the board of directors of the
corporation prior to the time that the Interested Stockholder becomes an
Interested Stockholder. The Company's Board of Directors has resolved to opt out
of the business combination provisions of the MGCL.

CONTROL SHARE ACQUISITIONS

The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" have no voting rights except to the extent
approved by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares of stock owned by the acquiror, by officers or by directors who
are employees of the corporation. "Control shares" are voting shares of stock
which, if aggregated with all other such shares of stock previously acquired by
the acquiror or in respect of which the acquiror is able to exercise or direct
the exercise of voting power (except solely by virtue of a revocable proxy),
would entitle the acquiror to exercise voting power in electing directors within
one of the following ranges of voting power: (i) one-fifth or more but less than
one-third, (ii) one-third or more but less than a majority, or (iii) a majority
or more of all voting power. Control shares do not include shares the acquiring
person is then entitled to vote as the result of having previously obtained
stockholder approval. A "control share acquisition" means the acquisition of
control shares, subject to certain exceptions.

A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of directors of the corporation to call a special meeting
of stockholders to be held within 50 days of demand to consider the voting
rights of the shares. If no request for a meeting is made, the corporation may
itself present the question at any stockholders meeting.

If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have previously
been approved) for fair value determined, without regard to the absence of
voting rights for the control shares, as of the date of the last control share
acquisition by the acquiror or of any meeting of stockholders at which the
voting rights of such shares are considered and not approved. If voting rights
for control shares are approved

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at a stockholders meeting and the acquiror becomes entitled to vote a majority
of the shares entitled to vote, all other stockholders may exercise appraisal
rights. The fair value of the shares as determined for purposes of such
appraisal rights may not be less than the highest price per share paid by the
acquiror in the control share acquisition.

The control share acquisition statute does not apply (a) to shares acquired
in a merger, consolidation or share exchange if the corporation is a party to
the transaction or (b) to acquisitions approved or exempted by the charter or
bylaws of the corporation.

The Bylaws of the Company contain a provision exempting from the control
share acquisition statute any and all acquisitions by any person of the
Company's shares of stock. There can be no assurance that such provision will
not be amended or eliminated at any time in the future.

AMENDMENT TO THE CHARTER

The Charter, including its provisions on classification of the Board of
Directors, restrictions on transferability of shares of Common Stock and removal
of directors, may be amended only by the affirmative vote of the holders of not
less than two thirds of all of the votes entitled to be cast on the matter.
However, the provisions of the Charter relating to authorized capital and the
classification and reclassification of shares of Common Stock and Preferred
Stock may be amended by the affirmative vote of the holders of not less than a
majority of the votes entitled to be cast on the matter.

DISSOLUTION OF THE COMPANY

The dissolution of the Company must be approved by the affirmative vote of
the holders of not less than two thirds of all of the votes entitled to be cast
on the matter.

ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS

The Bylaws of the Company provide that (a) with respect to an annual meeting
of stockholders, nominations of persons for election to the Board of Directors
and the proposal of business to be considered by stockholders may be made only
(i) pursuant to the Company's notice of the meeting, (ii) by the Board of
Directors or (iii) by a stockholder who is entitled to vote at the meeting and
has complied with the advance notice procedures set forth in the Bylaws and (b)
with respect to special meetings of the stockholders, only the business
specified in the Company's notice of meeting may be brought before the meeting
of stockholders and nominations of persons for election to the Board of
Directors may be made only (i) pursuant to the Company's notice of the meeting,
(ii) by the Board of Directors or (iii) provided that the Board of Directors has
determined that directors shall be elected at such meeting, by a stockholder who
is entitled to vote at the meeting and has complied with the advance notice
provisions set forth in the Bylaws.

ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE CHARTER
AND BYLAWS

The business combination provisions and the control share acquisition
provisions of the MGCL, in each case if they ever became applicable to the
Company, the provisions of the Charter on classification of the Board of
Directors and removal of directors and the advance notice provisions of the
Bylaws could delay, defer or prevent a transaction or a change in control of the
Company that might involve a premium price for holders of Common Stock or
otherwise be in their best interest.

RIGHTS TO PURCHASE SECURITIES AND OTHER PROPERTY

The Charter authorizes the Board of Directors to create and issue rights
entitling the holders thereof to purchase from the Company shares of stock or
other securities or property. The times at which and terms upon which such
rights are to be issued would be determined by the Board of Directors and set
forth in the contracts or instruments that evidence such rights. This provision
is intended to confirm the Board of Directors' authority to issue share purchase
rights, which may have terms that could impede a merger, tender offer or other
takeover attempt, or other rights to purchase shares or securities of the
Company or any other corporation.

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SHARES AVAILABLE FOR FUTURE SALE

GENERAL

Upon the completion of the Offering, the Company will have outstanding
18,852,500 shares of Common Stock (21,679,500 shares if the Underwriters'
overallotment option is exercised in full). In addition, 2,889,071 shares of
Common Stock are reserved for issuance upon exchange of OP Units. The shares of
Common Stock issued in the Offering will be freely tradeable by persons other
than "affiliates" of the Company without restriction under the Securities Act,
subject to the limitations on ownership set forth in the Charter. See "Capital
Stock -- Restrictions on Transfer." The shares of Common Stock owned by the
Participants or acquired by any Participant in redemption of OP Units (the
"Restricted Shares") will be "restricted" securities under the meaning of Rule
144 promulgated under the Securities Act ("Rule 144") and may not be sold in the
absence of registration under the Securities Act unless an exemption from
registration is available, including exemptions contained in Rule 144. As
described below under "-- Registration Rights," the Company has granted certain
holders registration rights with respect to their shares of Common Stock.

In general, under Rule 144 as currently in effect, if two years have elapsed
since the later of the date of acquisition of Restricted Shares from the Company
or any "affiliate" of the Company, as that term is defined under the Securities
Act, the acquiror or subsequent holder thereof is entitled to sell within any
three-month period a number of shares that does not exceed the greater of 1% of
the then outstanding shares of Common Stock or the average weekly trading volume
of the Common Stock during the four calendar weeks preceding the date on which
notice of the sale is filed with the SEC. Sales under Rule 144 are also subject
to certain manner of sales provisions, notice requirements and the availability
of current public information about the Company. If three years have elapsed
since the date of acquisition of Restricted Shares from the Company or from any
"affiliate" of the Company, and the acquiror or subsequent holder thereof is
deemed not to have been an affiliate of the Company at any time during the 90
days preceding a sale, such person is entitled to sell such shares in the public
market under Rule 144(k) without regard to the volume limitations, manner of
sale provisions, public information requirements or notice requirements.

The Commission has proposed to amend the holding period required by Rule 144
to permit sales of "restricted securities" after one year rather than two years
(and two years rather than three years for "non-affiliates" who desire to sell
such shares under Rule 144(k)). If such proposed amendment were enacted, the
"restricted securities" would become freely tradeable (subject to any applicable
contractual restrictions) at these earlier dates.

In connection with the Offering, Messrs. Ziman and Coleman have agreed not
to sell any shares of Common Stock acquired by them upon exchange of OP Units
for a period of two years after the completion of the Offering without the
consent of Lehman Brothers Inc. Such restriction will not apply to any OP Units
or other shares of Common Stock purchased or otherwise acquired by Messrs. Ziman
or Coleman following consummation of the Offering. See "Underwriting."

The Company has established the Stock Incentive Plan for the purpose of
attracting and retaining directors, executive officers and other key employees.
See "Management -- Stock Incentive Plan" and "-- Compensation of Directors." The
Company intends to issue options to purchase approximately 868,500 shares of
Common Stock to directors, executive officers and certain key employees prior to
the completion of the Offering and has reserved 631,500 additional shares for
future issuance under the Stock Incentive Plan. Prior to the expiration of the
initial 12-month period following consummation of the Offering, the Company
expects to file a registration statement on Form S-8 with the SEC with respect
to the shares of Common Stock issuable under the Stock Incentive Plan, which
shares may be resold without restriction, unless held by affiliates.

Prior to the Offering, there has been no public market for the Common Stock.
Trading of the Common Stock on the New York Stock Exchange is expected to
commence immediately following the completion of the Offering. No prediction can
be made as to the effect, if any, that future sales of shares, or the
availability of shares for future sale, will have on the market price prevailing
from time to time. Sales of substantial amounts of Common Stock (including
shares issued upon the exercise of Options), or the perception that

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such sales occur, could adversely affect prevailing market prices of the Common
Stock. See "Risk Factors -- Absence of Prior Public Market for Common Stock --
Effect on Common Stock Price of Shares Available for Future Sale" and
"Partnership Agreement -- Transferability of Interests."

REGISTRATION RIGHTS

The Company has granted the Participants who received OP Units in the
Formation Transactions certain registration rights with respect to the shares of
Common Stock owned by them or acquired by them in connection with the exercise
of the Redemption/Exchange Rights under the Partnership Agreement. These
registration rights require the Company to register all such shares of Common
Stock effective on the first anniversary of the consummation of the Offering.
The Company will bear expenses incident to its registration requirements under
the registration rights, except that such expenses shall not include any
underwriting discounts or commissions or transfer taxes, if any, relating to
such shares.

FEDERAL INCOME TAX CONSEQUENCES

The following summary of material federal income tax consequences regarding
the Company and the Offering is based on current law, is for general information
only and is not tax advice. The information set forth below, to the extent that
it constitutes matters of law, summaries of legal matters or legal conclusions
is the opinion of Latham & Watkins, tax counsel to the Company. This discussion
does not purport to deal with all aspects of taxation that may be relevant to
particular stockholders in light of their personal investment or tax
circumstances, or to certain types of stockholders subject to special treatment
under the tax laws, including without limitation insurance companies, financial
institutions or broker-dealers, tax-exempt organizations (except to the extent
discussed under the heading "Taxation of Tax-Exempt Stockholders") or foreign
corporations and persons who are not citizens or residents of the United States
(except to the extent discussed under the heading "Taxation of Non-U.S.
Stockholders"). In addition, the summary below does not consider the effect of
any foreign, state, local or other tax laws that may be applicable to
prospective stockholders.

EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE, OWNERSHIP
AND SALE OF THE COMMON STOCK, INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND
OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP AND SALE AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.

TAXATION OF THE COMPANY

GENERAL. The Company plans to make an election to be taxed as a REIT under
Sections 856 through 860 of the Code, commencing with its taxable year ending
December 31, 1996. The Company believes that, commencing with its taxable year
ending December 31, 1996, it will be organized and will operate in such a manner
as to qualify for taxation as a REIT under the Code commencing with such taxable
year, and the Company intends to continue to operate in such a manner, but no
assurance can be given that it will continue to operate in such a manner so as
to qualify or remain qualified.

These sections of the Code and the corresponding Treasury Regulations, are
highly technical and complex. The following sets forth the material aspects of
the sections that govern the federal income tax treatment of a REIT and its
stockholders.

Latham & Watkins has acted as tax counsel to the Company in connection with
the Offering and the Company's election to be taxed as a REIT. In the opinion of
Latham & Watkins, commencing with the Company's taxable year ending December 31,
1996, the Company will be organized in conformity with the requirements for
qualification as a REIT, and its proposed method of operation will enable it to
meet the requirements for qualification and taxation as a REIT under the Code.
It must be emphasized that this opinion is based upon certain representations
made by the Company as to factual matters relating to the organization and
operation of the Company and the Operating Partnership. In addition, this
opinion is based upon the factual representations of the Company concerning its
business and properties as set forth in this Prospectus and assumes that the
actions described in this Prospectus are completed in a timely fashion.

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Moreover, such qualification and taxation as a REIT depends upon the Company's
ability to meet (through actual annual operating results, distribution levels
and diversity of stock ownership) the various qualification tests imposed under
the Code discussed below, the results of which will not be reviewed by Latham &
Watkins. Accordingly, no assurance can be given that the actual results of the
Company's operation for any particular taxable year will satisfy such
requirements. Further, the anticipated income tax treatment described in this
Prospectus may be changed, perhaps retroactively, by legislative, administrative
or judicial action at any time. See " -- Failure to Qualify."

If the Company qualifies for taxation as a REIT, it generally will not be
subject to federal corporate income taxes on its net income that is currently
distributed to stockholders. This treatment substantially eliminates the "double
taxation" (at the corporate and stockholder levels) that generally results from
investment in a regular corporation. However, the Company will be subject to
federal income tax as follows: First, the Company will be taxed at regular
corporate rates on any undistributed REIT taxable income, including
undistributed net capital gains. Second, under certain circumstances, the
Company may be subject to the "alternative minimum tax" on its items of tax
preference. Third, if the Company has (i) net income from the sale or other
disposition of "foreclosure property" which is held primarily for sale to
customers in the ordinary course of business or (ii) other nonqualifying income
from foreclosure property, it will be subject to tax at the highest corporate
rate on such income. Fourth, if the Company has net income from prohibited
transactions (which are, in general, certain sales or other dispositions of
property held primarily for sale to customers in the ordinary course of business
other than foreclosure property), such income will be subject to a 100% tax.
Fifth, if the Company should fail to satisfy the 75% gross income test or the
95% gross income test (as discussed below), but has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on an amount equal to (a) the gross income
attributable to the greater of the amount by which the Company fails the 75% or
95% test multiplied by (b) a fraction intended to reflect the Company's
profitability. Sixth, if the Company should fail to distribute during each
calendar year at least the sum of (i) 85% of its REIT ordinary income for such
year, (ii) 95% of its REIT capital gain net income for such year, and (iii) any
undistributed taxable income from prior periods, the Company would be subject to
a 4% excise tax on the excess of such required distribution over the amounts
actually distributed. Seventh, with respect to any asset (a "Built-In Gain
Asset") acquired by the Company from a corporation which is or has been a C
corporation (I.E., generally a corporation subject to full corporate-level tax)
in a transaction in which the basis of the Built-In Gain Asset in the hands of
the Company is determined by reference to the basis of the asset in the hands of
the C corporation, if the Company recognizes gain on the disposition of such
asset during the ten-year period (the "Recognition Period") beginning on the
date on which such asset was acquired by the Company, then, to the extent of the
Built-In Gain (i.e., the excess of (a) the fair market value of such asset over
(b) the Company's adjusted basis in such asset, determined as of the beginning
of the Recognition Period), such gain will be subject to tax at the highest
regular corporate rate pursuant to Internal Revenue Service ("IRS") regulations
that have not yet been promulgated. The results described above with respect to
the recognition of Built-In Gain assume that the Company will make an election
pursuant to IRS Notice 88-19.

REQUIREMENTS FOR QUALIFICATION. The Code defines a REIT as a corporation,
trust or association (i) which is managed by one or more trustees or directors;
(ii) the beneficial ownership of which is evidenced by transferable shares, or
by transferable certificates of beneficial interest; (iii) which would be
taxable as a domestic corporation, but for Sections 856 through 859 of the Code;
(iv) which is neither a financial institution nor an insurance company subject
to certain provisions of the Code; (v) the beneficial ownership of which is held
by 100 or more persons; (vi) during the last half of each taxable year not more
than 50% in value of the outstanding stock of which is owned, actually or
constructively, by five or fewer individuals (as defined in the Code to include
certain entities); and (vii) which meets certain other tests, described below,
regarding the nature of its income and assets. The Code provides that conditions
(i) to (iv), inclusive, must be met during the entire taxable year and that
condition (v) must be met during at least 335 days of a taxable year of twelve
months, or during a proportionate part of a taxable year of less than twelve
months. Conditions (v) and (vi) will not apply until after the first taxable
year for which an election is made to be taxed as a REIT. For purposes of
conditions (v) and (vi), pension funds and certain other tax-exempt entities are
treated as individuals, subject to a "look-through" exception in the case of
condition (vi).

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The Company believes that it will have issued sufficient shares of Common
Stock with sufficient diversity of ownership pursuant to the Offering to allow
it to satisfy conditions (v) and (vi). In addition, the Company's Charter
provides for restrictions regarding the transfer and ownership of shares, which
restrictions are intended to assist the Company in continuing to satisfy the
share ownership requirements described in (v) and (vi) above. Such ownership and
transfer restrictions are described in "Capital Stock -- Restrictions on
Transfer." These restrictions, however, may not ensure that the Company will, in
all cases, be able to satisfy the share ownership requirements described above.
If the Company fails to satisfy such share ownership requirements, the Company's
status as a REIT will terminate. See " -- Failure to Qualify."

In addition, a corporation may not elect to become a REIT unless its taxable
year is the calendar year. The Company will have a calendar taxable year.

OWNERSHIP OF A PARTNERSHIP INTEREST. In the case of a REIT which is a
partner in a partnership, Treasury Regulations provide that the REIT will be
deemed to own its proportionate share of the assets of the partnership and will
be deemed to be entitled to the income of the partnership attributable to such
share. In addition, the character of the assets and gross income of the
partnership shall retain the same character in the hands of the REIT for
purposes of Section 856 of the Code, including satisfying the gross income tests
and the asset tests. Thus, the Company's proportionate share of the assets and
items of income of the Operating Partnership (including the Operating
Partnership's share of such items of any subsidiary partnerships) will be
treated as assets and items of income of the Company for purposes of applying
the requirements described herein. A summary of the rules governing the federal
income taxation of partnerships and their partners is provided below in " -- Tax
Aspects of the Operating Partnership." The Company has direct control of the
Operating Partnership and intends to operate it consistent with the requirements
for qualification as a REIT.

INCOME TESTS. In order to maintain qualification as a REIT, the Company
annually must satisfy three gross income requirements. First, at least 75% of
the Company's gross income (excluding gross income from prohibited transactions)
for each taxable year must be derived directly or indirectly from investments
relating to real property or mortgages on real property (including "rents from
real property" and, in certain circumstances, interest) or from certain types of
temporary investments. Second, at least 95% of the Company's gross income
(excluding gross income from prohibited transactions) for each taxable year must
be derived from such real property investments, dividends, interest and gain
from the sale or disposition of stock or securities (or from any combination of
the foregoing). Third, short-term gain from the sale or other disposition of
stock or securities, gain from prohibited transactions and gain on the sale or
other disposition of real property held for less than four years (apart from
involuntary conversions and sales of foreclosure property) must represent less
than 30% of the Company's gross income (including gross income from prohibited
transactions) for each taxable year. For purposes of applying the 30% gross
income test, the holding period of Properties acquired by the Operating
Partnership in the Formation Transactions will be deemed to have commenced on
the date of acquisition.

Rents received by the Company will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if
several conditions are met. First, the amount of rent must not be based in whole
or in part on the income or profits of any person. However, an amount received
or accrued generally will not be excluded from the term "rents from real
property" solely by reason of being based on a fixed percentage or percentages
of receipts or sales. Second, the Code provides that rents received from a
tenant will not qualify as "rents from real property" in satisfying the gross
income tests if the REIT, or an actual or constructive owner of 10% or more of
the REIT, actually or constructively owns 10% or more of such tenant (a "Related
Party Tenant"). Third, if rent attributable to personal property, leased in
connection with a lease of real property, is greater than 15% of the total rent
received under the lease, then the portion of rent attributable to such personal
property will not qualify as "rents from real property." Finally, for rents
received to qualify as "rents from real property," the REIT generally must not
operate or manage the property or furnish or render services to the tenants of
such property, other than through an independent contractor from whom the REIT
derives no revenue. The REIT may, however, directly perform certain services
that are "usually or customarily rendered" in connection with the rental of
space for occupancy only and are not otherwise considered "rendered to the
occupant" of the property. The Company

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does not and will not (i) charge rent for any property that is based in whole or
in part on the income or profits of any person (except by reason of being based
on a percentage of receipts or sales, as described above), (ii) rent any
property to a Related Party Tenant (unless the Board of Directors determines in
its discretion that the rent received from such Related Party Tenant is not
material and will not jeopardize the Company's status as a REIT), (iii) derive
rental income attributable to personal property (other than personal property
leased in connection with the lease of real property, the amount of which is
less than 15% of the total rent received under the lease), or (iv) perform
services considered to be rendered to the occupant of the property, other than
through an independent contractor from whom the Company derives no revenue.

The Company expects to receive fees in exchange for the performance of
certain management activities for third parties with respect to properties in
which the Company does not own an interest. Such fees will result in
nonqualifying income to the Company under the 95% and 75% gross income tests.
The Company believes that the aggregate amount of nonqualifying income in any
taxable year, including such fees, will not exceed the limit on nonqualifying
income under the gross income tests.

The term "interest" generally does not include any amount received or
accrued (directly or indirectly) if the determination of such amount depends in
whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "interest"
solely by reason of being based on a fixed percentage or percentages of receipts
or sales.

If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions will be generally available if the Company's failure to meet such
tests was due to reasonable cause and not due to willful neglect, the Company
attaches a schedule of the sources of its income to its federal income tax
return, and any incorrect information on the schedule was not due to fraud with
intent to evade tax. It is not possible, however, to state whether in all
circumstances the Company would be entitled to the benefit of these relief
provisions. For example, if the Company fails to satisfy the gross income tests
because nonqualifying income that the Company intentionally incurs exceeds the
limits on such income, the IRS could conclude that the Company's failure to
satisfy the tests was not due to reasonable cause. If these relief provisions
are inapplicable to a particular set of circumstances involving the Company, the
Company will not qualify as a REIT. As discussed above in "-- Taxation of the
Company -- General," even if these relief provisions apply, a tax would be
imposed with respect to the excess net income. No similar mitigation provision
provides relief if the Company fails the 30% income test. In such case, the
Company would cease to qualify as a REIT.

Any gain realized by the Company on the sale of any property held as
inventory or other property held primarily for sale to customers in the ordinary
course of business (including the Company's share of any such gain realized by
the Operating Partnership) will be treated as income from a prohibited
transaction that is subject to a 100% penalty tax. Such prohibited transaction
income may also have an adverse effect upon the Company's ability to satisfy the
income tests for qualification as a REIT. Under existing law, whether property
is held as inventory or primarily for sale to customers in the ordinary course
of a trade or business is a question of fact that depends on all the facts and
circumstances with respect to the particular transaction. The Operating
Partnership intends to hold the Properties for investment with a view to
long-term appreciation, to engage in the business of acquiring, developing,
owning, and operating the Properties (and other properties) and to make such
occasional sales of the Properties as are consistent with the Operating
Partnership's investment objectives. There can be no assurance, however, that
the IRS might not contend that one or more of such sales is subject to the 100%
penalty tax.

ASSET TESTS. The Company, at the close of each quarter of its taxable year,
must also satisfy three tests relating to the nature of its assets. First, at
least 75% of the value of the Company's total assets (including its allocable
share of the assets held by the Operating Partnership) must be represented by
real estate assets including (i) its allocable share of real estate assets held
by partnerships in which the Company owns an interest and (ii) stock or debt
instruments held for not more than one year purchased with the proceeds of a
stock offering or long-term (at least five years) debt offering of the Company,
cash, cash items and government securities. Second, not more than 25% of the
Company's total assets may be represented by

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securities other than those in the 75% asset class. Third, of the investments
included in the 25% asset class, the value of any one issuer's securities owned
by the Company may not exceed 5% of the value of the Company's total assets and
the Company may not own more than 10% of any one issuer's outstanding voting
securities.

After initially meeting the asset tests at the close of any quarter, the
Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset values.
If the failure to satisfy the asset tests results from an acquisition of
securities or other property during a quarter (including as a result of the
Company increasing its interest in the Operating Partnership), the failure can
be cured by disposition of sufficient nonqualifying assets within 30 days after
the close of that quarter. The Company intends to maintain adequate records of
the value of its assets to ensure compliance with the asset tests and to take
such other actions within 30 days after the close of any quarter as may be
required to cure any noncompliance. If the Company fails to cure noncompliance
with the asset tests within such time period, the Company would cease to qualify
as a REIT.

ANNUAL DISTRIBUTION REQUIREMENTS. The Company, in order to qualify as a
REIT, is required to distribute dividends (other than capital gain dividends) to
its stockholders in an amount at least equal to (i) the sum of (a) 95% of the
Company's "REIT taxable income" (computed without regard to the dividends paid
deduction and the Company's net capital gain) and (b) 95% of the net income
(after tax), if any, from foreclosure property, minus (ii) the sum of certain
items of noncash income. In addition, if the Company disposes of any Built-In
Gain Asset during its Recognition Period, the Company will be required, pursuant
to Treasury Regulations which have not yet been promulgated, to distribute at
least 95% of the Built-in Gain (after tax), if any, recognized on the
disposition of such asset. Such distributions must be paid in the taxable year
to which they relate, or in the following taxable year if declared before the
Company timely files its tax return for such year and if paid on or before the
first regular dividend payment after such declaration. To the extent that the
Company does not distribute all of its net capital gain or distributes at least
95%, but less than 100%, of its "REIT taxable income," as adjusted, it will be
subject to tax thereon at regular ordinary and capital gain corporate tax rates.
The Company intends to make timely distributions sufficient to satisfy these
annual distribution requirements. In this regard, the Partnership Agreement
authorizes the Company, as general partner, to take such steps as may be
necessary to cause the Operating Partnership to distribute to its partners an
amount sufficient to permit the Company to meet these distribution requirements.

It is expected that the Company's REIT taxable income will be less than its
cash flow due to the allowance of depreciation and other non-cash charges in
computing REIT taxable income. Accordingly, the Company anticipates that it will
generally have sufficient cash or liquid assets to enable it to satisfy the
distribution requirements described above. It is possible, however, that the
Company, from time to time, may not have sufficient cash or other liquid assets
to meet these distribution requirements due to timing differences between (i)
the actual receipt of income and actual payment of deductible expenses and (ii)
the inclusion of such income and deduction of such expenses in arriving at
taxable income of the Company. In the event that such timing differences occur,
in order to meet the distribution requirements, the Company may find it
necessary to arrange for short-term, or possibly long-term, borrowings or to pay
dividends in the form of taxable stock dividends.

Under certain circumstances, the Company may be able to rectify a failure to
meet the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year, which may be included in the Company's deduction
for dividends paid for the earlier year. Thus, the Company may be able to avoid
being taxed on amounts distributed as deficiency dividends; however, the Company
will be required to pay interest based upon the amount of any deduction taken
for deficiency dividends.

Furthermore, if the Company should fail to distribute during each calendar
year at least the sum of (i) 85% of its REIT ordinary income for such year, (ii)
95% of its REIT capital gain income for such year, and (iii) any undistributed
taxable income from prior periods, the Company would be subject to a 4% excise
tax on the excess of such required distribution over the amounts actually
distributed.

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FAILURE TO QUALIFY

If the Company fails to qualify for taxation as a REIT in any taxable year,
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to stockholders in any year in which the
Company fails to qualify will not be deductible by the Company nor will they be
required to be made. As a result, the Company's failure to qualify as a REIT
would significantly reduce the cash available for distribution by the Company to
its stockholders. In addition, if the Company fails to qualify as a REIT, all
distributions to stockholders will be taxable as ordinary income, to the extent
of the Company's current and accumulated earnings and profits, and, subject to
certain limitations of the Code, corporate distributees may be eligible for the
dividends received deduction. Unless entitled to relief under specific statutory
provisions, the Company will also be disqualified from taxation as a REIT for
the four taxable years following the year during which qualification was lost.
It is not possible to state whether in all circumstances the Company would be
entitled to such statutory relief.

TAXATION OF TAXABLE U.S. STOCKHOLDERS GENERALLY

As used herein, the term "U.S. Stockholder" means a holder of shares of
Common Stock who (for United States federal income tax purposes) (i) is a
citizen or resident of the United States, (ii) is a corporation, partnership, or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, or (iii) is an estate or trust the income
of which is subject to United States federal income taxation regardless of its
source.

As long as the Company qualifies as a REIT, distributions made by the
Company out of its current or accumulated earnings and profits (and not
designated as capital gain dividends) will constitute dividends taxable to its
taxable U.S. Stockholders as ordinary income. Such distributions will not be
eligible for the dividends received deduction in the case of U.S. Stockholders
that are corporations. Distributions made by the Company that are properly
designated by the Company as capital gain dividends will be taxable to taxable
U.S. Stockholders as long-term capital gains (to the extent that they do not
exceed the Company's actual net capital gain for the taxable year) without
regard to the period for which a U.S. Stockholder has held his shares of Common
Stock. U.S. Stockholders that are corporations may, however, be required to
treat up to 20% of certain capital gain dividends as ordinary income. To the
extent that the Company makes distributions (not designated as capital gain
dividends) in excess of its current and accumulated earnings and profits, such
distributions will be treated first as a tax-free return of capital to each U.S.
Stockholder, reducing the adjusted basis which such U.S. Stockholder has in his
shares of Common Stock for tax purposes by the amount of such distribution (but
not below zero), with distributions in excess of a U.S. Stockholder's adjusted
basis in his shares taxable as capital gains (provided that the shares have been
held as a capital asset). Dividends declared by the Company in October,
November, or December of any year and payable to a stockholder of record on a
specified date in any such month shall be treated as both paid by the Company
and received by the stockholder on December 31 of such year, provided that the
dividend is actually paid by the Company on or before January 31 of the
following calendar year. Stockholders may not include in their own income tax
returns any net operating losses or capital losses of the Company.

Distributions made by the Company and gain arising from the sale or exchange
by a U.S. Stockholder of shares of Common Stock will not be treated as passive
activity income, and, as a result, U.S. Stockholders generally will not be able
to apply any "passive losses" against such income or gain. Distributions made by
the Company (to the extent they do not constitute a return of capital) generally
will be treated as investment income for purposes of computing the investment
income limitation. Gain arising from the sale or other disposition of Common
Stock, however, will not be treated as investment income unless the U.S.
Stockholder elects to reduce the amount of such U.S. Stockholder's total net
capital gain eligible for the 28% maximum capital gains rate by the amount of
such gain with respect to such Common Stock.

Upon any sale or other disposition of Common Stock, a U.S. Stockholder will
recognize gain or loss for federal income tax purposes in an amount equal to the
difference between (i) the amount of cash and the fair market value of any
property received on such sale or other disposition and (ii) the holder's
adjusted basis in such shares of Common Stock for tax purposes. Such gain or
loss will be capital gain or loss if the shares have

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been held by the U.S. Stockholder as a capital asset, and will be long-term gain
or loss if such shares have been held for more than one year. In general, any
loss recognized by a U.S. Stockholder upon the sale or other disposition of
shares of Common Stock that have been held for six months or less (after
applying certain holding period rules) will be treated as a long-term capital
loss, to the extent of distributions received by such U.S. Stockholder from the
Company which were required to be treated as long-term capital gains.

BACKUP WITHHOLDING

The Company will report to its U.S. Stockholders and the IRS the amount of
dividends paid during each calendar year, and the amount of tax withheld, if
any. Under the backup withholding rules, a stockholder may be subject to backup
withholding at the rate of 31% with respect to dividends paid unless such holder
(a) is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact, or (b) provides a taxpayer identification
number, certifies as to no loss of exemption from backup withholding, and
otherwise complies with applicable requirements of the backup withholding rules.
A U.S. Stockholder that does not provide the Company with his correct taxpayer
identification number may also be subject to penalties imposed by the IRS. Any
amount paid as backup withholding will be creditable against the stockholder's
income tax liability. In addition, the Company may be required to withhold a
portion of capital gain distributions to any stockholders who fail to certify
their non-foreign status to the Company. See " -- Taxation of Non-U.S.
Stockholders."

TAXATION OF TAX-EXEMPT STOCKHOLDERS

The IRS has ruled that amounts distributed as dividends by a qualified REIT
do not constitute unrelated business taxable income ("UBTI") when received by a
tax-exempt entity. Based on that ruling, provided that a tax-exempt stockholder
(except certain tax-exempt stockholders described below) has not held its shares
of Common Stock as "debt financed property" within the meaning of the Code and
such shares are not otherwise used in a trade or business, the dividend income
from the Company will not be UBTI to a tax-exempt stockholder. Similarly, income
from the sale of Common Stock will not constitute UBTI unless such tax-exempt
stockholder has held such shares as "debt financed property" within the meaning
of the Code or has used the shares in a trade or business.

For tax-exempt stockholders that are social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts, and qualified
group legal services plans exempt from federal income taxation under Code
Sections 501 (c)(7), (c)(9), (c)(17) and (c)(20), respectively, income from an
investment in the Company will constitute UBTI unless the organization is able
to properly deduct amounts set aside or placed in reserve for certain purposes
so as to offset the income generated by its investment in the Company. Such
prospective investors should consult their own tax advisors concerning these
"set aside" and reserve requirements.

Notwithstanding the above, however, the Omnibus Budget Reconciliation Act of
1993 (the "1993 Act") provides that, effective for taxable years beginning in
1994, a portion of the dividends paid by a "pension held REIT" shall be treated
as UBTI as to any trust which (i) is described in Section 401(a) of the Code,
(ii) is tax-exempt under Section 501(a) of the Code, and (iii) holds more than
10% (by value) of the interests in the REIT. Tax-exempt pension funds that are
described in Section 401(a) of the Code are referred to below as "qualified
trusts."

A REIT is a "pension held REIT" if (i) it would not have qualified as a REIT
but for the fact that Section 856(h)(3) of the Code (added by the 1993 Act)
provides that stock owned by qualified trusts shall be treated, for purposes of
the "not closely held" requirement, as owned by the beneficiaries of the trust
(rather than by the trust itself), AND (ii) EITHER (a) at least one such
qualified trust holds more than 25% (by value) of the interests in the REIT, OR
(b) one or more such qualified trusts, each of which owns more than 10% (by
value) of the interests in the REIT, hold in the aggregate more than 50% (by
value) of the interests in the REIT. The percentage of any REIT dividend treated
as UBTI is equal to the ratio of (i) the UBTI earned by the REIT (treating the
REIT as if it were a qualified trust and therefore subject to tax on UBTI) to
(ii) the total gross income of the REIT. A DE MINIMIS exception applies where
the percentage is less than 5% for any year. The provisions requiring qualified
trusts to treat a portion of REIT distributions as UBTI will not apply if the
REIT is able to satisfy the "not closely held" requirement without relying upon
the "look-through"

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exception with respect to qualified trusts. As a result of certain limitations
on transfer and ownership of Common Stock contained in the Charter, the Company
does not expect to be classified as a "pension held REIT."

TAXATION OF NON-U.S. STOCKHOLDERS

The rules governing United States federal income taxation of the ownership
and disposition of stock by persons that are, for purposes of such taxation,
nonresident alien individuals, foreign corporations, foreign partnerships or
foreign estates or trusts (collectively, "Non-U.S. Stockholders") are complex,
and no attempt is made herein to provide more than a brief summary of such
rules. Accordingly, the discussion does not address all aspects of United States
federal income tax and does not address state, local or foreign tax consequences
that may be relevant to a Non-U.S. Stockholder in light of its particular
circumstances. In addition, this discussion is based on current law, which is
subject to change, and assumes that the Company qualifies for taxation as a
REIT. Prospective Non-U.S. Stockholders should consult with their own tax
advisers to determine the impact of federal, state, local and foreign income tax
laws with regard to an investment in Common Stock, including any reporting
requirements.

DISTRIBUTIONS. Distributions by the Company to a Non-U.S. Stockholder that
are neither attributable to gain from sales or exchanges by the Company of
United States real property interests nor designated by the Company as capital
gains dividends will be treated as dividends of ordinary income to the extent
that they are made out of current or accumulated earnings and profits of the
Company. Such distributions ordinarily will be subject to withholding of United
States federal income tax on a gross basis (that is, without allowance of
deductions) at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty, unless the dividends are treated as effectively
connected with the conduct by the Non-U.S. Stockholder of a United States trade
or business. Dividends that are effectively connected with such a trade or
business will be subject to tax on a net basis (that is, after allowance of
deductions) at graduated rates, in the same manner as domestic stockholders are
taxed with respect to such dividends and are generally not subject to
withholding. Any such dividends received by a Non-U.S. Stockholder that is a
corporation may also be subject to an additional branch profits tax at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty.

Pursuant to current Treasury Regulations, dividends paid to an address in a
country outside the United States are generally presumed to be paid to a
resident of such country for purposes of determining the applicability of
withholding discussed above and the applicability of a tax treaty rate. Under
proposed Treasury Regulations, not currently in effect, however, a Non-U.S.
Stockholder who wished to claim the benefit of an applicable treaty rate would
be required to satisfy certain certification and other requirements. Under
certain treaties, lower withholding rates generally applicable to dividends do
not apply to dividends from a REIT, such as the Company. Certain certification
and disclosure requirements must be satisfied to be exempt from withholding
under the effectively connected income exemption discussed above.

Distributions in excess of current or accumulated earnings and profits of
the Company will not be taxable to a Non-U.S. Stockholder to the extent that
they do not exceed the adjusted basis of the stockholders's Common Stock, but
rather will reduce the adjusted basis of such stock. To the extent that such
distributions exceed the adjusted basis of a Non-U.S. Stockholder's Common
Stock, they will give rise to gain from the sale or exchange of his stock, the
tax treatment of which is described below. If it cannot be determined at the
time a distribution is made whether or not such distribution will be in excess
of current or accumulated earnings and profits, the distribution will generally
be treated as a dividend for withholding purposes. However, amounts thus
withheld are generally refundable by the IRS if it is subsequently determined
that such distribution was, in fact, in excess of current or accumulated
earnings and profits of the Company.

Distributions to a Non-U.S. Stockholder that are designated by the Company
at the time of distribution as capital gains dividends (other than those arising
from the disposition of a United States real property interest) generally will
not be subject to United States federal income taxation, unless (i) investment
in the Common Stock is effectively connected with the Non-U.S. Stockholder's
United States trade or business, in which case the Non-U.S. Stockholder will be
subject to the same treatment as domestic stockholders with

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respect to such gain (except that a stockholder that is a foreign corporation
may also be subject to the 30% branch profits tax, as discussed above), or (ii)
the Non-U.S. Stockholder is a nonresident alien individual who is present in the
United States for 183 days or more during the taxable year and has a "tax home"
in the United States, in which case the nonresident alien individual will be
subject to a 30% tax on the individual's capital gains.

Distributions to a Non-U.S. Stockholder that are attributable to gain from
sales or exchanges by the Company of United States real property interests will
cause the Non-U.S. Stockholder to be treated as recognizing such gain as income
effectively connected with a United States trade or business. Non-U.S.
Stockholders would thus generally be taxed at the same rates applicable to
domestic stockholders (subject to a special alternative minimum tax in the case
of nonresident alien individuals). Also, such gain may be subject to a 30%
branch profits tax in the hands of a Non-U.S. Stockholder that is a corporation,
as discussed above. The Company is required to withhold 35% of any such
distribution. That amount is creditable against the Non-U.S. Stockholder's
United States federal income tax liability.

SALE OF COMMON STOCK. Gain recognized by a Non-U.S. Stockholder upon the
sale or exchange of shares of Common Stock generally will not be subject to
United States taxation unless such shares constitute a "United States real
property interest" within the meaning of FIRPTA. The Common Stock will not
constitute a "United States real property interest" so long as the Company is a
"domestically controlled REIT." A "domestically controlled REIT" is a REIT in
which at all times during a specified testing period less than 50% in value of
its stock is held directly or indirectly by Non-U.S. Stockholders. The Company
believes that at the closing of the Offering it will be a "domestically
controlled REIT," and therefore that the sale of shares of Common Stock will not
be subject to taxation under FIRPTA. However, because the shares of Common Stock
will be publicly traded, no assurance can be given that the Company will
continue to be a "domestically-controlled REIT." Notwithstanding the foregoing,
gain from the sale or exchange of shares of Common Stock not otherwise subject
to FIRPTA will be taxable to a Non-U.S. Stockholder if the Non-U.S. Stockholder
is a nonresident alien individual who is present in the United States for 183
days or more during the taxable year and has a "tax home" in the United States.
In such case, the nonresident alien individual will be subject to a 30% United
States withholding tax on the amount of such individual's gain.

If the Company does not qualify as or ceases to be a
"domestically-controlled REIT," whether gain arising from the sale or exchange
by a Non-U.S. Stockholder of shares of Common Stock would be subject to United
States taxation under FIRPTA as a sale of a "United States real property
interest" will depend on whether the shares are "regularly traded" (as defined
by applicable Treasury Regulations) on an established securities market (E.G.,
the New York Stock Exchange) and on the size of the selling Non-U.S.
Stockholder's interest in the Company. If gain on the sale or exchange of shares
of Common Stock were subject to taxation under FIRPTA, the Non-U.S. Stockholder
would be subject to regular United States income tax with respect to such gain
in the same manner as a U.S. Stockholder (subject to any applicable alternative
minimum tax, a special alternative minimum tax in the case of nonresident alien
individuals and the possible application of the 30% branch profits tax in the
case of foreign corporations), and the purchaser of the stock would be required
to withhold and remit to the IRS 10% of the purchase price.

BACKUP WITHHOLDING TAX AND INFORMATION REPORTING. Backup withholding tax
(which generally is a withholding tax imposed at the rate of 31% on certain
payments to persons that fail to furnish certain information under the United
States information reporting requirements) and information reporting will
generally not apply to distributions paid to Non-U.S. Stockholders outside the
United States that are treated as (i) dividends subject to the 30% (or lower
treaty rate) withholding tax discussed above, (ii) capital gains dividends or
(iii) distributions attributable to gain from the sale or exchange by the
Company of United States real property interests. As a general matter, backup
withholding and information reporting will not apply to a payment of the
proceeds of a sale of Common Stock by or through a foreign office of a foreign
broker. Information reporting (but not backup withholding) will apply, however,
to a payment of the proceeds of a sale of Common Stock by a foreign office of a
broker that (a) is a United States person, (b) derives 50% or more of its gross
income for certain periods from the conduct of a trade or business in the United
States or (c) is a "controlled foreign corporation" (generally, a foreign
corporation controlled by United States stockholders) for United States tax
purposes, unless the broker has documentary evidence in

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its records that the holder is a Non-U.S. Stockholder and certain other
conditions are met, or the stockholder otherwise establishes an exemption.
Payment to or through a United States office of a broker of the proceeds of a
sale of Common Stock is subject to both backup withholding and information
reporting unless the stockholder certifies under penalty of perjury that the
stockholder is a Non-U.S. Stockholder, or otherwise establishes an exemption. A
Non-U.S. Stockholder may obtain a refund of any amounts withheld under the
backup withholding rules by filing the appropriate claim for refund with the
IRS.

The United States Treasury has recently issued proposed regulations
regarding the withholding and information reporting rules discussed above. In
general, the proposed regulations do not alter the substantive withholding and
information reporting requirements but unify current certification procedures
and forms and clarify and modify reliance standards. If finalized in their
current form, the proposed regulations would generally be effective for payments
made after December 31, 1997, subject to certain transition rules.

TAX ASPECTS OF THE OPERATING PARTNERSHIP

GENERAL. Substantially all of the Company's investments will be held
indirectly through the Operating Partnership. In general, partnerships are
"pass-through" entities which are not subject to federal income tax. Rather,
partners are allocated their proportionate shares of the items of income, gain,
loss, deduction and credit of a partnership, and are potentially subject to tax
thereon, without regard to whether the partners receive a distribution from the
partnership. The Company will include in its income its proportionate share of
the foregoing partnership items for purposes of the various REIT income tests
and in the computation of its REIT taxable income. Moreover, for purposes of the
REIT asset tests, the Company will include its proportionate share of assets
held by the Operating Partnership. See "-- Taxation of the Company."

ENTITY CLASSIFICATION. The Company's interest in the Operating Partnership
involves special tax considerations, including the possibility of a challenge by
the IRS of the status of the Operating Partnership as a partnership (as opposed
to an association taxable as a corporation) for federal income tax purposes. If
the Operating Partnership were treated as an association, it would be taxable as
a corporation and therefore be subject to an entity-level tax on its income. In
such a situation, the character of the Company's assets and items of gross
income would change and preclude the Company from satisfying the asset tests and
possibly the income tests (see "-- Taxation of the Company -- Asset Tests" and
"-- Income Tests"), and in turn would prevent the Company from qualifying as a
REIT. See "-- Taxation of the Company -- Failure to Qualify" above for a
discussion of the effect of the Company's failure to meet such tests for a
taxable year. In addition, a change in the Operating Partnership's status for
tax purposes might be treated as a taxable event in which case the Company might
incur a tax liability without any related cash distributions.

An organization formed as a partnership will be treated as a partnership for
federal income tax purposes rather than as a corporation only if it has no more
than two of the four corporate characteristics that the Treasury Regulations use
to distinguish a partnership from a corporation for tax purposes. These four
characteristics are (i) continuity of life, (ii) centralization of management,
(iii) limited liability and (iv) free transferability of interests. The Company
has not requested, and does not intend to request, a ruling from the IRS that
the Operating Partnership will be treated as a partnership for federal income
tax purposes. However, Latham & Watkins will deliver an opinion to the Company
stating that based on the provisions of the Partnership Agreement and certain
factual assumptions and representations described in the opinion, the Operating
Partnership will be treated as a partnership for federal income tax purposes
(and not as an association or a publicly traded partnership taxable as a
corporation). Unlike a private letter ruling, an opinion of counsel is not
binding on the IRS, and no assurance can be given that the IRS will not
challenge the status of the Operating Partnership as a partnership for federal
income tax purposes. If such challenge were sustained by a court, the Operating
Partnership could be treated as a corporation for federal income tax purposes.

Recently proposed Treasury Regulations (the "Proposed Regulations"), if
finalized in their present form, would eliminate the four factor test described
above and, in its place, permit a partnership or limited liability company to
elect to be taxed as a partnership for federal income tax purposes without
regard to the number of corporate characteristics possessed by such entity. The
Proposed Regulations are proposed to apply for tax periods beginning on or after
the date that final regulations are published by the IRS. Until that

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time, the existing regulations will continue to apply. The Proposed Regulations
provide that the IRS will not challenge the classification of an existing
partnership or limited liability company for tax periods to which the existing
Treasury Regulations apply if (1) the entity had a reasonable basis for its
claimed classification, (2) the entity claimed that same classification in all
prior years, and (3) as of the date that the proposed regulations were
published, neither the entity nor any member of the entity had been notified in
writing that the classification of the entity is under examination by the IRS.

PARTNERSHIP ALLOCATIONS. Although a partnership agreement will generally
determine the allocation of income and loss among partners, such allocations
will be disregarded for tax purposes if they do not comply with the provisions
of Section 704(b) of the Code and the Treasury Regulations promulgated
thereunder. Generally, Section 704(b) and the Treasury Regulations promulgated
thereunder require that partnership allocations respect the economic arrangement
of the partners.

If an allocation is not recognized for federal income tax purposes, the item
subject to the allocation will be reallocated in accordance with the partners'
interests in the partnership, which will be determined by taking into account
all of the facts and circumstances relating to the economic arrangement of the
partners with respect to such item. The Operating Partnership's allocations of
taxable income and loss are intended to comply with the requirements of Section
704(b) of the Code and the Treasury Regulations promulgated thereunder.

The Partnership Agreement provides that net income or net loss of the
Operating Partnership will generally be allocated to the Company and the Limited
Partners in accordance with their respective percentage interests in the
Operating Partnership. Notwithstanding the foregoing, such agreement provides
that certain interest deductions and income from the discharge of certain
indebtedness of the Operating Partnership, attributable to loans transferred to
the Operating Partnership by Arden Predecessors, will be allocated
disproportionately to the Limited Partners. In addition, allocations of net
income or net loss will be subject to compliance with the provisions of Sections
704(b) and 704(c) of the Code and the Treasury Regulations promulgated
thereunder.

TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES. Pursuant to Section 704(c)
of the Code, income, gain, loss and deduction attributable to appreciated or
depreciated property (such as the Properties) that is contributed to a
partnership in exchange for an interest in the partnership, must be allocated in
a manner such that the contributing partner is charged with, or benefits from,
respectively, the unrealized gain or unrealized loss associated with the
property at the time of the contribution. The amount of such unrealized gain or
unrealized loss is generally equal to the difference between the fair market
value of contributed property at the time of contribution and the adjusted tax
basis of such property at such time (a "Book-Tax Difference"). Such allocations
are solely for federal income tax purposes and do not affect the book capital
accounts or other economic or legal arrangements among the partners. The
Operating Partnership was formed by way of contributions of appreciated property
(including the Properties). Consequently, the Partnership Agreement requires
that such allocations be made in a manner consistent with Section 704(c) of the
Code.

In general, the Limited Partners of the Operating Partnership will be
allocated depreciation deductions for tax purposes which are lower than such
deductions would be if determined on a pro rata basis. In addition, in the event
of the disposition of any of the contributed assets which have a Book-Tax
Difference, all income attributable to such Book-Tax Difference will generally
be allocated to such limited partners, and the Company will generally be
allocated only its share of capital gains attributable to appreciation, if any,
occurring after the closing of the Formation Transactions. This will tend to
eliminate the Book-Tax Difference over the life of the Operating Partnership.
However, the special allocation rules of Section 704(c) do not always entirely
eliminate the Book-Tax Difference on an annual basis or with respect to a
specific taxable transaction such as a sale. Thus, the carryover basis of the
contributed assets in the hands the Operating Partnership may cause the Company
to be allocated lower depreciation and other deductions, and possibly an amount
of taxable income in the event of a sale of such contributed assets in excess of
the economic or

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book income allocated to it as a result of such sale. This may cause the Company
to recognize taxable income in excess of cash proceeds, which might adversely
affect the Company's ability to comply with the REIT distribution requirements.
See " -- Taxation of the Company -- Annual Distribution Requirements."

Treasury Regulations under Section 704(c) of the Code provide partnerships
with a choice of several methods of accounting for Book-Tax Differences,
including retention of the "traditional method" or the election of certain
methods which would permit any distortions caused by a Book-Tax Difference to be
entirely rectified on an annual basis or with respect to a specific taxable
transaction such as a sale. The Operating Partnership and the Company have not
yet selected a method to account for Book-Tax Differences with respect to the
Properties initially contributed to the Operating Partnership.

With respect to any property purchased by the Operating Partnership
subsequent to the admission of the Company to the Operating Partnership, such
property will initially have a tax basis equal to its fair market value, and
Section 704(c) of the Code will not apply.

BASIS IN OPERATING PARTNERSHIP INTEREST. The Company's adjusted tax basis
in its interest in the Operating Partnership generally (i) will be equal to the
amount of cash and the basis of any other property contributed to the Operating
Partnership by the Company, (ii) will be increased by (a) its allocable share of
the Operating Partnership's income and (b) its allocable share of indebtedness
of the Operating Partnership and (iii) will be reduced, but not below zero, by
the Company's allocable share of (a) losses suffered by the Operating
Partnership, (b) the amount of cash distributed to the Company and (c) by
constructive distributions resulting from a reduction in the Company's share of
indebtedness of the Operating Partnership.

If the allocation of the Company's distributive share of the Operating
Partnership's loss exceeds the adjusted tax basis of the Company's partnership
interest in the Operating Partnership, the recognition of such excess loss will
be deferred until such time and to the extent that the Company has adjusted tax
basis in its interest in the Operating Partnership. To the extent that the
Operating Partnership's distributions, or any decrease in the Company's share of
the indebtedness of the Operating Partnership (such decreases being considered a
constructive cash distribution to the partners), exceeds the Company's adjusted
tax basis, such excess distributions (including such constructive distributions)
constitute taxable income to the Company. Such taxable income will normally be
characterized as a capital gain, and if the Company's interest in the Operating
Partnership has been held for longer than the long-term capital gain holding
period (currently one year), such distributions and constructive distributions
will constitute long-term capital gain.

OTHER TAX CONSEQUENCES

The Company and its stockholders may be subject to state or local taxation
in various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of the Company
and its stockholders may not conform to the federal income tax consequences
discussed above. Consequently, prospective stockholders should consult their own
tax advisors regarding the effect of state and local tax laws on an investment
in the Company.

ERISA CONSIDERATIONS

THE FOLLOWING IS A SUMMARY OF MATERIAL CONSIDERATIONS ARISING UNDER ERISA
AND THE PROHIBITED TRANSACTIONS PROVISIONS OF SECTION 4975 OF THE CODE THAT MAY
BE RELEVANT TO A PROSPECTIVE PURCHASER (INCLUDING WITH RESPECT TO THE DISCUSSION
CONTAINED IN " -- STATUS OF THE COMPANY AND THE OPERATING PARTNERSHIP UNDER
ERISA," TO A PROSPECTIVE PURCHASER THAT IS NOT AN EMPLOYEE BENEFIT PLAN SUBJECT
TO ERISA, ANOTHER TAX-QUALIFIED PENSION, PROFIT SHARING OR STOCK BONUS PLAN, OR
AN INDIVIDUAL RETIREMENT ACCOUNT OR ANNUITY ("IRA")). THE DISCUSSION DOES NOT
PURPORT TO DEAL WITH ALL ASPECTS OF ERISA OR SECTION 4975 OF THE CODE THAT MAY
BE RELEVANT TO PARTICULAR PROSPECTIVE PURCHASERS (INCLUDING EMPLOYEE BENEFIT
PLANS SUBJECT TO ERISA, OTHER TAX-QUALIFIED PLANS AND IRAS) OR MATERIAL
CONSIDERATIONS RELATING TO PROSPECTIVE PURCHASERS THAT ARE GOVERNMENTAL PLANS,
CHURCH PLANS OR OTHER EMPLOYEE BENEFIT PLANS THAT ARE EXEMPT FROM ERISA OR
SECTION 4975 OF THE CODE BUT THAT MAY BE SUBJECT TO STATE LAW REQUIREMENTS IN
LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.

A FIDUCIARY MAKING THE DECISION TO INVEST IN SHARES OF THE COMMON STOCK ON
BEHALF OF A PROSPECTIVE PURCHASER WHICH IS AN EMPLOYEE BENEFIT PLAN SUBJECT

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TO ERISA, A TAX-QUALIFIED PENSION, PROFIT SHARING OR STOCK BONUS PLAN, AN IRA, A
CHURCH PLAN OR A GOVERNMENTAL PLAN IS ADVISED TO CONSULT ITS OWN LEGAL ADVISOR
REGARDING THE SPECIFIC CONSIDERATIONS ARISING UNDER ERISA, SECTION 4975 OF THE
CODE, AND STATE LAW WITH RESPECT TO THE PURCHASE, OWNERSHIP, OR SALE OF SHARES
OF THE COMMON STOCK BY SUCH PLAN OR IRA.

EMPLOYMENT BENEFIT PLANS, TAX-QUALIFIED PENSION, PROFIT SHARING OR STOCK BONUS
PLANS AND IRAS

Each fiduciary of an employee benefit plan subject to ERISA (an "ERISA
Plan") should carefully consider whether an investment in the Common Stock is
consistent with its fiduciary responsibilities under ERISA. In particular, the
fiduciary requirements of Part 4 of Title I of ERISA require an ERISA Plan's
investments to be (i) prudent and in the interests of the participants and
beneficiaries of the ERISA Plan, (ii) diversified in order to minimize the risk
of large losses, unless it is clearly prudent not to do so and (iii) authorized
under the terms of the governing documents of the ERISA Plan. In addition, a
fiduciary of an ERISA Plan should not cause or permit to enter into transactions
prohibited under Section 406 of ERISA or Section 4975 of the Code. In
determining whether an investment in the Common Stock is prudent for purposes of
ERISA, the appropriate fiduciary of an ERISA Plan should consider all of the
facts and circumstances, including whether the investment is reasonably
designed, as a part of the ERISA Plan's investment portfolio for which the
fiduciary has responsibility, to meet the objectives of the ERISA Plan, taking
into consideration the risk of loss and opportunity for gain (or other return)
from the investment, the diversification, cash flow and funding requirements of
the ERISA Plan, and the liquidity and current return of the ERISA Plan's
investment portfolio. A fiduciary should also take into account the nature of
the Company's business, the length of the Company's operating history, the terms
of the Management Agreements, the fact that certain investment properties may
not have been identified yet, other matters described under "Risk Factors" and
the possibility of UBTI. See "Federal Income Tax Considerations -- Taxation of
Stockholders."

The fiduciary of an ERISA Plan, an IRA or a qualified pension, profit
sharing or stock bonus plan not subject to ERISA (a "Non-ERISA Plan") should be
subject to Section 4975 of the Code ("Other Plans") should ensure that the
purchase of Common Stock will not constitute a prohibited transactions under
ERISA or the Code.

STATUS OF THE COMPANY AND THE OPERATING PARTNERSHIP UNDER ERISA

THE FOLLOWING SECTION DISCUSSES CERTAIN PRINCIPLES THAT APPLY IN DETERMINING
WHETHER THE FIDUCIARY REQUIREMENTS OF ERISA AND THE PROHIBITED TRANSACTION
PROVISIONS OF ERISA AND THE CODE APPLY TO AN ENTITY BECAUSE ONE OR MORE
INVESTORS IN THE ENTITY'S EQUITY INTERESTS IS AN ERISA PLAN OR OTHER PLAN. AN
ERISA PLAN FIDUCIARY SHOULD ALSO CONSIDER THE RELEVANCE OF THESE PRINCIPLES TO
ERISA'S PROHIBITION ON IMPROPER DELEGATION OF CONTROL OVER OR RESPONSIBILITY FOR
"PLAN ASSETS" AND ERISA'S IMPOSITION OF CO-FIDUCIARY LIABILITY ON A FIDUCIARY
WHO PARTICIPATES IN, PERMITS (BY ACTION OR INACTION) THE OCCURRENCE OF, OR FAILS
TO REMEDY A KNOWN BREACH BY ANOTHER FIDUCIARY.

If the assets of the Company are deemed to be assets of an ERISA Plan or
Other Plan ("plan assets"), (i) the prudence standards and other provisions of
Part 4 of Title I of ERISA and the prohibited transaction provisions of ERISA
and the Code would be applicable to any transactions involving the Company's
assets and (ii) persons who exercise any authority or control over the Company's
assets, or who provide investment advice to the Company, would be (for purposes
of ERISA and the Code) fiduciaries of ERISA Plans and Other Plans that acquire
Common Stock. The Department of Labor (the "DOL"), which has certain
administrative responsibility over ERISA Plans and Other Plans, has issued a
regulation defining plan assets for certain purposes (the "DOL Regulation"). The
DOL Regulation generally provides that when an ERISA Plan or Other Plan acquires
a security that is an equity interest in an entity and that security is neither
a "publicly-offered security" nor a security issued by an investment company
registered under the 1940 Act, the assets of the ERISA Plan or Other Plan
include both the equity interest and an undivided interest in each of the
underlying assets of the entity, unless it is established either that the entity
is an "operating company" (as defined in the DOL Regulation) or that equity
participation in the entity by "benefit plan investors" is not "significant."

The DOL Regulation defines a "publicly-offered security" as a security that
is "widely held," "freely transferable" and either part of a class of securities
registered under the Exchange Act, or sold pursuant to an effective registration
statement under the Securities Act (provided the securities are registered under
the

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Exchange Act within 120 days, or such later time as may be allowed by the SEC
(the "registration period"), after the end of the fiscal year of the issuer
during which the offering occurred). The Common Stock is being sold in an
offering registered under the Securities Act and the Company intends to register
the Common Stock under the Exchange Act within the registration period.

The DOL Regulation provides that a security is "widely-held" only if it is
part of a class of securities that is owned by 100 or more investors independent
of the issuer and of one another. A security will not fail to be "widely held"
because the number of independent investors falls below 100 subsequent to the
initial public offering as a result of events beyond the issuer's control. The
Company expects the Common Stock to be "widely held" upon completion of the
Offering.

The DOL Regulation provides that whether a security is "freely transferable"
is a factual question to be determined on the basis of all relevant facts and
circumstances. The DOL Regulation further provides that where a security is part
of an offering in which the minimum investment is $10,000 or less, certain
restrictions ordinarily will not, alone or in combination, affect a finding that
such securities are "freely transferable." The Offering will not impose a
minimum investment requirement. The restrictions on transfer enumerated in the
DOL Regulation as ordinarily not affecting a finding that the securities are
"freely transferable" include: (i) any restriction on or prohibition against any
transfer or assignment that would result in a termination or reclassification of
the Company for federal or state tax purposes, or that would otherwise violate
any state or federal law or court order, (ii) any requirement that advance
notice of a transfer or assignment be given to the Company, (iii) any
requirement that either the transferor or transferee, or both, execute
documentation setting forth representations as to compliance with any
restrictions on transfer that are among those enumerated in the DOL Regulation
as not affecting free transferability, (iv) any administrative procedure that
establishes an effective date, or an event (such as completion of the Offering)
prior to which a transfer or assignment will not be effective, (v) any
prohibition against transfer or assignment to an ineligible or unsuitable
investor, and (vi) any limitation or restriction on transfer or assignment that
is not imposed by the issuer or a person acting on behalf of the issuer. The
Company believes that the restrictions imposed under the Charter on the transfer
of Common Stock are of the type of restrictions on transfer generally permitted
under the DOL Regulation or are not otherwise material and should not result in
the failure of the Common Stock to be "freely transferable" within the meaning
of the DOL Regulation. See "Capital Stock -- Restrictions on Transfer." The
Company also believes that certain restrictions on transfer that derive from the
securities laws, from contractual arrangements with the Underwriters in
connection with the Offering and from certain provisions should not result in
the failure of the Common Stock to be "freely transferable." See "Underwriting"
and "Certain Provisions of Maryland Law and the Company's Charter and Bylaws."
Furthermore, the Company is not aware of any other facts or circumstances
limiting the transferability of the Common Stock that are not included among
those enumerated as not affecting their free transferability under the DOL
Regulation, and the Company does not expect to impose in the future (or to
permit any person to impose on its behalf) any other limitations or restrictions
on transfer that would not be among the enumerated permissible limitations or
restrictions.

Assuming that the Company registers the Common Stock under the Exchange Act
within the registration period, the Common Stock will be "widely held" and that
no facts and circumstances other than those referred to in the preceding
paragraph exist that restrict transferability of the Common Stock, the Company
believes that, under the DOL Regulation, the Common Stock should be
"publicly-offered securities" and, therefore, that the assets of the Company
should not be deemed to be plan assets of any ERISA Plan or Other Plan that
invests in the Common Stock.

The DOL Regulation will also apply in determining whether the assets of the
Operating Partnership will be deemed to be plan assets. The partnership
interests in the Operating Partnership will not be publicly offered securities.
Nevertheless, if the Common Stock constitutes publicly offered securities, the
Company believes that the indirect investment in the Operating Partnership by
ERISA Plans or Other Plans through their ownership of the Common Stock will not
cause the assets of the Operating Partnership to be treated as plan assets.

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UNDERWRITING

The underwriters of the Offering (the "Underwriters"), for whom Lehman
Brothers Inc., Alex. Brown & Sons Incorporated, Dean Witter Reynolds Inc., A.G.
Edwards & Sons, Inc., Smith Barney Inc., EVEREN Securities, Inc., Legg Mason
Wood Walker, Incorporated and Raymond James & Associates, Inc. are acting as
representatives (the "Representatives"), have severally agreed, subject to the
conditions contained in the Underwriting Agreement (the form of which is filed
as an exhibit to the Registration Statement of which this Prospectus forms a
part), to purchase from the Company and the Company has agreed to sell to each
Underwriter, the aggregate number of shares of Common Stock set forth opposite
the name of each such Underwriter.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- -------------------------------------------------------------------------------- ------------
<S> <C>
Lehman Brothers Inc.............................................................
Alex. Brown & Sons Incorporated.................................................
Dean Witter Reynolds Inc........................................................
A.G. Edwards & Sons, Inc........................................................
Smith Barney Inc................................................................
EVEREN Securities, Inc..........................................................
Legg Mason Wood Walker, Incorporated............................................
Raymond James & Associates, Inc.................................................
------------
Total......................................................................... 18,847,500
------------
------------
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to certain
conditions, and that if any of the shares of Common Stock are purchased by the
Underwriters pursuant to the Underwriting Agreement, all of the shares agreed to
be purchased by the Underwriters under the Underwriting Agreement must be so
purchased.

The Company has been advised that the Underwriters propose to offer shares
of Common Stock directly to the public initially at the public offering price
set forth on the cover page of this Prospectus, and to certain selected dealers
who may include the Underwriters at such public offering price less a selling
concession not in excess of $ per share. The selected dealers may reallow a
concession not in excess of $ per share to certain brokers or dealers.
After the Offering, the public offering price, the concession to selected
dealers, and the reallowance may be changed by the Representatives.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
the payments they may be required to make in respect thereto.

The Company has granted to the Underwriters an option to purchase up to an
additional 2,827,000 shares of Common Stock, at the public offering price, less
the aggregate underwriting discounts and commissions, shown on the cover page of
this Prospectus, solely to cover overallotments, if any. Such option may be
exercised at any time within 30 days after the date of the Underwriting
Agreement. To the extent that such option is exercised, each Underwriter will be
committed, subject to certain conditions, to purchase a number of the additional
shares of Common Stock proportionate to such Underwriter's initial commitment as
indicated in the preceding table.

Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price will be determined through negotiations
between the Company and the Representatives. Among the factors to be considered
in such negotiations, in addition to prevailing market conditions, are
distribution rates and financial characteristics of publicly traded REITs that
the Company and the Representatives believe to be comparable to the Company, the
expected results of operations of the Company (which are based on the results of
operations of the Properties and the fee management business in recent periods),
estimates of future business potential and earnings prospects of the Company as
a whole and the current state of the real estate market in the Company's primary
markets and the economy as a whole. The initial

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price per share to the public set forth on the cover page of this Prospectus
should not, however, be considered an indication of the actual value of the
Common Stock. Such price is subject to change as a result of market conditions
and other factors.

The Underwriters do not intend to confirm sales of Common Stock to any
account over which they exercise discretionary authority.

After giving effect to Mortgage Financing, Lehman Brothers Holdings Inc., an
affiliate of Lehman Brothers Inc., will receive approximately $202 million of
the net proceeds from the Offering as repayment of indebtedness and related
interest expected to be outstanding upon consummation of the Offering. See "Use
of Proceeds."

In connection with the Offering, Messrs. Ziman and Coleman have agreed not
to sell any shares of Common Stock acquired by them upon exchange of OP Units
for a period of two years after the completion of the Offering without the
consent of Lehman Brothers Inc. Such restrictions will not apply to any OP Units
or other shares of Common Stock purchased or otherwise acquired by Messrs. Ziman
or Coleman following consummation of the Offering.

The Company has agreed for a period of 180 days from the date of this
Prospectus, not to, directly or indirectly, offer for sale, sell or otherwise
dispose of (or enter into any transaction or device which is designed to, or
could be expected to, result in the disposition by any person at any time in the
future of) shares of Common Stock (other than the shares offered hereby and
shares issued pursuant to the Stock Incentive Plan existing on the date hereof
and any OP Units or shares of Common Stock that may be issued in connection with
any acquisition of a property) or sell or grant options, rights or warrants with
respect to any shares of Common Stock (other than the grant of options pursuant
to the Stock Incentive Plan existing on the date hereof), without the prior
written consent of Lehman Brothers Inc.

The Company has agreed to pay Lehman Brothers Inc. an advisory fee equal to
.50% of the gross proceeds received from the sale of Common Stock of the
Offering for advisory services rendered in connection with the evaluation,
analysis and structuring of the Company's formation and the Offering.

Although the Conduct Rules of the National Association of Securities
Dealers, Inc. exempt REITs from the conflict of interest provisions thereof,
because an affiliate of Lehman Brothers Inc. will receive more than 10% of the
net proceeds of the Offering in repayment of currently outstanding indebtedness,
the Underwriters have determined to conduct the Offering in accordance with the
applicable provisions of Rule 2710(c)(8) of the Conduct Rules. In accordance
with these requirements, Dean Witter Reynolds Inc. (the "Independent
Underwriter") is assuming the responsibilities of acting as "qualified
independent underwriter," and will recommend the maximum initial public offering
price for the shares of Common Stock in compliance with the requirements of the
Conduct Rules. In connection with the Offering, the Independent Underwriter is
performing due diligence investigations and is reviewing and participating in
the preparation of this Prospectus and the Registration Statement of which this
Prospectus forms a part. The initial public offering price of the Common Stock
will be no higher than the price recommended by the Independent Underwriter.

The Underwriters have reserved for sale at the public offering price up to
500,000 shares of Common Stock to directors, officers and employees of the
Company, their business affiliates and related parties who have expressed an
interest in purchasing shares. The number of shares available for sale to the
general public will be reduced to the extent such persons purchase such reserved
shares. Any reserved shares not so purchased will be offered by the Underwriters
to the general public on the same basis as the other shares offered hereby.

EXPERTS

The combined financial statements of the Arden Predecessors as of December
31, 1995 and 1994 and for each of the three years in the period ended December
31, 1995, the statements of revenues and certain expenses for 16000 Ventura;
1950 Sawtelle; Westwood Terrace, Skyview Center, 4811 and 4900/10 Airport Plaza
Drive and New Wilshire; 70 South Lake and Calabasas Commerce Center; the 1996
Acquired

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Properties, the Acquisition Properties, and the balance sheet of Arden Realty
Group, Inc., a Maryland Corporation as of May 1, 1996, all appearing in this
Prospectus and Registration Statement, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon appearing elsewhere
herein, and are included in reliance upon such reports given upon the authority
of such firm as experts in accounting and auditing.

LEGAL MATTERS

Certain legal matters will be passed upon for the Company by Latham &
Watkins and certain legal matters, including the validity of the shares of
Common Stock offered hereby, will be passed upon for the Company by Ballard
Spahr Andrews & Ingersoll. Certain legal matters will be passed upon for the
Underwriters by Hogan & Hartson L.L.P. Latham & Watkins and Hogan & Hartson
L.L.P. will rely upon the opinion of Ballard Spahr Andrews & Ingersoll as to all
matters of Maryland law.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"SEC") a Registration Statement on Form S-11 (of which this Prospectus is a
part) under the Securities Act with respect to the securities offered hereby.
This Prospectus does not contain all information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the rules
and regulations of the SEC. Statements contained in this Prospectus as to the
content of any contract or other document are not necessarily complete, and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference and the exhibits and schedules
hereto. For further information regarding the Company and the Common Stock
offered hereby, reference is hereby made to the Registration Statement and such
exhibits and schedules, which may be obtained from the SEC as its principal
office at 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the
fees prescribed by the SEC. The SEC maintains a website at http://www.sec.gov
containing reports, proxy and information statements and other information
regarding registrants, including the Company, that file electronically with the
SEC. In addition, the Common Stock will be listed on the New York Stock Exchange
("NYSE") and similar information concerning the Company can be inspected and
copied at the offices of the NYSE, 20 Broad Street, New York, New York 10005.

The Company intends to furnish its stockholders with annual reports
containing audited combined financial statements and a report thereon by
independent certified public accountants.

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GLOSSARY

Unless the context otherwise requires, the following capitalized terms shall
have the meanings set forth below for the purposes of this Prospectus:

"1940 ACT" means the Investment Company Act of 1940, as amended.

"1993 ACT" means the Omnibus Budget Reconciliation Act of 1993.

"1995 ACQUIRED PROPERTIES" means the nine commercial office properties
located in Southern California which were acquired by the Arden Predecessors in
1995.

"1996 ACQUIRED PROPERTIES" means the five commercial office properties
located in Southern California which were acquired or are scheduled to be
acquired by the Arden Predecessors in 1996.

"401(K) PLAN" means the Arden Realty Group Section 401(k) Savings/Retirement
Plan.

"ACM" means asbestos-containing materials.

"ACQUISITION PROPERTIES" means the two additional Properties (303 Glenoaks
and 12501 East Imperial Highway) that will be acquired by the Company
concurrently with the Offering.

"ADA" means the Americans with Disabilities Act.

"ANNUALIZED BASE RENT" means the monthly contractual base rent under the
applicable lease(s) (e.g., relating to a tenant, a Property or all of the
Properties, as applicable) as of a specified date multiplied by 12.

"AFFILIATES" means with respect to any individual or entity, any other
individual or entity directly or indirectly controlling, controlled by or under
common control with such individual or entity.

"ARDEN" means Arden Realty Group, Inc., a California corporation.

"ARDEN PREDECESSORS" means Arden and certain Arden affiliated entities which
are engaged in owning, acquiring, managing, leasing and renovating office
properties in Southern California.

"BENEFICIARY" means a qualified charitable organization selected by the
Company to receive in trust any excess shares resulting from a transfer of
Common Stock in violation of the Ownership Limit or the Charter.

"BOOK-TAX DIFFERENCE" means the difference between the fair market value of
contributed property at the time of contribution and the adjusted tax basis of
such property at such time.

"BUILT-IN GAIN ASSET" means any asset acquired by the Company from a
corporation which is or has been a C corporation.

"BYLAWS" means the bylaws of the Company.

"C&W" means Cushman & Wakefield of California, Inc.

"C&W MARKET STUDY" means the Office Market Study of Three Southern
California Counties (Los Angeles, Orange, and San Diego Counties) prepared for
the Company by Cushman & Wakefield as of December 31, 1995.

"CHARITABLE BENEFICIARY" means a qualified charitable organization selected
by the Company which will be the beneficiary of a trust created to hold any
excess shares.

"CHARTER" means the charter of the Company.

"CMBS OFFERING" means an offering of commercial mortgage-backed securities
in an amount of approximately $104 million which the Company intends to engage
in to refinance the Mortgage Financing.

"CODE" means the Internal Revenue Code of 1986, as amended.

"COMMON STOCK" means shares of the Company's Common Stock, $.01 par value
per share.

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"COMPANY" means Arden Realty, Inc., a Maryland corporation. While the
Company and the Operating Partnership are separate entities, for ease of
reference and unless the context otherwise requires, all references in this
Prospectus to the "Company" refer to the Company and the Operating Partnership.

"CONTRIBUTION AGREEMENTS" means separate contribution agreements between (i)
the Operating Partnership and certain Participants whereby certain interests in
the Arden Predecessors and in certain of the Properties held by such
Participants will be contributed to the Operating Partnership in exchange for OP
Units and (ii) the Operating Partnership and Arden whereby Arden will contribute
certain of its assets to the Operating Partnership in exchange for OP Units.

"CONTROLLED FOREIGN CORPORATION" means generally a foreign corporation
controlled by United States stockholders.

"CREDIT FACILITY" means the proposed $100 million credit facility being
restructured by the Company.

"CPI" means the Consumer Price Index.

"CUSHMAN & WAKEFIELD" means Cushman & Wakefield of California, Inc.

"DOL" means the Department of Labor.

"DOL REGULATION" means the regulation issued by the DOL defining Plan Assets
for certain purposes.

"DOMESTICALLY CONTROLLED REIT " means a REIT in which at all times during a
specified testing period less than 50% in value of its stock is held directly or
indirectly by Non-U.S. Stockholders.

"DOUBLE TAXATION" means taxation at the corporate and stockholder levels
that generally results from investment in a corporation.

"DOWNTOWN/CBD" means the Los Angeles central business district.

"ENVIRONMENTAL LAWS" means the various Federal, state and local laws,
ordinances and regulations relating to the protection of the environment.

"ERISA PLAN" means an employee benefit plan subject to ERISA.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

"GAAP" means generally accepted accounting principles.

"INDEPENDENT UNDERWRITER" means Dean Witter Reynolds Inc. which will act as
qualified independent underwriter and will recommend the maximum initial public
offering price for the shares of Common Stock.

"INTERESTED STOCKHOLDER" means any person who beneficially owns ten percent
or more of the voting power of a corporation's shares.

"IRA" means an individual retirement account or annuity.

"IRS" means the Internal Revenue Service.

"LC" means leasing commissions.

"LEASED" refers to space for which leases have been executed and have
commenced as of the specified date.

"LIMITED PARTNERS" means the limited partners of the Operating Partnership.

"LOS ANGELES EDC" means the Los Angeles Economic Development Corporation.

"LOS ANGELES PMSA" means the Los Angeles/Long Beach Primary Metropolitan
Statistical Area.

"LOS ANGELES PMSA" means the Los Angeles Primary Metropolitan Statistical
Area.

"MGCL" means the Maryland General Corporation Law, as amended.

"MORTGAGE FINANCING" means the one year interim loan of approximately $104
million to the Company.

134
<PAGE>
"MORTGAGE FINANCING PROPERTIES" means the following nine Properties: Skyview
Center, 9665 Wilshire, Westwood Terrace, 425 West Broadway, 5000 East Spring,
Anaheim City Centre, 16000 Ventura Blvd., Imperial Bank Tower and 1950 Sawtelle.

"NAMED EXECUTIVE OFFICERS" means the Company's six most highly compensated
executive officers including the Chief Executive Officer.

"NAREIT" means the National Association of Real Estate Investment Trusts.

"NON-ERISA PLAN" means an IRA or a qualified pension, profit sharing or
stock bonus plan not subject to ERISA.

"NON-U.S. STOCKHOLDERS" means the persons that are, for purposes of United
States federal income taxation, nonresident alien individuals, foreign
corporations, foreign partnerships or foreign estates or trusts.

"NYSE" means the New York Stock Exchange, Inc..

"OFFERING" means the Offering of shares of Common Stock of the Company
pursuant to and as described in this Prospectus.

"OPERATING PARTNERSHIP" means Arden Realty Limited Partnership, a Maryland
limited partnership.

"OPTION AGREEMENTS" means separate option agreements between the Company and
certain Participants whereby certain interests in the Arden Predecessors and in
certain of the Properties held by such Participants will be transferred to the
Company in exchange for cash.

"OP UNITS" means the limited and general partner interests in the Operating
Partnership.

"OWNERSHIP LIMIT" means the Company's Charter provision prohibiting any
stockholder or group of affiliated stockholders from owning more than 9.0% of
the outstanding Common Stock.

"PARTNERSHIP AGREEMENT" means the agreement of limited partnership of the
Operating Partnership.

"PARTICIPANTS" means the parties participating in the Formation Transactions
including the Company and the Operating Partnership, together with the partners
and members of the Arden Predecessors and other parties which hold ownership
interests in certain of the Properties.

"PEER GROUP" means the group of properties identified in the C&W Market
Study that are most similar in terms of quality, market position and tenant
appeal to each of the Company's Properties.

"PFG" means Pacific Financial Group, a California limited partnership.

"PHASE I ASSESSMENTS" means Phase I Environmental Assessments conducted by
environmental consultants.

"PLAN ASSETS" means the assets of the Company which are deemed to be assets
of an ERISA Plan or other plan.

"PREFERRED STOCK" means the $.01 par value preferred stock of the Company.

"PROHIBITED OWNER" means the person or entity holding record title to shares
of the Company in excess of the Ownership Limit.

"PROHIBITED TRANSFEREE" means any transfer of Common Stock of the Company
whereby the purported transfer would result in any person violating the
Ownership Limit.

"PROPERTIES" means the 24 office properties referred to herein which
comprise the Company's portfolio of Southern California office properties.

"PROPOSED REGULATIONS" means Treasury Regulations proposed by the IRS which
have not been issued in permanent form.

"PUBLICLY-OFFERED SECURITY" means a security that is widely held, freely
transferable and either part of a class of securities registered under the
Exchange Act, or sold pursuant to an effective registration statement

135
<PAGE>
under the Securities Act (provided the securities are registered under the
Exchange Act within 120 days, or such later time as may be allowed by the SEC
(the registration period), after the end of the fiscal year of the issuer during
which the offering occurred).

"RECOGNITION PERIOD" means the ten-year period beginning on the date a
Built-In Gain Asset is acquired by the Company.

"REIT" means real estate investment trust as defined by Sections 856 through
860 of the Code and applicable Treasury Regulations.

"RELATED PARTY TENANT" means a tenant actually or constructively owned 10%
or more by the REIT or an owner of 10% or more of the REIT.

"REPLACEMENT COST RENTS" as defined in the C&W Market Study means the rental
rates that would be required to provide a reasonable return on investment to a
developer of a new Class A multi-tenant office building.

"REPRESENTATIVES" means Lehman Brothers Inc., Alex. Brown & Sons
Incorporated, Dean Witter Reynolds Inc., A.G. Edwards & Sons, Inc., Smith Barney
Inc., EVEREN Securities, Inc., Legg Mason Wood Walker Incorporated and Raymond
James & Associates, Inc.

"RESTRICTED SHARES" means the shares of Common Stock acquired by any
Participant in exchange for OP Units which will be restricted securities under
the meaning of Rule 144 promulgated under the Securities Act.

"RULE 144" means Rule 144 promulgated under the Securities Act.

"SECURITIES ACT" means the Securities Act of 1933, as amended.

"SAME STORE PROPERTIES" means those Properties that were owned by the
Company for the entire six months ended June 30, 1995 and June 30, 1996.

"SFAS" means Statements of Financial Accounting Standards.

"STOCK INCENTIVE PLAN" means the 1996 Stock Incentive Plan of Arden Realty
Group, Inc. and Arden Realty Group, Ltd.

"SWAP AGREEMENT" means the forward swap agreement in the notional amount of
$104 million which the Company intends to enter into with an affiliate of Wells
Fargo Bank at the time of this Offering and the Formation Transactions or
shortly thereafter.

"TI" means tenant improvements.

"UBTI" means unrelated business taxable income.

"UNDERWRITERS" means the underwriters of the Offering for whom Lehman
Brothers Inc., Alex. Brown & Sons Incorporated, Dean Witter Reynolds Inc., A.G.
Edwards & Sons, Inc., Smith Barney Inc., EVEREN Securities, Inc., Legg Mason
Wood Walker Incorporated, and Raymond James & Associates, Inc. are acting as
representatives.

"U.S. STOCKHOLDER" means a holder of shares of Common Stock who (for United
States federal income tax purposes) (i) is a citizen or resident of the United
States, (ii) is a corporation, partnership, or other entity created or organized
in or under the laws of the United States or of any political subdivision
thereof, or (iii) is an estate or trust the income of which is subject to United
States federal income taxation regardless of its source.

"UST" means underground storage tank.

"WHITE PAPER" means the White Paper on Funds from Operations approved by the
Board of Governors of the NAREIT in March of 1995.

136
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
ARDEN REALTY, INC.
Pro Forma Condensed Combined Financial Statements (Unaudited):............................................ F-3
Pro Forma Condensed Combined Balance Sheet as of June 30, 1996.......................................... F-4
Pro Forma Condensed Combined Statement of Operations for the Six Months Ended June 30, 1996............. F-5
Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 1995............... F-6
Notes to Pro Forma Condensed Combined Financial Statements.............................................. F-7

Historical:
Report of Independent Auditors.......................................................................... F-10
Balance Sheet as of May 1, 1996 and June 30, 1996 (Unaudited)........................................... F-11
Notes to Balance Sheet.................................................................................. F-12

ARDEN PREDECESSORS
Combined Financial Statements:
Report of Independent Auditors.......................................................................... F-15
Combined Balance Sheets as of June 30, 1996 (Unaudited) and December 31, 1995 and 1994.................. F-16
Combined Statements of Operations for the Six Months ended June 30, 1996 and 1995 (Unaudited) and the
Years Ended December 31, 1995, 1994 and 1993........................................................... F-17
Combined Statements of Owners' Equity for the Six Months ended June 30, 1996 (Unaudited) and the Years
Ended December 31, 1995, 1994 and 1993................................................................. F-18
Combined Statements of Cash Flows for the Six Months ended June 30, 1996 and 1995 (Unaudited) and the
Years Ended December 31, 1995, 1994 and 1993........................................................... F-19
Notes to Combined Financial Statements.................................................................. F-20
Schedule III - Commercial Office Properties and Accumulated Depreciation................................ F-29

16000 VENTURA
Statement of Revenue and Certain Expenses:
Report of Independent Auditors.......................................................................... F-31
Statement of Revenue and Certain Expenses for the Period January 1, 1995 to March 15, 1995.............. F-32
Notes to Statement of Revenue and Certain Expenses...................................................... F-33

1950 SAWTELLE
Statement of Revenue and Certain Expenses:
Report of Independent Auditors.......................................................................... F-34
Statement of Revenue and Certain Expenses for the Period January 1, 1995 to June 14, 1995............... F-35
Notes to Statement of Revenue and Certain Expenses...................................................... F-36

WESTWOOD TERRACE, SKYVIEW CENTER, 4811 AND 4900/10 AIRPORT PLAZA DRIVE AND NEW WILSHIRE
Combined Statement of Revenue and Certain Expenses:
Report of Independent Auditors.......................................................................... F-37
Combined Statement of Revenue and Certain Expenses for the Period December 1, 1994 to November 22,
1995................................................................................................... F-38
Notes to Combined Statement of Revenue and Certain Expenses............................................. F-39
</TABLE>

F-1
<PAGE>

<TABLE>
<CAPTION>
PAGE
---------
70 SOUTH LAKE AND CALABASAS COMMERCE CENTER
<S> <C>
Combined Statement of Revenue and Certain Expenses:
Report of Independent Auditors.......................................................................... F-41
Combined Statement of Revenue and Certain Expenses for the Period January 1, 1995 to November 22,
1995................................................................................................... F-42
Notes to Combined Statement of Revenue and Certain Expenses............................................. F-43

1996 ACQUIRED PROPERTIES
Combined Statements of Revenue and Certain Expenses:
Report of Independent Auditors.......................................................................... F-45
Combined Statements of Revenue and Certain Expenses for the 1996 Interim Period Prior to Acquisition
(Unaudited) and the Year Ended December 31, 1995....................................................... F-46
Notes to Combined Statements of Revenue and Certain Expenses............................................ F-47

ACQUISITION PROPERTIES
Combined Statements of Revenue and Certain Expenses:
Report of Independent Auditors.......................................................................... F-49
Combined Statements of Revenue and Certain Expenses for the Six Months Ended June 30, 1996 and 1995
(Unaudited) and the Year Ended December 31, 1995....................................................... F-50
Notes to Combined Statements of Revenue and Certain Expenses............................................ F-51
</TABLE>

F-2
<PAGE>

ARDEN REALTY, INC.

PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(UNAUDITED)

The unaudited pro forma financial and operating information for the six
months ended June 30, 1996 and the year ended December 31, 1995 is presented as
if the Offering, the Formation Transactions (including the purchase of the
Acquisition Properties), and the acquisitions of the Properties acquired during
1996 prior to the Offering (the "1996 Acquired Properties") and the Properties
acquired during 1995 (the "1995 Acquired Properties") all had occurred by the
date of the June 30, 1996 combined balance sheet and at the beginning of the
period presented for the combined statements of operations. The pro forma June
30, 1996 balance sheet information also gives effect to the recording of
minority interests for OP Units, as if these transactions occurred on June 30,
1996.

The pro forma financial statements are not necessarily indicative of what
the Company's financial position or results of operations would have been
assuming the completion of the Formation Transactions and the Offering on such
date or at the beginning of the period indicated, nor does it purport to project
the Company's financial position or results of operations at any future date or
for any future period.

F-3
<PAGE>

ARDEN REALTY, INC.

PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 1996
(UNAUDITED)
(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
HISTORICAL INVESTMENTS
ARDEN IN NONCOMBINED PRO FORMA COMPANY
PREDECESSORS ENTITIES ADJUSTMENTS PRO FORMA
------------ --------------- ----------- -----------
<S> <C> <C> <C> <C>
Commercial office properties-net.................. $ 254,749 $ 91,555 $ 54,831(F) $ 410,160
8,673(C)
352(I)

Cash and cash equivalents......................... 913 495 347,433(A) 12,657
(26,777)(C)
102,216(D)
(358,002)(E)
(54,831)(F)
1,210(B)
Restricted cash................................... 17,334 1,932 (19,266)(E) --
Rents and other receivables....................... 2,577 167 -- 2,744
Deferred rents.................................... 2,996 1,761 -- 4,757
Prepaid financing and leasing costs-net........... 1,659 1,588 (757)(G) 4,274
1085(D)
699(D)
Prepaid expenses and other assets................. 2,868 330 (1,210)(B) 1,988
Investments in noncombined entities............... 3,069 (3,069) -- --
------------ ------- ----------- -----------
Total assets.................................. $ 286,165 $ 94,759 $ 55,656 $ 436,580
------------ ------- ----------- -----------
------------ ------- ----------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY

Mortgage loans payable............................ $ 263,492 $ 86,420 $ 104,000(D) $ 104,000
(349,912)(E)
Unsecured lines of credit......................... 2,467 0 (2,467)(E) --
Accounts payable and accrued expenses............. 4,726 1,398 (1,397)(E) 4,727
Deferred interest................................. 5,318 281 (5,599)(E) --
Security deposits................................. 1,914 827 -- 2,741
------------ ------- ----------- -----------
Total liabilities............................. 277,917 88,927 (255,376) 111,468
------------ ------- ----------- -----------
Minority interests................................ 718 (718) 43,231(I) 43,231
Owners' Equity.................................... 7,530 6,551 (14,081)(H) --
Stockholders' Equity:
Common Stock.................................... -- -- 189(A) 189
Additional paid-in capital...................... -- -- 347,244(A) 281,693
(9,175)(C)
(757)(G)
5,599(E)
14,081(H)
(23,491)(E)
(42,879)(I)
(8,929)(C)
------------ ------- ----------- -----------
Total stockholders' equity.................... -- -- 281,882 281,882
------------ ------- ----------- -----------
Total liabilities and equity.................. $ 286,165 $ 94,759 $ 55,656 $ 436,580
------------ ------- ----------- -----------
------------ ------- ----------- -----------
</TABLE>

See accompanying notes.

F-4
<PAGE>

ARDEN REALTY, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
EQUITY IN PRE-ACQUISITION
HISTORICAL NET (LOSS) OF PERIOD FOR
ARDEN NONCOMBINED 1996 ACQUIRED ACQUISITION PRO FORMA COMPANY
PREDECESSORS ENTITIES PROPERTIES PROPERTIES ADJUSTMENTS PRO FORMA
------------ ------------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Rental.................................. $ 19,404 $ 7,937 $ 3,923 $ 2,101 $ 128(J) $ 33,493
Tenant reimbursements................... 1,425 308 258 58 -- 2,049
Parking................................. 2,121 574 308 87 -- 3,090
Other................................... 1,521 166 144 174 -- 2,005
------------ ------ ------ ----------- ----------- -----------
Total revenue......................... 24,471 8,985 4,633 2,420 128 40,637
------------ ------ ------ ----------- ----------- -----------
EXPENSES
Property operating, taxes, insurance and
ground rent............................ 8,252 3,293 1,489 1,021 69(K) 14,124
General and administrative.............. 830 435 -- -- 635(L) 1,900
Interest................................ 14,741 4,317 -- -- (15,000)(M) 4,058
Depreciation and amortization........... 3,036 1,673 -- -- 1,065(N) 5,774
------------ ------ ------ ----------- ----------- -----------
Total expenses........................ 26,859 9,718 1,489 1,021 (13,231) 25,856
------------ ------ ------ ----------- ----------- -----------
Equity in net (loss) of noncombined
entities................................. (94) 94 -- -- -- --
------------ ------ ------ ----------- ----------- -----------
(Loss) income before minority interests... (2,482) (639) 3,144 1,399 13,359(O) 14,781
Minority interests........................ 344 (344) -- -- (1,964)(O) (1,964)
------------ ------ ------ ----------- ----------- -----------
Net (loss) income......................... $ (2,138) $ (983) $ 3,144 $ 1,399 $ 11,395 $ 12,817
------------ ------ ------ ----------- ----------- -----------
------------ ------ ------ ----------- ----------- -----------
Pro forma common shares outstanding before
conversion of OP units................... 18,853
-----------
-----------
Net income per share...................... $.68
-----------
-----------
</TABLE>

See accompanying notes.

F-5
<PAGE>

ARDEN REALTY, INC.

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
EQUITY IN
NET (LOSS) PRE-ACQUISITION
HISTORICAL OF PERIOD FOR 1996
ARDEN NONCOMBINED 1995 ACQUIRED ACQUIRED ACQUISITION PRO FORMA
PREDECESSORS ENTITIES PROPERTIES PROPERTIES PROPERTIES ADJUSTMENTS
------------ ------------ -------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Rental............................... $ 8,832 $ 15,610 $ 16,564 $ 19,391 $ 4,280 $ 2,014(J)
Tenant reimbursements................ 403 419 1,073 961 54 --
Parking.............................. 750 915 2,238 1,859 133 --
Other................................ 1,707 776 877 350 85 --
------------ ------------ ------- ----------- ----------- -----------
Total revenue...................... 11,692 17,720 20,752 22,561 4,552 2,014
------------ ------------ ------- ----------- ----------- -----------
EXPENSES
Property operating, taxes, insurance
and ground rent..................... 3,339 6,927 7,813 8,848 2,228 936(K)
General and administrative........... 1,377 831 -- -- -- 1,592(L)
Interest............................. 5,537 8,243 -- -- -- (5,704)(M)
Depreciation and amortization........ 1,898 2,475 -- -- -- 7,176(N)
------------ ------------ ------- ----------- ----------- -----------
Total expenses..................... 12,151 18,476 7,813 8,848 2,228 4,000
------------ ------------ ------- ----------- ----------- -----------
Equity in net (loss) of noncombined
entities.............................. (116) 116 -- -- -- --
------------ ------------ ------- ----------- ----------- -----------
(Loss) income before minority
interests............................. (575) (640) 12,939 13,713 2,324 (1,986)
Minority interests..................... (1) 1 -- -- -- (3,425)(O)
------------ ------------ ------- ----------- ----------- -----------
Net (loss) income...................... $ (576) $ (639) $ 12,939 $ 13,713 $ 2,324 $ (5,411)
------------ ------------ ------- ----------- ----------- -----------
------------ ------------ ------- ----------- ----------- -----------
Pro forma common shares outstanding
before conversion of OP units.........
Net income per share...................

COMPANY
PRO FORMA
-----------
<S> <C>
REVENUE
Rental............................... $ 66,691
Tenant reimbursements................ 2,910
Parking.............................. 5,895
Other................................ 3,795
-----------
Total revenue...................... 79,291
-----------
EXPENSES
Property operating, taxes, insurance
and ground rent..................... 30,091
General and administrative........... 3,800
Interest............................. 8,076
Depreciation and amortization........ 11,549
-----------
Total expenses..................... 53,516
-----------
Equity in net (loss) of noncombined
entities.............................. --
-----------
(Loss) income before minority
interests............................. 25,775
Minority interests..................... (3,425)
-----------
Net (loss) income...................... $ 22,350
-----------
-----------
Pro forma common shares outstanding
before conversion of OP units......... 18,853
-----------
-----------
Net income per share................... $1.19
-----------
-----------
</TABLE>

See accompanying notes.

F-6
<PAGE>

ARDEN REALTY, INC.
NOTES TO PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS)

1. ADJUSTMENTS TO THE PRO FORMA CONDENSED COMBINED BALANCE SHEET
The adjustments to the Pro Forma Condensed Combined Balance Sheet as of June
30, 1996 are as follows:

<TABLE>
<S> <C> <C>
(A) Sale of 18,848 shares of common stock in the offering
Proceeds from offering.............................................. $ 376,950
Costs associated with offering including prepaid offering costs..... (29,517)
----------
Net proceeds...................................................... $ 347,433
----------
----------
Par value of common stock to be issued.............................. $ 189
Additional paid in capital from proceeds of sale of common stock.... 347,244
----------
$ 347,433
----------
----------
(B) Reclassification of offering costs prepaid by the Arden Predecessors prior
to June 30, 1996......................................................... $ (1,210)
----------
----------
(C) Acquisition of certain interests of the Participants for cash
Reduction in additional paid-in capital for book value of interests
acquired........................................................... $ 9,175
Reduction in additional paid-in capital for distributions to
affiliates of cash paid in excess of book value of interests....... 8,929
Purchase price in excess of book value of interests in the
properties purchased from nonaffiliates............................ 8,673
----------
$ 26,777
----------
----------
(D) Mortgage financing and line of credit commitment fees
Proceeds from new debt.............................................. $ 104,000
Costs associated with new debt origination.......................... (1,085)
Prepaid commitment fees............................................. (699)
----------
$ 102,216
----------
----------
(E) Repayment of certain mortgage loans and unsecured lines of credit of the
Arden Predecessors
Payment of mortgage loans........................................... $ 349,913
Payment of unsecured lines of credit................................ 2,467
Payment of additional interest on debt (includes deferred interest
of $5,599 which was accrued as of June 30, 1996, and $17,892 of
additional interest currently due as a result of the prepayment)... 23,491
Payment of accrued interest......................................... 1,397
Release of restricted cash to repay mortgage loans.................. (19,266)
----------
$ 358,002
----------
----------
(F) Purchase price and actual and estimated additional closing costs of 100
Broadway and Acquisition Properties...................................... $ 54,831
----------
----------
(G) Write off of unamortized loan fees........................................ $ (757)
----------
----------
(H) Elimination of owners' equity............................................. $ (14,081)
----------
----------
</TABLE>

F-7
<PAGE>

ARDEN REALTY, INC.
NOTES TO PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(IN THOUSANDS)

1. ADJUSTMENTS TO THE PRO FORMA CONDENSED COMBINED BALANCE SHEET (CONTINUED)
<TABLE>
<S> <C> <C>
(I) To establish minority interests in Operating Partnership based on units
issued................................................................... $ 43,231
Excess of fair value over book value related to issuance of Operating
Partnership units to nonaffiliates....................................... (352)
----------
$ 42,879
----------
----------
Total Equity before percentage allocable to minority interests................. $ 325,113
Percentage allocable to minority interests..................................... 13.30%
----------
$ 43,231
----------
----------
</TABLE>

<TABLE>
<S> <C> <C> <C>
Minority OP Units.......................................... 2,889 13.30%
Total Shares Issued........................................ 18,853 86.70%
--------- ---------
Total...................................................... 21,742 100.00%
--------- ---------
--------- ---------
</TABLE>

2. ADJUSTMENTS TO THE PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
The pro forma adjustments reflected in the Pro Forma Condensed Combined
Statements of Operations for the six months ended June 30, 1996 and the year
ended December 31, 1995 are set forth below:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
-------------- -----------------
<S> <C> <C> <C>
(J) Increase in rental revenue to adjust the 1995 Acquired Properties, the
1996 Acquired Properties and the Acquisition Properties to straight
line rental revenue based on the acquisition date of the Arden
Predecessors.......................................................... $ 128 $ 2,014
-------------- --------
-------------- --------
(K) Increase in property general and administrative related to additional
property payroll costs relating to the 1995 Acquired Properties, the
1996 Acquired Properties and the Acquisition Properties............... $ 69 $ 936
-------------- --------
-------------- --------
(L) Increase in general and administrative expense related to expected
level of operations as a public real estate investment trust.......... $ 635 $ 1,592
-------------- --------
-------------- --------
(M) Decrease in interest expense
Decrease in interest expense due to repayment of mortgage
loans........................................................... $ (19,058) $ (13,780)
Increase in interest expense related to the newly originated
non-amortizing debt with an interest rate of 7.43% due in seven
years........................................................... 3,864 7,688
Increase in amortization of finance costs related to the newly
originated debt................................................. 194 388
-------------- --------
Net decrease in interest expense............................... $ (15,000) $ (5,704)
-------------- --------
-------------- --------
</TABLE>

F-8
<PAGE>

ARDEN REALTY, INC.
NOTES TO PRO FORMA CONDENSED COMBINED
FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
(IN THOUSANDS)

2. ADJUSTMENTS TO THE PRO FORMA CONDENSED COMBINED STATEMENTS OF
OPERATIONS (CONTINUED)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
-------------- -----------------
<S> <C> <C> <C>
(N) Increase in depreciation expense to reflect a full period of
depreciation for the 1995 Acquired Properties, the 1996 Acquired
Properties and the Acquisition Properties utilizing a 40 year useful
life for buildings and a 10 year useful life for improvements......... $ 936 $ 6,918

Increase in depreciation due to the fair value of units or cash paid in
excess of book value of interests in the properties acquired from the
nonaffiliates......................................................... 129 258
-------------- --------
Net increase in depreciation expense........................... $ 1,065 $ 7,176
-------------- --------
-------------- --------

Historical depreciation of the Arden Predecessors...................... $ 4,709 $ 4,373

Additional depreciation of the 1995 and 1996 Acquired Properties:

Pro forma depreciation as if the 1995 and 1996 Acquired
Properties were purchased on January 1, 1995.................... 1,450 6,920

Historical depreciation recorded by the Arden Predecessors....... (922) (818)
-------------- --------
Net increase in depreciation expense (the pro forma adjustment
for the six months ended June 30, 1996 includes only the 1996
Acquired Properties).......................................... 528 6,102

Depreciation on the Acquisition Properties............................. 408 816

Depreciation on the price in excess of book value...................... 129 258
-------------- --------
$ 5,774 $ 11,549
-------------- --------
-------------- --------
(O) To reflect adjustment for minority interests of 13.30% in the Operating
Partnership........................................................... $ 1,964 $ 3,425
-------------- --------
-------------- --------
</TABLE>

F-9
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Board of Directors
Arden Realty, Inc.

We have audited the accompanying balance sheet of Arden Realty, Inc., a
Maryland corporation, as of May 1, 1996. This balance sheet is the
responsibility of the management of Arden Realty Group, Inc. Our responsibility
is to express an opinion on the balance sheet based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit provides a reasonable basis for our opinion.

In our opinion, the balance sheet presents fairly, in all material respects,
the financial position of Arden Realty, Inc., a Maryland corporation, as of May
1, 1996 in conformity with generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
May 1, 1996

F-10
<PAGE>

ARDEN REALTY, INC.
BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
MAY 1, 1996
-------------- JUNE 30, 1996
--------------
(UNAUDITED)

<S> <C> <C>
ASSETS........................................................................... $ -- $ --
-------------- --------------
-------------- --------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Commitments and contingencies.................................................... $ -- $ --
-------------- --------------
Preferred stock, $.01 par value, 20,000,000 shares authorized, none issued and
outstanding..................................................................... -- --
-------------- --------------
Common stock, $.01 par value, 100,000,000 shares authorized, 100 shares issued
and outstanding as of June 30, 1996 (unaudited)................................. -- --
-------------- --------------
$ -- $ --
-------------- --------------
-------------- --------------
</TABLE>

See accompanying notes.

F-11
<PAGE>

ARDEN REALTY, INC.

NOTES TO BALANCE SHEET

1. ORGANIZATION

Arden Realty, Inc. (the "Company") is a Maryland corporation which was
formed on May 1, 1996, to acquire a portfolio of office properties (the
"Properties") and continue the real estate business of Arden Realty Group, Inc.,
a California corporation, its principals and certain affiliates and affiliated
partnerships. Substantial ownership interests in the entities (the "Arden
Predecessors") that own interests in the Properties are held by Richard Ziman,
Victor Coleman, Arthur Gilbert and their affiliates, consisting of related
individuals and entities controlled by them. The Arden Predecessors are engaged
in owning, acquiring, managing, leasing and renovating office properties in
Southern California.

The Company will be the sole general partner of a newly formed limited
partnership (the "Operating Partnership"). The Company will initially hold an
aggregate of 86.7% of the ownership interests in the Operating Partnership. The
Operating Partnership will initially hold all the interests in the Properties.
It is expected that in connection with the Mortgage Financing discussed below
the Operating Partnership will transfer the particular Mortgage Financing
Properties to a financing subsidiary. The Company will conduct substantially all
of its business through the Operating Partnership. As the sole general partner
of the Operating Partnership, the Company will have exclusive power to manage
and conduct the business of the Operating Partnership, subject to certain
limited exceptions.

Concurrently with the consummation of a proposed public offering of the
Company's Common Stock (the "Offering"), the Company and the Operating
Partnership, together with the partners and members of the Arden Predecessors
including certain unaffiliated investors (collectively, the "Participants"),
will engage in certain formation transactions (the "Formation Transactions").
The Formation Transactions have been designed to (i) enable the Company to raise
the necessary capital to acquire the Properties and repay certain mortgage debt
relating thereto, (ii) provide a vehicle for future acquisitions, (iii) enable
the Company to comply with certain requirements under the federal income tax
laws and regulations relating to real estate investment trusts, (iv) facilitate
potential securitized mortgage financings, and (v) preserve certain tax
advantages for certain Arden Predecessors and unaffiliated participants. The
Formation Transactions are as follows:

- The Company will sell shares of Common Stock in the Offering.

- Pursuant to separate option agreements (the "Option Agreements"), the
Company will acquire for cash from certain Participants the interests
owned by such Participants in certain of the Arden Predecessor entities
and in certain of the Properties. The Company will pay approximately $26.8
million from the net proceeds of the Offering for such interests.

- The Company will contribute (i) the interests in the Arden Predecessors
and in the Properties acquired pursuant to the Option Agreements and (ii)
the net proceeds from the Offering (after payment of the cash
consideration to certain Participants as described above) to the Operating
Partnership in exchange for a 86.7% general partner interest in the
Operating Partnership.

- Pursuant to separate contribution agreements (the "Contribution
Agreements"), the following additional contributions will be made to the
Operating Partnership in exchange for OP Units representing limited
partner interests: (i) certain Participants will contribute the remaining
interests in the Arden Predecessors and in certain of the Properties
(I.E., all interests not acquired by the Company pursuant to the Option
Agreements) and (ii) Arden will contribute certain of its assets,
including management contracts relating to certain of the Properties and
the contract rights to purchase the Acquisition Properties (303 Glenoaks
Blvd. and 12501 East Imperial Highway). The Participants making such
contributions (including Messrs. Ziman, Coleman and Gilbert) will receive
an aggregate of 2,889,071 OP Units, with an estimated value of
approximately $57.8 million based on the assumed initial public offering
price of the Common Stock.

F-12
<PAGE>

ARDEN REALTY, INC.

NOTES TO BALANCE SHEET -- (CONTINUED)

1. ORGANIZATION (CONTINUED)
- The Company, through the Operating Partnership, will borrow approximately
$104 million aggregate principal amount (the "Mortgage Financing") which
will be secured by cross-collateralized and cross-defaulted first mortgage
liens on nine of the Properties (the "Mortgage Financing Properties").

- Approximately $35 million of the net proceeds of the Offering and the
Mortgage Financing will be used by the Operating Partnership to purchase
the Acquisition Properties.

- Approximately $398 million of the net proceeds of the Offering and the
Mortgage Financing will be used by the Operating Partnership to repay
certain mortgage debt secured by the Properties and indebtedness
outstanding under lines of credit to be assumed by the Operating
Partnership in the Formation Transactions.

- The Company, through the Operating Partnership, will enter into a $100
million Credit Facility.

- The transfer of the properties and operating interests of Messrs. Ziman,
Coleman, Gilbert and their affiliates to the Operating Partnership for
cash or ownership units in the Operating Partnership will be accounted for
at the historical cost of their interests in the Arden Predecessors
similar to a pooling of interests. All transfers by nonaffiliates will be
accounted for at the fair value of the units issued and/ or cash
consideration paid.

2. COMMITMENTS AND CONTINGENCIES
The Company will become a party to various legal actions resulting from the
operating activities to be transferred to the Operating Partnership. These
actions are incidental to the transferred business and management does not
believe that these actions will have a material adverse effect on the Company.

Pursuant to the Operating Partnership's limited partnership agreement,
beginning one year after consummation of the Offering, the OP Units issued
concurrently with the Offering are redeemable (at the election of the holder)
for cash or, at the option of the Company, exchangeable for shares of Common
Stock of the Company on a one-for-one basis.

3. RISKS AND UNCERTAINTIES
The preparation of financial statements, in conformity with 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 and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

4. INCOME TAXES
After the Offering, the Company intends to make an election to be taxed as a
real estate investment trust ("REIT") under Sections 586 through 860 of the
Internal Revenue Code. As a REIT, the Company generally will not be subject to
federal income tax if it distributes at least 95% of its taxable income for each
tax year to its stockholders. REITs are subject to a number of organizational
and operational requirements. If the Company fails to qualify as a REIT in any
taxable year, the Company will be subject to federal income tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
tax rates. Even if the Company qualifies for taxation as a REIT, the Company may
be subject to state and local income taxes and to federal income tax and excise
tax on its undistributed income.

5. STOCK INCENTIVE PLAN
The Company intends to adopt a Stock Incentive Plan to provide incentives to
attract and retain officers, key employees and outside directors.

F-13
<PAGE>

ARDEN REALTY, INC.

NOTES TO BALANCE SHEET -- (CONTINUED)

5. STOCK INCENTIVE PLAN (CONTINUED)
The Stock Incentive Plan will be qualified under Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the"Exchange Act"). The Stock
Incentive Plan will be administered by the Compensation Committee and provide
for the granting of stock options, stock appreciation rights or restricted stock
with respect to up to 1,500,000 shares of Common Stock to executive or other key
employees of the Company. Stock options may be granted in the form of "incentive
stock options," as defined in Section 422 of the Code, or non-statutory stock
options and are exercisable for up to 10 years following the date of grant. The
exercise price of each option will be established by the Compensation Committee;
provided, however, that the price per share must be equal to or greater than the
fair market value of the Common Stock on the grant date.

During 1995 an accounting pronouncement was issued by the Financial
Accounting Standards Board that applies to the Company, Statement of Financial
Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." This new standard will become effective for the Company's 1996
fiscal year. SFAS No. 123 establishes a fair value method for accounting for
stock-based compensation, such as option plans, but does not require that the
new method be adopted. The Company may elect to continue following the
methodology in APB Opinion No. 25, "Accounting for Stock Issued to Employees",
whereby the compensation expense is measured as the difference between the
exercise price of the option and the stock price on the measurement date with
the fair value of options disclosed in the footnotes in the financial
statements. SFAS No. 123 is not expected to adversely affect the Company's
future reported results.

F-14
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Owners of the Arden Predecessors

We have audited the accompanying combined balance sheets of the Arden
Predecessors, as defined in Note 1, as of December 31, 1995 and 1994, and the
related combined statements of operations, owners' equity and cash flows for
each of the three years in the period ended December 31, 1995. Our audits also
included the financial statement schedule III, commercial office properties and
accumulated depreciation. These financial statements and schedule are the
responsibility of the management of the Arden Predecessors. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. 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 combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the Arden
Predecessors as of December 31, 1995 and 1994, and the combined results of their
operations and cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.

Ernst & Young LLP

Los Angeles, California
April 10, 1996

F-15
<PAGE>
ARDEN PREDECESSORS

COMBINED BALANCE SHEETS
(IN THOUSANDS)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
JUNE 30, ---------- ---------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Commercial office properties, net of accumulated depreciation of $6,248,
$3,296 and $1,530, respectively.............................................. $ 254,749 $ 160,874 $ 34,977
Cash and cash equivalents..................................................... 913 790 611
Restricted cash............................................................... 17,334 12,249 600
Rents and other receivables................................................... 2,577 1,095 21
Deferred rents................................................................ 2,996 1,778 1,106
Prepaid financing and leasing costs, net of accumulated amortization of $408,
$421 and $112, respectively.................................................. 1,659 1,359 746
Prepaid expenses and other assets............................................. 2,868 1,071 446
Investments in noncombined entities........................................... 3,069 3,163 7,583
----------- ---------- ---------
Total assets.............................................................. $ 286,165 $ 182,379 $ 46,090
----------- ---------- ---------
----------- ---------- ---------

LIABILITIES AND OWNERS' EQUITY

Mortgage loans payable........................................................ $ 263,492 $ 167,638 $ 32,196
Unsecured lines of credit..................................................... 2,467 813 748
Accounts payable and accrued expenses......................................... 4,726 3,398 897
Deferred interest............................................................. 5,318 884 --
Security deposits............................................................. 1,914 1,430 307
----------- ---------- ---------
Total liabilities......................................................... 277,917 174,163 34,148
Minority interests............................................................ 718 100 99
Owners' equity................................................................ 7,530 8,116 11,843
----------- ---------- ---------
Total liabilities and owners' equity...................................... $ 286,165 $ 182,379 $ 46,090
----------- ---------- ---------
----------- ---------- ---------
</TABLE>

See accompanying notes.

F-16
<PAGE>
ARDEN PREDECESSORS

COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED FOR THE YEARS ENDED
JUNE 30, DECEMBER 31,
--------------- ------------------------
1996 1995 1995 1994 1993
------- ------ ------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUE
Rental.................................................... $19,404 $2,822 $ 8,832 $ 5,157 $3,034
Tenant reimbursements..................................... 1,425 177 403 217 35
Parking................................................... 2,121 220 750 382 279
Other..................................................... 1,521 649 1,707 796 314
------- ------ ------- ------- ------
Total revenue......................................... 24,471 3,868 11,692 6,552 3,662
------- ------ ------- ------- ------
EXPENSES
Property operating and maintenance........................ 4,998 754 2,539 1,869 1,324
Real estate taxes......................................... 1,291 138 502 272 107
Insurance................................................. 1,503 42 279 50 49
Ground rent............................................... 460 -- 19 -- --
General and administrative................................ 830 684 1,377 689 386
Interest.................................................. 14,741 1,403 5,537 1,673 646
Depreciation and amortization............................. 3,036 638 1,898 1,143 499
------- ------ ------- ------- ------
Total expenses........................................ 26,859 3,659 12,151 5,696 3,011
------- ------ ------- ------- ------
Equity in net (loss) income of noncombined entities......... (94) 108 (116) 201 4
------- ------ ------- ------- ------
(Loss) income before minority interests..................... (2,482) 317 (575) 1,057 655
Minority interests.......................................... 344 (7) (1) 1 --
------- ------ ------- ------- ------
Net (loss) income........................................... $(2,138) $ 310 $ (576) $ 1,058 $ 655
------- ------ ------- ------- ------
------- ------ ------- ------- ------
</TABLE>

See accompanying notes.

F-17
<PAGE>
ARDEN PREDECESSORS

COMBINED STATEMENTS OF OWNERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
AND FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(IN THOUSANDS)

<TABLE>
<CAPTION>
Balance at January 1, 1993........................................................ $ (153)
<S> <C>
Owners' contributions........................................................... 2,680
Owners' distributions........................................................... (460)
Net income - 1993............................................................... 655
---------
Balance at December 31, 1993...................................................... 2,722
Owners' contributions........................................................... 9,452
Owners' distributions........................................................... (1,389)
Net income - 1994............................................................... 1,058
---------
Balance at December 31, 1994...................................................... 11,843
Owners' contributions........................................................... 7,427
Owners' distributions........................................................... (10,578)
Net (loss) - 1995............................................................... (576)
---------
Balance at December 31, 1995...................................................... 8,116
Owners' contributions (unaudited)............................................... 2,500
Owners' distributions (unaudited)............................................... (948)
Net (loss) - six months ended June 30, 1996 (unaudited)......................... (2,138)
---------
Balance at June 30, 1996 (unaudited).............................................. $ 7,530
---------
---------
</TABLE>

See accompanying notes.

F-18
<PAGE>
ARDEN PREDECESSORS

COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS FOR THE YEARS ENDED DECEMBER
ENDED JUNE 30, 31,
------------------ ----------------------------
1996 1995 1995 1994 1993
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income..................................................... $ (2,138) $ 310 $ (576) $ 1,058 $ 655
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Equity in net loss (income) of noncombined entities............... 94 (108) 116 (201) (4)
(Loss) income allocable to minority interests..................... (344) 7 1 (1) --
Depreciation and amortization..................................... 3,036 638 1,898 1,143 499
Amortization of loan costs and fees............................... 102 94 211 21 1
(Increase) decrease in rents and other receivables................ (1,482) (58) (1,074) 198 (98)
Increase in deferred rents........................................ (1,218) (247) (672) (746) (360)
Increase in prepaid financing and leasing costs................... (575) (70) (633) (582) (271)
(Increase) decrease in prepaid expenses and other assets.......... (1,709) 266 (947) (428) (21)
Increase (decrease) in accounts payable and accrued expenses...... 1,328 (501) 2,501 267 582
Increase in deferred interest..................................... 4,434 23 884 -- --
Increase in security deposits..................................... 485 104 1,121 105 203
-------- -------- -------- -------- --------
Net cash provided by operating activities............................. 2,013 458 2,830 834 1,186
-------- -------- -------- -------- --------
INVESTING ACTIVITIES
Acquisitions and improvements to commercial office properties......... (96,827) (9,466) (127,663) (10,622) (25,885)
Decrease (increase) in investments in noncombined entities............ -- 3,888 4,305 (7,299) (80)
-------- -------- -------- -------- --------
Net cash used in investing activities................................. (96,827) (5,578) (123,358) (17,921) (25,965)
-------- -------- -------- -------- --------
FINANCING ACTIVITIES
Proceeds from mortgage loans.......................................... 100,092 10,125 142,501 8,139 24,058
Repayments of mortgage loans.......................................... (4,238) (30) (7,060) -- --
Proceeds from unsecured lines of credit............................... 3,657 1,316 3,310 1,240 298
Repayments of unsecured lines of credit............................... (2,003) (1,275) (3,244) (791) (250)
(Increase) decrease in restricted cash................................ (5,085) (1,113) (11,649) 94 (694)
Contributions from minority interests................................. 1,000 -- -- 100 --
Distributions to minority interests................................... (38) -- -- -- --
Owners' contributions................................................. 2,500 1,474 7,427 9,452 2,680
Owners' distributions................................................. (948) (5,947) (10,578) (1,389) (460)
-------- -------- -------- -------- --------
Net cash provided by financing activities............................. 94,937 4,550 120,707 16,845 25,632
-------- -------- -------- -------- --------
Net increase (decrease) in cash and cash equivalents.................. 123 (570) 179 (242) 853
Cash and cash equivalents at beginning of period...................... 790 611 611 853 --
-------- -------- -------- -------- --------
Cash and cash equivalents at end of period............................ $ 913 $ 41 $ 790 $ 611 $ 853
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
SUPPLEMENTAL DISCLOSURE OF NONCASH TRANSACTIONS
Cash paid during the period for interest, net of interest
capitalized......................................................... $ 9,640 $ 1,367 $ 4,022 $ 1,547 $ 521
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>

See accompanying notes.

F-19
<PAGE>
ARDEN PREDECESSORS
NOTES TO COMBINED FINANCIAL STATEMENTS

1. ORGANIZATION
The entities below are currently engaged in owning, acquiring, managing,
leasing and renovating office properties in Southern California. Substantial
ownership interests in the entities (the "Arden Predecessors") that own
interests in the properties are held by Richard Ziman, Victor Coleman, Arthur
Gilbert and their affiliates consisting of related individuals and entities
controlled by them.

The partners and members of the Arden Predecessors, which collectively
represent the "Participants", will, concurrently with a proposed public
offering, enter into a series of transactions with Arden Realty, Inc., a
Maryland corporation, to form a real estate investment trust (the "REIT") to
continue and expand the business of the Arden Predecessors. All of the
properties owned by the entities (the "Properties") have been managed by Arden
Realty Group, Inc., a California corporation, since their acquisition by the
Arden Predecessors.

The properties and entities are all managed by Messrs. Ziman and Coleman. In
connection with the proposed offering, in those instances where the financial
interests held by Messrs. Ziman, Coleman, Gilbert and their affiliates are also
controlling interests, the entities have been combined in the accompanying
financial statements. Minority interests have been recorded for those entities
that the affiliated Participants control but are not wholly-owned. Where
controlling interests are not held by these affiliated Participants, the
entities are accounted for as investments in noncombined entities utilizing
equity accounting. Although the affiliated Participants own a 77.5% interest in
5000 Spring Associates Tenancy in Common they do not have the unilateral right
to refinance the debt on the property. As a result, the affiliated Participants
have accounted for this investment utilizing equity accounting.

<TABLE>
<CAPTION>
PREDECESSORS
- -----------------------------------------------------------------------------------------------------------------
ENTITY NAME PROPERTY NAME CITY ACQUISITION DATE
- --------------------------------------- ---------------------------------- ------------------ ----------------
<S> <C> <C> <C>
COMBINED ENTITIES
- -----------------------------------------------------------------------------------------------
Arden Realty Group, Inc., a California
corporation Operating Management Company -- --
Century Center Tenancy in Common Century Park Center Los Angeles March 1993
1950 Sawtelle Associates, L.P. 1950 Sawtelle Los Angeles June 1995
Arden LAOP IV, LLC 70 South Lake Pasadena November 1995
New Wilshire Los Angeles November 1995
Calabasas Commerce Center Calabasas November 1995
Westwood Terrace Los Angeles November 1995
Skyview Center Los Angeles November 1995
5601 Lindero Canyon Westlake Village March 1994
4811 Airport Plaza Drive Long Beach November 1995
4900/10 Airport Plaza Drive Long Beach November 1995
Arden LAOP V, LLC (Note 8) 5832 Bolsa Huntington Beach February 1996
400 Corporate Pointe Culver City February 1996
9665 Wilshire Beverly Hills February 1996
Imperial Bank Tower San Diego February 1996
Arden Broadway Associates, LLC 100 West Broadway Long Beach July 1996
INVESTMENTS IN NONCOMBINED ENTITIES
- -----------------------------------------------------------------------------------------------
Beverly Ventura Associates, L.P. Beverly Atrium Beverly Hills December 1993
Woodland Hills Financial Woodland Hills December 1993
Bristol Encino Associates, LLC Bristol Plaza Culver City August 1994
16000 Ventura Blvd. Encino March 1995
222 Harbor Associates, LLC Anaheim City Centre Anaheim November 1994
425 West Broadway Glendale December 1994
5000 Spring Associates Tenancy in
Common 5000 East Spring Long Beach December 1994
</TABLE>

F-20
<PAGE>
ARDEN PREDECESSORS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

1. ORGANIZATION (CONTINUED)

All significant balances and transactions between the Arden Predecessors
have been eliminated in the combined financial statements.

PROPOSED TRANSACTIONS

Concurrently with the consummation of an initial public offering of the
REIT's Common Stock (the "Offering"), which is expected to be completed in 1996,
the REIT and a newly formed limited partnership (the "Operating Partnership"),
together with the Participants will engage in certain formation transactions
(the "Formation Transactions"). The Formation Transactions are designed to (i)
enable the REIT to raise the necessary capital to acquire the Properties and
repay certain mortgage debt relating thereto, (ii) provide a vehicle for future
acquisitions, (iii) enable the REIT to comply with certain requirements under
the federal income tax laws and regulations relating to real estate investment
trusts, (iv) facilitate potential securitized mortgage financings and (v)
preserve certain tax advantages for certain Participants.

The operations of the REIT will be carried on primarily through the
Operating Partnership and its subsidiaries in order to assist the REIT and the
Participants in forming the REIT under the Internal Revenue Code of 1986.

The REIT will be the sole general partner in the Operating Partnership and
the Participants will transfer their property and operating interests in the
Arden Predecessors in exchange for limited partnership interests in the
Operating Partnership and/or cash.

The transfer of the properties and operating interests of Messrs. Ziman,
Coleman, Gilbert and their affiliates to the Operating Partnership for cash or
ownership units in the Operating Partnership will be accounted for at the
historical cost of their interests in the Arden Predecessors similar to a
pooling of interests. All transfers by nonaffiliates will be accounted for at
the fair value of the ownership units issued and/or cash consideration paid.

2. SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES

RISKS AND UNCERTAINTIES

The preparation of financial statements, in conformity with 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 and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

COMMERCIAL OFFICE PROPERTIES AND FURNITURE, FIXTURES AND EQUIPMENT

The properties are recorded at cost less accumulated depreciation. During
1995, the Arden Predecessors adopted the new accounting pronouncement, Statement
of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of."
Under this standard, if impairment conditions exist, the Arden Predecessors make
an assessment of the recoverability of the carrying amounts of the properties by
estimating the future undiscounted cash flows, excluding interest charges. If
the carrying amount exceeds the aggregate future cash flows, the Arden
Predecessors would recognize an impairment loss to the extent the carrying
amount exceeds the fair value of

F-21
<PAGE>
ARDEN PREDECESSORS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
the property. Any long-lived assets to be disposed of are to be valued at
estimated fair value less costs to sell. Based on such periodic assessments, no
impairments have been determined and, therefore, no real estate carrying amounts
have been adjusted.

Repairs and maintenance are expensed as incurred. Replacements and
betterments in excess of $500 are capitalized and depreciated over their
estimated useful lives.

Depreciation is calculated using the straight-line method and forty year
lives for buildings and ten year lives for building improvements. Amortization
of tenant improvements is calculated using the straight-line method over the
estimated term of the related lease.

CASH EQUIVALENTS

Cash equivalents consist of highly liquid investments with original
maturities of three months or less when acquired.

RESTRICTED CASH

Restricted cash consists of cash held as collateral to provide credit
enhancement for certain mortgage loans payable and cash reserves for capital
expenditures, tenant improvements, security deposits and property taxes. All
restricted cash is controlled directly or indirectly by the related mortgage
lenders.

PREPAID COSTS

Prepaid leasing costs are amortized on a straight-line basis over the term
of the related lease.

Fees and costs incurred in obtaining long-term financing are amortized over
the terms of the related loan agreements.

REVENUE RECOGNITION

Minimum rent, including rental abatements and contractual fixed increases
attributable to operating leases, is recognized on a straight-line basis over
the term of the related lease. Amounts expected to be received in later years
are included in deferred rents. Property operating cost reimbursements due from
tenants for common area maintenance, real estate taxes and other recoverable
costs are recognized in the period the expenses are incurred.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The mortgage loans payable of the Arden Predecessors consist primarily of
mortgage loans with loan to value ratios in excess of conforming loans generally
offered by financial institutions. The loans provide for variable indexed rates
and, in most cases, significant additional interest due at maturity.
Accordingly, management believes it is not practical to determine fair values
due to the lack of availability of current market information on terms,
including information on appropriate discount rates for computing discounted
cash flows, of similar financial instruments. Other than the mortgage loans
payable, the Arden Predecessors believe the carrying amounts of their financial
instruments approximate their fair values.

INCOME TAXES

The combined and noncombined entities that make up the Arden Predecessors
consist of a Subchapter S corporation, limited liability companies and
partnerships. Taxable income is recorded on the separate tax returns of the
membership unit holders and individual partners and, accordingly, no provision
for income taxes has been recorded in the accompanying financial statements.

PER SHARE DATA

Per share data is not relevant since the Arden Predecessors represents a
presentation of the operations of a group of companies and partnerships.

F-22
<PAGE>
ARDEN PREDECESSORS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

2. SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
UNAUDITED INTERIM STATEMENTS

The combined financial statements as of June 30, 1996 and for the six months
ended June 30, 1996 and 1995 are unaudited. In the opinion of management, such
financial statements reflect all adjustments necessary for a fair presentation
of the results of the respective interim periods. All such adjustments are of a
normal, recurring nature.

3. COMMERCIAL OFFICE PROPERTIES
The commercial office properties were acquired from nonaffiliated third
parties and consist of office buildings and related parking facilities, as
follows:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1995 1994
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
Land................................................................... $ 24,216 $ 9,789
Buildings.............................................................. 125,252 23,313
Building improvements.................................................. 12,896 1,358
Tenant improvements.................................................... 1,806 2,047
---------- ---------
164,170 36,507
Accumulated depreciation............................................... (3,296) (1,530)
---------- ---------
$ 160,874 $ 34,997
---------- ---------
---------- ---------
</TABLE>

The Arden Predecessors capitalize interest and taxes related to buildings
under construction and renovation, including tenant improvements, to the extent
such assets qualify for capitalization. Total interest capitalized was $8,000,
$265,000, and $319,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.

All commercial office properties are encumbered by mortgages (Note 5).

Office space in the properties is generally leased to tenants under lease
terms which provide for the tenants to pay for increases in operating expenses
in excess of specified amounts.

Noncancelable operating leases with tenants expire on various dates through
2011. The future minimum lease payments to be received under leases existing as
of December 31, 1995, are as follows:

<TABLE>
<S> <C>
1996................................................... $41,928,000
1997................................................... 37,636,000
1998................................................... 31,743,000
1999................................................... 28,054,000
2000................................................... 23,069,000
Thereafter............................................. 64,872,000
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

The Arden Predecessors lease the land underlying the office buildings and
parking structures of 4811 Airport Plaza Drive and 4900/10 Airport Plaza Drive
from the city of Long Beach.

F-23
<PAGE>
ARDEN PREDECESSORS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

3. COMMERCIAL OFFICE PROPERTIES (CONTINUED)

Future minimum ground lease payments due under existing ground leases,
including properties acquired subsequent to December 31, 1995 (Note 8), are as
follows:

<TABLE>
<S> <C>
1996................................................... $1,294,000
1997................................................... 1,297,000
1998................................................... 1,297,000
1999................................................... 1,340,000
2000................................................... 942,000
Thereafter............................................. 60,307,000
</TABLE>

4. INVESTMENTS IN NONCOMBINED ENTITIES
The following are the Arden Predecessors' investments in various entities
which own commercial office properties in which Messrs. Ziman, Coleman, Gilbert
and their affiliates do not own controlling financial interests. These
investments are accounted for utilizing the equity method of accounting. Under
such accounting method, the net equity investment of the Arden Predecessors is
reflected on the combined balance sheets, and the combined statements of
operations include the Arden Predecessors' share of net income or loss from the
entities. The Arden Predecessors' stated ownership interest in each entity is as
follows:

<TABLE>
<CAPTION>
ARDEN PREDECESSORS'
ENTITY OWNERSHIP %
- -------------------------------------------------------------------------- ---------------------
<S> <C>
Bristol Encino Associates, LLC............................................ 20.9%
222 Harbor Associates, LLC................................................ 26.3%
Beverly Ventura Associates, L.P........................................... 50.0%
5000 Spring Associates Tenancy in Common.................................. 77.5%
</TABLE>

Condensed combined balance sheets and operating information is presented
below for all noncombined entities.

CONDENSED COMBINED BALANCE SHEETS OF NONCOMBINED ENTITIES

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
JUNE 30,
1996
-----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Assets:
Commercial office properties, net........................ $ 91,555 $ 91,208 $ 71,158
Other assets............................................. 6,273 7,220 3,389
----------- --------- ---------
Total assets........................................... $ 97,828 $ 98,428 $ 74,547
----------- --------- ---------
----------- --------- ---------
Liabilities and owners' equity:
Mortgage loans payable................................... $ 86,420 $ 85,545 $ 61,487
Other liabilities........................................ 2,506 3,248 1,445
Arden Predecessors' equity............................... 3,069 3,163 7,583
Other owners' equity..................................... 5,833 6,472 4,032
----------- --------- ---------
Total liabilities and owners' equity................... $ 97,828 $ 98,428 $ 74,547
----------- --------- ---------
----------- --------- ---------
</TABLE>

F-24
<PAGE>
ARDEN PREDECESSORS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

4. INVESTMENTS IN NONCOMBINED ENTITIES (CONTINUED)
CONDENSED COMBINED STATEMENTS OF OPERATIONS OF NONCOMBINED ENTITIES

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1996 1995 1995 1994 1993
--------- --------- --------- --------- ---------
(UNAUDITED) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue....................................... $ 8,985 $ 8,355 $ 17,720 $ 7,736 $ 132
--------- --------- --------- --------- ---------
Expenses:
Property operating expenses................. 3,728 3,369 7,758 3,331 36
Interest.................................... 4,317 3,777 8,243 3,436 26
Depreciation and amortization............... 1,673 1,257 2,475 1,041 30
--------- --------- --------- --------- ---------
Total expenses............................ 9,718 8,403 18,476 7,808 92
--------- --------- --------- --------- ---------
Net (loss) income......................... $ (733) $ (48) $ (756) $ (72) $ 40
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

The significant accounting policies used by the noncombined entities are
similar to those used by the Arden Predecessors.

COMMERCIAL OFFICE PROPERTIES OF NONCOMBINED ENTITIES

The commercial office properties consist of office buildings and related
parking facilities, as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Land.................................................................... $ 16,229 $ 12,709
Buildings............................................................... 73,416 58,546
Building Improvements................................................... 1,960 10
Tenant Improvements..................................................... 2,957 939
--------- ---------
94,562 72,204
Accumulated Depreciation................................................ (3,354) (1,046)
--------- ---------
$ 91,208 $ 71,158
--------- ---------
--------- ---------
</TABLE>

MORTGAGE LOANS PAYABLE OF NONCOMBINED ENTITIES

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
MORTGAGE LOANS DUE TO MORTGAGE BANKERS
Two mortgage loans, dated December 23, 1993, secured by two cross-
collateralized first trust deeds on real property, bearing interest at the
lender's composite commercial rate, which was 5.53% at December 31, 1995, plus
a margin of 3.25%. Interest only payments are due monthly and principal
payments are due periodically based on a portion of operating cash flows from
the property. Unpaid principal and interest of $22,283,000 is due on December
31, 1998. The remaining balance of $15,571,000 is due on December 31, 2000. $ 37,854,000 $ 36,747,000
</TABLE>

F-25
<PAGE>
ARDEN PREDECESSORS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

4. INVESTMENTS IN NONCOMBINED ENTITIES (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1994
------------- -------------
<S> <C> <C>
MORTGAGE LOANS DUE TO BANKS
Two mortgage loans, dated March 15, 1995, secured by two cross-collateralized
first trust deeds on real property, bearing interest at LIBOR plus 4.5%.
Interest only payments are due monthly, and all principal and interest is due
on March 15, 1997. This loan has an additional interest requirement of
$434,000 or approximately 2.0% of the principal balance to be deferred and
paid at maturity. At December 31, 1995, the borrower had recorded $172,000 of
additional interest, resulting in an effective interest rate of 11.5%. The
borrower is required to maintain a debt service coverage ratio, as defined in
the Loan Agreement, of 1.20:1.0. 22,351,000 --
A mortgage loan, dated December 23, 1994, secured by a first trust deed,
$12.09 million of the balance bearing interest at LIBOR plus 3.75% or a
periodic fixed rate, the remaining $2.79 million bearing interest at LIBOR
plus 4.0% at the option of the borrower. Interest only payments are due
monthly, and the principal and all unpaid interest is due on December 23,
1997. 14,880,000 14,880,000
A mortgage loan, dated December 14, 1994, secured by a first trust deed,
bearing interest at the Eleventh District Monthly Weighted Average Cost of
Funds Rate, as calculated by the Federal Home Loan Bank of San Francisco,
which was 5.059% at December 31, 1995, plus 3.75%. Interest only payments are
due monthly, and principal and all unpaid interest are due on January 1, 2005. 10,460,000 9,860,000
------------- -------------
Total Mortgage Loans Payable $ 85,545,000 $ 61,487,000
------------- -------------
------------- -------------
</TABLE>

5. MORTGAGE LOANS PAYABLE AND UNSECURED LINES OF CREDIT

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1994
-------------- -------------
<S> <C> <C>
MORTGAGE LOANS DUE TO LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS HOLDINGS
INC. (LEHMAN)
A mortgage loan, dated November 20, 1995, secured by seven first trust deeds
and one second trust deed on real property, bearing interest at LIBOR (with a
floor on LIBOR of 5.5%) plus 3.0%. Interest only payments are to be made
monthly and all principal and unpaid interest is due on November 20, 1998.
The loan agreement provides for additional interest to be deferred and paid
at maturity in the amount of $10,560,000 (Tier I Additional Interest) which
increases the day after each of the first and second anniversary dates of the
loan by $2,640,000, or 2% of the original principal balance (Tier II and Tier
III Additional Interest, respectively). At December 31, 1995, the Arden
Predecessors had recorded $586,000 of additional interest, resulting in an
effective interest rate of approximately 11.3%. Effective on the first
anniversary date of the loan, the Arden Predecessors are required to maintain
a debt service coverage ratio of 1.25:1.0. $ 132,000,000 $ 6,741,000
</TABLE>

F-26
<PAGE>
ARDEN PREDECESSORS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

5. MORTGAGE LOANS PAYABLE AND UNSECURED LINES OF CREDIT (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------
1995 1994
-------------- -------------
<S> <C> <C>
A mortgage loan, dated June 13, 1995, secured by a first trust deed on real
property, bearing interest at LIBOR plus 4.5%. Interest only payments are due
monthly and all principal and unpaid interest is due on June 13, 1997. The
loan agreement provides for additional interest of $1,100,000 to be deferred
and repaid at maturity (Tier I Additional Interest). If the loan is extended
for an additional twelve months, the Arden Predecessors are to pay an
additional interest amount of $600,000 (Tier II Additional Interest). As of
December 31, 1995, the Arden Predecessors had recorded $298,000 of additional
interest, resulting in an effective interest rate of 15.6%. Effective on the
first anniversary date of the loan, the Arden Predecessors are required to
maintain a debt service coverage ratio 1.15:1.0. 10,200,000 --

MORTGAGE LOANS DUE TO BANKS
A mortgage loan, dated March 1, 1993, secured by a first trust deed on real
property, bearing interest, at the Arden Predecessor's option, at LIBOR plus
a margin of 1.0%, the treasury rate plus a margin of 1.75%, or the Prime Rate
plus 0.25%. Interest only payments are due monthly. Monthly payments of
principal begin March 1, 1996. The mortgage loan matures March 1, 2003. 25,438,000 25,455,000
-------------- -------------
Total mortgage loans payable $ 167,638,000 $ 32,196,000
-------------- -------------
-------------- -------------
</TABLE>

The LIBOR rate was 5.72% at December 31, 1995.

One mortgage loan provides for additional funds to be drawn for qualified
and approved tenant improvements, leasing commissions and capital improvements.
The amount of funds available for disbursement from this lending institution is
$3,500,000. As of December 31, 1995, total funds drawn for these purposes was
$2,713,000, and the undisbursed portion was $787,000.

The Arden Predecessors have three unsecured lines of credit, with a total
commitment of $2,713,000, from two domestic banks. The aggregate outstanding
balance was $813,000 at December 31, 1995. The lines accrue interest at the
Prime Rate. The undisbursed portion at December 31, 1995 was $1,900,000.

As of December 31, 1995, the scheduled principal payments for the mortgage
loans payable and unsecured lines of credit are as follows:

<TABLE>
<S> <C>
1996 $ 1,490,000
1997.................................................. 10,975,000
1998.................................................. 132,836,000
1999.................................................. 901,000
2000.................................................. 734,000
Thereafter............................................ 21,515,000
-----------
$168,451,000
-----------
-----------
</TABLE>

F-27
<PAGE>
ARDEN PREDECESSORS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

6. COMMITMENTS AND CONTINGENCIES

CONCENTRATION OF CREDIT RISK

The Arden Predecessors maintain their cash and cash equivalents at financial
institutions. The combined account balances at each institution periodically
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.
Management of the Arden Predecessors believes that the risk is not significant.

OFFICE RENT EXPENSE

The Arden Predecessors lease office space for its corporate offices. The
future minimum rental payments due under the terms of the lease are $123,000 for
each of the next four years and $62,000 in the final year. The lease expires
June 30, 2000. The Arden Predecessors have the right to renew the lease for two,
one-year terms prior to expiration of the initial lease term.

LITIGATION

Management of the Arden Predecessors does not believe there is any
litigation threatened against the Arden Predecessors other than routine
litigation arising out of the ordinary course of business, some of which is
expected to be covered by liability insurance and all of which is not expected
to have a material adverse effect on the combined financial statements of the
Arden Predecessors.

7. RELATED PARTY TRANSACTIONS

Included in other income are management fees of $95,000, $213,000 and
$137,000 for 1995, 1994, and 1993, respectively, from various affiliated
partnerships.

Included in accounts receivable are $28,000, $58,000 and $56,000 at December
31, 1995, 1994, and 1993, respectively, from various affiliated partnerships.

8. PROPERTY ACQUISITIONS

Subsequent to December 31, 1995, the Arden Predecessors purchased additional
properties from nonaffiliated third parties for an aggregate purchase price of
$94,665,000. The Participants incurred $100,000,000 of debt from an affiliate of
Lehman Brothers, Inc. as a result of financing the purchase, of which $5,335,000
was retained in a restricted cash account to be used for tenant improvements,
capital improvements and leasing commissions.

F-28
<PAGE>
ARDEN PREDECESSORS
SCHEDULE III
COMMERCIAL OFFICE PROPERTIES AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT SQUARE FOOT DATA)
<TABLE>
<CAPTION>
COSTS
CAPTIALIZED
INITIAL COSTS SUBSEQUENT TO TOTAL COSTS
------------------------ ACQUISITION ------------------------
SQUARE BUILDINGS AND ----------------- BUILDINGS AND
COMBINED ENTITIES FOOTAGE LAND IMPROVEMENTS IMPROVEMENTS (4) LAND IMPROVEMENTS
- ----------------------------------------------- --------- --------- ------------- ----------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
PROPERTY NAME
- -----------------------------------------------
Century Park Center............................ 243,404 $ 7,189 $ 16,742 $ 4,472 $ 7,189 $ 21,214
1950 Sawtelle.................................. 103,772 1,988 7,263 107 1,988 7,370
70 South Lake.................................. 100,133 1,360 9,097 -- 1,360 9,097
New Wilshire................................... 202,704 1,200 19,902 4 1,200 19,906
Calabasas Commerce Center...................... 123,121 1,262 9,725 -- 1,262 9,725
Westwood Terrace............................... 135,943 2,103 16,850 37 2,103 16,887
Skyview Center................................. 391,675 6,514 33,701 -- 6,514 33,701
5601 Lindero Canyon............................ 105,830 2,600 6,067 1,535 2,600 7,602
4811 Airport Plaza Drive and 4900/10 Airport
Plaza Drive................................... 272,013 -- 14,452 -- -- 14,452
--------- --------- ------------- ------- --------- -------------
1,678,595 $ 24,216 $ 133,799 $ 6,155 $ 24,216 $ 139,954
--------- --------- ------------- ------- --------- -------------
--------- --------- ------------- ------- --------- -------------
NONCOMBINED ENTITIES
- -----------------------------------------------
PROPERTY NAME
- -----------------------------------------------
Beverly Atrium................................. 61,314 $ 4,127 $ 11,513 $ 600 $ 4,127 $ 12,113
Woodland Hills Financial....................... 224,955 6,566 14,754 1,715 6,566 16,469
Bristol Plaza.................................. 84,014 1,820 3,380 185 1,820 3,565
16000 Ventura Blvd............................. 174,841 1,700 17,189 571 1,700 17,760
Anaheim City Centre............................ 175,391 515 11,199 240 515 11,439
425 West Broadway.............................. 71,589 1,500 4,436 187 1,500 4,623
5000 East Spring............................... 163,358 -- 11,658 707 -- 12,365
--------- --------- ------------- ------- --------- -------------
955,462 $ 16,228 $ 74,129 $ 4,205 $ 16,228 $ 78,334
--------- --------- ------------- ------- --------- -------------
--------- --------- ------------- ------- --------- -------------

ACCUMULATED YEAR
COMBINED ENTITIES TOTAL DEPRECIATION (1) ENCUMBRANCES BUILT
- ----------------------------------------------- --------- ----------------- ------------- -----
<S> <C> <C> <C> <C>
PROPERTY NAME
- -----------------------------------------------
Century Park Center............................ $ 28,403 $ 2,357 $ 25,438 1972
1950 Sawtelle.................................. 9,358 131 10,200 1988
70 South Lake.................................. 10,457 33 11,000(3) 1982
New Wilshire................................... 21,106 72 22,000(3) 1989
Calabasas Commerce Center...................... 10,987 42 11,800(3) 1990
Westwood Terrace............................... 18,990 67 21,000(3) 1988
Skyview Center................................. 40,215 128 41,200(3) 1981
5601 Lindero Canyon............................ 10,202 427 10,400(3) 1989
4811 Airport Plaza Drive and 4900/10 Airport
Plaza Drive................................... 14,452 39 14,600(3) 1987
--------- ------ -------------
$ 164,170 $ 3,296 $ 167,638
--------- ------ -------------
--------- ------ -------------
NONCOMBINED ENTITIES
- -----------------------------------------------
PROPERTY NAME
- -----------------------------------------------
Beverly Atrium................................. $ 16,240 $ 790 $ 15,570(2) 1989
Woodland Hills Financial....................... 23,035 1,177 22,284(2) 1972
Bristol Plaza.................................. 5,385 114 5,200 1982
16000 Ventura Blvd............................. 19,460 313 17,151 1980
Anaheim City Centre............................ 11,954 437 9,880 1986
425 West Broadway.............................. 6,123 163 5,000 1984
5000 East Spring............................... 12,365 360 10,460 1989
--------- ------ -------------
$ 94,562 $ 3,354 $ 85,545
--------- ------ -------------
--------- ------ -------------
</TABLE>

(1) The depreciable life for buildings and improvements ranges from ten to forty
years.

(2) Each of these properties is collateral for both loans.

(3) All of these properties are collateral for a mortgage loan totaling
$132,000,000. The encumbrance allocated to an individual property is based
on the related individual release price.

(4) Includes total capitalized interest of $628,000.

F-29
<PAGE>
A summary of activity of combined commercial office properties and
accumulated depreciation is as follows:
<TABLE>
<CAPTION>
COMMERCIAL OFFICE PROPERTIES
--------------------------------
DECEMBER 31,
--------------------------------
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of period........................................ $ 36,507 $ 25,885 $ --
Improvements.......................................................... 2,245 1,955 1,954
Acquisition of land, building and improvements........................ 125,418 8,667 23,931
---------- --------- ---------
Balance at end of period.............................................. $ 164,170 $ 36,507 $ 25,885
---------- --------- ---------
---------- --------- ---------

ACCUMULATED DEPRECIATION
--------------------------------
DECEMBER 31,
--------------------------------
1995 1994 1993
---------- --------- ---------
<S> <C> <C> <C> <C>
Balance at beginning of period............................................... $ 1,530 $ 481 $ --
Depreciation expense......................................................... 1,766 1,049 481
--------- --------- ---------
Balance at end of period..................................................... $ 3,296 $ 1,530 $ 481
--------- --------- ---------
--------- --------- ---------
</TABLE>

F-30
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Board of Directors

Arden Realty, Inc.

We have audited the accompanying statement of revenue and certain expenses
of 16000 Ventura for the period January 1, 1995 to March 15, 1995. This
statement of revenue and certain expenses is the responsibility of the
management of 16000 Ventura. Our responsibility is to express an opinion on the
statement of revenue and certain expenses based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of revenue and certain expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis
for our opinion.

The accompanying statement of revenue and certain expenses was prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the registration statement on Form S-11 of
Arden Realty, Inc. Certain expenses (described in Note 1) that would not be
comparable to those resulting from the proposed future operations of the
property are excluded and the statement is not intended to be a complete
presentation of the revenue and expenses of the property.

In our opinion, the statement of revenue and certain expenses presents
fairly, in all material respects, the revenue and certain expenses, as defined
above, of 16000 Ventura for the period January 1, 1995 to March 15, 1995.

Ernst & Young LLP

Los Angeles, California
April 10, 1996

F-31
<PAGE>
16000 VENTURA
STATEMENT OF REVENUE AND CERTAIN EXPENSES
(IN THOUSANDS)
FOR THE PERIOD JANUARY 1, 1995 TO MARCH 15, 1995

<TABLE>
<S> <C>
REVENUE:
Rental............................................................................. $ 674
Tenant reimbursements.............................................................. 24
Parking............................................................................ 36
Other.............................................................................. 7
---------
Total revenue.................................................................... 741
---------
CERTAIN EXPENSES:
Property operating and maintenance................................................. 192
Real estate taxes.................................................................. 77
---------
Total certain expenses........................................................... 269
---------
Excess of revenue over certain expenses........................................ $ 472
---------
---------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-32
<PAGE>
16000 VENTURA

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE PERIOD JANUARY 1, 1995 TO MARCH 15, 1995

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statement of revenue and certain expenses includes the
operations of 16000 Ventura, a 174,841 square foot commercial office property
located in Encino, California. 16000 Ventura was acquired by Bristol Encino
Associates, LLC on March 15, 1995 for $18,889,000. Substantial ownership
interests in the entity that owns the property are held by Richard Ziman, Victor
Coleman, Arthur Gilbert, and related individuals and entities controlled by
them, (the "Arden Predecessors"). The Arden Predecessors, along with other
unrelated parties which collectively represent the "Participants" will,
concurrently with a proposed public offering, enter into a series of
transactions with Arden Realty, Inc., a Maryland corporation, to form a real
estate investment trust (the "REIT") to continue and expand the business of the
Arden Predecessors. 16000 Ventura has been managed by Arden Realty Group, Inc.,
a California corporation, since its acquisition by the Arden Predecessors. 16000
Ventura was purchased from a nonaffiliated third party.

BASIS OF PRESENTATION

The accompanying statement is not representative of the actual operations
for the period presented as certain expenses that may not be comparable to the
expenses expected to be incurred by the Company in the future operations of
16000 Ventura have been excluded. Excluded expenses consist of interest,
depreciation and amortization and property general and administrative costs not
directly comparable to the future operations of the 16000 Ventura.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

RISKS AND UNCERTAINTIES

The preparation of financial statements in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amount of revenue and expenses during the
reporting period. Actual results could differ from those estimates.

2. COMMERCIAL OFFICE PROPERTIES
The future minimum lease payments to be received under existing operating
leases as of March 15, 1995 are as follows:

<TABLE>
<S> <C>
1996............................................................ $2,790,000
1997............................................................ 2,132,000
1998............................................................ 1,275,000
1999............................................................ 602,000
2000............................................................ 282,000
Thereafter...................................................... --
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in 16000 Ventura is generally leased to tenants under lease
terms which provide for the tenants to pay for increases in operating expenses
in excess of specified amounts.

F-33
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Board of Directors

Arden Realty, Inc.

We have audited the accompanying statement of revenue and certain expenses
of 1950 Sawtelle for the period January 1, 1995 to June 14, 1995. This statement
of revenue and certain expenses is the responsibility of the management of 1950
Sawtelle. Our responsibility is to express an opinion on the statement of
revenue and certain expenses based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of revenue and certain expenses
is free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis
for our opinion.

In our opinion, the statement of revenue and certain expenses presents
fairly, in all material respects, the revenue and certain expenses, as defined
above, of 1950 Sawtelle for the period January 1, 1995 to June 14, 1995.

Ernst & Young LLP

Los Angeles, California
April 10, 1996

F-34
<PAGE>
1950 SAWTELLE
STATEMENT OF REVENUE AND CERTAIN EXPENSES
(IN THOUSANDS)
FOR THE PERIOD JANUARY 1, 1995 TO JUNE 14, 1995

<TABLE>
<S> <C>
REVENUE:
Rental............................................................................. $ 847
Tenant reimbursements.............................................................. 33
Parking............................................................................ 68
---------
Total revenue.................................................................... 948
---------
CERTAIN EXPENSES:
Property operating and maintenance................................................. 204
Real estate taxes.................................................................. 83
---------
Total certain expenses........................................................... 287
---------
Excess of revenue over certain expenses........................................ $ 661
---------
---------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-35
<PAGE>
1950 SAWTELLE

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE PERIOD JANUARY 1, 1995 TO JUNE 14, 1995

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statement of revenue and certain expenses includes the
operations of 1950 Sawtelle, a 103,772 square foot commercial office property
located in Los Angeles, California. 1950 Sawtelle was acquired by 1950 Sawtelle
Associates, L.P. on June 14, 1995 for $9,251,000. Substantial ownership
interests in the entity that owns the property are held by Richard Ziman, Victor
Coleman, and related individuals and entities controlled by them (the "Owners").
The Owners of this property and other affiliates (the "Arden Predecessors") and
other unrelated parties, which collectively represent the "Participants," will,
concurrently with a proposed public offering, enter into a series of
transactions with Arden Realty, Inc., a Maryland corporation, to form a real
estate investment trust (the "REIT") to continue and expand the business of the
Arden Predecessors. 1950 Sawtelle has been managed by Arden Realty Group, Inc.,
a California corporation, since its acquisition by the Arden Predecessors. 1950
Sawtelle was purchased from a nonaffiliated third party.

BASIS OF PRESENTATION

The accompanying statement is not representative of the actual operations
for the period presented as certain expenses that may not be comparable to the
expenses expected to be incurred by the Company in the future operations of 1950
Sawtelle have been excluded. Excluded expenses consist of interest, depreciation
and amortization and property general and administrative costs not directly
comparable to the future operations of the 1950 Sawtelle.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

RISKS AND UNCERTAINTIES

2. COMMERCIAL OFFICE PROPERTIES
The future minimum lease payments to be received under existing operating
leases as of June 14, 1995 are as follows:

<TABLE>
<S> <C>
1996............................................................ $1,568,000
1997............................................................ 1,338,000
1998............................................................ 610,000
1999............................................................ 173,000
2000............................................................ 110,000
Thereafter...................................................... 136,000
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in 1950 Sawtelle is generally leased to tenants under lease
terms which provide for the tenants to pay for increases in operating expenses
in excess of specified amounts.

F-36
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Board of Directors
Arden Realty, Inc.

We have audited the accompanying combined statement of revenue and certain
expenses of Westwood Terrace, Skyview Center, 4811 and 4900/10 Airport Plaza
Drive and New Wilshire for the period December 1, 1994 to November 22, 1995.
This combined statement of revenue and certain expenses is the responsibility of
the management of Westwood Terrace, Skyview Center, 4811 and 4900/10 Airport
Plaza Drive and New Wilshire. Our responsibility is to express an opinion on the
combined statement of revenue and certain expenses based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined statement of revenue and certain
expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. 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 audit provides a
reasonable basis for our opinion.

The accompanying combined statement of revenue and certain expenses was
prepared for the purpose of complying with the rulesand regulations of the
Securities and Exchange Commission for inclusion in the registration statement
on Form S-11 of Arden Realty, Inc. Certain expenses (described in Note 1) that
would not be comparable to those resulting from the proposed future operations
of the properties are excluded and the statement is not intended to be a
complete presentation of the revenue and expenses of the properties.

In our opinion, the combined statement of revenue and certain expenses
presents fairly, in all material respects, the combined revenue and certain
expenses, as defined above, of Westwood Terrace, Skyview Center, 4811 and
4900/10 Airport Plaza Drive and New Wilshire for the period December 1, 1994 to
November 22, 1995.

Ernst & Young LLP

Los Angeles, California
September 10, 1996

F-37
<PAGE>
WESTWOOD TERRACE, SKYVIEW CENTER,
4811 AND 4900/10 AIRPORT PLAZA DRIVE
AND NEW WILSHIRE

COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
(IN THOUSANDS)

FOR THE PERIOD DECEMBER 1, 1994 TO NOVEMBER 22, 1995

<TABLE>
<S> <C>
REVENUE:
Rental........................................................................... $ 12,675
Tenant reimbursements............................................................ 693
Parking.......................................................................... 2,162
Other............................................................................ 805
---------
Total revenue.................................................................... 16,335
---------

CERTAIN EXPENSES:
Property operating and maintenance............................................... 4,208
Real estate taxes................................................................ 1,505
Insurance........................................................................ 416
Ground rent...................................................................... 169
Bad debts........................................................................ 66
Other............................................................................ 107
---------
Total certain expenses........................................................... 6,471
---------
Excess of revenue over certain expenses........................................ $ 9,864
---------
---------
</TABLE>

See accompanying notes to combined statement of revenue and certain expenses.

F-38
<PAGE>
WESTWOOD TERRACE, SKYVIEW CENTER,
4811 AND 4900/10 AIRPORT PLAZA DRIVE
AND NEW WILSHIRE

NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE PERIOD DECEMBER 1, 1994 TO NOVEMBER 22, 1995

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying combined statement of revenue and certain expenses includes
the operations of five commercial office properties located in Southern
California which were acquired by Arden LAOP IV, LLC on November 22, 1995 from
nonaffiliated third parties. The ownership interests in the entity that owns the
properties are held by Richard Ziman, Victor Coleman, Arthur Gilbert and related
individuals and entities controlled by them (the "Arden Predecessors"). The
Arden Predecessors, along with other unrelated parties, which collectively
represent the "Participants," will, concurrently with a proposed public
offering, enter into a series of transactions with Arden Realty, Inc., a
Maryland corporation, to form a real estate investment trust (the "REIT") to
continue and expand the business of the Arden Predecessors. All of the
properties have been managed by Arden Realty Group, Inc., a California
corporation, since acquisition by the Arden Predecessors.

The properties are as follows:

<TABLE>
<CAPTION>
SOUTHERN APPROXIMATE
CALIFORNIA RENTABLE ACQUISITION
PROPERTY NAME LOCATION SQUARE FOOTAGE ACQUISITION DATE PRICE
- -------------------- ------------------ -------------- ------------------ ----------------
<S> <C> <C> <C> <C>
Westwood Terrace Los Angeles 135,943 November 1995 $ 18,953,000
Skyview Center Los Angeles 391,675 November 1995 40,215,000
4811 and 4900/10
Airport Plaza Dr. Long Beach 272,013 November 1995 14,452,000
New Wilshire Los Angeles 202,704 November 1995 21,102,000
-------------- ----------------
1,002,335 $ 94,722,000
-------------- ----------------
-------------- ----------------
</TABLE>

BASIS OF PRESENTATION

The accompanying statement was prepared to comply with the rules and
regulations of the Securities and Exchange Commission for inclusion in the
registration statement on Form S-11 of Arden Realty, Inc., a Maryland
corporation (the "Company"). The accompanying statement was prepared on a
combined basis because the properties are all currently owned and managed by the
Arden Predecessors. There are no interproperty accounts to be eliminated.

The accompanying statement is not representative of the actual operations
for the periods presented as certain expenses that may not be comparable to the
expenses expected to be incurred by the Company in the future operations of
Westwood Terrace, Skyview Center, 4811 and 4900/10 Airport Plaza Drive and New
Wilshire have been excluded. Excluded expenses consist of interest, depreciation
and amortization and property general and administrative costs not directly
comparable to the future operations of Westwood Terrace, Skyview Center, 4811
and 4900/10 Airport Plaza Drive and New Wilshire.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

RISKS AND UNCERTAINTIES

F-39
<PAGE>
WESTWOOD TERRACE, SKYVIEW CENTER,
4811 AND 4900/10 AIRPORT PLAZA DRIVE
AND NEW WILSHIRE

NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES -- (CONTINUED)

FOR THE PERIOD DECEMBER 1, 1994 TO NOVEMBER 22, 1995

2. COMMERCIAL OFFICE PROPERTIES
The future minimum lease payments to be received under the existing
operating leases as of November 22, 1995 are as follows:

<TABLE>
<S> <C>
1996........................................................... $15,290,000
1997........................................................... 13,880,000
1998........................................................... 11,456,000
1999........................................................... 9,396,000
2000........................................................... 8,271,000
Thereafter..................................................... 24,817,000
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in Westwood Terrace, Skyview Center, 4811 and 4900/10 Airport
Plaza Drive and New Wilshire is generally leased to tenants under lease terms
which provide for the tenants to pay for increases in operating expenses in
excess of specified amounts.

F-40
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Board of Directors
Arden Realty, Inc.

We have audited the accompanying combined statement of revenue and certain
expenses of 70 South Lake and Calabasas Commerce Center for the period January
1, 1995 to November 22, 1995. This combined statement of revenue and certain
expenses is the responsibility of the management of 70 South Lake and Calabasas
Commerce Center. Our responsibility is to express an opinion on the combined
statement of revenue and certain expenses based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined statement of revenue and certain
expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. 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 audit provides a
reasonable basis for our opinion.

The accompanying combined statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the registration statement
on Form S-11 of Arden Realty, Inc. Certain expenses (described in Note 1) that
would not be comparable to those resulting from the proposed future operations
of the properties are excluded and the statement is not intended to be a
complete presentation of the revenue and expenses of the properties.

In our opinion, the combined statement of revenue and certain expenses
presents fairly, in all material respects, the combined revenue and certain
expenses, as defined above, of 70 South Lake and Calabasas Commerce Center for
the period January 1, 1995 to November 22, 1995.

Ernst & Young LLP

Los Angeles, California
April 10, 1996

F-41
<PAGE>
70 SOUTH LAKE AND CALABASAS COMMERCE CENTER
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
(IN THOUSANDS)
FOR THE PERIOD JANUARY 1, 1995 TO NOVEMBER 22, 1995

<TABLE>
<CAPTION>
REVENUE:
<S> <C>
Rental............................................................................ $ 3,411
Tenant reimbursements............................................................. 401
Parking........................................................................... 150
Other............................................................................. 77
---------
Total revenue..................................................................... 4,039
---------
CERTAIN EXPENSES:
Property operating and maintenance................................................ 968
Real estate taxes................................................................. 232
Insurance......................................................................... 43
Other............................................................................. 10
---------
Total certain expenses............................................................ 1,253
---------
Excess of revenue over certain expenses......................................... $ 2,786
---------
---------
</TABLE>

See accompanying notes to combined statement of revenue and certain expenses.

F-42
<PAGE>
70 SOUTH LAKE AND CALABASAS COMMERCE CENTER
NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION

The accompanying combined statement of revenue and certain expenses includes
the operations of two commercial office properties located in Southern
California which were acquired by Arden LAOP IV, LLC on November 22, 1995. The
ownership interests in the entity that owns the properties are held by Richard
Ziman, Victor Coleman, Arthur Gilbert and related individuals and entities
controlled by them (the "Arden Predecessors"). The Arden Predecessors, along
with other unrelated parties, which collectively represent the "Participants,"
will, concurrently with a proposed public offering, enter into a series of
transactions with Arden Realty, Inc. a Maryland corporation, to form a real
estate investment trust (the "REIT") to continue and expand the business of the
Arden Predecessors. All of the properties have been managed by Arden Realty
Group, Inc., a California corporation, since acquisition by the Arden
Predecessors. The properties were purchased from nonaffiliated third parties.

The properties are as follows:

<TABLE>
<CAPTION>
APPROXIMATE
SOUTHERN RENTABLE
CALIFORNIA SQUARE ACQUISITION
PROPERTY NAME LOCATION FOOTAGE ACQUISITION DATE PRICE
- ------------------------------------- ----------- ------------ ---------------------- -------------
<S> <C> <C> <C> <C>
70 South Lake........................ Pasadena 100,133 November 22, 1995 $ 10,457,000
Calabasas Commerce Center............ Calabasas 123,121 November 22, 1995 10,987,000
------------ -------------
223,254 $ 21,444,000
------------ -------------
------------ -------------
</TABLE>

BASIS OF PRESENTATION

The accompanying statement is not representative of the actual operations
for the period presented as certain expenses that may not be comparable to the
expenses expected to be incurred by the Company in the future operations of 70
South Lake and Calabasas Commerce Center have been excluded. Excluded expenses
consist of interest, depreciation and amortization and property general and
administrative costs not directly comparable to the future operations of 70
South Lake and Calabasas Commerce Center.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

RISKS AND UNCERTAINTIES

F-43
<PAGE>
70 SOUTH LAKE AND CALABASAS COMMERCE CENTER
NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES -- (CONTINUED)

2. COMMERCIAL OFFICE PROPERTIES
The future minimum lease payments to be received under existing operating
leases as of November 22, 1995 are as follows:

<TABLE>
<CAPTION>
1996............................................................. 3,150,000
<S> <C>
1997............................................................. 2,749,000
1998............................................................. 2,133,000
1999............................................................. 1,870,000
2000............................................................. 731,000
Thereafter....................................................... 1,968,000
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in 70 South Lake and Calabasas Commerce Center is generally
leased to tenants under lease terms which provide for the tenants to pay for
increases in operating expenses in excess of specified amounts.

F-44
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Board of Directors
Arden Realty, Inc.

We have audited the accompanying combined statement of revenue and certain
expenses of the 1996 Acquired Properties for the year ended December 31, 1995.
This combined statement of revenue and certain expenses is the responsibility of
the management of the 1996 Acquired Properties. Our responsibility is to express
an opinion on the combined statement of revenue and certain expenses based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined statement of revenue and certain
expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. 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 audit provides a
reasonable basis for our opinion.

The accompanying combined statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the registration statement
on Form S-11 of Arden Realty, Inc. Certain expenses (described in Note 1) that
would not be comparable to those resulting from the proposed future operations
of the properties are excluded and the statement is not intended to be a
complete presentation of the revenue and expenses of the properties.

In our opinion, the combined statement of revenue and certain expenses
presents fairly, in all material respects, the combined revenue and certain
expenses, as defined above, of the 1996 Acquired Properties for the year ended
December 31, 1995, in conformity with generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
April 10, 1996

F-45
<PAGE>
1996 ACQUIRED PROPERTIES

COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
DECEMBER 31,
1995
FOR THE 1996 ------------
INTERIM PERIOD
PRIOR TO
ACQUISITION
---------------
(UNAUDITED)
<S> <C> <C>
REVENUE
Rental............................................................................ $ 3,923 $ 19,391
Tenant reimbursements............................................................. 258 961
Parking........................................................................... 308 1,859
Other............................................................................. 144 350
------ ------------
Total revenue................................................................... 4,633 22,561
------ ------------

CERTAIN EXPENSES
Property operating and maintenance................................................ 1,065 5,401
Real estate taxes................................................................. 151 1,753
Insurance......................................................................... 135 521
Ground rent....................................................................... 138 1,067
Bad debts......................................................................... -- 106
------ ------------
Total certain expenses.......................................................... 1,489 8,848
------ ------------
Excess of revenue over certain expenses....................................... $ 3,144 $ 13,713
------ ------------
------ ------------
</TABLE>

See accompanying notes to combined statements of revenue and certain expenses.

F-46
<PAGE>
1996 ACQUIRED PROPERTIES

NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1995

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying combined statements of revenue and certain expenses include
the combined operations of five commercial office properties located in Southern
California which were acquired in 1996 (the "1996 Acquired Properties") from
nonaffiliated third parties by entities in which substantial interests are owned
by Richard Ziman, Victor Coleman, Arthur Gilbert and related individuals and
controlled by them (the "Arden Predecessors"). The properties were purchased for
cash utilizing funds from new debt financing. Two of the properties (400
Corporate Pointe and 5832 Bolsa) were acquired from a single seller. The Arden
Predecessors, along with other unrelated parties, which collectively represent
the "Participants," will, concurrently with a proposed public offering, enter
into a series of transactions with Arden Realty, Inc., a Maryland corporation,
to form a real estate investment trust (the "REIT") to continue and expand the
business of the Arden Predecessors. All of the properties have been managed by
Arden Realty Group, Inc., a California corporation, since their acquisition by
the Arden Predecessors.

The 1996 Acquired Properties are as follows:

<TABLE>
<CAPTION>
APPROXIMATE
RENTABLE
SOUTHERN CALIFORNIA SQUARE ACQUISITION ACQUISITION
PROPERTY NAME LOCATION FOOTAGE DATE PRICE
- ------------------------ -------------------- ------------ ---------------- --------------
<S> <C> <C> <C> <C>
5832 Bolsa Huntington Beach 49,355 February 1996 $ 4,654,000
400 Corporate Pointe Culver City 164,598 February 1996 21,206,000
9665 Wilshire Beverly Hills 158,684 February 1996 29,331,000
Imperial Bank Tower San Diego 540,413 February 1996 39,474,000
100 Broadway Long Beach 191,727 July 1, 1996 19,799,000
------------ --------------
1,104,777 $ 114,464,000
------------ --------------
------------ --------------
</TABLE>

BASIS OF PRESENTATION

The accompanying statements were prepared to comply with the rules and
regulations of the Securities and Exchange Commission for inclusion in the
registration statement on Form S-11 of Arden Realty, Inc., a Maryland
corporation (the "Company"). The accompanying statements were prepared on a
combined basis because the properties are controlled by the Arden Predecessors.
There are no interproperty accounts to be eliminated.

The accompanying statements are not representative of the actual operations
for the periods presented as certain expenses that may not be comparable to the
expenses expected to be incurred by the Company in the future operations of the
1996 Acquired Properties have been excluded. Excluded expenses consist of
interest, depreciation and amortization and property general and administrative
costs not directly comparable to the future operations of the 1996 Acquired
Properties.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

RISKS AND UNCERTAINTIES

F-47
<PAGE>
1996 ACQUIRED PROPERTIES

NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES -- (CONTINUED)

FOR THE YEAR ENDED DECEMBER 31, 1995

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
UNAUDITED INTERIM STATEMENT

The combined interim financial statements for the 1996 interim period
includes the revenue and certain expenses for the period prior to acquisition by
the Arden Predecessors. In the opinion of management, such financial statements
reflect all adjustments necessary for a fair presentation of the results of the
respective interim periods. All such adjustments are of a normal, recurring
nature.

2. COMMERCIAL OFFICE PROPERTIES
The future minimum lease payments to be received under existing operating
leases as of December 31, 1995 are as follows:

<TABLE>
<S> <C>
1996........................................... $19,849,000
1997........................................... 18,159,000
1998........................................... 16,405,000
1999........................................... 15,866,000
2000........................................... 14,204,000
Thereafter..................................... 34,774,000
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the 1996 Acquired Properties is generally leased to tenants
under lease terms which provide for the tenants to pay for increases in
operating expenses in excess of specified amounts.

F-48
<PAGE>
REPORT OF INDEPENDENT AUDITORS

To the Board of Directors
Arden Realty, Inc.

We have audited the accompanying combined statement of revenue and certain
expenses of the Acquisition Properties for the year ended December 31, 1995.
This combined statement of revenue and certain expenses is the responsibility of
the management of the Acquisition Properties. Our responsibility is to express
an opinion on the combined statement of revenue and certain expenses based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the combined statement of revenue and certain
expenses is free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statement. 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 audit provides a
reasonable basis for our opinion.

The accompanying combined statement of revenue and certain expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in the registration statement
on Form S-11 of Arden Realty, Inc. Certain expenses (described in Note 1) that
would not be comparable to those resulting from the proposed future operations
of the properties are excluded and the statement is not intended to be a
complete presentation of the revenue and expenses of the properties.

In our opinion, the combined statement of revenue and certain expenses
presents fairly, in all material respects, the combined revenue and certain
expenses, as defined above, of the Acquisition Properties for the year ended
December 31, 1995, in conformity with generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
April 19, 1996

F-49
<PAGE>
ACQUISITION PROPERTIES

COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS ENDED FOR THE YEAR
JUNE 30, ENDED
-------------------- DECEMBER 31,
1996 1995 1995
--------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
REVENUE
Rental........................................................................ $ 2,101 $ 2,240 $ 4,280
Tenant reimbursements......................................................... 58 26 54
Parking....................................................................... 87 55 133
Other......................................................................... 174 31 85
--------- --------- ------
Total revenue............................................................... 2,420 2,352 4,552
--------- --------- ------

CERTAIN EXPENSES
Property operating and maintenance............................................ 717 844 1,606
Real estate taxes............................................................. 190 205 412
Insurance..................................................................... 114 78 151
Bad debts..................................................................... -- 2 18
Other......................................................................... -- 20 41
--------- --------- ------
Total certain expenses...................................................... 1,021 1,149 2,228
--------- --------- ------
Excess of revenue over certain expenses................................... $ 1,399 $ 1,203 $ 2,324
--------- --------- ------
--------- --------- ------
</TABLE>

See accompanying notes to combined statements of revenue and certain expenses.

F-50
<PAGE>
ACQUISITION PROPERTIES

NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1995

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying combined statements of revenue and certain expenses include
the combined operations of two commercial office properties located in Southern
California (the "Acquisition Properties") which are to be acquired by Arden
Realty, Inc., a Maryland corporation (the "Company") from the same nonaffiliated
third party, concurrently with the consummation of a proposed initial public
offering of the Common Stock of the Company.

The Acquisition Properties are as follows:

<TABLE>
<CAPTION>
SOUTHERN APPROXIMATE
CALIFORNIA RENTABLE ACQUISITION
PROPERTY NAME LOCATION SQUARE FOOTAGE PRICE
- ---------------------- ------------------ -------------- -------------
<S> <C> <C> <C>
303 Glenoaks Blvd. Burbank 175,449 $ 24,854,000
12501 East Imperial Norwalk 122,175 9,978,000
------- -------------
297,624 $ 34,832,000
------- -------------
------- -------------
</TABLE>

BASIS OF PRESENTATION

The accompanying statements have been prepared to comply with the rules and
regulations of the Securities and Exchange Commission for inclusion in the
registration statement on Form S-11 of the Company.

The accounts of the Acquisition Properties are combined in the statements of
revenue and certain expenses and there are no interproperty accounts to be
eliminated. The accompanying statements are not representative of the actual
operations for the periods presented as certain expenses that may not be
comparable to the expenses expected to be incurred by the Company in the future
operations of the Acquisition Properties have been excluded. Excluded expenses
consist of interest, depreciation and amortization and property general and
administrative costs not directly comparable to the future operations of the
Acquisition Properties.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

RISKS AND UNCERTAINTIES

UNAUDITED INTERIM STATEMENT

The combined statements of revenue and certain expenses for the six months
ended June 30, 1996 and 1995 are unaudited. In the opinion of management, such
financial statements reflect all adjustments necessary for a fair presentation
of the results of the respective interim periods. All such adjustments are of a
normal, recurring nature.

F-51
<PAGE>
ACQUISITION PROPERTIES

NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES -- (CONTINUED)

FOR THE YEAR ENDED DECEMBER 31, 1995

2. COMMERCIAL OFFICE PROPERTY
The future minimum lease payments to be received under existing operating
leases as of December 31, 1995 are as follows:

<TABLE>
<S> <C>
1996............................................ $5,310,000
1997............................................ 5,185,000
1998............................................ 4,175,000
1999............................................ 2,789,000
2000............................................ 1,770,000
Thereafter...................................... 1,739,000
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Acquisition Properties is generally leased to tenants
under lease terms which provide for the tenants to pay for increases in
operating expenses in excess of specified amounts.

F-52
<PAGE>
Map of California showing the locations of Arden Realty Group, Inc.
properties in Los Angeles County (including a blow up of Los Angeles County),
Orange County and San Diego County.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

No dealer, salesman or any other person has been authorized to give any
information or to make any representations not contained in this Prospectus,
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Company or any of the Underwriters. This
Prospectus does not constitute an offer of any securities other than those to
which it relates or an offer to sell, or a solicitation of an offer to buy, to
any person in any jurisdiction where such an offer or solicitation would be
unlawful. Neither the delivery of this Prospectus nor any sale made hereunder
shall, under any circumstances, create any implication that the information
contained herein is correct as of any time subsequent to the date hereof.

---------------------

SUMMARY TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
---
<S> <C>
Prospectus Summary................................. 1
Risk Factors....................................... 16
The Company........................................ 28
Business and Growth Strategies..................... 30
Use of Proceeds.................................... 34
Distributions...................................... 35
Capitalization..................................... 40
Dilution........................................... 41
Selected Combined Financial Information............ 42
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 45
Southern California Economy and Office Markets..... 54
Business and Properties............................ 59
Office Submarkets and Property Information......... 70
Management......................................... 91
Structure and Formation of the Company............. 97
Policies With Respect to Certain Transactions...... 101
Certain Transactions............................... 104
Partnership Agreement.............................. 105
Principal Stockholders............................. 108
Capital Stock...................................... 109
Certain Provisions of Maryland law and the
Company's Charter and Bylaws..................... 112
Shares Available for Future Sale................... 115
Federal Income Tax Considerations.................. 116
ERISA Considerations............................... 127
Underwriting....................................... 130
Experts............................................ 131
Legal Matters...................................... 132
Additional Information............................. 132
Glossary........................................... 133
Index to Financial Statements...................... F-1
</TABLE>

---------------------

Until , 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the securities offered hereby, whether or not
participating in this distribution, may be required to deliver a prospectus.
This is in addition to the obligation of dealers to deliver a prospectus when
acting as underwriters and with respect to their unsold allotments or
subscriptions.

18,847,500 SHARES

ARDEN REALTY, INC.

COMMON STOCK

-------------------

PROSPECTUS
, 1996

---------------------

LEHMAN BROTHERS

ALEX. BROWN & SONS
INCORPORATED

DEAN WITTER REYNOLDS INC.

A.G. EDWARDS & SONS, INC.

SMITH BARNEY INC.

EVEREN SECURITIES, INC.

LEGG MASON WOOD WALKER
INCORPORATED

RAYMOND JAMES &
ASSOCIATES, INC.

ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

<TABLE>
<S> <C>
Registration Fee - Securities and Exchange Commission......... $ 150,344.00
NASD Fee...................................................... $ 30,500.00
New York Stock Exchange Listing Fee........................... $ 84,600.00
Transfer Agent and Registrar's Fees........................... $ 20,000.00
Printing and Engraving Expenses............................... $ 300,000.00
Legal Fees and Expenses (other than Blue Sky)................. $1,500,000.00
Accounting Fees and Expenses.................................. $1,800,000.00
Blue Sky Fees and Expenses.................................... $ 50,000.00
Miscellaneous Expenses........................................ $ 404,556.00
------------
Total..................................................... $4,340,000.00
------------
------------
</TABLE>

- ------------------------
* To be completed by Amendment.

ITEM 31. SALES TO SPECIAL PARTIES.

See Item 32.

ITEM 32. RECENT SALES OF UNREGISTERED SECURITIES.

As part of the Formation Transactions an aggregate of 2,889,071 OP Units
will be issued to the following Participants in return for (i) the contribution
of certain interests in the Arden Predecessors and in certain of the Properties
to the Operating Partnership and (ii) the contribution by Arden of certain of
its assets, including management contracts relating to certain of the Properties
and the contract rights to purchase the Acquisition Properties: Richard S. Ziman
(556,991 OP Units), Victor J. Coleman (325,992 OP Units), Michele Byer (51,032
OP Units), Jonathan Glaser (4,876 OP Units), Anaheim Properties Company (34,138
OP Units), Arden Century Associates (41,992 OP Units), Arden LAOP Two, LLC
(43,200 OP Units), Arden Sawtelle Associates (38,374 OP Units), Broad Base
Investments Two, LLC (37,518 OP Units), Coleman Enterprises, Inc. (84,108 OP
Units), Gilbert Trust (436,601 OP Units), Intercity Building Associates (39,801
OP Units), Metropolitan Falls Partners (68,918 OP Units), Montour Realty
Associates (213,710 OP Units), NAMIZ, Inc. (formerly Arden Realty Group, Inc., a
California corporation) (775,196 OP Units) and Ziman Realty Partners (136,674 OP
Units).

The issuance of the OP Units will be effected in reliance upon an exemption
from registration under Section 4(2) of the Securities Act as a transaction by
an issuer not involving a public offering. The descriptions of the foregoing
transactions in the Prospectus under the headings "Formation Transactions,"
"Management" and "Certain Transactions" are incorporated herein by reference.

ITEM 33. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Charter of the
Company contains such a provision which eliminates such liability to the maximum
extent permitted by Maryland law.

The Charter of the Company authorizes it, to the maximum extent permitted by
Maryland law, to obligate itself to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to (a) any present or
former director or officer or (b) any individual who, while a director of the
Company and at the request of the Company, serves or has served another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise from and against any claim or liability to which such person may
incur by reason of his status as a present or former stockholder, director or
officer of the Company. The Bylaws of the Company obligate it, to the maximum
extent permitted by Maryland law, to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (a) any
present or former director of officer who is made a party to the proceeding by
reason of his service in

II-1
<PAGE>
that capacity or (b) any individual who, while a director of the Company and at
the request of the Company, serves or has served another corporation,
partnership, joint venture, trust, employee benefit plan or any other enterprise
as a director, officer, partner or trustee of such corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise and who is made
a party to the proceeding by reason of his service in that capacity against any
claim or liability to which he may become subject by reason of such service. The
Charter and Bylaws also permit the Company to indemnify and advance expenses to
any person who served a predecessor of the Company in any of the capacities
described above and to any employee or agent of the Company or a predecessor of
the Company.

The MGCL requires a corporation (unless its charter provides otherwise,
which the Company's Charter does not) to indemnify a director or officer who has
been successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his services in that capacity. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (a) the act or omission of the director
or officer was material to the matter giving rise to the proceeding and (i) was
committed in bad faith or (ii) was the result of active and deliberate
dishonesty, (b) the director or officer actually received an improper personal
benefit in money, property or services or (c) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful. However, a Maryland corporation may not indemnify for
an adverse judgment in a suit by or in the right of the corporation. In
addition, the MGCL requires the Company, as a condition to advancing expenses,
to obtain (a) a written affirmation by the director or officer of his good faith
belief that he has met the standard of conduct necessary for indemnification by
the Company as authorized by the Bylaws and (b) a written statement by or on his
behalf to repay the amount paid or reimbursed by the Company if it shall
ultimately be determined that the standard of conduct was not met.

ITEM 34. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.

Not applicable.

ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements.

ARDEN REALTY, INC.

Pro Forma Condensed Combined Financial Statements (Unaudited)

Pro Forma Condensed Combined Balance Sheet as of June 30, 1996
(Unaudited)

Pro Forma Condensed Combined Statement of Operations for the Six
Months Ended June 30, 1996 (Unaudited)

Pro Forma Condensed Combined Statement of Operations for the Year
Ended December 31, 1995 (Unaudited)

Notes to Pro Forma Condensed Combined Financial Statements
(Unaudited)

Historical:

Report of Independent Auditors

Balance Sheet as of May 1, 1996 and June 30, 1996 (Unaudited)

Notes to Balance Sheet

ARDEN PREDECESSORS

Combined Financial Statements:

Report of Independent Auditors

Combined Balance Sheets as of June 30, 1996 (Unaudited) and
December 31, 1995 and 1994

II-2
<PAGE>
Combined Statements of Operations for the Six Months ended June
30, 1996 and 1995 (Unaudited) and the Years Ended December 31,
1995, 1994 and 1993

Combined Statements of Owners' Equity for the Six Months ended
June 30, 1996 (Unaudited) and the Years Ended December 31, 1995,
1994 and 1993

Combined Statements of Cash Flows for the Six Months ended June
30, 1996 and 1995 (Unaudited) and the Years Ended December 31,
1995, 1994 and 1993

Notes to Combined Financial Statements

Schedule III -- Commercial Office Properties and Accumulated
Depreciation

16000 VENTURA

Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Statement of Revenue and Certain Expenses for the Period January
1, 1995 to March 15, 1995

Notes to Statement of Revenue and Certain Expenses

1950 SAWTELLE

Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Statement of Revenue and Certain Expenses for the Period January
1, 1995 to June 14, 1995

Notes to Statement of Revenue and Certain Expenses

WESTWOOD TERRACE, SKYVIEW CENTER, 4811 AND 4900/10 AIRPORT PLAZA DRIVE
AND NEW WILSHIRE

Combined Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Combined Statement of Revenue and Certain Expenses for the Period
December 1, 1994 to November 22, 1995

Notes to Combined Statement of Revenue and Certain Expenses

70 SOUTH LAKE AND CALABASAS COMMERCE CENTER

Combined Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Combined Statement of Revenue and Certain Expenses for the Period
January 1, 1995 to
November 22, 1995

Notes to Combined Statement of Revenue and Certain Expenses

1996 ACQUIRED PROPERTIES

Combined Statements of Revenue and Certain Expenses:

Report of Independent Auditors

Combined Statements of Revenue and Certain Expenses for the 1996
Interim Period Prior to Acquisition (Unaudited) and the Year End
December 31, 1995

Notes to Combined Statements of Revenue and Certain Expenses

II-3
<PAGE>
ACQUISITION PROPERTIES

Combined Statements of Revenue and Certain Expenses:

Report of Independent Auditors

Combined Statements of Revenue and Certain Expenses for the Six
Months Ended June 30, 1996 and 1995 (Unaudited) and the Year Ended
December 31, 1995

Notes to Combined Statements of Revenue and Certain Expenses

(b) Schedules Included in Part II: None.

All other schedules have been omitted because they are either not applicable
or the information required has been disclosed in the financial statements and
related notes included in this Prospectus.

<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement between the Company and the Representatives.
3.1 Form of Articles of Amendment and Restatement of the Company's Charter.
3.2 Bylaws of the Company.
3.3 Specimen of certificate representing shares of Common Stock.
5.1 Opinion of Ballard Spahr Andrews & Ingersoll regarding the validity of the
securities being registered.
8.1 Opinion of Latham & Watkins regarding tax matters.
10.1 Form of Agreement of Limited Partnership of the Operating Partnership.
10.2 1996 Stock Option and Incentive Plan.
10.3 Form of Officers and Directors Indemnification Agreement.
10.5* Commitment Letter regarding Mortgage Financing.
10.6 Employment Agreement between the Company and Mr. Ziman.
10.7 Employment Agreement between the Company and Mr. Coleman.
10.8* Employment Agreement between the Company and Ms. Laing.
10.9 Miscellaneous Rights Agreement among the Company, the Operating Partnership,
NAMIZ, Inc. and Mr. Ziman.
10.10* Ground lease for Imperial Bank Tower.
10.11* Ground lease for parking structure at Imperial Bank Tower.
10.12* Master Ground Lease for Long Beach Airport Business Park.
10.13* Ground lease for parking structure at the Anaheim City Centre.
10.14 Option Agreement with Broad Base Investments Two, LLC.
10.15* Option Agreement with CIC Equities, Inc.
10.16* Option Agreement with TJB Investments, Inc.
10.17 Contribution Agreement with Richard S. Ziman.
10.18 Contribution Agreement with Victor J. Coleman.
10.19 Contribution Agreement with Michele Byer.
10.20* Contribution Agreement with Arden Century Associates.
10.21* Contribution Agreement with Arden LAOP Two, LLC.
10.22* Contribution Agreement with Arden Sawtelle Associates.
10.23* Contribution Agreement with Coleman Enterprises, Inc.
10.24* Partnership Interest Contribution Agreement with Arthur Gilbert and Rosalinde
Gilbert 1982 Trust.
10.25* Contribution Agreement with Intercity Building Associates.
10.26* Contribution Agreement with Metropolitan Falls Partners.
10.27* Contribution Agreement with Montour Realty Associates.
10.28* Contribution Agreement with Ziman Realty Partners.
</TABLE>

II-4
<PAGE>

<TABLE>
<C> <S>
10.29* Contribution Agreement with Arthur Gilbert and Rosalinde Gilbert 1982 Trust.
10.30 Contribution Agreement with Arden Realty Group, Inc.
10.31* Office Market Study Prepared by Cushman & Wakefield of California, Inc.
10.32 Contribution Agreement with Broad Base Investments Two, LLC.
21.1* Subsidiary of the Registrant.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Cushman & Wakefield of California, Inc.
23.3 Consent of Latham & Watkins (contained in Exhibit 8.1).
23.4* Consent of Carl D. Covitz.
23.5* Consent of Kenneth B. Roath.
23.6* Consent of Arthur Gilbert.
23.7* Consent of Steven C. Good.
23.8* Consent of Jerry Asher.
23.9 Consent of Ballard Spahr Andrews and Ingersoll (contained in Exhibit 5.1)
24.* Power of Attorney.
27. Financial Data Schedule.
</TABLE>

- ------------------------

* Previously filed.

ITEM 36. UNDERTAKINGS.

The undersigned Company hereby undertakes to provide to the Underwriters at
the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions described under Item 33 above, or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a Director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
Director, Officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned Company hereby undertakes that:

(1) For the purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of the
Registration Statement in reliance upon Rule 430A and contained in the form of
Prospectus filed by the Company pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of the Registration
Statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.

II-5
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirements
for filing on Form S-11 and has duly caused this Amendment No. 3 to Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Los Angeles, State of California on the 30th day of
September, 1996.

ARDEN REALTY, INC.

By: /s/ RICHARD S. ZIMAN

-----------------------------------
Richard S. Ziman
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER

Pursuant to the requirements of the Securities Act, this Amendment No. 3 to
Registration Statement has been signed below by the following persons in the
capacities indicated on September 30, 1996.

TITLE
-------------------------

Chairman of the Board of
/s/ RICHARD S. ZIMAN Directors and
- ----------------------------------- Chief Executive Officer
Richard S. Ziman (Principal Executive
Officer)

/s/ VICTOR J. COLEMAN* President, Chief
- ----------------------------------- Operating Officer and
Victor J. Coleman Director

/s/ DIANA M. LAING* Chief Financial Officer
- ----------------------------------- (Principal Financial
Diana M. Laing Officer)

Chief Accounting Officer
/s/ MICHELE BYER* and Secretary
- ----------------------------------- (Principal Accounting
Michele Byer Officer)

*By: /s/ RICHARD S.
ZIMAN
- -----------------------------------
Richard S. Ziman,
as attorney-in-fact

II-6
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NO. EXHIBIT NUMBERED PAGE
- --------- ---------------------------------------------------------------------------------------- ---------------------
<S> <C> <C>
1.1 Form of Underwriting Agreement between the Company and the Representatives.
3.1 Form of Articles of Amendment and Restatement of the Company's Charter.
3.2 Bylaws of the Company.
3.3 Specimen of certificate representing shares of Common Stock.
5.1 Opinion of Ballard Spahr Andrews & Ingersoll regarding the validity of the securities
being registered.
8.1 Opinion of Latham & Watkins regarding tax matters.
10.1 Form of Agreement of Limited Partnership of the Operating Partnership.
10.2 1996 Stock Option and Incentive Plan.
10.3 Form of Officers and Directors Indemnification Agreement.
10.5* Mortgage Financing Agreement.
10.6 Employment Agreements between the Company and Mr. Ziman.
10.7 Employment Agreement between the Company and Mr. Coleman.
10.8* Employment Agreement between the Company and Ms. Laing.
10.9 Miscellaneous Rights Agreement among the Company, the Operating Partnership, NAMIZ, Inc.
and Mr. Ziman.
10.10* Ground lease for Imperial Bank Tower.
10.11* Ground lease for parking structure of Imperial Bank Tower.
10.12* Master Ground Lease for Long Beach Airport Business Park.
10.13* Ground lease for parking structure at the Anaheim City Centre.
10.14 Option Agreement with Broad Base Investments Two, LLC.
10.15* Option Agreement with CIC Equities, Inc.
10.16* Option Agreement with TJB Investments, Inc.
10.17 Contribution Agreement with Richard S. Ziman.
10.18 Contribution Agreement with Victor J. Coleman.
10.19 Contribution Agreement with Michele Byer.
10.20* Contribution Agreement with Arden Century Associates.
10.21* Contribution Agreement with Arden LAOP Two, LLC.
10.22* Contribution Agreement with Arden Sawtelle Associates.
10.23* Contribution Agreement with Coleman Enterprises, Inc.
10.24* Partnership Interest Contribution Agreement with Arthur Gilbert and Rosalinde Gilbert
1982 Trust.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NO. EXHIBIT NUMBERED PAGE
- --------- ---------------------------------------------------------------------------------------- ---------------------
10.25* Contribution Agreement with Intercity Building Associates.
<S> <C> <C>
10.26* Contribution Agreement with Metropolitan Falls Partners.
10.27* Contribution Agreement with Montour Realty Associates.
10.28* Contribution Agreement with Ziman Realty Partners.
10.29* Contribution Agreement with Arthur Gilbert and Rosalinde Gilbert 1982 Trust.
10.30 Contribution Agreement with Arden Realty Group, Inc.
10.31* Office Market Study Prepared by Cushman & Wakefield of California, Inc.
10.32 Contribution Agreement with Broad Base Investments Two, LLC.
21.1* Subsidiary of the Registrant.
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Cushman & Wakefield of California, Inc.
23.3 Consent of Latham & Watkins (contained in Exhibit 8.1).
23.4* Consent of Carl D. Covitz.
23.5* Consent of Kenneth B. Roath.
23.6* Consent of Arthur Gilbert.
23.7* Consent of Steven C. Good.
23.8* Consent of Jerry Asher.
23.9 Consent of Ballard Spahr Andrews and Ingersoll (contained in Exhibit 5.1).
24.* Power of Attorney.
27.* Financial Data Schedule.
</TABLE>

- ------------------------

* Previously filed.

<PAGE>

EXHIBIT 1.1

18,847,500 SHARES

ARDEN REALTY GROUP, INC.
(A MARYLAND CORPORATION)
COMMON STOCK, $.01 PAR VALUE PER SHARE

UNDERWRITING AGREEMENT

October __, 1996

LEHMAN BROTHERS INC.
ALEX. BROWN & SONS INCORPORATED
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
SMITH BARNEY INC.
EVEREN SECURITIES, INC.
LEGG MASON WOOD WALKER INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.
As Representatives of the several
Underwriters named in Schedule 1,
c/o Lehman Brothers Inc.
Three World Financial Center
New York, New York 10285

Dear Sirs:

Arden Realty Group, Inc., a Maryland corporation (the "Company"), proposes
to sell 18,847,500 shares (the "Firm Stock") of the Company's Common Stock (the
"Common Stock") par value $.01 per share. In addition, the Company proposes to
grant to the Underwriters named in Schedule 1 hereto (the "Underwriters") an
option to purchase up to an additional 2,827,000 shares of the Common Stock on
the terms and for the purposes set forth in Section 2 (the "Option Stock"). The
Firm Stock and the Option Stock, if purchased, are hereinafter collectively
called the "Stock." This is to confirm the agreement concerning the purchase of
the Stock from the Company by the Underwriters.

At or prior to the First Delivery Date (as hereinafter defined), the
Company and Arden Realty Group Limited Partnership, a Maryland limited
partnership (the "Operating Partnership"), will complete a series of
transactions described in each of the Preliminary Prospectus and the Prospectus
(as hereinafter defined) under the heading "Structure and Formation of the
Company -- The Formation Transactions." As part of these transactions, among
other things, the Operating Partnership will acquire direct or indirect
interests in 24 office properties located in Los Angeles County, California,
Orange County, California and San Diego, California (collectively, the
"Properties") and third-party management contracts relating to four office
properties (collectively, the "Managed Properties"). As used herein, the term
"Formation Transactions" shall mean

<PAGE>

the occurrence of all the events described in the Prospectus under the heading
"Structure and Formation of the Company -- The Formation Transactions" and the
other transactions related thereto, and the term "Formation Documents" shall
mean all the material contracts, agreements and other documents executed in
connection with the Formation Transactions set forth in Schedule 2 hereto.

As used in this Agreement, "Effective Time" shall mean the date and
the time as of which the registration statement, or the most recent post-
effective amendment thereto, if any, was declared effective by the Securities
and Exchange Commission (the "Commission"); "Effective Date" shall mean the date
of the Effective Time; "Preliminary Prospectus" shall mean each prospectus
included in such registration statement, or amendments thereof, before it became
effective under the Securities Act of 1933, as amended (the "Securities Act")
and any prospectus filed with the Commission by the Company with the consent of
the representatives ("Representatives") pursuant to Rule 424(a) of the rules and
regulations of the Commission thereunder (the "Rules and Regulations");
"Registration Statement" shall mean such registration statement, as amended at
the Effective Time, including all information contained in the final prospectus
filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations
in accordance with Section 6(a) hereof and deemed to be a part of the
registration statement as of the Effective Time pursuant to paragraph (b) of
Rule 430A of the Rules and Regulations; and "Prospectus" shall mean such final
prospectus, as first filed with the Commission pursuant to paragraph (1) or (4)
of Rule 424(b) of the Rules and Regulations. Any registration statement
(including any amendment or supplement thereto or information which is deemed
part thereof) filed by the Company to register additional shares of Common Stock
of the Company under rule 462(b) of the Rules and Regulations ("Rule 462(b)
Registration Statement") shall be deemed a part of the Registration Statement.
Any prospectus (including any amendment or supplement thereto or information
which is deemed to be a part thereof) included in a Rule 462(b) Registration
Statement and any term sheet as contemplated by Rule 434 of the Rules and
Regulations (a "Term Sheet") shall be deemed to be part of the Prospectus.

1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY AND THE
OPERATING PARTNERSHIP. The Company and the Operating Partnership, jointly and
severally, represent, warrant and agree as follows:

(a) A registration statement on Form S-11 (File No. 333-8163)
and certain amendments thereto, with respect to the Stock has (i) been
prepared by the Company in conformity with the requirements of the
Securities Act and the Rules and Regulations of the Commission, (ii)
been filed with the Commission under the Securities Act and (iii)
become effective under the Securities Act. Copies of such
registration statement and each amendment thereto have been delivered
by the Company to you as the Representatives of the Underwriters. The
Commission has not issued any order preventing or suspending the use
of any Preliminary Prospectus.

<PAGE>

(b) The Registration Statement conforms, and the Prospectus and
any further amendments or supplements to the Registration Statement or
the Prospectus will, when they become effective or are filed with the
Commission, as the case may be, conform in all material respects to
the requirements of the Securities Act and the Rules and Regulations
and do not and will not, as of the applicable effective date (as to
the Registration Statement and any amendment thereto) contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, and as of the applicable filing date (as to
the Prospectus and any amendment or supplement thereto) contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; PROVIDED that no representation or warranty is made as to
information contained in or omitted from the Registration Statement or
the Prospectus in reliance upon and in conformity with written
information furnished to the Company through the Representatives by or
on behalf of any Underwriter specifically for inclusion therein.

(c) The Company is a corporation duly incorporated and existing
under and by virtue of the laws of the State of Maryland and is in
good standing with the State Department of Assessments and Taxation of
Maryland (the "SDAT") with corporate power to own, lease and operate
its properties, to conduct the business in which it is engaged or
proposes to engage as described in the Prospectus and to enter into
and perform its obligations under this Agreement and the other
Formation Documents to which it is a party. The Company is duly
qualified or registered as a foreign corporation and is in good
standing in California and is in good standing in each other
jurisdiction in which such qualification or registration is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or be
registered or to be in good standing in such other jurisdiction would
not result in a material adverse effect on the consolidated financial
position, results of operations, business or prospects of the Company
and the Operating Partnership taken as a whole (a "Material Adverse
Effect"). The Company has no subsidiaries other than the Operating
Partnership.

(d) The Operating Partnership is a limited partnership duly
formed and existing under and by virtue of the laws of the State of
Maryland and is in good standing with the SDAT with partnership power
to own, lease and operate its properties, to conduct the business in
which it is engaged or proposes to engage as described in the
Prospectus and to enter into and perform its obligations under this
Agreement and the other Formation Documents to which it is a party.
The Operating Partnership is

<PAGE>

duly qualified or registered as a foreign partnership and is in good
standing in California and is in good standing in each other
jurisdiction in which such qualification or registration is required,
whether by reason of the ownership or leasing of property or the
conduct of business, except where the failure so to qualify or be
registered or to be in good standing in such other jurisdiction would
not result in a Material Adverse Effect. The Company is the sole
general partner of the Operating Partnership and, immediately after
the First Delivery Date will be the sole general partner of the
Operating Partnership and will own approximately 86.71% of all
outstanding partnership interests in the Operating Partnership. The
Operating Partnership has no subsidiaries.

(e) Each of the corporations, limited partnerships or limited
liability companies listed on Schedule 3 hereto (collectively, the
"Predecessor Entities") has been duly incorporated or formed and is
validly existing as a corporation, limited partnership or limited
liability company in good standing under the laws of its state of
formation, with power and authority to own, lease and operate its
properties, and to conduct the business in which it is engaged. Each
Predecessor Entity is duly qualified or registered as a foreign
corporation, partnership, limited partnership or limited liability
company, as applicable, to transact business in each jurisdiction in
which such qualification or registration is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or be registered
would not result in a Material Adverse Effect.

(f) The transfer of interests or other assets pursuant to the
Formation Documents does not violate the charter, limited liability
agreement or limited partnership agreement, as the case may be, of any
Predecessor Entity. The Formation Documents are sufficient to effect
the transfer to the Company or Operating Partnership of all direct or
indirect interests in the Properties and other assets specified
therein upon payment of the consideration therefor.

(g) Pursuant to the Formation Documents, the Company or the
Operating Partnership will acquire, as of the First Delivery Date (as
defined herein), all of the direct and indirect interests of each of
the Contributors or Optionors named therein in each of the Predecessor
Entities in which such Contributors or Optionors owned an interest, in
each case free and clear of any liens, restrictions, encumbrances or
security interests (a) set forth in the limited liability company
agreement or limited partnership agreement, as the case may be,
governing such Predecessor Entities, or (b) reflected on the books or
limited liability company or limited partnership registry of any
Predecessor Entity. None of the interests held by any person in any
Predecessor Entity and being acquired by the Company or the Operating
Partnership are evidenced by certificates and no such interests
constitute "certificated" securities under

<PAGE>

the Uniform Commercial Code.

(h) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of stock of the Company
have been duly and validly authorized and issued, are fully paid and
non-assessable and conform in all material respects to the description
thereof contained in the Prospectus; and all of the issued partnership
interests of the Operating Partnership (the "Partnership Interests")
have been duly and validly authorized and issued and are fully paid
and, with respect to the Partnership Interests owned by the Company
are owned directly by the Company, free and clear of all liens,
encumbrances, equities or claims.

(i) The shares of the Stock to be issued and sold by the Company
to the Underwriters hereunder have been duly and validly authorized
and, when issued and delivered against payment therefor as provided
herein will be duly and validly issued, fully paid and non-assessable;
and the Stock will conform in all material respects to the description
thereof contained in the Prospectus.

(j) The limited partnership interests in the Operating
Partnership (the "Units") to be issued in connection with the
Formation Transactions and the Partnership Interests to be issued to
the Company, have been duly authorized for issuance by the Operating
Partnership to the holders or prospective holders thereof, and at each
Delivery Date will be validly issued and fully paid. Immediately
after the First Delivery Date, [__________] Units will be issued and
outstanding. The Units have been and will be offered and sold on or
prior to the First Delivery Date in compliance with all applicable
laws (including, without limitation, federal and state securities
laws).

(k) None of the Company or the Operating Partnership is in
violation of its charter, by-laws, certificate of limited partnership,
articles of organization, operating agreement or partnership
agreement, as the case may be, and none of the Company or the
Operating Partnership is in default in the performance or observance
of any obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which such entity is a party or by which such entity may
be bound, or to which any of the property or assets of such entity is
subject, except for such defaults that would not have a Material
Adverse Effect.

(l) This Agreement has been duly authorized, executed and
delivered by the Company and the Operating Partnership.

(m) The execution, delivery and performance of this Agreement by
the Company and the Operating Partnership and the consummation of

<PAGE>

the transactions contemplated hereby including the Formation
Transactions will not conflict with or result in a breach or violation
of any of the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or the Operating
Partnership is a party or by which the Company or the Operating
Partnership is bound or to which any of the property or assets of the
Company, the Operating Partnership or any of their subsidiaries is
subject, (except for such conflicts, breaches, violations or defaults
that (i) would not have a Material Adverse Effect, (ii) relate to
mortgage indebtedness to be repaid in full with a portion of the net
proceeds from the sale of the Stock and the Mortgage Financing as
reflected in the "Use of Proceeds" section of the Prospectus, or (iii)
relate to agreements or instruments that are terminable at will or
upon 30 days notice); nor will such actions result in any violation of
the provisions of the charter, by-laws or partnership agreement of the
Company or the Operating Partnership or any statute or any order, rule
or regulation of any court or governmental agency or body having
jurisdiction over the Company or the Operating Partnership or any of
the properties, assets or business to be owned by them following
completion of the Formation Transactions; and except for (a) the
registration of the Stock under the Securities Act and such consents,
approvals, authorizations, registrations or qualifications as may be
required under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and applicable state and foreign securities laws in
connection with the purchase and distribution of the Stock by the
Underwriters, (b) consents, approvals, authorizations, orders, filings
or registrations that will be completed prior to the Closing Date and
(c) such consents, approvals, authorizations, orders, filings or
registrations, the absence of which, individually or in the aggregate
would not have a Material Adverse Effect, no consent, approval,
authorization or order of, or filing or registration with, any such
court or governmental agency or body or any other person is required
for the execution, delivery and performance of this Agreement by the
Company and the Operating Partnership and the consummation of the
transactions contemplated hereby, including the Formation
Transactions.

(n) Except as disclosed in the Prospectus, there are no
contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any
securities of the Company owned or to be owned by such person or to
require the Company to include such securities in the securities
registered pursuant to the Registration Statement or in any securities
being registered pursuant to any other registration statement filed by
the Company under the Securities Act.

(o) Except as described in the Prospectus and 100 shares

<PAGE>

(which will be repurchased at the closing) issued to Mr. Ziman, the
Company has not sold or issued any shares of Common Stock during the
six-month period preceding the date of the Prospectus, including any
sales pursuant to Rule 144A under, or Regulations D or S of, the
Securities Act.

(p) Since the date of the latest audited financial statements
included in the Prospectus, (i) there has been no material adverse
change in the financial condition, results of operation or business of
the Company or the Operating Partnership or any Predecessor Entity,
whether or not arising in the ordinary course of business, (ii) no
material casualty loss or material condemnation or other material
adverse event with respect to any Property has occurred, (iii) there
have been no transactions or acquisitions entered into by the Company
or the Operating Partnership other than those in the ordinary course
of business, which are material with respect to such entity, except in
connection with the Formation Transactions, (iv) there has been no
dividend or distribution of any kind declared, paid or made by the
Company on any class of its stock or by the Operating Partnership with
respect to its partnership interests and (v) there has been no change
in the stock of the Company or the partnership interests of the
Operating Partnership, or any increase in the indebtedness of the
Company or the Operating Partnership, except in connection with the
Formation Transactions.

(q) The financial statements and pro forma financial information
(including all necessary pro forma adjustments and including the
related notes and supporting schedules) filed as part of the
Registration Statement or included in the Prospectus present fairly
the financial condition and results of operations of the entities
purported to be shown thereby, at the dates and for the periods
indicated, and have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis
throughout the periods involved and all adjustments necessary for a
fair presentation of results for such periods have been made. The
financial information set forth in the Prospectus presents fairly the
information shown therein and has been prepared on an accounting basis
consistent with such financial statements and the books and records of
the respective entities presented therein. The pro forma financial
statements and other information included in the Prospectus have been
prepared in accordance with the applicable requirements of Rules 11-01
and 11-02 of Regulation S-X under the Securities Act, and the
necessary pro forma adjustments have been properly applied to the
historical amounts in the compilation of such information. Other than
the historical and pro forma financial statements (and schedules)
included therein, no other historical or pro forma financial
statements (or schedules) are required by the Securities Act or the
Rules and Regulations to be included in the Registration Statement.

<PAGE>

(r) Ernst & Young LLP, who have certified certain financial
statements included in the Registration Statement, whose report
appears in the Prospectus and who have delivered the initial letter
referred to in Section 8(g) hereof, are independent public accountants
as required by the Securities Act and the Rules and Regulations during
the periods covered by the financial statements on which they reported
contained in the Prospectus.

(s) (i) The Company and the Operating Partnership, upon
consummation of the Formation Transactions, will have good and
marketable title in fee simple to all real property and will own all
personal property in each case owned by or as contemplated in the
Prospectus to be owned by them on the First Delivery Date, in each
case free and clear of all liens, encumbrances and defects except such
as are described in the Prospectus or such as do not materially affect
the value of such property and do not materially interfere with the
use made and proposed to be made of such property by the Company and
the Operating Partnership (except for such real property, buildings
and personal property as are described in subparagraph (ii) below);
and (ii) all real property, buildings and personal property held under
lease by the Company and the Operating Partnership are held by them
under valid, existing and enforceable leases in each case free and
clear of all liens, encumbrances and defects except such as are
described in the Prospectus, and such exceptions as are not material
and do not materially interfere with the use made and proposed to be
made of such property and buildings by the Company and the Operating
Partnership.

(t) Except as described in the Prospectus, the Company and the
Operating Partnership carry, or are covered by, insurance in such
amounts and covering such risks as is adequate for the conduct of
their respective businesses and the value of Properties held or
contemplated in the Prospectus to be held by them following the
Formation Transactions and as is customary for companies engaged in
similar businesses in similar industries.

(u) The Company and the Operating Partnership own, possess or
can acquire on reasonable terms, adequate rights to use all material
patents, patent applications, trademarks, service marks, trade names,
trademark registrations, service mark registrations, copyrights and
licenses necessary for the conduct of their respective businesses and
have no reason to believe that the conduct of their respective
businesses will conflict with, and have not received any notice of any
claim of conflict with, any such rights of others, which conflict (if
the subject of any unfavorable decision, ruling or finding) would
result in a Material Adverse Effect.

<PAGE>

(v) Except as described in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or the Operating
Partnership is a party or of which any property or assets of the
Company or the Operating Partnership or any of the property, assets or
business contemplated in the Prospectus to be owned by them after the
Formation Transactions is the subject which, if determined adversely
to the Company or the Operating Partnership, would have a Material
Adverse Effect; and to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental authorities
or threatened by others.

(w) Upon completion of the Formation Transactions and the sale
of Stock hereunder, the Company will be organized in conformity with
the requirements for qualification as a real estate investment trust
under the Internal Revenue Code of 1986, as amended (the "Code"), and
its proposed method of operation will enable it to meet the
requirements for taxation as a real estate investment trust under the
Code for its taxable periods beginning or otherwise including the
period after the Effective Date. All statements in the Prospectus
regarding the Company's qualification as a REIT are true, complete and
correct in all material respects.

(x) There are no contracts or other documents which are required
to be described in the Prospectus or filed as exhibits to the
Registration Statement by the Securities Act or by the Rules and
Regulations which have not been described in the Prospectus or filed
as exhibits to the Registration Statement or incorporated therein by
reference as permitted by the Rules and Regulations.

(y) No relationship, direct or indirect, exists between or among
the Company or the Operating Partnership on the one hand, and the
directors, officers, stockholders (in the case of the Company),
limited partners (in the case of the Operating Partnership), customers
or suppliers of the Company or the Operating Partnership on the other
hand, which is required to be described in the Prospectus which is not
so described.

(z) There is (i) no material unfair labor practice complaint
pending against the Company, the Operating Partnership or any
Predecessor Entity nor, to the best knowledge of the Company,
threatened against any of them before the National Labor Relations
Board or any state or local labor relations board, and no significant
grievance or significant arbitration proceeding arising out of or
under any collective bargaining agreement is so pending against the
Company, the Operating Partnership or any Predecessor Entity or, to
the best knowledge of the

<PAGE>

Company, threatened against any of them, (ii) no material strike,
labor dispute, slowdown or stoppage pending against the Company, the
Operating Partnership or any Predecessor Entity nor, to the best
knowledge of the Company, threatened against the Company, the
Operating Partnership or any Predecessor Entity which in any case
would have a Material Adverse Effect.

(aa) The Company and the Operating Partnership are in compliance
in all material respects with all presently applicable provisions of
the Employee Retirement Income Security Act of 1974, as amended,
including the regulations and published interpretations thereunder
("ERISA"); no "reportable event" (as defined in ERISA) has occurred
with respect to any "pension plan" (as defined in ERISA) for which the
Company or the Operating Partnership would have any liability; the
Company or the Operating Partnership has not incurred and does not
expect to incur liability under (i) Title IV of ERISA with respect to
termination of, or withdrawal from, any "pension plan" or (ii)
Sections 412 or 4971 of the Code including the regulations and
published interpretations thereunder; and each "pension plan" for
which the Company or the Operating Partnership would have any
liability that is intended to be qualified under Section 401(a) of the
Code is so qualified in all material respects and nothing has
occurred, whether by action or by failure to act, which would cause
the loss of such qualification, except for such noncompliance,
reportable events, liabilities, or failures to qualify that would not
result in a Material Adverse Effect.

(ab) The Company, the Operating Partnership and each Predecessor
Entity have filed all federal, state and local income and franchise
tax returns required to be filed through the date hereof and have paid
all taxes due thereon, and no tax deficiency has been determined
adversely to the Company or the Operating Partnership which has had
(nor does the Company have any knowledge of any tax deficiency which,
if determined adversely to the Company or the Operating Partnership
would have) a Material Adverse Effect.

(ac) Since the date as of which information is given in the
Prospectus through the date hereof, and except as may otherwise be
disclosed in the Prospectus, the Company and the Operating Partnership
have not (i) issued or granted any securities, (ii) incurred any
material liability or obligation, direct or contingent, other than
liabilities and obligations which were incurred in the ordinary course
of business, (iii) entered into any transaction not in the ordinary
course of business which is material to the Company and the Operating
Partnership, taken as a whole or (iv) declared or paid any dividend on
their stock.

(ad) The Company and the Operating Partnership and the

<PAGE>

Predecessor Entities (i) make and keep books and records which are
accurate in all material respects and (ii) maintain internal
accounting controls which provide reasonable assurance that (A)
transactions are executed in accordance with management's
authorization, (B) transactions are recorded as necessary to permit
preparation of their financial statements and to maintain
accountability for their assets, (C) access to their assets is
permitted only in accordance with management's authorization and (D)
the reported accountability for their assets is compared with existing
assets at reasonable intervals.

(ae) Neither the Company nor the Operating Partnership is, or
will be following consummation of the Formation Transactions, (i) in
violation of its charter, partnership agreement, by-laws or other
similar documents, (ii) in default in any material respect, and no
event has occurred which, with notice or lapse of time or both, would
constitute such a default, in the due performance or observance of any
term, covenant or condition contained in any material indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument to which it is a party or by which it is bound or to which
any of its properties or assets is subject or (iii) in violation in
any material respect of any law, ordinance, governmental rule, permit,
license, regulation or court decree to which it or its property or
assets may be subject or has failed to obtain any material license,
permit, certificate, franchise or other governmental authorization or
permit necessary to the ownership of its property or to the conduct of
its business.

(af) Neither the Company nor the Operating Partnership, nor any
director, officer, agent, employee or other person associated with or
acting on behalf of the Company or the Operating Partnership, has used
any corporate funds for any unlawful contribution, gift, entertainment
or other unlawful expense relating to political activity; made any
direct or indirect unlawful payment to any foreign or domestic
government official or employee from corporate funds; violated or is
in violation of any provision of the Foreign Corrupt Practices Act of
1977; or made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment.

(ag) Except as disclosed in the Prospectus, there has been no
storage, disposal, generation, manufacture, refinement,
transportation, handling or treatment of toxic wastes, medical wastes,
hazardous wastes or hazardous substances by the Company, the Operating
Partnership, any Predecessor Entity or any of their subsidiaries (or,
to the knowledge of the Company, any of their predecessors in interest
or any other person) at, upon or from any of the property now or
previously owned or leased by the Company, the Operating Partnership,
any Predecessor Entity or any of their subsidiaries in violation of
any applicable law, ordinance, rule, regulation, order, judgment,
decree or permit or which would require any

<PAGE>

removal, remedial or other response action under any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit, except
for any violation or response action which would not have singularly
or in the aggregate with all such violations and response actions, a
Material Adverse Effect; there also has been no storage, disposal,
generation, manufacture, refinement, transportation, handling or
treatment of toxic wastes, medical wastes, hazardous wastes or
hazardous substances by the Company, the Operating Partnership, any
Predecessor Entity or any of their subsidiaries (or, to the knowledge
of the Company, any of their predecessors in interest) at or upon any
property owned by anyone else in violation of any applicable law,
ordinance, rule, regulation, order, judgment, decree or permit or
which would require any removal, remedial or other response action
under any applicable law, ordinance, rule, regulation, order,
judgment, decree or permit, except for any violation or response
action which would not have singularly or in the aggregate with all
such violations and response actions, a Material Adverse Effect; there
has been no material spill, discharge, leak, emission, injection,
escape, placement, dumping or release of any kind onto such property
or into the environment surrounding such property of any toxic wastes,
medical wastes, solid wastes, hazardous wastes or hazardous substances
due to or caused by the Company, the Operating Partnership, any
Predecessor Entity or any of their subsidiaries or with respect to
which the Company, the Operating Partnership, any Predecessor Entity
or any of their subsidiaries have knowledge, except for any such
spill, discharge, leak, emission, injection, escape, placement,
dumping or release which would not have singularly or in the aggregate
with all such spills, discharges, leaks, emissions, injections,
escapes, placements, dumpings and releases, a Material Adverse Effect;
and the terms "hazardous wastes," "toxic wastes," "hazardous
substances" and "medical wastes" shall have the meanings specified in
any applicable local, state, federal and foreign laws or regulations
with respect to environmental protection. There are no underground
storage tanks located on or in the Properties except such tanks the
existence of which would not have a Material Adverse Effect. None of
the Predecessor Entities (other than NAMIZ, Inc.) owns or operates, or
has owned or operated, any real property other than the Properties.

(ah) Neither the Company, the Operating Partnership nor any of
their subsidiaries is an "investment company" within the meaning of
such term under the Investment Company Act of 1940, as amended, and
the rules and regulations of the Commission thereunder.

(ai) The Stock has been approved for listing on the New York
Stock Exchange, Inc. subject to official notice of issuance.

(aj) Neither of the Company nor the Operating Partnership, nor

<PAGE>

any of their directors, officers or controlling persons, has taken or
will take, directly or indirectly, any action resulting in a violation
of Rule 10b-6 under the Exchange Act, or designed to cause or result
in, or that has constituted or that reasonably might be expected to
constitute, the stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Stock.

(ak) All of the representations and warranties of the Company and
the Operating Partnership contained in the Formation Documents set
forth on Schedule 2 hereof are true and correct in all material
respects.

(al) No real estate transfer or similar taxes are or will become
due and payable by the Company, the Operating Partnership or any
Predecessor Entity as a result of the acquisition by the Operating
Partnership or any affiliate thereof of any direct or indirect
interest in any of the Properties or any Predecessor Entity in
connection with the Formation Transactions, except for such taxes
which, in the aggregate, will not exceed $125,000.

(am) Except as described in the Prospectus, the Operating
Partnership is not currently prohibited, directly or indirectly, from
paying any dividends or distributions to the Company to the extent
permitted by applicable law, from making any other distribution on the
Operating Partnership's partnership interests, from repaying to the
Company any loans or advances to the Operating Partnership from the
Company or from transferring any of the Operating Partnership's
property or assets to the Company.

(an) The Company, the Operating Partnership and any Predecessor
Entity are currently in substantial compliance with all presently
applicable provisions of the Americans with Disabilities Act and no
failure of the Company, the Operating Partnership or any Predecessor
Entity to comply with all presently applicable provisions of the
Americans with Disabilities Act would result in a Material Adverse
Effect.

(ao) On the First Delivery Date, each of the Formation Documents
will have been duly and validly authorized, executed and delivered by
the Company and the Operating Partnership and will be a valid and
binding agreement, enforceable in accordance with its terms.

2. PURCHASE OF THE STOCK BY THE UNDERWRITERS. On the basis of the
representations and warranties contained in, and subject to the terms and
conditions of, this Agreement, the Company agrees to sell 18,847,500 shares of
the Firm Stock to the several Underwriters and each of the Underwriters,
severally and not jointly, agrees to purchase the number of shares of the Firm
Stock set forth opposite that Underwriter's name in Schedule 1 hereto. The
respective purchase obligations of the Underwriters

<PAGE>

with respect to the Firm Stock shall be rounded among the Underwriters to avoid
fractional shares, as the Representatives may determine.

In addition, the Company grants to the Underwriters an option to
purchase up to 2,827,000 shares of Option Stock. Such option is granted solely
for the purpose of covering over-allotments in the sale of Firm Stock and is
exercisable as provided in Section 5 hereof. Shares of Option Stock shall be
purchased severally for the account of the Underwriters in proportion to the
number of shares of Firm Stock set forth opposite the name of such Underwriters
in Schedule 1 hereto. The respective purchase obligations of each Underwriter
with respect to the Option Stock shall be adjusted by the Representatives so
that no Underwriter shall be obligated to purchase Option Stock other than in
100 share amounts. The price of both the Firm Stock and any Option Stock shall
be $_____ per share.

The Company shall not be obligated to deliver any of the Stock to be
delivered on the First Delivery Date or the Second Delivery Date (as hereinafter
defined), as the case may be, except upon payment for all the Stock to be
purchased on such Delivery Date as provided herein.

3. RETENTION OF QUALIFIED INDEPENDENT UNDERWRITERS. The Company
hereby confirms its engagement of Dean Witter Reynolds Inc. as, and Dean Witter
Reynolds Inc. hereby confirms its agreement with the Company to render services
as, "qualified independent underwriter" within the meaning of Rule 2710(c)(8) of
the Conduct Rules of the National Association of Securities Dealers, Inc. with
respect to the offering and sale of Stock. Dean Witter Reynolds Inc., solely in
its capacity as qualified independent underwriter and not otherwise, is referred
to herein as the "Independent Underwriter."

4. OFFERING OF STOCK BY THE UNDERWRITERS. Upon authorization by the
Representatives of the release of the Firm Stock, the several Underwriters
propose to offer the Firm Stock for sale upon the terms and conditions set forth
in the Prospectus.

It is understood that 500,000 shares of the Firm Stock will initially
be reserved by the several Underwriters for offer and sale upon the terms and
conditions set forth in the Prospectus and in accordance with the rules and
regulations of the National Association of Securities Dealers, Inc. to employees
and persons having business relationships with the Company, the Operating
Partnership and their subsidiaries who have heretofore delivered to the
Representatives offers or indications of interest to purchase shares of Firm
Stock in form satisfactory to the Representatives, and that any allocation of
such Firm Stock among such persons will be made in accordance with timely
directions received by the Representatives from the Company; PROVIDED, that
under no circumstances will the Representatives or any Underwriter be liable to
the Company or to any such person for any action taken or omitted in good faith
in connection with such offering to employees and persons having business
relationships with the Company, the Operating Partnership and their
subsidiaries. It is further understood that any shares of such Firm Stock which
are not purchased by such

<PAGE>

persons will be offered by the Underwriters to the public upon the terms and
conditions set forth in the Prospectus.

5. DELIVERY OF AND PAYMENT FOR THE STOCK. Delivery of and payment
for the Firm Stock shall be made at the office of Lehman Brothers Inc., Three
World Financial Center, New York, New York 10285, at 10:00 A.M., New York City
time, on the fourth full business day following the date of this Agreement or at
such other date or place as shall be determined by agreement between the
Representatives and the Company. This date and time are sometimes referred to
as the "First Delivery Date." On the First Delivery Date, the Company shall
deliver or cause to be delivered certificates representing the Firm Stock to the
Representatives for the account of each Underwriter against payment to or upon
the order of the Company of the purchase price by wire transfer of federal same-
day funds to an account or accounts previously designated in writing to Lehman
Brothers Inc. by the Company. Time shall be of the essence, and delivery at the
time and place specified pursuant to this Agreement is a further condition of
the obligation of each Underwriter hereunder. Upon delivery, the Firm Stock
shall be registered in such names and in such denominations as the
Representatives shall request in writing not less than two full business days
prior to the First Delivery Date. For the purpose of expediting the checking
and packaging of the certificates for the Firm Stock, the Company shall make the
certificates representing the Firm Stock available for inspection by the
Representatives in New York, New York, not later than 2:00 P.M., New York City
time, on the business day prior to the First Delivery Date.

At any time on or before the thirtieth day after the date of this
Agreement, the option granted in Section 2 may be exercised by written notice
being given to the Company by the Representatives. Such notice shall set forth
the aggregate number of shares of Option Stock as to which the option is being
exercised, the names in which the shares of Option Stock are to be registered,
the denominations in which the shares of Option Stock are to be issued and the
date and time, as determined by the Representatives, when the shares of Option
Stock are to be delivered; PROVIDED, HOWEVER, that this date and time shall not
be earlier than the First Delivery Date nor earlier than the second business day
after the date on which the option shall have been exercised nor later than the
fourth business day after the date on which the option shall have been
exercised. The date and time the shares of Option Stock are delivered are
sometimes referred to as the "Second Delivery Date" and the First Delivery Date
and the Second Delivery Date are sometimes each referred to as a "Delivery
Date."

Delivery of and payment for the Option Stock shall be made at the
place specified in the first sentence of the first paragraph of this Section 5
(or at such other place as shall be determined by agreement between the
Representatives and the Company) at 10:00 A.M., New York City time, on the
Second Delivery Date. On the Second Delivery Date, the Company shall deliver or
cause to be delivered the certificates representing the Option Stock to the
Representatives for the account of each Underwriter against payment to or upon
the order of the Company of the purchase price by wire transfer of federal same-
day funds to an account or accounts previously

<PAGE>

designated to Lehman Brothers Inc. in writing by the Company. Time shall be of
the essence, and delivery at the time and place specified pursuant to this
Agreement is a further condition of the obligation of each Underwriter
hereunder. Upon delivery, the Option Stock shall be registered in such names
and in such denominations as the Representatives shall request in the aforesaid
written notice. For the purpose of expediting the checking and packaging of the
certificates for the Option Stock, the Company shall make the certificates
representing the Option Stock available for inspection by the Representatives in
New York, New York, not later than 2:00 P.M., New York City time, on the
business day prior to the Second Delivery Date.

6. FURTHER AGREEMENTS OF THE COMPANY. The Company agrees:

(a) To prepare the Prospectus in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b)
under the Securities Act not later than the Commission's close of
business on the second business day following the execution and
delivery of this Agreement or, if applicable, such earlier time as may
be required by Rule 430A(a)(3) under the Securities Act; to make no
further amendment or any supplement to the Registration Statement or
to the Prospectus except as permitted herein; to advise the
Representatives, promptly after it receives notice thereof, of the
time when any amendment to the Registration Statement has been filed
or becomes effective or any supplement to the Prospectus or any
amended Prospectus has been filed and to furnish the Representatives
with copies thereof; to advise the Representatives, promptly after it
receives notice thereof, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus, of the suspension of the
qualification of the Stock for offering or sale in any jurisdiction,
of the initiation or threatening of any proceeding for any such
purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or the Prospectus or for
additional information; and, in the event of the issuance of any stop
order or of any order preventing or suspending the use of any
Preliminary Prospectus or the Prospectus or suspending any such
qualification, to use promptly its best efforts to obtain its
withdrawal.

(b) To furnish promptly to each of the Representatives and to
counsel for the Underwriters a signed copy of the Registration
Statement as originally filed with the Commission, and each amendment
thereto filed with the Commission, including all consents and exhibits
filed therewith.

(c) To deliver promptly to the Representatives such number of
the following documents as the Representatives shall reasonably
request: (i) conformed copies of the Registration Statement as
originally filed with the Commission and each amendment thereto (in
each case excluding

<PAGE>

exhibits other than this Agreement) and (ii) each of the Preliminary
Prospectus, the Prospectus and any amended or supplemented Prospectus;
and, if the delivery of a prospectus is required at any time after the
Effective Time in connection with the offering or sale of the Stock or
any other securities relating thereto and if at such time any events
shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Prospectus is delivered, not
misleading, or, if for any other reason it shall be necessary to amend
or supplement the Prospectus in order to comply with the Securities
Act, to notify the Representatives and, upon their request, to prepare
and furnish without charge to each Underwriter and to any dealer in
securities as many copies as the Representatives may from time to time
reasonably request of an amended or supplemented Prospectus which will
correct such statement or omission or effect such compliance, and in
case any Underwriter is required to deliver a prospectus in connection
with sales of any of the Stock at any time nine months or more after
the Effective Time, upon request of the Representatives but at the
expense of such Underwriter, to prepare and deliver to such
Underwriter as many copies as the Representatives may reasonably
request of an amended or supplemented prospectus complying with
Section 10(a)(3) of the Securities Act.

(d) To file promptly with the Commission any amendment to the
Registration Statement or the Prospectus or any supplement to the
Prospectus that may, in the reasonable judgment of the Company or the
Representatives, be required by the Securities Act or requested by the
Commission.

(e) Prior to filing with the Commission any amendment to the
Registration Statement or supplement to the Prospectus or any
Prospectus pursuant to Rule 424 of the Rules and Regulations, to
furnish a copy thereof to the Representatives and counsel for the
Underwriters and obtain the consent of the Representatives to the
filing.

(f) As soon as practicable after the Effective Date but in any
event not later than 45 days after the end of the Company's fiscal
quarter in which the first anniversary date of the Effective Date
occurs, to make generally available to the Company's security holders
and to deliver to the Representatives an earning statement of the
Company and its subsidiaries (which need not be audited) complying
with Section 11(a) of the Securities Act and the Rules and Regulations
(including, at the option of the Company, Rule 158).

(g) For a period of five years following the Effective Date, to

<PAGE>

furnish to the Representatives copies of all materials furnished by
the Company to its security holders and all public reports and all
reports and financial statements furnished by the Company to the
principal national securities exchange upon which the Common Stock may
be listed pursuant to requirements of or agreements with such exchange
or to the Commission pursuant to the Exchange Act or any rule or
regulation of the Commission thereunder.

(h) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Stock for
offering and sale under the securities laws of such jurisdictions as
the Representatives may request and to comply with such laws so as to
permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of the Stock; PROVIDED, that in connection therewith the
Company shall not be required to take any action that would subject it
to income taxation in such jurisdictions, qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction.

(i) For a period of 180 days from the date of the Prospectus,
not to, directly or indirectly, offer for sale, sell or otherwise
dispose of (or enter into any transaction or device which is designed
to, or could be expected to, result in the disposition by any person
at any time in the future of) any shares of Common Stock (other than
the Stock offered hereby and shares issued pursuant to the Stock
Incentive Plan existing on the date hereof), or sell or grant options,
rights or warrants with respect to any shares of Common Stock (other
than the grant of options pursuant to the Stock Incentive Plan
existing on the date hereof), without the prior written consent of
Lehman Brothers Inc.

(j) Prior to the Effective Date, to apply for the listing of the
Stock on the New York Stock Exchange, and to use its best efforts to
complete that listing, subject only to official notice of issuance,
prior to the First Delivery Date.

(k) Prior to filing with the Commission any reports on Form SR
pursuant to Rule 463 of the Rules and Regulations, to furnish a copy
thereof to the counsel for the Underwriters and receive and consider
its comments thereon, and to deliver promptly to the Representatives a
signed copy of each report on Form SR filed by it with the Commission.

(l) To apply the net proceeds from the sale of the Stock being
sold by the Company as set forth in the Prospectus.

(m) To take such steps as shall be necessary to ensure that
neither the Company, the Operating Partnership nor any subsidiary
shall

<PAGE>

become an "investment company" within the meaning of such term under
the Investment Company Act of 1940, as amended, and the rules and
regulations of the Commission thereunder.

7. EXPENSES. The Company agrees to pay (a) the costs incident to
the authorization, issuance, sale and delivery of the Stock and any taxes
payable in that connection; (b) the costs incident to the preparation, printing
and filing under the Securities Act of the Registration Statement and any
amendments and exhibits thereto; (c) the costs of distributing the Registration
Statement as originally filed and each amendment thereto and any post-effective
amendments thereof (including, in each case, exhibits), any Preliminary
Prospectus, the Prospectus and any amendment or supplement to the Prospectus,
all as provided in this Agreement; (d) the costs of printing, photocopying and
distributing this Agreement and any other related documents in connection with
the offering, purchase, sale and delivery of the Stock; (e) the fees and
expenses (including reasonable attorneys' fees) incident to securing any
required review by the National Association of Securities Dealers, Inc. of the
terms of sale of the Stock; (f) any applicable listing or other fees; (g) the
fees and expenses of qualifying the Stock under the securities laws of the
several jurisdictions as provided in Section 6(h) and of preparing, printing and
distributing a Blue Sky Memorandum (including related fees and expenses of
counsel to the Underwriters); (h) all costs and expenses of the Underwriters,
including fees and disbursements of counsel for the Underwriters, incident to
the offer and sale of shares of the Stock by the Underwriters to employees and
persons having business relationships with the Company, the Operating
Partnership and their subsidiaries as described in Section 4; and (i) all other
costs and expenses incident to the performance of the obligations of the Company
under this Agreement; PROVIDED that, except as provided in this Section 7 and in
Section 12 the Underwriters shall pay their own costs and expenses, including
the costs and expenses of their counsel, any transfer taxes on the Stock which
they may sell and the expenses of advertising any offering of the Stock made by
the Underwriters.

8. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective
obligations of the Underwriters hereunder are subject to the accuracy, when made
and on each Delivery Date, of the representations and warranties of the Company
and the Operating Partnership contained herein, to the performance by the
Company of its obligations hereunder, and to each of the following additional
terms and conditions:

(a) The Registration Statement shall have become effective and
the Representatives shall have received notice thereof, not later than
the first full business day next following the date of this Agreement
or such later date as shall be consented to in writing by the
Representatives. The Prospectus shall have been timely filed with the
Commission in accordance with Section 6(a); no stop order suspending
the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission; and any request of the
Commission for inclusion of additional information in the Registration
Statement or the Prospectus or

<PAGE>

otherwise shall have been complied with.

(b) No Underwriter shall have discovered and disclosed to the
Company on or prior to such Delivery Date that the Registration
Statement or any amendment thereto contains an untrue statement of a
fact which, in the opinion of Hogan & Hartson L.L.P., counsel for the
Underwriters, is material or omits to state a fact which, in the
opinion of such counsel, is material and is required to be stated
therein or is necessary to make the statements therein not misleading
or that the Prospectus and any amendment or supplement thereto
contains an untrue statement of a fact which, in the opinion of Hogan
& Hartson L.L.P., counsel for the Underwriters, is material or omits
to state a fact which, in the opinion of such counsel, is material and
is required to be stated therein or is necessary to make the
statements, in light of the circumstances under which they were made,
not misleading.

(c) All corporate proceedings and other legal matters incident
to the authorization, form and validity of this Agreement, the
Formation Documents, the Stock, the Registration Statement and the
Prospectus, and all other legal matters and agreements relating to
this Agreement and the transactions contemplated hereby shall be
reasonably satisfactory in all material respects to counsel for the
Underwriters, and the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable
them to pass upon such matters.

(d) Latham & Watkins shall have furnished to the Representatives
its written opinion, as counsel to the Company, addressed to the
Underwriters and dated such Delivery Date, in form and substance
reasonably satisfactory to the Representatives, to the effect that:

(i) The Company is a corporation duly incorporated and
existing under and by virtue of the laws of the State of Maryland
and is in good standing with the SDAT. The Company has full
corporate power to conduct its business as described in the
Prospectus. Based solely on certificates from public officials,
the Company is duly qualified as a foreign corporation to
transact business and is in good standing in the State of
California;

(ii) The Operating Partnership is a limited partnership duly
formed and existing under and by virtue of the laws of the State
of Maryland and is in good standing with the SDAT. The Operating
Partnership has full power as a limited partnership to conduct
its business as described in the Prospectus. Based solely on
certificates from public officials, the Operating Partnership is
duly qualified as a foreign limited partnership to transact
business and is

<PAGE>

in good standing in the State of California;

(iii) The Company has an authorized capitalization
as set forth in the line items "Preferred Stock" and "Common
Stock" under the caption "Capitalization" in the Prospectus, and
all of the issued shares of stock of the Company (including the
shares of Stock being delivered on such Delivery Date) have been
duly and validly authorized and, assuming receipt of
consideration therefor as provided in the resolutions authorizing
issuance thereof of the board of directors of the Company, are
validly issued, are fully paid and non-assessable and conform in
all material respects to the description thereof contained in the
Prospectus under the caption "Capital Stock"; and all of the
issued stock or Partnership Interests of the Operating
Partnership and of each subsidiary of the Company have been duly
and validly authorized, assuming receipt of consideration
therefor as provided in the resolutions authorizing issuance
thereof of the board of directors of the Company, as general
partner of the Operating Partnership, or by the board of
directors of such subsidiary, are fully paid and (except as set
forth in the Prospectus) are owned of record by the Company; and
to the knowledge of such counsel, based solely on an officer's
certificate, are owned free and clear of all liens, encumbrances,
equities or claims;

(iv) Except as set forth in the Prospectus, there are
no preemptive or other rights to subscribe for or to purchase,
nor any restriction upon the voting or transfer of, any shares of
the Stock pursuant to the Company's charter or by-laws or any
agreement or other instrument to which the Company is a party
known to such counsel;

(v) Except as set forth in the Prospectus, there are
no preemptive or other rights to subscribe for or to purchase,
nor any restriction upon the voting or transfer of, any Units
pursuant to the Operating Partnership Agreement or any agreement
or other instrument to which the Operating Partnership is a party
known to such counsel;

(vi) To such counsel's knowledge based solely on an
officer's certificate and review of attorney letters furnished to
the Company's independent public accountants in connection with
their audit of financial statements, and other than as set forth
in the Prospectus, there are no legal or governmental proceedings
pending to which the Company or the Operating Partnership is a
party or of which any property or assets of the Company or the
Operating Partnership is the subject which, if determined
adversely

<PAGE>

to the Company or the Operating Partnership, would have a
Material Adverse Eeffect; and, to such counsel's knowledge, based
solely on an officer's certificate, no such proceedings are
threatened or contemplated by governmental authorities or
threatened by others.

(vii) The Registration Statement was declared
effective under the Securities Act as of the date and time
specified in such opinion, the Prospectus was filed with the
Commission pursuant to the subparagraph of Rule 424(b) of the
Rules and Regulations specified in such opinion on the date
specified therein and no stop order suspending the effectiveness
of the Registration Statement has been issued and, to the
knowledge of such counsel, no proceeding for that purpose is
pending or threatened by the Commission;

(viii) The Registration Statement at the date it
became effective and at the date of any amendment thereto made by
the Company prior to such Delivery Date (other than the financial
statements and related schedules and other financial and
statistical information and data (collectively, "Financial Data")
included therein, as to which such counsel need express no
opinion) complied, and the Prospectus as of its date and at the
date of any supplement thereto made by the Company prior to such
Delivery Date (other than the Financial Data, as to which counsel
need express no opinion) complied as to form in all material
respects with the requirements of the Securities Act and the
Rules and Regulations;

(ix) The statements contained in the Prospectus under
the caption "FEDERAL INCOME TAX CONSEQUENCES" AND "RISK FACTORS -
- ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT; OTHER TAX
LIABILITIES," insofar as they describe federal statutes, rules
and regulations, constitute a fair summary thereof and the
opinion of such counsel filed as Exhibit 8.1 to the Registration
Statement is confirmed and the Underwriters may rely upon such
opinion as if it were addressed to them. The information in the
Prospectus under the captions "CAPITAL STOCK" and "SHARES
AVAILABLE FOR FUTURE SALE," to the extent that it constitutes
matters of law or legal conclusions, has been reviewed by such
counsel and is correct in all material respects. The statements
contained in the Prospectus under the heading "CERTAIN PROVISIONS
OF MARYLAND LAW AND THE COMPANY'S CHARTER AND BYLAWS," insofar as
they describe Maryland statutory law are correct in all material
respects;

(x) To such counsel's knowledge, there are no
contracts or

<PAGE>

other documents which are required to be described in the
Prospectus or filed as exhibits to the Registration Statement by
the Securities Act or by the Rules and Regulations which have not
been described or filed as exhibits to the Registration
Statement;

(xi) This Agreement has been duly authorized, executed and
delivered by the Company and the Operating Partnership;

(xii) The issuance and sale of the shares of Stock being
delivered on such Delivery Date by the Company and the compliance by
the Company and the Operating Partnership with all of the provisions
of this Agreement and the consummation of the Formation Transactions
by the Company and the Operating Partnership will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument filed as an exhibit to
the Registration Statement, any Formation Document or any management
contract related to a Managed Property, except for such conflicts,
breaches, violations or defaults that (i) would not have a Material
Adverse Effect, (ii) relate to mortgage indebtedness to be repaid in
full with a portion of the net proceeds from the sale of the Stock and
the Mortgage Financing as reflected in the "Use of Proceeds" section
of the Prospectus, or (iii) relate to agreements or instruments that
are terminable at will or upon 30 days notice, nor will such actions
result in any violation of the provisions of the charter or by-laws of
the Company or the Agreement of Limited Partnership of the Operating
Partnership or any statute or any order, rule or regulation known to
such counsel of any court or governmental agency or body having
jurisdiction over the Company or the Operating Partnership or any of
their properties or assets; and, except for (a) the registration of
the Stock under the Securities Act, such consents, approvals,
authorizations, registrations or qualifications as may be required
under the Exchange Act and applicable state and foreign securities
laws in connection with the purchase and distribution of the Stock by
the Underwriters, (b) consents, approvals, authorizations, orders,
filings or registrations that will be completed prior to the Closing
Date and (c) such consents, approvals, authorizations, orders, filing
or registrations, the absence of which, individually or in the
aggregate would not have a Material Adverse Effect, no consent,
approval, authorization or order of, or filing or registration with,
any such court or governmental agency or body or any other person is
required for the execution, delivery and performance of this Agreement
by the Company and the Operating Partnership, and the consummation of
the Formation Transactions;

<PAGE>

(xiii) To such counsel's knowledge based solely on a
certificate from a officer of the Company, other than as
disclosed in the Prospectus, there are no contracts, agreements
or understandings between the Company and any person granting
such person the right to require the Company to file a
registration statement under the Securities Act with respect to
any securities of the Company owned or to be owned by such person
or to require the Company to include such securities in the
securities registered pursuant to the Registration Statement or
in any securities being registered pursuant to any other
registration statement filed by the Company under the Securities
Act;

(xiv) Neither the Company, the Operating Partnership nor
any of their subsidiaries is, after giving effect to the
Formation Transactions, an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended;

(xv) The issuances of securities described in Items 31 and
32 of the Registration Statement were not at the time of issue,
and are not as of the Delivery Date, required to be registered
under the Securities Act;

(xvi) The transfer of interests pursuant to the Formation
Documents does not violate the limited liability agreement or
limited partnership agreement, as the case may be, of any
Predecessor Entity.

(xvii) The offer and sale of the Units on or prior to the
First Delivery Date did not result in any violation of any
statute or any order, rule or regulation (including, without
limitation, federal and state securities laws) known to such
counsel of any court or governmental body having jurisdiction
over the Company or the Operating Partnership or any of their
properties or assets. The terms of the Units conform in all
material respects to all statements and descriptions related
thereto contained in the Prospectus.

In rendering such opinion, such counsel may (i) state that its
opinion, as applicable, is limited to matters governed by the Federal
securities and tax laws of the United States of America, the corporate
and partnership laws of the State of California and the State of
Maryland and that such counsel is not admitted in the State of
Maryland; and (ii) rely (to the extent such counsel deems proper and
specifies in its opinion), as to matters involving the application of
the laws of the State of Maryland upon the opinion of Ballard Spahr
Andrews & Ingersoll, Baltimore, Maryland, PROVIDED that such Maryland
counsel furnishes a copy of its opinion to the

<PAGE>

Representatives. Such counsel shall also have furnished to the
Representatives a written statement, addressed to the Underwriters and
dated such Delivery Date, in form and substance satisfactory to the
Representatives, to the effect that (x) such counsel has acted as
counsel to the Company in connection with the preparation of the
Registration Statement and participated in conferences with certain
officers and representatives of the Company and the Operating
Partnership, representatives of Ernst & Young LLP and representatives
of the Underwriters at which the Registration Statement and the
Prospectus and related matters were discussed and (y) during the
course of such counsel's participation (relying as to factual matters
as to materiality to a large extent upon the statements of officers
and other representatives of the Company), no facts have come to the
attention of such counsel which led it to believe that (i) the
Registration Statement (other than the Financial Data and data from
the C&W Market Study, as to which such counsel need make no
statement), as of the Effective Date, contained any untrue statement
of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein
not misleading, or (ii) the Prospectus as of the Delivery Date (other
than the Financial Data and data from the C&W Market Study, as to
which such counsel need make no statement) contains any untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The foregoing opinion and statement may be
qualified by a statement to the effect that such counsel does not
assume any responsibility for the accuracy, completeness or fairness
of the statements contained in the Registration Statement or the
Prospectus and has not made any independent judgment, check or
verification thereof except to the extent set forth in paragraph (ix)
above.

(e) The Representatives shall have received from Hogan & Hartson
L.L.P., counsel for the Underwriters, such opinion or opinions, dated
such Delivery Date, with respect to the issuance and sale of the
Stock, the Registration Statement, the Prospectus and other related
matters as the Representatives may reasonably require, and the Company
shall have furnished to such counsel such documents as they reasonably
request for the purpose of enabling them to pass upon such matters.

(f) At the time of execution of this Agreement, the
Representatives shall have received from Ernst & Young LLP a letter,
in form and substance satisfactory to the Representatives, addressed
to the Underwriters and dated the date hereof (i) confirming that they
are independent public accountants within the meaning of the
Securities Act and are in compliance with the applicable requirements
relating to the

<PAGE>

qualification of accountants under Rule 2-01 of Regulation S-X of the
Commission and (ii) stating, as of the date hereof (or, with respect
to matters involving changes or developments since the respective
dates as of which specified financial information is given in the
Prospectus, as of a date not more than five days prior to the date
hereof), the conclusions and findings of such firm with respect to the
financial information and other matters ordinarily covered by
accountants' "comfort letters" to underwriters in connection with
registered public offerings.

(g) With respect to the letter of Ernst & Young LLP referred to
in the preceding paragraph and delivered to the Representatives
concurrently with the execution of this Agreement (the "initial
letter"), the Company shall have furnished to the Representatives a
letter (the "bring-down letter") of such accountants, addressed to the
Underwriters and dated such Delivery Date (i) confirming that they are
independent public accountants within the meaning of the Securities
Act and are in compliance with the applicable requirements relating to
the qualification of accountants under Rule 2-01 of Regulation S-X of
the Commission, (ii) stating, as of the date of the bring-down letter
(or, with respect to matters involving changes or developments since
the respective dates as of which specified financial information is
given in the Prospectus, as of a date not more than five days prior to
the date of the bring-down letter), the conclusions and findings of
such firm with respect to the financial information and other matters
covered by the initial letter and (iii) confirming in all material
respects the conclusions and findings set forth in the initial letter.

(h) The Company shall have furnished to the Representatives a
letter of Cushman & Wakefield of California, Inc., addressed to the
Underwriters and dated such Delivery Date (i) confirming that they are
independent real estate service experts retained by the Company, and
(ii) confirming the conclusions and findings of such firm with respect
to the information and other matters contained in the Prospectus
attributed to them.

(i) The Company shall have furnished to the Representatives a
certificate, dated such Delivery Date, of its Chairman of the Board,
its President or a Vice President and its chief financial officer
stating on behalf of the Company that:

(i) The representations, warranties and agreements of
the Company in Section 1 are true and correct as of such Delivery
Date; the Company has complied with all its agreements contained
herein; and the conditions set forth in Sections 8(a) and 8(l)
have been fulfilled; and

<PAGE>

(ii) They have carefully examined the Registration
Statement and the Prospectus and, in their opinion (A) as of the
Effective Date, the Registration Statement did not include any
untrue statement of a material fact and did not omit to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading, (B) the Prospectus as of
the Delivery Date did not include any untrue statement of a
material fact and did not omit to state a material fact required
to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading and (C) since the Effective Date no event has occurred
which should have been set forth in a supplement or amendment to
the Registration Statement or the Prospectus.

(j) (i) Neither the Company, the Operating Partnership nor any
of their subsidiaries shall have sustained since the date of the
latest audited financial statements included in the Prospectus any
loss or interference with their business from fire, explosion, flood
or other calamity, whether or not covered by insurance, or from any
labor dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the Prospectus or (ii)
since such date there shall not have been any change in the stock,
partnership interests or long-term debt of the Company, the Operating
Partnership or any of their subsidiaries or any change, or any
development involving a prospective change in, or affecting the
general affairs, management, financial position, stockholders' equity,
partners' equity or results of operations of the Company, the
Operating Partnership and their subsidiaries, taken as a whole,
otherwise than as set forth or contemplated in the Prospectus, the
effect of which, in any such case described in clause (i) or (ii), is,
in the judgment of the Representatives, so material and adverse as to
make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Stock being delivered on such Delivery
Date on the terms and in the manner contemplated in the Prospectus.

(k) Subsequent to the execution and delivery of this Agreement
there shall not have occurred any of the following: (i) trading in
securities generally on the New York Stock Exchange, Inc. or the
American Stock Exchange, Inc. or on the Nasdaq Stock Market, Inc., or
trading in any securities of the Company on any exchange or on the
Nasdaq Stock Market, Inc., shall have been suspended or minimum prices
shall have been established on any such exchange or such market by the
Commission, by such exchange or by any other regulatory body or
governmental authority having jurisdiction, (ii) a banking moratorium
shall have been declared by Federal, New York or California
authorities, (iii) the United States shall have become engaged in
hostilities, there shall have been an escalation in hostilities
involving the United States or there shall

<PAGE>

have been a declaration of a national emergency or war by the United
States or (iv) there shall have occurred such a material adverse
change in general economic, political or financial conditions (or the
effect of international conditions on the financial markets in the
United States shall be such) as to make it, in the judgment of a
majority in interest of the several Underwriters, impracticable or
inadvisable to proceed with the public offering or delivery of the
Stock being delivered on such Delivery Date on the terms and in the
manner contemplated in the Prospectus.

(l) The New York Stock Exchange, Inc. shall have approved the
Stock for listing, subject only to official notice of issuance and
evidence of satisfactory distribution.

(m) All of the Formation Transactions shall have occurred prior
to, or shall occur simultaneously with, the First Delivery Date.

(n) All of the representations and warranties contained in the
agreements set forth on Schedule 2 shall be true and correct in all
material respects, and all of the conditions to closing contained in
the agreements set forth on Schedule 2 shall have been satisfied or
waived, with the waiver of such conditions having been approved by the
Underwriters.

(o) The Company shall have delivered to the Underwriters under
separate cover at or prior to the Delivery Date any and all officers'
and other certificates delivered by the Company, the Operating
Partnership, their subsidiaries or its affiliates to Latham & Watkins,
Ballard Spahr Andrews & Ingersoll and Ernst & Young LLP on which such
firms relied in rendering opinions or in preparing financial
statements in connection with the Formation Transactions, including
the offering of Stock.

(p) Each of Messrs. Ziman and Coleman and NAMIZ, Inc. shall have
delivered lock-up agreements to Lehman Brothers Inc., pursuant to
which each such person shall agree not to, directly or indirectly,
offer for sale, sell or otherwise dispose of (or enter into any
transaction or device which is designed to, or could be expected to,
result in the disposition by any person at any time in the future of)
any shares of Common Stock or Units for a period of two (2) years from
the date of the Prospectus, without the prior written consent of
Lehman Brothers Inc.

All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Underwriters.

<PAGE>

9. INDEMNIFICATION AND CONTRIBUTION.

(a) The Company and the Operating Partnership, jointly and
severally, shall indemnify and hold harmless each Underwriter, its officers and
employees and each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any loss, claim, damage or liability, joint or several, or any
action in respect thereof (including, but not limited to, any loss, claim,
damage, liability or action relating to purchases and sales of Stock), to which
that Underwriter, officer, employee or controlling person may become subject,
under the Securities Act or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained (A) in any Preliminary
Prospectus, the Registration Statement or the Prospectus or in any amendment or
supplement thereto or (B) in any blue sky application or other document prepared
or executed by the Company (or based upon any written information furnished by
the Company) specifically for the purpose of qualifying any or all of the Stock
under the securities laws of any state or other jurisdiction (any such
application, document or information being hereinafter called a "Blue Sky
Application"), (ii) the omission or alleged omission to state in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any amendment or
supplement thereto, or in any Blue Sky Application any material fact required to
be stated therein or necessary to make the statements therein not misleading or
(iii) any act or failure to act or any alleged act or failure to act by any
Underwriter in connection with, or relating in any manner to, the Stock or the
offering contemplated hereby, and which is included as part of or referred to in
any loss, claim, damage, liability or action arising out of or based upon
matters covered by clause (i) or (ii) above (PROVIDED that the Company and the
Operating Partnership shall not be liable under this clause (iii) to the extent
that is determined in a final judgment by a court of competent jurisdiction that
such loss, claim, damage, liability or action resulted directly from any such
acts or failures to act undertaken or omitted to be taken by such Underwriter
through its gross negligence or willful misconduct) and shall reimburse each
Underwriter and each such officer, employee or controlling person promptly upon
demand for any legal or other expenses reasonably incurred by that Underwriter,
officer, employee or controlling person in connection with investigating or
defending or preparing to defend against any such loss, claim, damage, liability
or action as such expenses are incurred; PROVIDED, HOWEVER, that the Company and
the Operating Partnership shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of, or is
based upon, any untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus, or in any such amendment or supplement, or in any Blue Sky
Application, in reliance upon and in conformity with written information
specified in Section 9(e) furnished to the Company through the Representatives
by or on behalf of any Underwriter specifically for inclusion therein; PROVIDED
FURTHER, that the foregoing indemnity with respect to any Preliminary Prospectus
shall not inure to the benefit of any Underwriter from whom the person asserting
any such loss, claim, damage or liability purchased the Stock which is the
subject thereof if such person did not receive a copy of the Prospectus (or the

<PAGE>

Prospectus as supplemented) at or prior to the confirmation of the sale of such
Stock to such person in any case where such delivery is required by the
Securities Act and the untrue statement or omission of a material fact contained
in such Preliminary Prospectus was corrected in the Prospectus (or the
Prospectus as supplemented). The foregoing indemnity agreement is in addition
to any liability which the Company or the Operating Partnership may otherwise
have to any Underwriter or to any officer, employee or controlling person of
that Underwriter.

The Company and the Operating Partnership, jointly and severally, also
will indemnify and hold harmless the Independent Underwriter, its officers and
employees and each person, if any, who controls the Independent Underwriter
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, from and against any and all losses, claims, damages,
liabilities and judgments incurred as a result of the Independent Underwriter's
participation as a "qualified independent underwriter" within the meaning of
Rule 2720 of the Conduct Rules of the National Association of Securities
Dealers, Inc. in connection with the offering of the Stock, except for any
losses, claims, damages, liabilities and judgments resulting form the
Independent Underwriter's or such controlling person's willful misconduct or
gross negligence.

(b) Each Underwriter, severally and not jointly, shall indemnify and
hold harmless the Company, the Operating Partnership, each of their respective
officers and employees, each of the Company's directors (including any person
who, with his or her consent, is named in the Registration Statement as about to
become a director of the Company), and each person, if any, who controls the
Company within the meaning of the Securities Act, from and against any loss,
claim, damage or liability, joint or several, or any action in respect thereof,
to which the Company or any such director, officer, employee or controlling
person may become subject, under the Securities Act or otherwise, insofar as
such loss, claim, damage, liability or action arises out of, or is based upon,
(i) any untrue statement or alleged untrue statement of a material fact
contained (A) in any Preliminary Prospectus, the Registration Statement or the
Prospectus or in any amendment or supplement thereto, or (B) in any Blue Sky
Application or (ii) the omission or alleged omission to state in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or in any amendment or
supplement thereto, or in any Blue Sky Application any material fact required to
be stated therein or necessary to make the statements therein not misleading,
but in each case only to the extent that the untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information specified in Section 9(e) furnished to the
Company through the Representatives by or on behalf of that Underwriter
specifically for inclusion therein, and shall reimburse the Company and any such
director, officer, employee or controlling person for any legal or other
expenses reasonably incurred by the Company or any such director, officer,
employee or controlling person in connection with investigating or defending or
preparing to defend against any such loss, claim, damage, liability or action as
such expenses are incurred. The foregoing indemnity agreement is in addition to
any liability which any Underwriter may otherwise have to the Company or any
such director, officer, employee or controlling person.

(c) Promptly after receipt by an indemnified party under this Section
9 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 9, notify the indemnifying party in
writing of the claim or the commencement of that action; PROVIDED, HOWEVER, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 9 except to the extent it has
been materially prejudiced by such failure and, PROVIDED FURTHER, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 9.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party

<PAGE>

thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 9 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; PROVIDED, HOWEVER, that the Representatives
shall have the right to employ a single counsel to represent jointly the
Representatives and those other Underwriters and their respective officers,
employees and controlling persons who may be subject to liability arising out of
any claim in respect of which indemnity may be sought by the Underwriters
against the Company or the Operating Partnership under this Section 9 if, in the
reasonable judgment of the Representatives, it is advisable for the
Representatives and those Underwriters, officers, employees and controlling
persons to be jointly represented by separate counsel, and in that event the
fees and expenses of such separate counsel shall be paid by the Company or the
Operating Partnership; PROVIDED FURTHER, that, if indemnity is sought pursuant
to the second paragraph of Section 9(a), then, in addition to such counsel for
the indemnified parties, the indemnifying party shall be liable for the
reasonable fees and expenses of not more than one separate counsel (in addition
to any necessary local counsel) for the Independent Underwriter in its capacity
as a "qualified independent underwriter," its officers and employees and all
persons, if any, who control the Independent Underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act, if, in the
reasonable judgment of the Independent Underwriter there may exist a conflict of
interest between the Independent Underwriter and the other indemnified parties.
In the case of any such separate counsel for the Independent Underwriter and
such control persons of the Independent Underwriter, such counsel shall be
designated in writing by the Independent Underwriter. No indemnifying party
shall (i) without the prior written consent of the indemnified parties (which
consent shall not be unreasonably withheld or delayed), settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified parties are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each indemnified
party from all liability arising out of such claim, action, suit or proceeding,
or (ii) be liable for any settlement of any such action effected without its
written consent (which consent shall not be unreasonably withheld or delayed),
but if settled with the consent of the indemnifying party or if there be a final
judgment of the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.

(d) If the indemnification provided for in this Section 9 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 9(a) in respect of any loss, claim, damage or liability, or
any action in respect thereof, referred to therein, then each indemnifying party
shall, in lieu of indemnifying such indemnified party, contribute to the amount
paid or payable by such indemnified party as a result of such loss, claim,
damage or liability, or action in respect thereof, (i)

<PAGE>

in such proportion as shall be appropriate to reflect the relative benefits
received by the Company and the Operating Partnership on the one hand and the
Underwriters on the other hand from the offering of the Stock or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company and
the Operating Partnership on the one hand and the Underwriters on the other hand
with respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Operating Partnership on the one hand and the Underwriters on the other hand
with respect to such offering shall be deemed to be in the same proportion as
the total net proceeds from the offering of the Stock purchased under this
Agreement (before deducting expenses) received by the Company and the Operating
Partnership, on the one hand, and the total underwriting discounts and
commissions received by the Underwriters with respect to the shares of the Stock
purchased under this Agreement and any financial advisory fees received by any
Underwriter, on the other hand, bear to the total gross proceeds from the
offering of the shares of the Stock under this Agreement, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault
shall be determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company and the Operating
Partnership or the Underwriters, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission. For purposes of the preceding two sentences, the net
proceeds deemed to be received by the Company shall be deemed to be also for the
benefit of the Operating Partnership and information supplied by the Company
shall also be deemed to have been supplied by the Operating Partnership. The
Company and the Underwriters agree that Dean Witter Reynolds Inc. will not
receive any additional benefits hereunder for serving as the Independent
Underwriter in connection with the offering and sale of the Stock. The Company,
the Operating Partnership and the Underwriters agree that it would not be just
and equitable if contributions pursuant to this Section 9(d) were to be
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to herein. The amount
paid or payable by an indemnified party as a result of the loss, claim, damage
or liability, or action in respect thereof, referred to above in this Section
9(d) shall be deemed to include, for purposes of this Section 9(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 9(d), no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at which the Stock
underwritten by it and distributed to the public was offered to the public
exceeds the amount of any damages which such Underwriter has otherwise paid or
become liable to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute as provided in
this Section 9(d) are several in proportion to their respective underwriting
obligations and not joint.

<PAGE>

(e) The Underwriters severally confirm and the Company and the
Operating Partnership acknowledge that the statements with respect to the public
offering of the Stock by the Underwriters set forth on the cover page of, the
legend concerning over-allotments on the inside front cover page of, under the
caption "Underwriting" in and concerning the affiliation of Lehman Brothers
Holdings, Inc. with Lehman Brothers Inc. in the Prospectus are correct and
constitute the only information concerning such Underwriters furnished in
writing to the Company and the Operating Partnership by or on behalf of the
Underwriters specifically for inclusion in the Registration Statement and the
Prospectus.

10. DEFAULTING UNDERWRITERS.

If, on either Delivery Date, any Underwriter defaults in the
performance of its obligations under this Agreement, the remaining non-
defaulting Underwriters shall be obligated to purchase the Stock which the
defaulting Underwriter agreed but failed to purchase on such Delivery Date in
the respective proportions which the number of shares of the Firm Stock set
forth opposite the name of each remaining non-defaulting Underwriter in Schedule
1 hereto bears to the total number of shares of the Firm Stock set forth
opposite the names of all the remaining non-defaulting Underwriters in Schedule
1 hereto; PROVIDED, HOWEVER, that the remaining non-defaulting Underwriters
shall not be obligated to purchase any of the Stock on such Delivery Date if the
total number of shares of the Stock which the defaulting Underwriter or
Underwriters agreed but failed to purchase on such date exceeds 9.09% of the
total number of shares of the Stock to be purchased on such Delivery Date, and
any remaining non-defaulting Underwriter shall not be obligated to purchase more
than 110% of the number of shares of the Stock which it agreed to purchase on
such Delivery Date pursuant to the terms of Section 2. If the foregoing
maximums are exceeded, the remaining non-defaulting Underwriters, or those other
underwriters satisfactory to the Representatives who so agree, shall have the
right, but shall not be obligated, to purchase, in such proportion as may be
agreed upon among them, all the Stock to be purchased on such Delivery Date. If
the remaining Underwriters or other underwriters satisfactory to the
Representatives do not elect to purchase the shares which the defaulting
Underwriter or Underwriters agreed but failed to purchase on such Delivery Date,
this Agreement (or, with respect to the Second Delivery Date, the obligation of
the Underwriters to purchase, and of the Company to sell, the Option Stock)
shall terminate without liability on the part of any non-defaulting Underwriter
or the Company, except that the Company will continue to be liable for the
payment of expenses to the extent set forth in Sections 7 and 12. As used in
this Agreement, the term "Underwriter" includes, for all purposes of this
Agreement unless the context requires otherwise, any party not listed in
Schedule 1 hereto who, pursuant to this Section 10, purchases Firm Stock which a
defaulting Underwriter agreed but failed to purchase.

Nothing contained herein shall relieve a defaulting Underwriter of any
liability it may have to the Company for damages caused by its default. If
other underwriters are obligated or agree to purchase the Stock of a defaulting
or withdrawing Underwriter, either the Representatives or the Company may
postpone the Delivery Date for up to seven full business days in order to effect
any changes that in the opinion of counsel for the Company or counsel for the
Underwriters may be necessary in the Registration Statement, the Prospectus or
in any other document or arrangement.

11. TERMINATION. The obligations of the Underwriters hereunder may
be terminated by the Representatives by notice given to and received by the
Company prior to delivery of and payment for the Firm Stock if, prior to that
time, any of the events described in Sections 8(j) or 8(k), shall have occurred
or if the Underwriters shall decline to purchase the Stock for any reason
permitted under this Agreement.

12. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the Company shall
fail to tender the Stock for delivery to the Underwriters by reason of any
failure, refusal

<PAGE>

or inability on the part of the Company or the Operating Partnership to perform
any agreement on its part to be performed, or because any other condition of the
Underwriters' obligations hereunder required to be fulfilled by the Company or
the Operating Partnership is not fulfilled (other than the conditions set forth
in Section 8(k)), the Company and the Operating Partnership will reimburse the
Underwriters for all reasonable out-of-pocket expenses (including fees and
disbursements of counsel) incurred by the Underwriters in connection with this
Agreement and the proposed purchase of the Stock, and upon demand the Company
and the Operating Partnership shall pay the full amount thereof to the
Representatives. If this Agreement is terminated pursuant to Section 10 by
reason of the default of one or more Underwriters, neither the Company nor the
Operating Partnership shall be obligated to reimburse any defaulting Underwriter
on account of those expenses.

13. NOTICES, ETC. All statements, requests, notices and agreements
hereunder shall be in writing, and:

(a) if to the Underwriters, shall be delivered or sent by mail,
telex or facsimile transmission to Lehman Brothers Inc., Three World
Financial Center, New York, New York 10285, Attention: Syndicate
Department (Fax: 212-526-6588), with a copy, in the case of any notice
pursuant to Section 9(d), to the Director of Litigation, Office of the
General Counsel, Lehman Brothers Inc., Three World Financial Center,
10th Floor, New York, NY 10285;

(b) if to the Company or to the Operating Partnership, shall be
delivered or sent by mail, telex or facsimile transmission to the
address of the Company set forth in the Registration Statement,
Attention: Richard S. Ziman (Fax: (310) 274-6218);

PROVIDED, HOWEVER, that any notice to an Underwriter pursuant to Section 9(d)
shall be delivered or sent by mail, telex or facsimile transmission to such
Underwriter at its address set forth in its acceptance telex to the
Representatives, which address will be supplied to any other party hereto by the
Representatives upon request. Any such statements, requests, notices or
agreements shall take effect at the time of receipt thereof. The Company and
the Operating Partnership shall be entitled to act and rely upon any request,
consent, notice or agreement given or made on behalf of the Underwriters by
Lehman Brothers Inc. on behalf of the Representatives.

14. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall
inure to the benefit of and be binding upon the Underwriters, the Company and
the Operating Partnership. This Agreement and the terms and provisions hereof
are for the sole benefit of only those persons, except that (A) the
representations, warranties, indemnities and agreements of the Company and the
Operating Partnership contained in this Agreement shall also be deemed to be for
the benefit of the person or persons, if any, who control any Underwriter or the
Independent Underwriter within the meaning of Section 15 of the Securities Act
and (B) the indemnity agreement of the Underwriters

<PAGE>

contained in Section 9(b) of this Agreement shall be deemed to be for the
benefit of officers, employees and directors of the Company and the Operating
Partnership, (including persons named in the Registration Statement with their
consent as about to become a director of the Company) and any person controlling
the Company within the meaning of Section 15 of the Securities Act. Nothing in
this Agreement is intended or shall be construed to give any person, other than
the persons referred to in this Section 14, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision contained
herein.

15. SURVIVAL. The respective indemnities, representations,
warranties and agreements of the Company, the Operating Partnership and the
Underwriters contained in this Agreement or made by or on behalf on them,
respectively, pursuant to this Agreement, shall survive the delivery of and
payment for the Stock and shall remain in full force and effect, regardless of
any investigation made by or on behalf of any of them or any person controlling
any of them.

16. DEFINITION OF THE TERMS "BUSINESS DAY" AND "SUBSIDIARY." For
purposes of this Agreement, (a) "business day" means any day on which the New
York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the
meaning set forth in Rule 405 of the Rules and Regulations and, when used in
reference to subsidiaries of the Company or the Operating Partnership, includes
the entities listed on Schedule 4.

17. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAWS THEREOF.

18. COUNTERPARTS. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.

19. HEADINGS. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.

If the foregoing correctly sets forth the agreement among the Company,
the Operating Partnership and the Underwriters, please indicate your acceptance
in the space provided for that purpose below.

Very truly yours,

ARDEN REALTY GROUP, INC.

By:
Name:
Title:

<PAGE>

ARDEN REALTY GROUP LIMITED
PARTNERSHIP, the Operating Partnership

By: Arden Realty Group, Inc., its
General Partner

By:
Name:
Title:

Accepted:

LEHMAN BROTHERS INC.
ALEX. BROWN & SONS INCORPORATED
DEAN WITTER REYNOLDS INC.
A.G. EDWARDS & SONS, INC.
SMITH BARNEY INC.
EVEREN SECURITIES INC.
LEGG MASON WOOD WALKER INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.

For themselves and as Representatives
of the several Underwriters named
in Schedule 1 hereto

By:
Lehman Brothers Inc.

By:
AUTHORIZED REPRESENTATIVE

<PAGE>

SCHEDULE 1

Number of
Underwriters Shares
- ------------ --------

Lehman Brothers Inc.
Alex. Brown & Sons Incorporated
Dean Witter Reynolds Inc.
A.G. Edwards & Sons, Inc.
Smith Barney Inc.
EVEREN Securities, Inc.
Legg Mason Wood Walker Incorporated
Raymond James & Associates, Inc.
--------
Total --------

<PAGE>

SCHEDULE 2

FORMATION DOCUMENTS

1. Cash Option Agreements

(a) Broad Base Investments Two, LLC
(b) CIC Equities, Inc.
(c) LA Office Fund, L.P.
(d) LA Office Properties II, L.P.
(e) TJB Investments, Inc.
(f) Velocity One, Inc.
(g) Robert Coleman
(h) David Gernsbacher
(i) Murray H. Niedorf

2. Contribution Agreements between the Company and

(a) Mr. Richard Ziman
(b) Mr. Victor Coleman
(c) Arden Realty Group, Inc.
(d) Arden Century Associates
(e) Arden LAOP Two, LLC
(f) Arden Sawtelle Associates
(g) Coleman Enterprises, Inc.
(h) Gilbert Trust
(i) Intercity Buildings Associates
(j) Metropolitan Falls Partners
(k) Montour Realty Associates
(l) Ziman Realty Partners
(m) Michele Byer
(n) Jonathan Glaser

3. Property Contribution Agreements between the Company and

(a) Anaheim Properties
(b) Gilbert Trust

4. Agreement of Limited Partnership of the Operating Partnership

5. Mortgage Financing Agreement

6. Miscellaneous Rights Agreement between the Company and the Participants

<PAGE>

SCHEDULE 3

LIST OF PREDECESSOR ENTITIES

Arden Realty Group, Inc., a California corporation
Arden Broadway Associates, LLC, a California LLC
Bristol Encino Associates, LLC, a Nevada LLC
222 Harbor Associates, LLC, a Nevada LLC
Century Center Associates, L.P., a California limited partnership
1950 Sawtelle Associates, L.P., a California limited partnership
5000 Spring Associates, LLC, a Nevada LLC
LAOP IV, LLC, a Nevada LLC
Beverly Ventura Associates, L.P., a California limited partnership
LAOP V, LLC, a Nevada LLC

<PAGE>

ARDEN REALTY GROUP, INC.

ARTICLES OF AMENDMENT AND RESTATEMENT

FIRST: Arden Realty Group, Inc., a Maryland corporation (the
"Corporation"), desires to amend and restate its charter (the "Charter") as
currently in effect and as hereinafter amended.

SECOND: The following provisions are all the provisions of the
Charter currently in effect and as hereinafter amended:

ARTICLE I

INCORPORATOR

The undersigned, James J. Hanks, Jr., whose address is c/o Ballard
Spahr Andrews & Ingersoll, 300 East Lombard Street, Baltimore, Maryland 21202,
being at least 18 years of age, does hereby form a corporation under the general
laws of the State of Maryland.

ARTICLE II

NAME

The name of the corporation (the "Corporation") is:
Arden Realty, Inc.

ARTICLE III

PURPOSE

The purposes for which the Corporation is formed are to engage in any
lawful act or activity (including, without limitation or obligation, engaging in
business as a real estate investment trust under the Internal Revenue Code of
1986, as amended, or any successor statute (the "Code")) for which corporations
may be organized under the general laws of the State of Maryland as now or
hereafter in force. For purposes of these Articles, "REIT" means a real

<PAGE>

estate investment trust under Sections 856 through 860 of the Code.

ARTICLE IV

PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT

The address of the principal office of the Corporation in the State of
Maryland is c/o Ballard Spahr Andrews & Ingersoll, 300 East Lombard Street,
Baltimore, Maryland 21202, Attention: James J. Hanks, Jr. The name of the
resident agent of the Corporation in the State of Maryland is James J. Hanks,
Jr., whose post address is c/o Ballard Spahr Andrews & Ingersoll, 300 East
Lombard Street, Baltimore, Maryland 21202. The resident agent is a citizen of
and resides in the State of Maryland.

ARTICLE V

PROVISIONS FOR DEFINING, LIMITING
AND REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS

Section 5.1 NUMBER AND CLASSIFICATION OF DIRECTORS. The business
and affairs of the Corporation shall be managed under the direction of the
Board of Directors. The number of directors of the Corporation initially
shall be 7, which number may be increased or decreased pursuant to the
Bylaws, but shall never be less than the minimum number required by the
Maryland General Corporation Law. The names of the directors who shall serve
until the annual meeting of stockholders held in the year adjacent to their
names below, and until their successors are duly elected and qualify are:

Richard S. Ziman (1999)
Victor J. Coleman (1999)
Jerry Asher (1998)
Carl D. Covitz (1997)
Kenneth B. Roath (1997)
Arthur Gilbert (1998)
Steven C. Good (1998)

<PAGE>

These directors may increase the number of directors and may fill any vacancy,
whether resulting from an increase in the number of directors or otherwise, on
the Board of Directors prior to the first annual meeting of stockholders in the
manner provided in the Bylaws.

The Corporation's Board of Directors (other than any director elected
solely by holders of one or more series of Preferred Stock) is divided into
three classes of directors, as nearly equal in number as possible, one class to
hold office initially for a term expiring at the next succeeding annual meeting
of stockholders, another class to hold office initially for a term expiring at
the second succeeding annual meeting of stockholders and another class to hold
office initially for a term expiring at the third succeeding annual meeting of
stockholders, with the members of each class to hold office until their
successors are duly elected and qualify. At each annual meeting of the
stockholders, the successors to the class of directors whose term expires at
such meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders held in the third year following the year of their
election.

Section 5.2 EXTRAORDINARY ACTIONS. Except as specifically provided
in Article VIII, notwithstanding any provision of law permitting or requiring
any action to be taken or authorized by the affirmative vote of the holders of a
greater number of votes, any such action shall be effective and valid if taken
or authorized by the affirmative vote of holders of shares entitled to cast a
majority of all the votes entitled to be cast on the matter.

Section 5.3 AUTHORIZATIONS BY BOARD OF STOCK ISSUANCE. The Board of
Directors may authorize the issuance from time to time of shares of stock of the
Corporation of any class or series, whether now or hereafter authorized, or
securities or rights convertible into shares of its stock of any class or
series, whether now or hereafter authorized, for such consideration as the Board
of Directors may deem advisable (or without consideration in the case of a stock
split

<PAGE>

or stock dividend), subject to such restrictions or limitations, if any, as may
be set forth in the Charter or the Bylaws.

Section 5.4 PREEMPTIVE RIGHTS. Except as may be provided by the
Board of Directors in setting the terms of classified or reclassified shares of
stock pursuant to Section 6.4, no holder of shares of stock of the Corporation
shall, as such holder, have any preemptive right to purchase or subscribe for
any additional shares of stock of the Corporation or any other security of the
Corporation which it may issue or sell unless the Corporation agrees to grant
such holder preemptive rights pursuant to a written contract.

Section 5.5 INDEMNIFICATION. The Corporation shall have the power,
to the maximum extent permitted by Maryland law in effect from time to time, to
obligate itself to indemnify, and to pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to, (a) any individual who is a
present or former director or officer of the Corporation who is made a party to
a proceeding by reason of his service in that capacity or (b) any individual
who, while a director of the Corporation and at the request of the Corporation,
serves or has served as a director, officer, partner or trustee of another
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise from and against any claim or liability to which such person
may become subject or which such person may incur by reason of his status as a
present or former director or officer of the Corporation. The Corporation shall
have the power, with the approval of the Board of Directors, to provide such
indemnification and advancement of expenses to a person who served a predecessor
of the Corporation in any of the capacities described in (a) or (b) above and to
any employee or agent of the Corporation or a predecessor of the Corporation;
provided, however, that such indemnification shall not be provided with respect
to any liability such person is

<PAGE>

determined to have, by virtue of an agreement or a final, non-appealable
judgment of a court, under any contribution agreement dated as of June 17, 1996
between such person and Arden Realty Group Limited Partnership. Neither the
amendment nor repeal of this Section 5.5, nor the adoption or amendment of any
other provision of the Bylaws or Charter of the Corporation inconsistent with
this Section 5.5, shall apply to or affect in any respect the applicability of
the foregoing with respect to any act or failure to act which occurred prior to
such amendment, repeal or adoption.

Section 5.6 DETERMINATIONS BY BOARD. The determination as to any
of the following matters, made in good faith by or pursuant to the direction of
the Board of Directors consistent with the Charter and in the absence of actual
receipt of an improper benefit in money, property or services or active and
deliberate dishonesty established by a court, shall be final and conclusive and
shall be binding upon the Corporation and every holder of shares of its stock:
the amount of the net income of the Corporation for any period and the amount of
assets at any time legally available for the payment of dividends, redemption of
its stock or the payment of other distributions on its stock; the amount of
paid-in surplus, net assets, other surplus, annual or other net profit, net
assets in excess of capital, undivided profits or excess of profits over losses
on sales of assets; the amount, purpose, time of creation, increase or decrease,
alteration or cancellation of any reserves or charges and the propriety thereof
(whether or not any obligation or liability for which such reserves or charges
shall have been created shall have been paid or discharged); the fair value, or
any sale, bid or asked price to be applied in determining the fair value, of any
asset owned or held by the Corporation; and any matters relating to the
acquisition, holding and disposition of any assets by the Corporation.

<PAGE>

Section 5.7 REIT QUALIFICATION. The Board of Directors shall use
its reasonable best efforts to take such actions as are necessary or
appropriate to preserve the status of the Corporation as a REIT; however, if
the Board of Directors determines that is is no longer in the best interests
of the Corporation to qualify or continue to be qualified as a REIT and such
determination is approved by the affirmative vote of the holders or not less
than two-thirds of all votes entitled to be cast on the matter, the Board of
Directors also may revoke or otherwise terminate the Corporation's REIT
election pursuant to Section 856(g) of the Code. The Board of Directors also
may determine that compliance with any restriction or limitation on stock
ownership and transfers set forth in Article VII is no longer required for
REIT qualification.

Section 5.8 REMOVAL OF DIRECTORS. Subject to the rights of one or
more classes or series of Preferred Stock to elect one or more directors, any
director, or the entire Board of Directors, may be removed from office at any
time, but only for cause and then only by the affirmative vote of the holders of
at least two thirds of the votes entitled to be cast in the election of
directors. For the purpose of this paragraph, "cause" shall mean with respect
to any particular director a final judgment of a court of competent jurisdiction
holding that such director caused demonstrable, material harm to the Corporation
through bad faith or active and deliberate dishonesty.

Section 5.9 ADVISOR AGREEMENTS. Subject to such approval of
stockholders and other conditions, if any, as may be required by any applicable
statute, rule or regulation, the Board of Directors may authorize the execution
and performance by the Corporation of one or more agreements with any person,
corporation, association, company, trust, partnership (limited or general) or
other organization whereby, subject to the supervision and control of the Board
of Directors, any such other person, corporation, association, company, trust,
partnership (limited or general) or other organization shall render or make
available to the Corporation managerial, investment, advisory and/or related
services, office space and other services and facilities (including, if deemed
advisable by the Board of Directors, the management or supervision of the
investments of the Corporation) upon such terms and conditions as may be

<PAGE>

provided in such agreement or agreements (including, if deemed fair and
equitable by the Board of Directors, the compensation payable thereunder by
the Corporation).

ARTICLE VI

STOCK

Section 6.1 AUTHORIZED SHARES. The Corporation has authority to
issue 100,000,000 shares of Common Stock, $.01 par value per share ("Common
Stock"), and 20,000,000 shares of Preferred Stock, $.01 par value per share
("Preferred Stock"). The aggregate par value of all authorized shares of
stock having par value is $1,200,000.

Section 6.2 COMMON STOCK. Subject to the provisions of Article
VII, each share of Common Stock shall entitle the holder thereof to one
vote. The Board of Directors may reclassify any unissued shares of Common
Stock from time to time in one or more classes or series of stock.

Section 6.3 PREFERRED STOCK. The Board of Directors may
classify any unissued shares of Preferred Stock and reclassify any
previously classified but unissued shares of Preferred Stock of any series
from time to time, in one or more series of stock.

Section 6.4 CLASSIFIED OR RECLASSIFIED SHARES. Prior to
issuance of classified or reclassified shares of any class or series, the
Board of Directors by resolution shall: (a) designate that class or series
to distinguish it from all other classes and series of stock of the
Corporation; (b) specify the number of shares to be included in the class
or series; (c) set or change, subject to the provisions of Article VII and
subject to the express terms of any class or series of stock of the
Corporation outstanding at the time, the preferences, conversion or other
rights, voting powers, restrictions, limitations as to transferability,
dividends or other distributions, qualifications and terms and conditions
of redemption for each class or series;

<PAGE>

and (d) cause the Corporation to file articles supplementary with the State
Department of Assessments and Taxation of Maryland ("SDAT"). Any of the
terms of any class or series of stock set or changed pursuant to clause (c)
of this Section 6.4 may be made dependent upon facts or events
ascertainable outside the Charter (including determinations by the Board of
Directors or other facts or events within the control of the Corporation)
and may vary among holders thereof, provided that the manner in which such
facts, events or variations shall operate upon the terms of such class or
series of stock is clearly and expressly set forth in the articles
supplementary filed with the SDAT.

Section 6.5 CHARTER AND BYLAWS. All persons who shall acquire
stock in the Corporation shall acquire the same subject to the provisions
of the Charter and the Bylaws.

ARTICLE VII

RESTRICTIONS ON OWNERSHIP AND TRANSFER TO PRESERVE TAX BENEFIT

Section 7.1 DEFINITIONS. For the purposes of this Article VII,
the following terms shall have the following meanings:

"Beneficial Ownership" shall mean ownership of Common Shares by a
Person who is or would be treated as an owner of such Common Shares either
actually or constructively through the application of Section 544 of the
Code, as modified by Section 856(h)(1)(B) of the Code. The terms
"Beneficial Owner," "Beneficially Own," "Beneficially Owns" and
"Beneficially Owned" shall have the correlative meanings.

"Charitable Beneficiary" shall mean one or more beneficiaries of
the Trust as determined pursuant to Section 7.3(f) of this Article VII.

"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time, or any successor statute.

<PAGE>

"Common Shares" shall mean shares of the Corporation's Common
Stock.

"Constructive Ownership" shall mean ownership of Common Shares by
a Person who is or would be treated as an owner of such Common Shares
either actually or constructively through the application of Section 318 of
the Code, as modified by Section 856(d)(5) of the Code. The terms
"Constructive Owner," "Constructively Own," "Constructively Owns" and
"Constructively Owned" shall have the correlative meanings.

"Initial Public Offering" shall mean the sale of Common Shares
pursuant to the Corporation's first effective registration statement for
such Common Shares filed under the Securities Act of 1933, as amended.

"IRS" means the United States Internal Revenue Service.

"Market Price" shall mean the last reported sales price reported
on the New York Stock Exchange of the Common Shares on the trading day
immediately preceding the relevant date, or if the Common Shares are not
then traded on the New York Stock Exchange, the last reported sales price
of the Common Shares on the trading day immediately preceding the relevant
date as reported on any exchange or quotation system over which the Common
Shares may be traded, or if the Common Shares are not then traded over any
exchange or quotation system, then the market price of the Common Shares on
the relevant date as determined in good faith by the Board of Directors of
the Corporation.

"Ownership Limit" shall mean 9.0% (by value or by number of
shares, whichever is more restrictive) of the outstanding Common Shares of
the Corporation.

"Partnership Agreement" shall mean the Agreement of Limited
Partnership of Arden Realty Group Limited Partnership, of which the
Corporation is the sole general partner, dated as of September ___, 1996,
as such agreement may be amended from time to time.

<PAGE>

"Person" shall mean an individual, corporation, partnership,
limited liability company, estate, trust (including a trust qualified under
Section 401(a) or 501(c)(17) of the Code), a portion of a trust permanently
set aside for or to be used exclusively for the purposes described in
Section 642(c) of the Code, association, private foundation within the
meaning of Section 509(a) of the Code, joint stock company or other entity;
but does not include an underwriter acting in a capacity as such in a
public offering of the Common Shares provided that the ownership of Common
Shares by such underwriter would not result in the Corporation being
"closely held" within the meaning of Section 856(h) of the Code, or
otherwise result in the Corporation failing to qualify as a REIT.

"Purported Beneficial Transferee" shall mean, with respect to any
purported Transfer which results in a transfer to a Trust, as provided in
Section 7.2(b) of this Article VII, the purported beneficial transferee or
owner for whom the Purported Record Transferee would have acquired or owned
Common Shares, if such Transfer had been valid under Section 7.2(a) of this
Article VII.

"Purported Record Transferee" shall mean, with respect to any
purported Transfer which results in a transfer to a Trust, as provided in
Section 7.2(b) of this Article VII, the record holder of the Common Shares
if such Transfer had been valid under Section 7.2(a) of this Article VII.

"REIT" shall mean a real estate investment trust under Section
856 through 860 of the Code.

"Restriction Termination Date" shall mean the first day after the
date of the Initial Public Offering on which the Board of Directors of the
Corporation determines that it is no longer in the best interests of the
Corporation to attempt to, or continue to, qualify as a

<PAGE>

REIT.

"Transfer" shall mean any sale, transfer, gift, assignment,
devise or other disposition of Common Shares, including (i) the granting of
any option or entering into any agreement for the sale, transfer or other
disposition of Common Shares or (ii) the sale, transfer, assignment or
other disposition of any securities (or rights convertible into or
exchangeable for Common Shares), whether voluntary or involuntary, whether
of record or beneficially or Beneficially or Constructively (including but
not limited to transfers of interests in other entities which results in
changes in Beneficial or Constructive Ownership of Common Shares), and
whether by operation of law or otherwise.

"Trust" shall mean each of the trusts provided for in Section 7.3
of this Article VII.

"Trustee" shall mean the Person unaffiliated with the
Corporation, the Purported Beneficial Transferee, and the Purported Record
Transferee, that is appointed by the Corporation to serve as trustee of the
Trust.

7.2 RESTRICTION ON OWNERSHIP AND TRANSFERS.

(a) From the date of the Initial Public Offering and prior
to the Restriction Termination Date:

(i) except as provided in Section 7.9 of this
Article VII, no Person shall Beneficially Own Common Shares in excess of
the Ownership Limit;

(ii) except as provided in Section 7.9 of this
Article VII, no Person shall Constructively Own in excess of 9.8% (by value
or by number of shares, whichever is more restrictive) of the outstanding
Common Shares of the Corporation; and

<PAGE>

(iii) no Person shall Beneficially or
Constructively Own Common Shares to the extent that such Beneficial or
Constructive Ownership would result in the Corporation being "closely held"
within the meaning of Section 856(h) of the Code, or otherwise failing to
qualify as a REIT (including but not limited to ownership that would result
in the Corporation owning (actually or Constructively) an interest in a
tenant that is described in Section 856(d)(2)(B) of the Code if the income
derived by the Corporation (either directly or indirectly through one or
more partnerships) from such tenant would cause the Corporation to fail to
satisfy any of the gross income requirements of Section 856(c) of the
Code).

(b) If, during the period commencing on the date of the
Initial Public Offering and prior to the Restriction Termination Date, any
Transfer (whether or not such Transfer is the result of a transaction
entered into through the facilities of the New York Stock Exchange
("NYSE")) or other event occurs that, if effective, would result in any
Person Beneficially or Constructively Owning Common Shares in violation of
Section 7.2(a) of this Article VII, (1) then that number of Common Shares
that otherwise would cause such Person to violate Section 7.2(a) of this
Article VII (rounded up to the nearest whole share) shall be automatically
transferred to a Trust for the benefit of a Charitable Beneficiary, as
described in Section 7.3, effective as of the close of business on the
business day prior to the date of such Transfer or other event, and such
Purported Beneficial Transferee shall thereafter have no rights in such
Common Shares or (2) if, for any reason, the transfer to the Trust
described in clause (1) of this sentence is not automatically effective as
provided therein to prevent any Person from Beneficially or Constructively
Owning Common Shares in violation of Section 7.2(a) of this Article VII,
then the Transfer of that number of Common Shares that otherwise would
cause any Person to violate Section 7.2(a) shall be void AB INITIO, and the
Purported

<PAGE>

Beneficial Transferee shall have no rights in such Common Shares.

(c) Notwithstanding any other provisions contained herein,
during the period commencing on the date of the Initial Public Offering and
prior to the Restriction Termination Date, any Transfer of Common Shares
(whether or not such Transfer is the result of a transaction entered into
through the facilities of the NYSE) that, if effective, would result in the
capital stock of the Corporation being beneficially owned by less than 100
Persons (determined without reference to any rules of attribution) shall be
void AB INITIO, and the intended transferee shall acquire no rights in such
Common Shares.

(d) It is expressly intended that the restrictions on
ownership and Transfer described in this Section 7.2 of Article VII shall
apply to the redemption/exchange rights provided in Section 8.6 of the
Partnership Agreement. Notwithstanding any of the provisions of the
Partnership Agreement to the contrary, a partner of Arden Realty Group
Limited Partnership shall not be entitled to effect an exchange of an
interest in Arden Realty Group Limited Partnership for Common Shares to the
extent the actual or beneficial or Beneficial or Constructive ownership of
such Common Shares would be prohibited under the provisions of this Article
VII.

Section 7.3 TRANSFERS OF COMMON SHARES IN TRUST

(a) Upon any purported Transfer or other event described in
Section 7.2(b) of this Article VII, such Common Shares shall be deemed to
have been transferred to the Trustee in his capacity as trustee of a Trust
for the exclusive benefit of one or more Charitable Beneficiaries. Such
transfer to the Trustee shall be deemed to be effective as of the close of
business on the business day prior to the purported Transfer or other event
that results in a transfer to the Trust pursuant to Section 7.2(b). The
Trustee shall be appointed by the

<PAGE>

Corporation and shall be a Person unaffiliated with the Corporation,
any Purported Beneficial Transferee, and any Purported Record Transferee.
Each Charitable Beneficiary shall be designated by the Corporation as
provided in Section 7.3(f) of this Article VII.

(b) Common Shares held by the Trustee shall be issued and
outstanding Common Shares of the Corporation. The Purported Beneficial
Transferee or Purported Record Transferee shall not benefit economically
from ownership of any Common Shares held in trust by the Trustee, shall
have no rights to dividends and shall not possess any rights to vote or
other rights attributable to the Common Shares held in the Trust.

(c) The Trustee shall have all voting rights and rights to
dividends with respect to Common Shares held in the Trust, which rights
shall be exercised for the exclusive benefit of the Charitable Beneficiary.
Any dividend or distribution paid prior to the discovery by the Corporation
that the Common Shares have been transferred to the Trustee shall be paid
to the Trustee upon demand, and any dividend or distribution declared but
unpaid shall be paid when due to the Trustee with respect to such Common
Shares. Any dividends or distributions so paid over to the Trustee shall
be held in trust for the Charitable Beneficiary. The Purported Record
Transferee and Purported Beneficial Transferee shall have no voting rights
with respect to the Common Shares held in the Trust and, subject to
Maryland law, effective as of the date the Common Shares have been
transferred to the Trustee, the Trustee shall have the authority (at the
Trustee's sole discretion) (i) to rescind as void any vote cast by a
Purported Record Transferee prior to the discovery by the Corporation that
the Common Shares have been transferred to the Trustee and (ii) to recast
such vote in accordance with the desires of the Trustee acting for the
benefit of the Charitable Beneficiary; provided, however, that if the
Corporation has already taken irreversible corporate action, then the
Trustees shall not have

<PAGE>

the authority to rescind and recast such vote. Notwithstanding the provisions
of this Article VII, until the Corporation has received notification that the
Common Shares have been transferred into a Trust, the Corporation shall be
entitled to rely on its share transfer and other stockholder records for
purposes of preparing lists of stockholders entitled to vote at meetings,
determining the validity and authority of proxies and otherwise conducting votes
of stockholders.

(d) Within 20 days of receiving notice from the Corporation
that Common Shares have been transferred to the Trust, the Trustee of the
Trust shall sell the Common Shares held in the Trust to a person,
designated by the Trustee, whose ownership of the Common Shares will not
violate the ownership limitations set forth in Section 7.2(a). Upon such
sale, the interest of the Charitable Beneficiary in the Common Shares sold
shall terminate and the Trustee shall distribute the net proceeds of the
sale to the Purported Record Transferee and to the Charitable Beneficiary
as provided in this Section 7.3(d). The Purported Record Transferee shall
receive the lesser of (1) the price paid by the Purported Record Transferee
for the Common Shares in the transaction that resulted in such transfer to
the Trust (or, if the event which resulted in the transfer to the Trust did
not involve a purchase of such Common Shares at Market Price, the Market
Price of such Common Shares on the day of the event which resulted in the
transfer of the Common Shares to the Trust) and (2) the price per share
received by the Trustee (net of any commissions and other expenses of sale)
from the sale or other disposition of the Common Shares held in the Trust.
Any net sales proceeds in excess of the amount payable to the Purported
Record Transferee shall be immediately paid to the Charitable Beneficiary
together with any dividends or other distributions thereon. If, prior to
the discovery by the Corporation that such Common Shares have been
transferred to the

<PAGE>

Trustee, such Common Shares are sold by a Purported Record Transferee then
(i) such Common Shares shall be deemed to have been sold on behalf of the
Trust and (ii) to the extent that the Purported Record Transferee received
an amount for such Common Shares that exceeds the amount that such
Purported Record Transferee was entitled to receive pursuant to this
subparagraph A(3)(d), such excess shall be paid to the Trustee upon demand.

(e) Common Shares transferred to the Trustee shall be
deemed to have been offered for sale to the Corporation, or its designee,
at a price per share equal to the lesser of (i) the price paid by the
Purported Record Transferee for the Common Shares in the transaction that
resulted in such transfer to the Trust (or, if the event which resulted in
the transfer to the Trust did not involve a purchase of such Common Shares
at Market Price, the Market Price of such Common Shares on the day of the
event which resulted in the transfer of the Common Shares to the Trust) and
(ii) the Market Price on the date the Corporation, or its designee, accepts
such offer. The Corporation shall have the right to accept such offer
until the Trustee has sold the Common Shares held in the Trust pursuant to
Section 7.3(d). Upon such a sale to the Corporation, the interest of the
Charitable Beneficiary in the Common Shares sold shall terminate and the
Trustee shall distribute the net proceeds of the sale to the Purported
Record Transferee and any dividends or other distributions held by the
Trustee with respect to such Common Shares shall thereupon be paid to the
Charitable Beneficiary.

(f) By written notice to the Trustee, the Corporation shall
designate one or more nonprofit organizations to be the Charitable
Beneficiary of the interest in the Trust such that (i) the Common Shares
held in the Trust would not violate the restrictions set forth in Section
7.2(a) in the hands of such Charitable Beneficiary and (ii) each Charitable
Beneficiary is an organization described in Sections 170(b)(1)(A),
170(c)(2) and 501(c)(3) of

<PAGE>

the Code.

Section 7.4 REMEDIES FOR BREACH. If the Board of Directors,
or a committee thereof (or other designees if permitted by Maryland law)
shall at any time determine in good faith that a Transfer or other event
has taken place in violation of Section 7.2 of this Article VII or that a
Person intends to acquire, has attempted to acquire or may acquire
beneficial ownership (determined without reference to any rules of
attribution), Beneficial Ownership or Constructive Ownership of any Common
Shares of the Corporation in violation of Section 7.2 of this Article VII,
the Board of Directors, or a committee thereof (or other designees if
permitted by Maryland law) shall take such action as it deems advisable to
refuse to give effect or to prevent such Transfer, including, but not
limited to, causing the Corporation to redeem Common Shares, refusing to
give effect to such Transfer on the books of the Corporation or instituting
proceedings to enjoin such Transfer; provided, however, that any Transfers
(or, in the case of events other than a Transfer, ownership or Constructive
Ownership or Beneficial Ownership) in violation of Section 7.2(a) of this
Article VII, shall automatically result in the transfer to a Trust as
described in Section 7.2(b) and any Transfer in violation of Section 7.2(c)
shall automatically be void AB INITIO irrespective of any action (or non-
action) by the Board of Directors.

Section 7.5 NOTICE OF RESTRICTED TRANSFER. Any Person who
acquires or attempts to acquire Common Shares in violation of Section 7.2
of this Article VII or any Person who is a Purported Transferee such that
an automatic transfer to a Trust results under Section 7.2(b) of this
Article VII, shall immediately give written notice to the Corporation of
such event and shall provide to the Corporation such other information as
the Corporation may request in order to determine the effect, if any, of
such Transfer or attempted Transfer on the

<PAGE>

Corporation's status as a REIT.

Section 7.6 OWNERS REQUIRED TO PROVIDE INFORMATION. From the
date of the Initial Public Offering and prior to the Restriction
Termination Date each Person who is a beneficial owner or Beneficial Owner
or Constructive Owner of Common Shares and each Person (including the
shareholder of record) who is holding Common Shares for a Beneficial Owner
or Constructive Owner shall provide to the Corporation such information
that the Corporation may request, in good faith, in order to determine the
Corporation's status as a REIT.

Section 7.7 REMEDIES NOT LIMITED. Nothing contained in this
Article VII (but subject to Section 7.12 of this Article VII and Section
5.7 of the Charter) shall limit the authority of the Board of Directors to
take such other action as it deems necessary or advisable to protect the
Corporation and the interests of its shareholders by preservation of the
Corporation's status as a REIT.

Section 7.8 AMBIGUITY. In the case of an ambiguity in the
application of any of the provisions of Sections 7.2 through 7.9 of this
Article VII, including any definition contained in Section 7.1, the Board
of Directors shall have the power to determine the application of the
provisions of Sections 7.2 through 7.9 with respect to any situation based
on the facts known to it (subject, however, to the provisions of Section
7.12 of this Article VII). In the event any of Sections 7.2 through 7.9
requires an action by the Board of Directors and these Amended and Restated
Articles of Incorporation fail to provide specific guidance with respect to
such action, the Board of Directors shall have the power to determine the
action to be taken so long as such action is not contrary to the provisions
of such Sections 7.2 through 7.9 of this Article VII. Absent a decision to
the contrary by the Board of Directors (which the

<PAGE>

Board may make in its sole and absolute discretion), if a Person would have
(but for the remedies set forth in Section 7.2(b)) acquired Beneficial or
Constructive Ownership of Common Shares in violation of Section 7.2(a) such
remedies (as applicable) shall apply first to the Common Shares which, but
for such remedies, would have been actually owned by such Person, and
second to Common Shares which, but for such remedies, would have been
Beneficially Owned or Constructively Owned (but not actually owned) by such
Person, pro rata among the Persons who actually own such Common Shares
based upon the relative number of the Common Shares held by each such
Person.

Section 7.9 EXCEPTIONS.

(a) Subject to Section 7.2(a)(iii), the Board of Directors,
in its sole discretion, may exempt a Person from the limitation on a Person
Beneficially Owning Common Shares in excess of the Ownership Limit if the
Board of Directors obtains such representations and undertakings from such
Person as are reasonably necessary to ascertain that no individual's
Beneficial Ownership of such Common Shares will violate the Ownership Limit
or that any such violation will not cause the Corporation to fail to
qualify as a REIT under the Code, and agrees that any violation of such
representations or undertaking (or other action which is contrary to the
restrictions contained in Section 7.2 of this Article VII) or attempted
violation will result in such Common Shares being transferred to a Trust in
accordance with Section 7.2(b) of this Article VII.

(b) Subject to Section 7.2(a)(iii), the Board of Directors,
in its sole discretion, may exempt a Person from the limitation on a Person
Constructively Owning Common Shares in excess of 9.8% (by value or by
number of Common Shares, whichever is more restrictive) of the outstanding
Common Shares of the Corporation, if such Person does

<PAGE>

not and represents that it will not own, actually or Constructively, an
interest in a tenant of the Corporation (or a tenant of any entity owned in
whole or in part by the Corporation) that would cause the Corporation to
own, actually or Constructively more than a 9.8% interest (as set forth in
Section 856(d)(2)(B) of the Code) in such tenant and the Corporation
obtains such representations and undertakings from such Person as are
reasonably necessary to ascertain this fact and agrees that any violation
or attempted violation will result in such Common Shares being transferred
to a Trust in accordance with Section 7.2(b) of this Article VII.
Notwithstanding the foregoing, the inability of a Person to make the
certification described in this Section 7.9(b) shall not prevent the Board
of Directors, in its sole discretion, from exempting such Person from the
limitation on a Person Constructively Owning Common Shares in excess of
9.8% of the outstanding Common Shares if the Board of Directors determines
that the resulting application of Section 856(d)(2)(B) of the Code would
affect the characterization of less than 0.5% of the gross income (as such
term is used in Section 856(c)(2) of the Code) of the Corporation in any
taxable year, after taking into account the effect of this sentence with
respect to all other Common Shares to which this sentence applies.

(c) Prior to granting any exception pursuant to Section
7.9(a) or (b) of this Article VII, the Board of Directors may require a ruling
from the Internal Revenue Service, or an opinion of counsel, in either case in
form and substance satisfactory to the Board of Directors in its sole
discretion, as it may deem necessary or advisable in order to determine or
ensure the Corporation's status as a REIT.

<PAGE>

Section 7.10 LEGEND. Each certificate for Common Shares shall
bear substantially the following legend:

"The Corporation is authorized to issue two classes of capital
stock which are designated as Common Shares and Preferred Shares.
The Board of Directors is authorized to determine the
preferences, limitations and relative rights of the Preferred
Shares before the issuance of any Preferred Shares. The
Corporation will furnish, without charge, to any shareholder
making a written request therefor, a copy of the Corporation's
Charter and a written statement of the designations, relative
rights, preferences and limitations applicable to each such class
of stock. Requests for such written statement may be directed to
Victor J. Coleman, the President of the Company, at the Company's
principal office.

The shares represented by this certificate are subject to
restrictions on Beneficial and Constructive Ownership and
Transfer for the purpose of the Corporation's maintenance of its
status as a Real Estate Investment Trust under the Internal
Revenue Code of 1986, as amended (the "Code"). Subject to
certain further restrictions and except as expressly provided in
the Corporation's Charter, (i) no Person may Beneficially Own in
excess of 9.0% of the outstanding Common Shares of the
Corporation (by value or by number of shares, whichever is more
restrictive); (ii) no Person may Constructively Own in excess of
9.8% of the outstanding Common Shares of the Corporation (by
value or by number of shares, whichever is more restrictive);
(iii) no Person may Beneficially or Constructively Own Common
Shares that would result in the Corporation being "closely held"
under Section 856(h) of the Code or otherwise cause the
Corporation to fail to qualify as a REIT; and (iv) no Person may
Transfer Common Shares if such Transfer would result in the
capital stock of the Corporation being owned by fewer than 100
Persons. Any Person who Beneficially or Constructively Owns or
attempts to Beneficially or Constructively Own Common Shares
which causes or will cause a Person to Beneficially or
Constructively Own Common Shares in excess of the above
limitations must immediately notify the Corporation. If any of
the restrictions on transfer or ownership are violated, the
Common Shares represented hereby will be automatically
transferred to a Trustee of a Trust for the benefit of one or
more Charitable Beneficiaries. In addition, the Corporation may
redeem shares upon the terms and conditions specified by the
Board of Directors in its sole discretion if the Board of
Directors determines that ownership or a Transfer or other event
may violate the restrictions described above. Furthermore, upon
the occurrence of certain events, attempted Transfers in
violation of the restrictions described above may be void AB
INITIO. All capitalized terms in this legend have the meanings
defined in the Charter of the Corporation, as the same may be
amended from time to time, a copy of

<PAGE>

which, including the restrictions on transfer and ownership, will be
furnished to each holder of Common Shares on request and without
charge. Requests for such a copy may be directed to Victor J.
Coleman, the President of the Company, at the Company's principal
office."

Section 7.11 SEVERABILITY. If any provision of this Article
VII or any application of any such provision is determined to be invalid by
any Federal or state court having jurisdiction over the issues, the
validity of the remaining provisions shall not be affected and other
applications of such provision shall be affected only to the extent
necessary to comply with the determination of such court.

Section 7.12 TERMINATION OF REIT STATUS. The Board of
Directors shall take no action to terminate the Corporation's status as a
REIT or to amend the provisions of this Article VII until such time as (i)
the Board of Directors adopts a resolution recommending that the
Corporation terminate its status as a REIT or amends this Article VII, as
the case may be, (ii) the Board of Directors presents the resolution at an
annual or special meeting of the stockholders and (iii) such resolution is
approved by at least two thirds of all votes entitled to be cast on the
matter.

Section 7.13 NYSE. Nothing in this Article VII shall preclude
the settlement of any transaction entered into through the facilities of
the NYSE. The fact that the settlement of any transaction is so permitted
shall not negate the effect of any other provision of this Article VII and
any transferee in such a transaction shall be subject to all the provisions
and limitations of this Article VII.

<PAGE>

ARTICLE VIII
AMENDMENTS AND TRANSACTIONS OUTSIDE
THE ORDINARY COURSE OF BUSINESS

The Corporation reserves the right from time to time to make any
amendment to its Charter, now or hereafter authorized by law, including any
amendment altering the terms or contract rights, as expressly set forth in
this Charter, of any shares of outstanding stock. All rights and powers
conferred by the Charter on stockholders, directors and officers are
granted subject to this reservation. Any amendment to Article VI of the
Charter shall be valid only if approved by the affirmative vote of holders
of shares entitled to cast a majority of all votes entitled to be cast on
the matter. Any other amendment to the Charter, including, without
limitation, amendments to Article V and VII, shall be valid only if
approved by the affirmative vote of the holders of not less than two-thirds
of all the votes entitled to be cast on the matter. In addition, the
Corporation shall not dissolve, merge, sell all or substantially all of its
assets, engage in a share exchange or engage in similar transactions
outside the ordinary course of business unless approved by the affirmative
vote of the holders of not less than two-thirds of all the votes entitled
to be cast on the matter.

ARTICLE IX
LIMITATION OF LIABILITY

To the maximum extent that Maryland law in effect from time to
time permits limitation of the liability of directors and officers of a
Corporation, no director or officer of the Corporation shall be liable to
the Corporation or its stockholders for money damages. Neither the
amendment nor repeal of this Article IX, nor the adoption or amendment of
any other provision of the Charter or Bylaws inconsistent with this Article
IX, shall apply to or

<PAGE>

affect in any respect the applicability of the preceding sentence with
respect to any act or failure to act which occurred prior to such
amendment, repeal or adoption.

THIRD: The amendment to and restatement of the Charter as
hereinabove set forth has been duly advised by the Board of Directors and
approved by the stockholders of the Corporation as required by law.

FOURTH: The current address of the principal office of the
Corporation is as set forth in Article IV of the foregoing amendment and
restatement of the Charter.

FIFTH: The name and address of the Corporation's current
resident agent is as set forth in Article IV of the foregoing amendment and
restatement of the Charter.

SIXTH: The number of directors of the Corporation and the names
of those currently in office are as set forth in Article V of the foregoing
amendment and restatement of the Charter.

SEVENTH: The total number of shares of stock which the
Corporation had authority to issue immediately prior to this amendment and
restatement was 1,000, all of one class, $.01 par value per share. The
aggregate par value of all shares of stock having par value was $10.00.

EIGHTH: The total number of shares of stock which the
Corporation has authority to issue pursuant to the foregoing amendment and
restatement of the Charter is 120,000,000, consisting of 100,000,000 shares
of Common Stock, $.01 par value per share, and 20,000,000 shares of Preferred
Stock, $.01 par value per share. The aggregate par value of all authorized
shares of stock having par value is $1,200,000.

NINTH: The undersigned Chairman of the Board acknowledges
these Articles of Amendment and Restatement to be the corporate act of the
Corporation and as to all matters or facts required to be verified under
oath, the undersigned Chairman of the Board acknowledges that to the best of
his knowledge, information and belief, these matters and facts are true in
all material respects and that this statement is made under the penalties for
perjury.

<PAGE>

IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment and Restatement to be signed in its name and on its behalf by its
Chairman of the Board and attested to by its Secretary on this _____ day of
____________, 1996.

ATTEST: ARDEN REALTY GROUP, INC.

By: (SEAL)
------------------------ ---------------------
Secretary Chairman of the Board

<PAGE>
ARDEN REALTY GROUP, INC.

BYLAWS

ARTICLE I

OFFICES

Section 1. PRINCIPAL OFFICE. The principal office of the Corporation
shall be located at such place or places as the Board of Directors may
designate.

Section 2. ADDITIONAL OFFICES. The Corporation may have additional
offices at such places as the Board of Directors may from time to time determine
or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

Section 1. PLACE. All meetings of stockholders shall be held at the
principal office of the Corporation or at such other place within the United
States as shall be stated in the notice of the meeting.

Section 2. ANNUAL MEETING. An annual meeting of the stockholders for
the election of directors and the transaction of any business within the powers
of the Corporation shall be held on a date and at the time set by the Board of
Directors during the month of May in each year, unless the Board of Directors
elects to hold the meeting in any other month.

Section 3. SPECIAL MEETINGS. The president, chief executive officer or
Board of Directors may call special meetings of the stockholders. Special
meetings of stockholders shall also be called by the secretary of the
Corporation upon the written request of the holders of shares entitled to cast
not less than a majority of all the votes entitled to be cast at such meeting.
Such request shall state the purpose of such meeting and the matters proposed to
be acted on at such meeting. The secretary shall inform such stockholders of
the reasonably estimated cost of preparing and mailing notice of the meeting
and, upon payment to the Corporation by such stockholders of such costs, the
secretary shall give notice to each stockholder entitled to notice of the
meeting.

Section 4. NOTICE. Not less than 10 nor more than 90 days before each
meeting of stockholders, the secretary shall give to each stockholder entitled
to vote at such meeting and to each stockholder not entitled to vote who is
entitled to notice of the meeting written or printed notice stating the time and
place of the meeting and, in the case of a special meeting or as otherwise may
be required by any statute, the purpose for which the meeting is called, either
by mail or by presenting it to such stockholder personally or by leaving it at
his residence or usual place of business. If mailed, such notice shall be
deemed to be given when deposited in the United States mail addressed to the
stockholder at his post office address as it appears on the records of the
Corporation, with postage thereon prepaid.

<PAGE>

Section 5. SCOPE OF NOTICE. Any business of the Corporation may be
transacted at an annual meeting of stockholders without being specifically
designated in the notice, except such business as is required by any statute to
be stated in such notice. No business shall be transacted at a special meeting
of stockholders except as specifically designated in the notice.

Section 6. ORGANIZATION. At every meeting of stockholders, the
chairman of the board, if there be one, shall conduct the meeting or, in the
case of vacancy in office or absence of the chairman of the board, one of the
following officers present shall conduct the meeting in the order stated: the
vice chairman of the board, if there be one, the president, the vice presidents
in their order of rank and seniority, or a chairman chosen by the stockholders
entitled to cast a majority of the votes which all stockholders present in
person or by proxy are entitled to cast, shall act as chairman, and the
secretary, or, in his absence, an assistant secretary, or in the absence of both
the secretary and assistant secretaries, a person appointed by the chairman
shall act as secretary.

Section 7. QUORUM. At any meeting of stockholders, the presence in
person or by proxy of stockholders entitled to cast a majority of all the votes
entitled to be cast at such meeting shall constitute a quorum; but this section
shall not affect any requirement under any statute or the charter of the
Corporation for the vote necessary for the adoption of any measure. If,
however, such quorum shall not be present at any meeting of the stockholders,
the stockholders entitled to vote at such meeting, present in person or by
proxy, shall have the power to adjourn the meeting from time to time to a date
not more than 120 days after the original record date without notice other than
announcement at the meeting. At such adjourned meeting at which a quorum shall
be present, any business may be transacted which might have been transacted at
the meeting as originally notified.

Section 8. VOTING. A plurality of all the votes cast at a meeting of
stockholders duly called and at which a quorum is present shall be sufficient to
elect a director. Each share may be voted for as many individuals as there are
directors to be elected and for whose election the share is entitled to be
voted. A majority of the votes cast at a meeting of stockholders duly called
and at which a quorum is present shall be sufficient to approve any other matter
which may properly come before the meeting, unless more than a majority of the
votes cast is required by statute or by the charter of the Corporation. Unless
otherwise provided in the charter, each outstanding share, regardless of class,
shall be entitled to one vote on each matter submitted to a vote at a meeting of
stockholders.

Section 9. PROXIES. A stockholder may vote the stock owned of record
by him, either in person or by proxy executed in writing by the stockholder or
by his duly authorized attorney in fact. Such proxy shall be filed with the
secretary of the Corporation before or at the time of the meeting. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy.

Section 10. VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the
Corporation registered in the name of a corporation, partnership, trust or other
entity, if entitled to be voted, may be voted by the president or a vice
president, a general partner or trustee

<PAGE>

thereof, as the case may be, or a proxy appointed by any of the foregoing
individuals, unless some other person who has been appointed to vote such stock
pursuant to a bylaw or a resolution of the governing body of such corporation or
other entity or agreement of the partners of a partnership presents a certified
copy of such bylaw, resolution or agreement, in which case such person may vote
such stock. Any director or other fiduciary may vote stock registered in his
name as such fiduciary, either in person or by proxy.

Shares of stock of the Corporation directly or indirectly owned by it
shall not be voted at any meeting and shall not be counted in determining the
total number of outstanding shares entitled to be voted at any given time,
unless they are held by it in a fiduciary capacity, in which case they may be
voted and shall be counted in determining the total number of outstanding shares
at any given time.

The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth the
class of stockholders who may make the certification, the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board of Directors considers necessary or desirable. On receipt of such
certification, the person specified in the certification shall be regarded as,
for the purposes set forth in the certification, the stockholder of record of
the specified stock in place of the stockholder who makes the certification.

Notwithstanding any other provision of the charter of the Corporation
or these Bylaws, Title 3, Subtitle 7 of the Corporations and Associations
Article of the Annotated Code of Maryland (or any successor statute) shall not
apply to any acquisition by any person of shares of stock of the Corporation.
This section may be repealed, in whole or in part, at any time, whether before
or after an acquisition of control shares and, upon such repeal, may, to the
extent provided by any successor bylaw, apply to any prior or subsequent control
share acquisition.

Section 11. INSPECTORS. At any meeting of stockholders, the chairman of
the meeting may appoint one or more persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares represented at
the meeting based upon their determination of the validity and effect of
proxies, count all votes, report the results and perform such other acts as are
proper to conduct the election and voting with impartiality and fairness to all
the stockholders.

<PAGE>

Each report of an inspector shall be in writing and signed by him or
by a majority of them if there is more than one inspector acting at such
meeting. If there is more than one inspector, the report of a majority shall be
the report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting shall
be PRIMA FACIE evidence thereof.

Section 12. NOMINATIONS AND STOCKHOLDER BUSINESS

(a) ANNUAL MEETINGS OF STOCKHOLDERS. (1) Nominations of persons for
election to the Board of Directors and the proposal of business to be considered
by the stockholders may be made at an annual meeting of stockholders
(i) pursuant to the Corporation's notice of meeting, (ii) by or at the direction
of the Board of Directors or (iii) by any stockholder of the Corporation who was
a stockholder of record both at the time of giving of notice provided for in
this Section 12(a) and at the time of the annual meeting, who is entitled to
vote at the meeting and who complied with the notice procedures set forth in
this Section 12(a).

(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of
paragraph (a)(1) of this Section 12, the stockholder must have given timely
notice thereof in writing to the secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to the secretary at the principal
executive offices of the Corporation not less than 60 days nor more than 90 days
prior to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is advanced by
more than 30 days or delayed by more than 60 days from such anniversary date,
notice by the stockholder to be timely must be so delivered not earlier than the
90th day prior to such annual meeting and not later than the close of business
on the later of the 60th day prior to such annual meeting or the tenth day
following the day on which public announcement of the date of such meeting is
first made. Such stockholder's notice shall set forth (i) as to each person
whom the stockholder proposes to nominate for election or reelection as a
director all information relating to such person that is required to be
disclosed in solicitations of proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (ii) as to any other business that the stockholder
proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business of such
stockholder and of the beneficial owner, if any, on whose behalf the proposal is
made; and (iii) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made, (x) the name
and address of such stockholder, as they appear on the Corporation's books, and
of such beneficial owner and (y) the number of shares of each class of stock of
the Corporation which are owned beneficially and of record by such stockholder
and such beneficial owner.

(3) Notwithstanding anything in the second sentence of paragraph
(a)(2) of this Section 12 to the contrary, in the event that the number of
directors to be elected to the Board of Directors is increased and there is no
public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Corporation

<PAGE>

at least 70 days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 12(a) shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the secretary at the
principal executive offices of the Corporation not later than the close of
business on the tenth day following the day on which such public announcement is
first made by the Corporation.

(b) SPECIAL MEETINGS OF STOCKHOLDERS. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought before
the meeting pursuant to the Corporation's notice of meeting. Nominations of
persons for election to the Board of Directors may be made at a special meeting
of stockholders at which directors are to be elected (i) pursuant to the
Corporation's notice of meeting, (ii) by or at the direction of the Board of
Directors or (iii) provided that the Board of Directors has determined that
directors shall be elected at such special meeting, by any stockholder of the
Corporation who is a stockholder of record at the time of giving of notice
provided for in this Section 12(b), who is entitled to vote at the meeting and
who complied with the notice procedures set forth in this Section 12(b). In the
event the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be) for election to such
position as specified in the Corporation's notice of meeting, if the
stockholder's notice containing the information required by paragraph (a)(2) of
this Section 12 shall be delivered to the secretary at the principal executive
offices of the Corporation not earlier than the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th day
prior to such special meeting or the tenth day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting.

(c) GENERAL. (1) Only such persons who are nominated in accordance
with the procedures set forth in this Section 12 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Section 12. The presiding officer of the meeting shall have
the power and duty to determine whether a nomination or any business proposed to
be brought before the meeting was made in accordance with the procedures set
forth in this Section 12 and, if any proposed nomination or business is not in
compliance with this Section 12, to declare that such defective nomination or
proposal be disregarded.

(2) For purposes of this Section 12, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.

(3) Notwithstanding the foregoing provisions of this Section 12,
a stockholder shall also comply with all applicable requirements of state law
and of the Exchange Act and the rules and regulations thereunder with respect to
the matters set forth in this Section 12. Nothing in this Section 12 shall be
deemed to affect any rights of stockholders to request inclusion of proposals in
the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.

<PAGE>

Section 13. VOTING BY BALLOT. Voting on any question or in any
election may be VIVA VOCE unless the presiding officer shall order or any
stockholder shall demand that voting be by ballot.

ARTICLE III

DIRECTORS

Section 1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed under the direction of its Board of Directors.

Section 2. NUMBER, TENURE AND QUALIFICATIONS. At any regular
meeting or at any special meeting called for that purpose, a majority of the
entire Board of Directors may establish, increase or decrease the number of
directors, provided that the number thereof shall not be less than 5 (or, if the
Maryland General Corporation Law ("MGCL") requires a number of directors greater
than 5, the minimum number required by the MGCL), nor more than 11, and further
provided that the tenure of office of a director shall not be affected by any
decrease in the number of directors.

Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the
Board of Directors shall be held immediately after and at the same place as the
annual meeting of stockholders, no notice other than this Bylaw being necessary.
The Board of Directors may provide, by resolution, the time and place, either
within or without the State of Maryland, for the holding of regular meetings of
the Board of Directors without other notice than such resolution.

Section 4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the chairman of the board,
president or by a majority of the directors then in office. The person or
persons authorized to call special meetings of the Board of Directors may fix
any place, either within or without the State of Maryland, as the place for
holding any special meeting of the Board of Directors called by them.

Section 5. NOTICE. Notice of any special meeting of the Board of
Directors shall be delivered personally or by telephone, facsimile transmission,
United States mail or courier to each director at his business or residence
address. Notice by personal delivery, by telephone or a facsimile transmission
shall be given at least two days prior to the meeting. Notice by mail shall be
given at least five days prior to the meeting and shall be deemed to be given
when deposited in the United States mail properly addressed, with postage
thereon prepaid. Telephone notice shall be deemed to be given when the director
is personally given such notice in a telephone call to which he is a party.
Facsimile transmission notice shall be deemed to be given upon completion of the
transmission of the message to the number given to the Corporation by the
director and receipt of a completed answer-back indicating receipt. Neither the
business to be transacted at, nor the purpose of, any annual, regular or special
meeting of the Board of Directors need be stated in the notice, unless
specifically required by statute or these Bylaws.

<PAGE>

Section 6. QUORUM. A majority of the directors shall constitute a
quorum for transaction of business at any meeting of the Board of Directors,
provided that, if less than a majority of such directors are present at said
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice, and provided further that if, pursuant to the
charter of the Corporation or these Bylaws, the vote of a majority of a
particular group of directors is required for action, a quorum must also include
a majority of such group.

The Board of Directors present at a meeting which has been
duly called and convened may continue to transact business until adjournment,
notwithstanding the withdrawal of enough directors to leave less than a quorum.

Section 7. VOTING. The action of the majority of the directors
present at a meeting at which a quorum is present shall be the action of the
Board of Directors, unless the concurrence of a greater proportion is required
for such action by applicable statute.

Section 8. TELEPHONE MEETINGS. Directors may participate in a
meeting by means of a conference telephone or similar communications equipment
if all persons participating in the meeting can hear each other at the same
time. Participation in a meeting by these means shall constitute presence in
person at the meeting.

Section 9. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting, if a consent in writing to such action is signed by each
director and such written consent is filed with the minutes of proceedings of
the Board of Directors.

Section 10. VACANCIES. If for any reason any or all the directors
cease to be directors, such event shall not terminate the Corporation or affect
these Bylaws or the powers of the remaining directors hereunder (even if fewer
than five directors remain). Any vacancy on the Board of Directors for any
cause other than an increase in the number of directors shall be filled at any
regular meeting or at any special meeting called for that purpose by a majority
vote of the remaining directors, although such majority may be less than a
quorum. Any vacancy in the number of directors created by an increase in the
number of directors may be filled by a majority vote of the entire Board of
Directors. Any individual so elected as director shall hold office until the
next annual meeting of stockholders and until his successor is elected and
qualifies.

Section 11. COMPENSATION. Directors shall not receive any stated
salary for their services as directors but, by resolution of the Board of
Directors, may receive fixed sums per year and/or per meeting and/or per visit
to real property or other facilities owned or leased by the Corporation and for
any service or activity they performed or engaged in as directors. Directors
may be reimbursed for expenses of attendance, if any, at each annual, regular or
special meeting of the Board of Directors or of any committee thereof and for
their expenses, if any, in connection with each property visit and any other
service or activity they performed or engaged in as directors; but nothing
herein contained shall be construed to preclude any directors from serving the
Corporation in any other capacity and receiving compensation therefor.

<PAGE>

Section 12. LOSS OF DEPOSITS. No director shall be liable for any
loss which may occur by reason of the failure of the bank, trust company,
savings and loan association, or other institution with whom moneys or stock
have been deposited.

Section 13. SURETY BONDS. Unless required by law, no director
shall be obligated to give any bond or surety or other security for the
performance of any of his duties.

Section 14. RELIANCE. Each director, officer, employee and agent
of the Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or failure
to act in reliance in good faith upon the books of account or other records of
the Corporation, upon an opinion of counsel or upon reports made to the
Corporation by any of its officers or employees or by the adviser, accountants,
appraisers or other experts or consultants selected by the Board of Directors or
officers of the Corporation, regardless of whether such counsel or expert may
also be a director.

Section 15. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS. The directors shall have no responsibility to devote their full time to
the affairs of the Corporation. Any director or officer, employee or agent of
the Corporation, in his personal capacity or in a capacity as an affiliate,
employee, or agent of any other person, or otherwise, may have business
interests and engage in business activities similar to or in addition to or in
competition with those of or relating to the Corporation.

ARTICLE IV

COMMITTEES

Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of
Directors may appoint from among its members an Executive Committee, an Audit
Committee, a Compensation Committee, and other committees, composed of one or
more directors, to serve at the pleasure of the Board of Directors.

Section 2. POWERS. The Board of Directors may delegate to
committees appointed under Section 1 of this Article any of the powers of the
Board of Directors, except as prohibited by law.

Section 3. MEETINGS. Notice of committee meetings shall be given
in the same manner as notice for special meetings of the Board of Directors. A
majority of the members of the committee shall constitute a quorum for the
transaction of business at any meeting of the committee. The act of a majority
of the committee members present at a meeting shall be the act of such
committee. The Board of Directors may designate a chairman of any committee,
and such chairman or any two members of any committee may fix the time and place
of its meeting unless the Board shall otherwise provide. In the absence of any
member of any such committee, the members thereof present at any meeting,
whether or not they constitute a quorum, may appoint another director to act in
the place of such absent member. Each committee shall keep minutes of its
proceedings.

<PAGE>

Section 4. TELEPHONE MEETINGS. Members of a committee of the
Board of Directors may participate in a meeting by means of a conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other at the same time. Participation in a meeting by
these means shall constitute presence in person at the meeting.

Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or
permitted to be taken at any meeting of a committee of the Board of Directors
may be taken without a meeting, if a consent in writing to such action is signed
by each member of the committee and such written consent is filed with the
minutes of proceedings of such committee.

Section 6. VACANCIES. Subject to the provisions hereof, the Board
of Directors shall have the power at any time to change the membership of any
committee, to fill all vacancies, to designate alternate members to replace any
absent or disqualified member or to dissolve any such committee.

ARTICLE V

OFFICERS

Section 1. GENERAL PROVISIONS. The officers of the Corporation
shall include a chief executive officer, a president, a secretary and a
treasurer and may include a chairman of the board, a vice chairman of the board,
one or more vice presidents, a chief operating officer, a chief financial
officer, one or more assistant secretaries and one or more assistant treasurers.
In addition, the Board of Directors may from time to time appoint such other
officers with such powers and duties as they shall deem necessary or desirable.
The officers of the Corporation shall be elected annually by the Board of
Directors at the first meeting of the Board of Directors held after each annual
meeting of stockholders, except that the chief executive officer may appoint
one or more vice presidents, assistant secretaries and assistant treasurers. If
the election of officers shall not be held at such meeting, such election shall
be held as soon thereafter as may be convenient. Each officer shall hold office
until his successor is elected and qualifies or until his death, resignation or
removal in the manner hereinafter provided. Any two or more offices except
president and vice president may be held by the same person. In its discretion,
the Board of Directors may leave unfilled any office except that of president,
treasurer and secretary. Election of an officer or agent shall not of itself
create contract rights between the Corporation and such officer or agent.

Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the
Corporation may be removed by the Board of Directors if in its judgment the best
interests of the Corporation would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed. Any
officer of the Corporation may resign at any time by giving written notice of
his resignation to the Board of Directors, the chairman of the board, the
president or the secretary. Any resignation shall take effect at any time
subsequent to the time specified therein or, if the time when it shall become
effective is not specified therein, immediately upon its receipt. The
acceptance of a resignation shall not be necessary to make it effective unless
otherwise stated in the resignation. Such resignation shall

<PAGE>

be without prejudice to the contract rights, if any, of the Corporation.

Section 3. VACANCIES. A vacancy in any office may be filled by
the Board of Directors for the balance of the term.

Section 4. CHIEF EXECUTIVE OFFICER. The Board of Directors may
designate a chief executive officer. In the absence of such designation, the
chairman of the board shall be the chief executive officer of the Corporation.
The chief executive officer shall have general responsibility for implementation
of the policies of the Corporation, as determined by the Board of Directors, and
for the management of the business and affairs of the Corporation.

Section 5. CHIEF OPERATING OFFICER. The Board of Directors may
designate a chief operating officer. The chief operating officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.

Section 6. CHIEF FINANCIAL OFFICER. The Board of Directors may
designate a chief financial officer. The chief financial officer shall have the
responsibilities and duties as set forth by the Board of Directors or the chief
executive officer.

Section 7. CHAIRMAN OF THE BOARD. The Board of Directors shall
designate a chairman of the board. The chairman of the board shall preside over
the meetings of the Board of Directors and of the stockholders at which he shall
be present. The chairman of the board shall perform such other duties as may be
assigned to him or them by the Board of Directors.

Section 8. PRESIDENT. The president or chief executive officer,
as the case may be, shall in general supervise and control all of the business
and affairs of the Corporation. In the absence of a designation of a chief
operating officer by the Board of Directors, the president shall be the chief
operating officer. He may execute any deed, mortgage, bond, contract or other
instrument, except in cases where the execution thereof shall be expressly
delegated by the Board of Directors or by these Bylaws to some other officer or
agent of the Corporation or shall be required by law to be otherwise executed;
and in general shall perform all duties incident to the office of president and
such other duties as may be prescribed by the Board of Directors from time to
time.

Section 9. VICE PRESIDENTS. In the absence of the president or in
the event of a vacancy in such office, the vice president (or in the event there
be more than one vice president, the vice presidents in the order designated at
the time of their election or, in the absence of any designation, then in the
order of their election) shall perform the duties of the president and when so
acting shall have all the powers of and be subject to all the restrictions upon
the president; and shall perform such other duties as from time to time may be
assigned to him by the president or by the Board of Directors. The Board of
Directors may designate one or more vice presidents as executive vice president,
senior vice president or as vice president for particular areas of
responsibility.

<PAGE>

Section 10. SECRETARY. The secretary shall (a) keep the minutes of
the proceedings of the stockholders, the Board of Directors and committees of
the Board of Directors in one or more books provided for that purpose; (b) see
that all notices are duly given in accordance with the provisions of these
Bylaws or as required by law; (c) be custodian of the corporate records and of
the seal of the Corporation; (d) keep a register of the post office address of
each stockholder which shall be furnished to the secretary by such stockholder;
(e) have general charge of the share transfer books of the Corporation; and
(f) in general perform such other duties as from time to time may be assigned to
him by the chief executive officer, the president or by the Board of Directors.

Section 11. TREASURER. The treasurer shall have the custody of the
funds and securities of the Corporation and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors. In the absence of a designation of a chief financial officer by
the Board of Directors, the treasurer shall be the chief financial officer of
the Corporation.

The treasurer shall disburse the funds of the Corporation as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and Board of Directors, at the
regular meetings of the Board of Directors or whenever it may so require, an
account of all his transactions as treasurer and of the financial condition of
the Corporation.

If required by the Board of Directors, the treasurer shall
give the Corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement or removal from office, of all books, papers,
vouchers, moneys and other property of whatever kind in his possession or under
his control belonging to the Corporation.

Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
assistant secretaries and assistant treasurers, in general, shall perform such
duties as shall be assigned to them by the secretary or treasurer, respectively,
or by the president or the Board of Directors. The assistant treasurers shall,
if required by the Board of Directors, give bonds for the faithful performance
of their duties in such sums and with such surety or sureties as shall be
satisfactory to the Board of Directors.

Section 13. SALARIES. The salaries and other compensation of the
officers shall be fixed from time to time by the Board of Directors and no
officer shall be prevented from receiving such salary or other compensation by
reason of the fact that he is also a director.

<PAGE>

ARTICLE VI

CONTRACTS, LOANS, CHECKS AND DEPOSITS

Section 1. CONTRACTS. The Board of Directors may authorize any
officer or agent to enter into any contract or to execute and deliver any
instrument in the name of and on behalf of the Corporation and such authority
may be general or confined to specific instances. Any agreement, deed,
mortgage, lease or other document executed by one or more of the directors or by
an authorized person shall be valid and binding upon the Board of Directors and
upon the Corporation when authorized or ratified by action of the Board of
Directors.

Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or agent of the
Corporation in such manner as shall from time to time be determined by the Board
of Directors.

Section 3. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may designate.

ARTICLE VII

STOCK

Section 1. CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of stock held by him in the Corporation. Each certificate
shall be signed by the chief executive officer, the president or a vice
president and countersigned by the secretary or an assistant secretary or the
treasurer or an assistant treasurer and may be sealed with the seal, if any, of
the Corporation. The signatures may be either manual or facsimile.
Certificates shall be consecutively numbered; and if the Corporation shall, from
time to time, issue several classes of stock, each class may have its own number
series. A certificate is valid and may be issued whether or not an officer who
signed it is still an officer when it is issued. Each certificate representing
shares which are restricted as to their transferability or voting powers, which
are preferred or limited as to their dividends or as to their allocable portion
of the assets upon liquidation or which are redeemable at the option of the
Corporation, shall have a statement of such restriction, limitation, preference
or redemption provision, or a summary thereof, plainly stated on the
certificate. If the Corporation has authority to issue stock of more than one
class, the certificate shall contain on the face or back a full statement or
summary of the designations and any preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption of each
class of stock and, if the Corporation is authorized to issue any preferred or
special class in series, the differences in the relative rights and preferences
between the shares of each series to the extent they have been set and the
authority of the Board of Directors to set the relative rights and preferences
of subsequent series. In lieu of such statement or summary, the certificate may
state that the

<PAGE>

Corporation will furnish a full statement of such information to any stockholder
upon request and without charge. If any class of stock is restricted by the
Corporation as to transferability, the certificate shall contain a full
statement of the restriction or state that the Corporation will furnish
information about the restrictions to the stockholder on request and without
charge.

Section 2. TRANSFERS. Upon surrender to the Corporation or the
transfer agent of the Corporation of a stock certificate duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.

The Corporation shall be entitled to treat the holder of
record of any share of stock as the holder in fact thereof and, accordingly,
shall not be bound to recognize any equitable or other claim to or interest in
such share or on the part of any other person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of the
State of Maryland.

Notwithstanding the foregoing, transfers of shares of any
class of stock will be subject in all respects to the charter of the Corporation
and all of the terms and conditions contained therein.

Section 3. REPLACEMENT CERTIFICATE. Any officer designated by the
Board of Directors may direct a new certificate to be issued in place of any
certificate previously issued by the Corporation alleged to have been lost,
stolen or destroyed upon the making of an affidavit of that fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing the
issuance of a new certificate, an officer designated by the Board of Directors
may, in his discretion and as a condition precedent to the issuance thereof,
require the owner of such lost, stolen or destroyed certificate or the owner's
legal representative to advertise the same in such manner as he shall require
and/or to give bond, with sufficient surety, to the Corporation to indemnify it
against any loss or claim which may arise as a result of the issuance of a new
certificate.

Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
The Board of Directors may set, in advance, a record date for the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or determining stockholders entitled to receive payment of any
dividend or the allotment of any other rights, or in order to make a
determination of stockholders for any other proper purpose. Such date, in any
case, shall not be prior to the close of business on the day the record date is
fixed and shall be not more than 90 days and, in the case of a meeting of
stockholders, not less than ten days, before the date on which the meeting or
particular action requiring such determination of stockholders of record is to
be held or taken.

In lieu of fixing a record date, the Board of Directors may
provide that the stock transfer books shall be closed for a stated period but
not longer than 20 days. If the stock transfer books are closed for the purpose
of determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days before the date
of such meeting.

<PAGE>

If no record date is fixed and the stock transfer books are
not closed for the determination of stockholders, (a) the record date for the
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day on which the notice of
meeting is mailed or the 30th day before the meeting, whichever is the closer
date to the meeting; and (b) the record date for the determination of
stockholders entitled to receive payment of a dividend or an allotment of any
other rights shall be the close of business on the day on which the resolution
of the directors, declaring the dividend or allotment of rights, is adopted.

When a determination of stockholders entitled to vote at any
meeting of stockholders has been made as provided in this section, such
determination shall apply to any adjournment thereof, except when (i) the
determination has been made through the closing of the transfer books and the
stated period of closing has expired or (ii) the meeting is adjourned to a date
more than 120 days after the record date fixed for the original meeting, in
either of which case a new record date shall be determined as set forth herein.

Section 5. STOCK LEDGER. The Corporation shall maintain at its
principal office or at the office of its counsel, accountants or transfer agent,
an original or duplicate share ledger containing the name and address of each
stockholder and the number of shares of each class held by such stockholder.

Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of
Directors may issue fractional stock or provide for the issuance of scrip, all
on such terms and under such conditions as they may determine. Notwithstanding
any other provision of the charter or these Bylaws, the Board of Directors may
issue units consisting of different securities of the Corporation. Any security
issued in a unit shall have the same characteristics as any identical securities
issued by the Corporation, except that the Board of Directors may provide that
for a specified period securities of the Corporation issued in such unit may be
transferred on the books of the Corporation only in such unit.

ARTICLE VIII

ACCOUNTING YEAR

The Board of Directors shall have the power, from time to time, to fix
the fiscal year of the Corporation by a duly adopted resolution.

ARTICLE IX

DISTRIBUTIONS

Section 1. AUTHORIZATION. Dividends and other distributions upon
the stock of the Corporation may be authorized and declared by the Board of
Directors, subject to the provisions of law and the charter of the Corporation.
Dividends and other distributions may be paid in cash, property or stock of the
Corporation, subject to the provisions of law and the charter.

<PAGE>

Section 2. CONTINGENCIES. Before payment of any dividends or
other distributions, there may be set aside out of any assets of the Corporation
available for dividends or other distributions such sum or sums as the Board of
Directors may from time to time, in its absolute discretion, think proper as a
reserve fund for contingencies, for equalizing dividends or other distributions,
for repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall determine to be in the best interest of
the Corporation, and the Board of Directors may modify or abolish any such
reserve in the manner in which it was created.

ARTICLE X

INVESTMENT POLICY

Subject to the provisions of the charter of the Corporation, the Board
of Directors may from time to time adopt, amend, revise or terminate any policy
or policies with respect to investments by the Corporation as it shall deem
appropriate in its sole discretion.

ARTICLE XI

SEAL

Section 1. SEAL. The Board of Directors may authorize the adoption of
a seal by the Corporation. The seal shall contain the name of the Corporation
and the year of its incorporation and the words "Incorporated Maryland." The
Board of Directors may authorize one or more duplicate seals and provide for the
custody thereof.

Section 2. AFFIXING SEAL. Whenever the Corporation is permitted or
required to affix its seal to a document, it shall be sufficient to meet the
requirements of any law, rule or regulation relating to a seal to place the word
"(SEAL)" adjacent to the signature of the person authorized to execute the
document on behalf
of the Corporation.

ARTICLE XII

INDEMNIFICATION AND ADVANCES FOR EXPENSES

To the maximum extent permitted by Maryland law in effect from time to
time, the Corporation, without requiring a preliminary determination of the
ultimate entitlement to indemnification, shall indemnify and shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any individual who is a present or former director or officer of the
Corporation and who is made a party to the proceeding by reason of his service
in that capacity or (b) any individual who, while a director of the Corporation
and at the request of the Corporation, serves or has served another corporation,
partnership, joint venture, trust, employee benefit plan or any other enterprise
as a director, officer, partner or trustee of such

<PAGE>

corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise and who is made a party to the proceeding by reason of his service in
that capacity. The Corporation may, with the approval of its Board of
Directors, provide such indemnification and advance for expenses to a person who
served a predecessor of the Corporation in any of the capacities described in
(a) or (b) above and to any employee or agent of the Corporation or a
predecessor of the Corporation.

Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the Bylaws or charter of the Corporation
inconsistent with this Article, shall apply to or affect in any respect the
applicability of the preceding paragraph with respect to any act or failure to
act which occurred prior to such amendment, repeal or adoption.

ARTICLE XIII

WAIVER OF NOTICE

Whenever any notice is required to be given pursuant to the charter of the
Corporation or these Bylaws or pursuant to applicable law, a waiver thereof in
writing, signed by the person or persons entitled to such notice, whether before
or after the time stated therein, shall be deemed equivalent to the giving of
such notice. Neither the business to be transacted at nor the purpose of any
meeting need be set forth in the waiver of notice, unless specifically required
by statute. The attendance of any person at any meeting shall constitute a
waiver of notice of such meeting, except where such person attends a meeting for
the express purpose of objecting to the transaction of any business on the
ground that the meeting is not lawfully called or convened.

ARTICLE XIV

AMENDMENT OF BYLAWS

The Board of Directors shall have the exclusive power to adopt, alter or
repeal any provision of these Bylaws and to make new Bylaws.

<PAGE>

EXHIBIT 3.3

Number *0* Shares *0*

ARI See Reverse for
Important Notice
on Transfer Restrictions
and other Information

THIS CERTIFICATE IS TRANSFERABLE CUSIP 039793 10 4
IN THE CITIES OF _______________

ARDEN REALTY, INC.

Incorporated Under the Laws of the State of Maryland

THIS CERTIFIES THAT **Specimen**

is the record holder of **Zero (0)**

fully paid and nonassessable shares of Common Stock, $.01 par value per share,
of

ARDEN REALTY, INC.

(the "Corporation") transferable on the books of the Corporation by the
holder hereof in person or by its duly authorized attorney, upon surrender of
this Certificate properly endorsed. This Certificate and the shares
represented hereby are issued and shall be held subject to all of the
provisions of the charter of the Corporation (the "Charter") and the Bylaws
of the Corporation and any amendments thereto. This Certificate is not valid
unless countersigned and registered by the Transfer Agent and Registrar.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
executed on its behalf by its duly authorized officers.

DATED ______________________

Countersigned and Registered:

THE BANK OF NEW YORK
Transfer Agent ________________(SEAL)
and Registrar President

By:_______________________________ ______________________
Authorized Signature Secretary

<PAGE>

The Corporation is authorized to issue two classes of capital stock
which are designated as Common Shares and Preferred Shares. The Board of
Directors is authorized to determine the preferences, limitations and
relative rights of the Preferred Shares before the issuance of any
Preferred Shares. The Corporation will furnish, without charge, to any
shareholder making a written request therefor, a copy of the
Corporation's Charter and a written statement of the designations,
relative rights, preferences and limitations applicable to each such
class of stock. Requests for such written statement may be directed to
Victor J. Coleman, the President of the Company, at the Company's
principal office.

The shares represented by this certificate are subject to restrictions
on Beneficial and Constructive Ownership and Transfer for the purpose of
the Corporation's maintenance of its status as a Real Estate Investment
Trust under the Internal Revenue Code of 1986, as amended (the "Code").
Subject to certain further restrictions and except as expressly provided
in the Corporation's Charter, (i) no Person may Beneficially Own in
excess of 9.0% of the outstanding Common Shares of the Corporation (by
value or by number of shares, whichever is more restrictive); (ii) no
Person may Constructively Own in excess of 9.8% of the outstanding
Common Shares of the Corporation (by value or by number of shares,
whichever is more restrictive; (iii) no Person may Beneficially or
Constructively Own Common Shares that would result in the Corporation
being "closely held" under Section 856(h) of the Code or otherwise cause
the Corporation to fail to qualify as a REIT; and (iv) no Person may
Transfer Common Shares if such Transfer would result in the capital
stock of the Corporation being owned by fewer than 100 Persons. Any
Person who Beneficially or Constructively Owns or attempts to
Beneficially or Constructively Own Common Shares which causes or will
cause a Person to Beneficially or Constructively Own Common Shares
in excess of the above limitations must immediately notify the
Corporation. If any of the restrictions on transfer or ownership are
violated, the Common Shares represented hereby will be automatically
transferred to a Trustee of a Trust for the benefit of one or more
Charitable Beneficiaries. In addition, the Corporation may redeem shares
upon the terms and conditions specified by the Board of Directors in its
sole discretion if the Board of Directors determines that ownership or a
Transfer or other event may violate the restrictions described above.
Furthermore, upon the occurrence of certain events, attempted Transfers
in violation of the restrictions described above may be void AD INITIO.
All capitalized terms in this legend have the meanings defined in the
Charter of the Corporation, as the same may be amended from time to
time, a copy of which, including the restrictions on transfer and
ownership, will be furnished to each holder of Common Shares on request
and without charge. Requests for such a copy may be directed to Victor
J. Coleman, the President of the Company, at the Company's principal
office.

KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN
OR DESTROYED, THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A
CONDITION OF THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
_________________________________

The following abbreviations, when used in the inscription on the face of this
Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT ______________ Custodian ___________
TEN ENT - as tenants by the entireties (Custodian) (Minor)
JT TEN - as joint tenants with right under Uniform Gifts to Minors Act of
of survivorship and not as tenants __________________________________
in common (State)
</TABLE>

Additional abbreviations may also be used though not in the above list.

FOR VALUE RECEIVED, ______________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE __________
________________________________________________________________________________
(Please Print or Typewrite Name and Address, Including Zip Code of Assignee)
_____________________ (_______________) shares of Common Stock of the
Corporation represented by this Certificate shares of Common Stock on the
books of the Corporation, with full power of substitution in the premises.

Dated___________________ _____________________________________________
NOTICE: The Signature To This Assignment Must
Correspond With The Name As Written Upon The
Face Of The Certificate In Every Particular,
Without Alteration Or Enlargement Or Any
Change Whatever.

<PAGE>

[LETTERHEAD]

FILE NUMBER
796698

September 27, 1996

Arden Realty, Inc.
9100 Wilshire Boulevard
East Tower, Suite 700
Beverly Hills, California 92707

Re: Registration Statement on Form S-11
Registration No. 333-8163
-----------------------------------

Ladies and Gentlemen:

We have served as Maryland counsel to Arden Realty, Inc., a Maryland
corporation (the "Company"), in connection with certain matters of Maryland law
arising out of the registration of 21,674,500 shares of Common Stock, $.01 par
value per share, of the Company (the "Shares") (including 2,827,000 shares which
over-allotments, if any), covered by the above-referenced Registration
Statement, and all amendments thereto (the "Registration Statement"), under the
Securities Act of 1933, as amended (the "1933 Act"). Unless otherwise defined
herein, capitalized terms used herein shall have the meanings assigned to them
in the Registration Statement.

In connection with our representation of the Company, and as a basis
for the opinion hereinafter set forth, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of the following
documents (hereinafter collectively referred to as the "Documents"):

1. The Registration Statement and the related form of prospectus
included therein in the form in which it was transmitted to the Securities and
Exchange Commission under the 1933 Act;

<PAGE>

Arden Realty, Inc.
September 27, 1996
Page 2

2. The charter of the Company, certified as of a recent date by the
State Department of Assessments and Taxation of Maryland (the "SDAT");

3. The Bylaws of the Company, certified as of a recent date by its
Secretary;

4. Resolutions adopted by the Board of Directors and stockholder of
the Company relating to the sale, issuance and registration of the Shares,
certified as of a recent date by the Secretary of the Company;

5. The form of certificate representing a Share, certified as of a
recent date by the Secretary of the Company;

6. A certificate of the SDAT as to the good standing of the Company,
dated September 27, 1996;

7. A certificate executed by Michele Byer, Secretary of the Company,
dated September 25, 1996;

8. An unexecuted copy of Articles of Amendment and Restatement of
the Company (the "Restated Articles"), provided to us by Latham & Watkins,
counsel to the Company; and

9. Such other documents and matters as we have deemed necessary or
appropriate to express the opinion set forth in this letter, subject to the
assumptions, limitations and qualifications stated herein.

In expressing the opinion set forth below, we have assumed, and so far
as is known to us there are no facts inconsistent with, the following:

1. Each of the parties (other than the Company) executing any of the
Documents has duly and validly executed and delivered each of the Documents to
which such party is a signatory, and such party's obligations set forth therein
are legal, valid and binding.

2. Each individual executing any of the Documents on behalf of a
party (other than the Company) is duly authorized to do so.

3. Each individual executing any of the Documents, whether on behalf
of such individual or any other person, is legally competent to do so.

<PAGE>

Arden Realty, Inc.
September 27, 1996
Page 3

4. All Documents submitted to us as originals are authentic. All
Documents submitted to us as certified or photostatic copies conform to the
original documents. All signatures on all such Documents are genuine. All
public records reviewed or relied upon by us or on our behalf are true and
complete. All statements and information contained in the Documents are true
and complete. There are no oral or written modifications or amendments to the
Documents, by action or conduct of the parties or otherwise.

5. The Restated Articles will be duly approved, executed and
properly filed for record with the SDAT prior to the issuance or the Shares.

The phrase "known to us" is limited to the actual knowledge, without
independent inquiry, of the lawyers at our firm who have performed legal
services in connection with the issuance of this opinion.

Based upon the foregoing, and subject to the assumptions, limitations
and qualifications stated herein, it is our opinion that:

1. The Company is a corporation duly incorporated and existing under
and by virtue of the laws of the State of Maryland and is in good standing with
the SDAT.

2. The Shares will be duly and validly authorized and when and if
delivered against payment therefor in accordance with the resolutions of the
Board of Directors of the Company authorizing their issuance, will be duly and
validly issued, fully paid and nonassessable.

The foregoing opinion is limited to the substantive laws of the State
of Maryland and we do not express any opinion herein concerning any other law.
We express no opinion as to compliance with the securities (or "blue sky") laws
or the real estate syndication laws of the State of Maryland.

We assume no obligation to supplement this opinion if any applicable
law changes after the date hereof or if we become aware of any fact that might
change the opinion expressed herein after the date hereof.

This opinion is being furnished to you solely for submission to the
Securities and Exchange Commission as an exhibit to the Registration Statement
and, accordingly, may not

<PAGE>

Arden Realty, Inc.
September 27, 1996
Page 4

be relied upon by, quoted in any manner to, or delivered to any other person or
entity (other than Latham & Watkins, counsel to the Company) without, in each
instance, our prior written consent.

We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein. In
giving this consent, we do not admit that we are within the category of persons
whose consent is required by Section 7 of the 1933 Act.

Very truly yours,

/s/ Ballard Spahr Andrew & Ingersoll

<PAGE>

[LETTERHEAD]

------------

September 30, 1996

Arden Realty, Inc.
9100 Wilshire Boulevard
East Tower, Suite 700
Beverly Hills, California 90212

Re: Federal Income Tax Consequences
-------------------------------

Ladies and Gentlemen:

We have acted as tax counsel to Arden Realty, Inc., a Maryland
corporation (the "Company"), in connection with its formation and its sale of up
to 18,847,500 shares of common stock of the Company pursuant to a registration
statement on Form S-11 under the Securities Act of 1933, as amended, filed with
the Securities and Exchange Commission on July 16, 1996, as amended as of the
date hereof (the "REGISTRATION STATEMENT").

You have requested our opinion concerning certain of the federal
income tax consequences to the Company and the purchasers of the securities
described above in connection with the sale described above. This opinion is
based on various facts and assumptions, including the facts set forth in the
Registration Statement concerning the business, properties and governing
documents of the Company and Arden Realty Limited Partnership (the "Operating
Partnership"). We have also been furnished with, and with your consent have
relied upon, certain representations made by the Company and the Operating
Partnership with respect to certain factual matters through a certificate of
an officer of the Company (the "Officer's Certificate").

<PAGE>

Arden Realty Group, Inc.
September 30, 1996
Page 2

With respect to matters of Maryland law, we have relied upon the opinion of
Ballard Spahr Andrews & Ingersoll, counsel for the Company, dated September
30, 1996.

In our capacity as tax counsel to the Company, we have made such legal
and factual examinations and inquiries, including an examination of originals
or copies certified or otherwise identified to our satisfaction of such
documents, corporate records and other instruments as we have deemed necessary
or appropriate for purposes of this opinion. In our examination, we have
assumed the authenticity of all documents submitted to us as originals, the
genuineness of all signatures thereon, the legal capacity of natural persons
executing such documents and the conformity to authentic original documents of
all documents submitted to us as copies.

We are opining herein as to the effect on the subject transaction only
of the federal income tax laws of the United States and we express no opinion
with respect to the applicability thereto, or the effect thereon, of other
federal laws, the laws of any state or other jurisdiction or as to any matters
of municipal law or the laws of any other local agencies within any state.

Based on such facts, assumptions and representations, it is our
opinion that:

1. Commencing with the Company's taxable year ending December 31,
1996, the Company has been organized in conformity with the requirements
for qualification as a "real estate investment trust," and its proposed
method of operation,

<PAGE>

Arden Realty Group, Inc.
September 30, 1996
Page 3

as described in the representations of the Company and the Operating
Partnership referred to above, will enable the Company to meet the
requirements for qualification and taxation as a "real estate investment
trust" under the Internal Revenue Code of 1986, as amended (the "Code").

2. The Operating Partnership will be treated as a partnership for
federal income tax purposes (and not as an association or publicly traded
partnership taxable as a corporation).

3. The statements in the Registration Statement set forth under the
caption "Federal Income Tax Consequences" to the extent such information
constitutes matters of law, summaries of legal matters, or legal
conclusions, have been reviewed by us and are accurate in all material
respects.

No opinion is expressed as to any matter not discussed herein.

This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters, all of which are
subject to change either prospectively or retroactively. Also, any variation or
difference in the facts from those set forth in the Registration Statement or
the Officer's Certificate may affect the conclusions stated herein. Moreover,
the Company's qualification and taxation as a real estate investment trust
depends upon the Company's ability to meet, through actual annual operating
results, distribution levels and diversity of stock ownership, the various
qualification tests imposed under the Code, the results of which have not been
and will not be reviewed by Latham & Watkins. Accordingly, no assurance can be
given that the actual results of the Company's operation for any one taxable
year will satisfy such requirements.

This opinion is rendered only to you, and is solely for your use in
connection with the transactions set forth in the Registration Statement. This
opinion may not be relied upon by you for any other purpose, or furnished to,
quoted to, or relied upon by any other person, firm or corporation, for any
purpose, without our prior written consent. We hereby consent to the filing of
this opinion as an exhibit to the Registration Statement and to the use of our
name under the caption "Legal Matters" in the Registration Statement.

Very truly yours,

/s/ Latham & Watkins

<PAGE>

-----------------------------------------------

AGREEMENT OF LIMITED PARTNERSHIP

ARDEN REALTY LIMITED PARTNERSHIP

-----------------------------------------------

<PAGE>

TABLE OF CONTENTS

PAGE
----

ARTICLE 1 - DEFINED TERMS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE 2 - ORGANIZATIONAL MATTERS . . . . . . . . . . . . . . . . . . . . . 15
Section 2.1 Organization . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.2 Name . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.3 Resident Agent; Principal Office . . . . . . . . . . . . 15
Section 2.4 Power of Attorney. . . . . . . . . . . . . . . . . . . . 15
Section 2.5 Term . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.6 Number of Partners . . . . . . . . . . . . . . . . . . . 17

ARTICLE 3 - PURPOSE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.1 Purpose and Business . . . . . . . . . . . . . . . . . . 17
Section 3.2 Powers . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.3 Partnership Only for Purposes Specified. . . . . . . . . 18
Section 3.4 Representations and Warranties by the Parties. . . . . . 18

ARTICLE 4 - CAPITAL CONTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . 20
Section 4.1 Capital Contributions of the Partners. . . . . . . . . . 20
Section 4.2 Loans by Third Parties . . . . . . . . . . . . . . . . . 20
Section 4.3 Additional Funding and Capital Contributions . . . . . . 20
Section 4.4 Stock Plan . . . . . . . . . . . . . . . . . . . . . . . 23
Section 4.5 Other Contribution Provisions . . . . . . . . . . . . . . . 23

ARTICLE 5 - DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.1 Requirement and Characterization of Distributions. . . . 24
Section 5.2 Distributions in Kind. . . . . . . . . . . . . . . . . . 24
Section 5.3 Distributions Upon Liquidation . . . . . . . . . . . . . 24
Section 5.4 Distributions to Reflect Issuance of Additional
Partnership Interests. . . . . . . . . . . . . . . . . . 24

ARTICLE 6 - ALLOCATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.1 Timing and Amount of Allocations of Net Income and Net
Loss . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.2 General Allocations. . . . . . . . . . . . . . . . . . . 25
Section 6.3 Additional Allocation Provisions . . . . . . . . . . . . 25
Section 6.4 Tax Allocations. . . . . . . . . . . . . . . . . . . . . 28

ARTICLE 7 - MANAGEMENT AND OPERATIONS OF BUSINESS. . . . . . . . . . . . . . 28
Section 7.1 Management . . . . . . . . . . . . . . . . . . . . . . . 28
Section 7.2 Certificate of Limited Partnership . . . . . . . . . . . 32
Section 7.3 Restrictions on General Partner's Authority. . . . . . . 32
Section 7.4 Reimbursement of the General Partner . . . . . . . . . . 34

<PAGE>

PAGE
----

Section 7.5 Outside Activities of the General Partner. . . . . . . . 35
Section 7.6 Contracts with Affiliates. . . . . . . . . . . . . . . . 36
Section 7.7 Indemnification. . . . . . . . . . . . . . . . . . . . . 36
Section 7.8 Liability of the General Partner . . . . . . . . . . . . 38
Section 7.9 Other Matters Concerning the General Partner . . . . . . 39
Section 7.10 Title to Partnership Assets. . . . . . . . . . . . . . . 40
Section 7.11 Reliance by Third Parties. . . . . . . . . . . . . . . . 40

ARTICLE 8 - RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS . . . . . . . . . . . 40
Section 8.1 Limitation of Liability. . . . . . . . . . . . . . . . . 40
Section 8.2 Management of Business . . . . . . . . . . . . . . . . . 41
Section 8.3 Outside Activities of Limited Partners . . . . . . . . . 41
Section 8.4 Return of Capital. . . . . . . . . . . . . . . . . . . . 41
Section 8.5 Rights of Limited Partners Relating to the Partnership . 41
Section 8.6 Redemption Rights. . . . . . . . . . . . . . . . . . . . 42

ARTICLE 9 - BOOKS, RECORDS, ACCOUNTING AND REPORTS . . . . . . . . . . . . . 44
Section 9.1 Records and Accounting . . . . . . . . . . . . . . . . . 44
Section 9.2 Fiscal Year. . . . . . . . . . . . . . . . . . . . . . . 45
Section 9.3 Reports. . . . . . . . . . . . . . . . . . . . . . . . . 45

ARTICLE 10 - TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.1 Preparation of Tax Returns . . . . . . . . . . . . . . . 45
Section 10.2 Tax Elections. . . . . . . . . . . . . . . . . . . . . . 45
Section 10.3 Tax Matters Partner. . . . . . . . . . . . . . . . . . . 46
Section 10.4 Organizational Expenses. . . . . . . . . . . . . . . . . 47
Section 10.5 Withholding. . . . . . . . . . . . . . . . . . . . . . . 47

ARTICLE 11 - TRANSFERS AND WITHDRAWALS . . . . . . . . . . . . . . . . . . . 48
Section 11.1 Transfer . . . . . . . . . . . . . . . . . . . . . . . . 48
Section 11.2 Transfer of General Partner's Partnership Interest . . . 48
Section 11.3 Limited Partners' Rights to Transfer . . . . . . . . . . 49
Section 11.4 Substituted Limited Partners . . . . . . . . . . . . . . 51
Section 11.5 Assignees. . . . . . . . . . . . . . . . . . . . . . . . 51
Section 11.6 General Provisions . . . . . . . . . . . . . . . . . . . 51

ARTICLE 12 - ADMISSION OF PARTNERS . . . . . . . . . . . . . . . . . . . . . 53
Section 12.1 Admission of Successor General Partner . . . . . . . . . 53
Section 12.2 Admission of Additional Limited Partners . . . . . . . . 54
Section 12.3 Amendment of Agreement and Certificate of Limited
Partnership. . . . . . . . . . . . . . . . . . . . . . . 54

ARTICLE 13 - DISSOLUTION AND LIQUIDATION . . . . . . . . . . . . . . . . . . 55
Section 13.1 Dissolution. . . . . . . . . . . . . . . . . . . . . . . 55
Section 13.2 Winding Up . . . . . . . . . . . . . . . . . . . . . . . 55
Section 13.3 Compliance with Timing Requirements of Regulations . . . 56
Section 13.4 Deemed Distribution and Recontribution . . . . . . . . . 57

<PAGE>

PAGE
----

Section 13.5 Rights of Limited Partners . . . . . . . . . . . . . . . 57
Section 13.6 Notice of Dissolution. . . . . . . . . . . . . . . . . . 57
Section 13.7 Cancellation of Certificate of Limited Partnership . . . 58
Section 13.8 Reasonable Time for Winding-Up . . . . . . . . . . . . . 58
Section 13.9 Waiver of Partition. . . . . . . . . . . . . . . . . . . 58

ARTICLE 14 - AMENDMENT OF PARTNERSHIP AGREEMENT; . . . . . . . . . . . . . . 58
Section 14.1 Amendments . . . . . . . . . . . . . . . . . . . . . . . 58
Section 14.2 Action by the Partners . . . . . . . . . . . . . . . . . 59

ARTICLE 15 - GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . 59
Section 15.1 Addresses and Notice . . . . . . . . . . . . . . . . . . 59
Section 15.2 Titles and Captions. . . . . . . . . . . . . . . . . . . 60
Section 15.3 Pronouns and Plurals . . . . . . . . . . . . . . . . . . 60
Section 15.4 Further Action . . . . . . . . . . . . . . . . . . . . . 60
Section 15.5 Binding Effect . . . . . . . . . . . . . . . . . . . . . 60
Section 15.6 Creditors. . . . . . . . . . . . . . . . . . . . . . . . 60
Section 15.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 60
Section 15.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . 60
Section 15.9 Applicable Law . . . . . . . . . . . . . . . . . . . . . 61
Section 15.10 Invalidity of Provisions . . . . . . . . . . . . . . . . 61
Section 15.11 Limitation to Preserve REIT Status . . . . . . . . . . . 61
Section 15.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . 62
Section 15.13 No Rights as Stockholders. . . . . . . . . . . . . . . . 62

iii

<PAGE>

AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
ARDEN REALTY LIMITED PARTNERSHIP

THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated as
of October __, 1996, is entered into by and among Arden Realty, Inc., a Maryland
corporation (the "REIT"), as the General Partner and the Persons whose names are
set forth on Exhibit A attached hereto, as the Limited Partners, together with
any other Persons who become Partners in the Partnership as provided herein.

WHEREAS, the limited partnership was formed on May 20, 1996 and an
original agreement of limited partnership was entered into between the REIT, as
general partner, and Victor Coleman, as limited partner;

WHEREAS, the REIT proposes to effect a public offering of its common
stock, to acquire and cause the Partnership to acquire direct and indirect
interests in 24 office properties and other assets, to cause the Partnership to
enter into certain mortgage financing transactions, and to contribute the
remaining net proceeds from the public offering to the Partnership;

WHEREAS, the Partnership will issue Partnership Interests to the REIT
and other persons in accordance with the foregoing transactions;

WHEREAS, upon the completion of the foregoing transactions, the
Partnership shall return the original capital contributions made by the REIT and
Mr. Coleman and any ongoing interest in the Partnership of the REIT and Mr.
Coleman shall be based on their respective contributions as contemplated below;

WHEREAS, by virtue of their respective execution of this Agreement the
REIT and Mr. Coleman hereby consent to the amendment and restatement of the
original agreement of limited partnership;

NOW, THEREFORE, BE IT RESOLVED, that for good and adequate
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:

ARTICLE 1
DEFINED TERMS

Section 1.1 DEFINITIONS.

The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.

<PAGE>

"ACT" means the Maryland Revised Uniform Limited Partnership Act, as
it may be amended from time to time, and any successor to such statute.

"ADDITIONAL FUNDS" shall have the meaning set forth in Section 4.3.A.

"ADDITIONAL LIMITED PARTNER" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 12.2 hereof and who is
shown as such on the books and records of the Partnership.

"ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant fiscal year, after giving effect to the following adjustments:

(i) decrease such deficit by any amounts which such Partner is
obligated to restore pursuant to this Agreement or is deemed to
be obligated to restore pursuant to Regulations Section 1.704-
1(b)(2)(ii)(c) or the penultimate sentence of each of Regulations
Sections 1.704-2(i)(5) and 1.704-2(g); and

(ii) increase such deficit by the items described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).

The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Regulations Section 1.704-
1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

"ADJUSTMENT DATE" means, with respect to any Capital Contribution, the
close of business on the Business Day last preceding the date of the Capital
Contribution, PROVIDED, THAT if such Capital Contribution is being made by the
General Partner in respect of the proceeds from the issuance of REIT Shares (or
the issuance of the General Partner's securities exercisable for, convertible
into or exchangeable for REIT Shares), then the Adjustment Date shall be as of
the close of business on the Business Day last preceding the date of the
issuance of such securities.

"AFFILIATE" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by or under common control with such Person.

"AGREED VALUE" means (i) in the case of any Contributed Property set
forth in Exhibit A and as of the time of its contribution to the Partnership,
the Agreed Value of such property as set forth in Exhibit A; (ii) in the case of
any Contributed Property not set forth in Exhibit A and as of the time of its
contribution to the Partnership, the fair market value of such property or other
consideration as determined by the General Partner, reduced by any liabilities
either assumed by the Partnership upon such contribution or to which such
property is subject when contributed; and (iii) in the case of any property
distributed to a Partner by the Partnership, the fair market value of such
property as determined by the General Partner at the time such property is
distributed, reduced by any liabilities either assumed by such Partner upon

<PAGE>

such distribution or to which such property is subject at the time of the
distribution as determined under Section 752 of the Code and the Regulations
thereunder.

"AGREEMENT" means this Agreement of Limited Partnership, as it may be
amended, supplemented or restated from time to time.

"APPRAISAL" means with respect to any assets, the opinion of an
independent third party experienced in the valuation of similar assets, selected
by the General Partner in good faith, such opinion may be in the form of an
opinion by such independent third party that the value for such property or
asset as set by the General Partner is fair, from a financial point of view, to
the Partnership.

"ASSIGNEE" means a Person to whom one or more Partnership Units have
been transferred in a manner permitted under this Agreement, but who has not
become a Substituted Limited Partner, and who has the rights set forth in
Section 11.5.

"AVAILABLE CASH" means, with respect to any period for which such
calculation is being made, (i) the sum of:

a. the Partnership's Net Income or Net Loss (as the case may
be) for such period,

b. Depreciation and all other noncash charges deducted in
determining Net Income or Net Loss for such period,

c. the amount of any reduction in reserves of the Partnership
referred to in clause (ii)(f) below (including, without limitation,
reductions resulting because the General Partner determines such
amounts are no longer necessary),

d. the excess of the net proceeds from the sale, exchange,
disposition, or refinancing of Partnership property for such period
over the gain (or loss, as the case may be) recognized from any such
sale, exchange, disposition, or refinancing during such period
(excluding Terminating Capital Transactions), and

e. all other cash received by the Partnership for such period
that was not included in determining Net Income or Net Loss for such
period;

(ii) less the sum of:

a. all principal debt payments made during such period by the
Partnership,

b. capital expenditures made by the Partnership during such
period,

c. investments in any entity (including loans made thereto) to
the extent that such investments are not otherwise described in
clauses (ii)(a) or (b),

<PAGE>

d. all other expenditures and payments not deducted in
determining Net Income or Net Loss for such period,

e. any amount included in determining Net Income or Net Loss
for such period that was not received by the Partnership during such
period,

f. the amount of any increase in reserves established during
such period which the General Partner determines are necessary or
appropriate in its sole and absolute discretion, and

g. the amount of any working capital accounts and other cash or
similar balances which the General Partner determines to be necessary
or appropriate in its sole and absolute discretion.

Notwithstanding the foregoing, Available Cash shall not include any
cash received or reductions in reserves, or take into account any disbursements
made or reserves, established, after commencement of the dissolution and
liquidation of the Partnership.

"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to be closed.

"CAPITAL ACCOUNT" means, with respect to any Partner, the Capital
Account maintained for such Partner in accordance with the following provisions:

(a) To each Partner's Capital Account there shall be added such
Partner's Capital Contributions, such Partner's share of Net Income and any
items in the nature of income or gain which are specially allocated pursuant to
Section 6.3 hereof, and the amount of any Partnership liabilities assumed by
such Partner or which are secured by any property distributed to such Partner.

(b) From each Partner's Capital Account there shall be subtracted the
amount of cash and the Gross Asset Value of any property distributed to such
Partner pursuant to any provision of this Agreement, such Partner's distributive
share of Net Losses and any items in the nature of expenses or losses which are
specially allocated pursuant to Section 6.3 hereof, and the amount of any
liabilities of such Partner assumed by the Partnership or which are secured by
any property contributed by such Partner to the Partnership.

(c) In the event any interest in the Partnership is transferred in
accordance with the terms of this Agreement (which does not result in a
termination of the Partnership for federal income tax purposes), the transferee
shall succeed to the Capital Account of the transferor to the extent it relates
to the transferred interest.

(d) In determining the amount of any liability for purposes of
subsections (a) and (b) hereof, there shall be taken into account Code section
752(c) and any other applicable provisions of the Code and Regulations.

<PAGE>

(e) The foregoing provisions and the other provisions of this
Agreement relating to the maintenance of Capital Accounts are intended to comply
with Regulations Sections 1.704-1(b) and 1.704-2, and shall be interpreted and
applied in a manner consistent with such Regulations. In the event the General
Partner shall determine that it is prudent to modify the manner in which the
Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Partnership, the
General Partner, or the Limited Partners) are computed in order to comply with
such Regulations, the General Partner may make such modification, PROVIDED THAT
it is not likely to have a material effect on the amounts distributable to any
Person pursuant to Article 13 of the Agreement upon the dissolution of the
Partnership. The General Partner also shall (i) make any adjustments that are
necessary or appropriate to maintain equality between the Capital Accounts of
the Partners and the amount of Partnership capital reflected on the
Partnership's balance sheet, as computed for book purposes, in accordance with
Regulations Section 1.704-1(b)(2)(iv)(q), and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section 1.704-1(b) or Section 1.704-2.

"CAPITAL CONTRIBUTION" means, with respect to any Partner, the amount
of money and the initial Gross Asset Value of any property (other than money)
contributed to the Partnership by such Partner.

"CASH AMOUNT" means, with respect to any Partnership Units subject to
a Redemption, an amount of cash equal to the Deemed Partnership Interest Value
attributable to such Partnership Units.

"CERTIFICATE" means the Certificate of Limited Partnership relating to
the Partnership filed in the office of the Maryland State Department of
Assessments and Taxation, as amended from time to time in accordance with the
terms hereof and the Act.

"CHARTER" means the Articles of Incorporation of the General Partner
filed with the Maryland State Department of Assessments and Taxation on May 1,
1996, as amended or restated from time to time.

"CODE" means the Internal Revenue Code of 1986, as amended from time
to time or any successor statute thereto, as interpreted by the applicable
regulations thereunder. Any reference herein to a specific section or sections
of the Code shall be deemed to include a reference to any corresponding
provision of future law.

"CONSENT" means the consent to, approval of, or vote on a proposed
action by a Partner given in accordance with Article 14 hereof.

"CONSENT OF THE LIMITED PARTNERS" means the Consent of a Majority In
Interest of the Limited Partners, which Consent shall be obtained prior to the
taking of any action for which it is required by this Agreement and may be given
or withheld by a Majority in Interest of the Limited Partners, unless otherwise
expressly provided herein, in their sole and absolute discretion.

<PAGE>

"CONSENT OF THE PARTNERS" means the Consent of Partners holding
Percentage Interests that are greater than 66 2/3% of the aggregate Percentage
Interests of all Partners, which Consent shall be obtained prior to the taking
of any action for which it is required by this Agreement and may be given or
withheld by such Partners, in their sole and absolute discretion.

"CONSTRUCTIVELY OWN" means ownership under the constructive ownership
rules described in Exhibit C.

"CONTRIBUTED PROPERTY" means each property or other asset, in such
form as may be permitted by the Act, but excluding cash, contributed or deemed
contributed to the Partnership (or deemed contributed to the Partnership on
termination and reconstitution thereof pursuant to Section 708 of the Code).

"DEBT" means, as to any Person, as of any date of determination,
(i) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services; (ii) all amounts owed by such Person to
banks or other Persons in respect to reimbursement obligations under letters of
credit, surety bonds and other similar instruments guaranteeing payment or other
performance of obligations by such Person; (iii) all indebtedness for borrowed
money or for the deferred purchase price of property or services secured by any
lien on any property owned by such Person, to the extent attributable to such
Person's interest in such property, even though such Person has not assumed or
become liable for the payment thereof; and (iv) lease obligations of such Person
which, in accordance with generally accepted accounting principles, should be
capitalized.

"DEEMED PARTNERSHIP INTEREST VALUE" means, as of any date with respect
to any class of Partnership Interests, the Deemed Value of the Partnership
Interests of such class multiplied by the applicable Partner's Percentage
Interest of such class.

"DEEMED VALUE OF THE PARTNERSHIP INTERESTS" means, as of any date with
respect to any class of Partnership Interests, (i) the total number of shares of
capital stock of the General Partner corresponding to such class of Partnership
Interests (as provided for in Sections 4.1 and 4.3.D) issued and outstanding as
of the close of business on such date (excluding any treasury shares) multiplied
by the Fair Market Value of a share of such capital stock on such date;
(ii) DIVIDED BY the Percentage Interest of the General Partner in such class of
Partnership Interests on such date.

"DEPRECIATION" means, for each fiscal year or other period, an amount
equal to the depreciation, amortization or other cost recovery deduction
allowable with respect to an asset for such year or other period, except that if
the Gross Asset Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year or other period, Depreciation
shall be an amount which bears the same ratio to such beginning Gross Asset
Value as the federal income tax depreciation, amortization or other cost
recovery deduction for such year or other period bears to such beginning
adjusted tax basis; PROVIDED, HOWEVER, that if the federal income tax
depreciation, amortization or other cost recovery deduction for such year is
zero, Depreciation shall be determined with reference to such beginning Gross
Asset Value using any reasonable method selected by the General Partner.

<PAGE>

"EFFECTIVE DATE" means the date of closing of the initial public
offering of REIT Shares, upon which contributions set forth on Exhibit A that
are to be effective on the Effective Date shall become effective.

"ELECTION NOTICE" shall have the meaning set forth in Section 4.3.F.

"FAIR MARKET VALUE" means, with respect to any share of capital stock
of the General Partner, the average of the daily market price for the ten (10)
consecutive trading days immediately preceding the date with respect to which
"Fair Market Value" must be determined hereunder or, if such date is not a
Business Day, the immediately preceding Business Day. The market price for each
such trading day shall be: (i) if such shares are listed or admitted to trading
on any securities exchange or the Nasdaq National Market, the closing price,
regular way, on such day, or if no such sale takes place on such day, the
average of the closing bid and asked prices on such day, (ii) if such shares are
not listed or admitted to trading on any securities exchange or the Nasdaq
National Market, the last reported sale price on such day or, if no sale takes
place on such day, the average of the closing bid and asked prices on such day,
as reported by a reliable quotation source designated by the General Partner, or
(iii) if such shares are not listed or admitted to trading on any securities
exchange or the Nasdaq National Market and no such last reported sale price or
closing bid and asked prices are available, the average of the reported high bid
and low asked prices on such day, as reported by a reliable quotation source
designated by the General Partner, or if there shall be no bid and asked prices
on such day, the average of the high bid and low asked prices, as so reported,
on the most recent day (not more than 10 days prior to the date in question) for
which prices have been so reported; PROVIDED THAT, if there are no bid and asked
prices reported during the 10 days prior to the date in question, the Fair
Market Value of such shares shall be determined by the General Partner acting in
good faith on the basis of such quotations and other information as it
considers, in its reasonable judgment, appropriate. In the event the REIT
Shares Amount for such shares includes rights that a holder of such shares would
be entitled to receive, then the Fair Market Value of such rights shall be
determined by the General Partner acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment,
appropriate; and PROVIDED FURTHER THAT, in connection with determining the
Deemed Value of the Partnership Interests for purposes of determining the number
of additional Partnership Units issuable upon a Capital Contribution funded by
an underwritten public offering of shares of capital stock of the General
Partner, the Fair Market Value of such shares shall be the public offering price
per share of such class of capital stock sold.

"FUNDING DEBT" means the incurrence of any Debt by or on behalf of the
General Partner for the purpose of providing funds to the Partnership.

"FUNDING NOTICE" shall have the meaning set forth in Section 4.3.B.

"GENERAL PARTNER" means the REIT or its successors as general partner
of the Partnership.

"GENERAL PARTNER INTEREST" means a Partnership Interest held by the
General Partner. A General Partner Interest may be expressed as a number of
Partnership Units.

<PAGE>

"GENERAL PARTNER LOAN" shall have the meaning set forth in Section
4.3.C.

"GENERAL PARTNER PAYMENT" shall have the meaning set forth in Section
15.11.

"GROSS ASSET VALUE" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:

(a) The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the gross fair market value of such asset,
as determined by the contributing Partner and the General Partner (as set forth
on Exhibit A attached hereto, as such Exhibit may be amended from time to time);
PROVIDED THAT, if the contributing Partner is the General Partner then, except
with respect to the General Partner's initial Capital Contribution which shall
be determined as set forth on Exhibit A, or capital contributions of cash, REIT
Shares or other shares of capital stock of the General Partner, the
determination of the fair market value of the contributed asset shall be
determined by (i) the price paid by the General Partner if the asset is acquired
by the General Partner contemporaneously with its contribution to the
Partnership and (ii) by Appraisal, if otherwise acquired by the General Partner.

(b) The Gross Asset Values of all Partnership assets shall be
adjusted to equal their respective gross fair market values, as determined by
the General Partner using such reasonable method of valuation as it may adopt,
PROVIDED HOWEVER, that for such purpose, the net value of all of the Partnership
assets, in the aggregate, shall be equal to the Deemed Value of the Partnership
Interests of all classes of Partnership Interests then outstanding, regardless
of the method of valuation adopted by the General Partner, as of the times
listed below:

(i) the acquisition of an additional interest in the Partnership by a
new or existing Partner in exchange for more than a de minimis
Capital Contribution, if the General Partner reasonably
determines that such adjustment is necessary or appropriate to
reflect the relative economic interests of the Partners in the
Partnership;

(ii) the distribution by the Partnership to a Partner of more than a
de minimis amount of Partnership property as consideration for an
interest in the Partnership if the General Partner reasonably
determines that such adjustment is necessary or appropriate to
reflect the relative economic interests of the Partners in the
Partnership;

(iii) the liquidation of the Partnership within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g); and

(iv) at such other times as the General Partner shall reasonably
determine necessary or advisable in order to comply with
Regulations Sections 1.704-1(b) and 1.704-2.

(c) The Gross Asset Value of any Partnership asset distributed to a
Partner shall be the gross fair market value of such asset on the date of
distribution as determined by

<PAGE>

the distributee and the General Partner, or if the distributee and the General
Partner cannot agree on such a determination, by Appraisal.

(d) The Gross Asset Values of Partnership assets shall be increased
(or decreased) to reflect any adjustments to the adjusted basis of such assets
pursuant to Code Section 734(b) or Code Section 743(b), but only to the extent
that such adjustments are taken into account in determining Capital Accounts
pursuant to Regulations Section 1.704-1(b)(2)(iv)(m); PROVIDED, HOWEVER, that
Gross Asset Values shall not be adjusted pursuant to this subparagraph (d) to
the extent that the General Partner reasonably determines that an adjustment
pursuant to subparagraph (b) is necessary or appropriate in connection with a
transaction that would otherwise result in an adjustment pursuant to this
subparagraph (d).

(e) If the Gross Asset Value of a Partnership asset has been
determined or adjusted pursuant to subparagraph (a), (b) or (d), such Gross
Asset Value shall thereafter be adjusted by the Depreciation taken into account
with respect to such asset for purposes of computing Net Income and Net Losses.

"HOLDER" means either the Partner or Assignee owning a Partnership
Unit.

"IRS" means the Internal Revenue Service, which administers the
internal revenue laws of the United States.

"IMMEDIATE FAMILY" means, with respect to any natural Person, such
natural Person's estate or heirs or current spouse, parents, parents-in-law,
children, siblings and grandchildren and any trust or estate, all of the
beneficiaries of which consist of such Person or such Person's spouse, parents,
parents-in-law, children, siblings or grandchildren.

"INCAPACITY" or "INCAPACITATED" means, (i) as to any individual
Partner, death, total physical disability or entry by a court of competent
jurisdiction adjudicating him or her incompetent to manage his or her Person or
his or her estate; (ii) as to any corporation which is a Partner, the filing of
a certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter; (iii) as to any partnership which is a Partner, the
dissolution and commencement of winding up of the partnership; (iv) as to any
estate which is a Partner, the distribution by the fiduciary of the estate's
entire interest in the Partnership; (v) as to any trustee of a trust which is a
Partner, the termination of the trust (but not the substitution of a new
trustee); or (vi) as to any Partner, the bankruptcy of such Partner. For
purposes of this definition, bankruptcy of a Partner shall be deemed to have
occurred when (a) the Partner commences a voluntary proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency or
other similar law now or hereafter in effect, (b) the Partner is adjudged as
bankrupt or insolvent, or a final and nonappealable order for relief under any
bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against the Partner, (c) the Partner executes and delivers a general
assignment for the benefit of the Partner's creditors, (d) the Partner files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Partner in any proceeding of the
nature described in clause (b) above, (e) the Partner seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for the
Partner or for all or any substantial part

<PAGE>

of the Partner's properties, (f) any proceeding seeking liquidation,
reorganization or other relief under any bankruptcy, insolvency or other similar
law now or hereafter in effect has not been dismissed within 120 days after the
commencement thereof, (g) the appointment without the Partner's consent or
acquiescence of a trustee, receiver of liquidator has not been vacated or stayed
within 90 days of such appointment, or (h) an appointment referred to in clause
(g) is not vacated within 90 days after the expiration of any such stay.

"INDEMNITEE" means (i) any Person made a party to a proceeding by
reason of his or her status as (A) the General Partner or (B) a director or
officer of the Partnership or the General Partner, and (ii) such other Persons
(including Affiliates of the General Partner or the Partnership) as the General
Partner may designate from time to time, in its sole and absolute discretion.

"LIMITED PARTNER" means any Person named as a Limited Partner in
Exhibit A attached hereto, as such Exhibit may be amended from time to time, or
any Substituted Limited Partner or Additional Limited Partner, in such Person's
capacity as a Limited Partner in the Partnership.

"LIMITED PARTNERSHIP INTEREST" means a Partnership Interest of a
Limited Partner representing a fractional part of the Partnership Interests of
all Limited Partners and includes any and all benefits to which the holder of
such a Partnership Interest may be entitled as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Limited Partnership Interest may be expressed
as a number of Partnership Units.

"LIQUIDATING EVENTS" shall have the meaning set forth in Section 13.1.

"LIQUIDATOR" shall have the meaning set forth in Section 13.2.A.

"MAJORITY IN INTEREST OF THE LIMITED PARTNERS" means Limited Partners
(other than any Limited Partner 50% or more of whose equity is owned, directly
or indirectly, by the General Partner) holding Percentage Interests that are
greater than fifty percent (50%) of the aggregate Percentage Interests of all
Limited Partners (other than any Limited Partner 50% or more whose equity is
owned, directly or indirectly, by the General Partner).

"MAJORITY OF REMAINING PARTNERS" means Partners other than the General
Partner owning (i) greater than fifty percent (50%) of the profits interests in
the Partnership held by all Partners other than the General Partner, determined
and allocated based on any reasonable estimate of profits from the relevant date
to the projected termination of the Partnership and taking into account present
and future allocations of profits under this Agreement as it is in effect on the
relevant date, and (ii) greater than fifty percent (50%) of the capital
interests in the Partnership, determined as of the relevant date under this
Agreement, owned by all the Partners other than the General Partner.

"MISCELLANEOUS RIGHTS AGREEMENT" means the Miscellaneous Rights
Agreement dated ___________ __, 1996 by and among the General Partner and
certain Limited Partners

<PAGE>

including the Specified Limited Partner, as such agreement may be amended,
modified or restated from time to time.

"NET INCOME" or "NET LOSS" means for each fiscal year of the
Partnership, an amount equal to the Partnership's taxable income or loss for
such fiscal year, determined in accordance with Code Section 703(a) (for this
purpose, all items of income, gain loss, or deduction required to be stated
separately pursuant to Code Section 703(a)(1) shall be included in taxable
income or loss), with the following adjustments:

(a) Any income of the Partnership that is exempt from federal income
tax and not otherwise taken into account in computing Net Income or Net Loss
pursuant to this definition of Net Income or Net Loss shall be added to such
taxable income or loss;

(b) Any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-1(b)(2)(iv)(i), and not otherwise taken into account
in computing Net Income or Net Loss pursuant to this definition of Net Income or
Net Loss shall be subtracted from such taxable income or loss;

(c) In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to subparagraph (b) or subparagraph (c) of the definition of
Gross Asset Value, the amount of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for purposes of computing Net
Income or Net Loss;

(d) Gain or loss resulting from any disposition of property with
respect to which gain or loss is recognized for federal income tax purposes
shall be computed by reference to the Gross Asset Value of the property disposed
of, notwithstanding that the adjusted tax basis of such property differs from
its Gross Asset Value;

(e) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such fiscal year;

(f) To the extent an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section 743(b) is
required pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)(4) to be taken
into account in determining Capital Accounts as a result of a distribution other
than in liquidation of a Partner's interest in the Partnership, the amount of
such adjustment shall be treated as an item of gain (if the adjustment increases
the basis of the asset) or loss (if the adjustment decreases the basis of the
asset) from the disposition of the asset and shall be taken into account for
purposes of computing Net Income or Net Loss; and

(g) Notwithstanding any other provision of this definition of Net
Income or Net Loss, any items which are specially allocated pursuant to Section
6.3 hereof shall not be taken into account in computing Net Income or Net Loss.
The amounts of the items of Partnership income, gain, loss, or deduction
available to be specially allocated pursuant to

<PAGE>

Section 6.3 hereof shall be determined by applying rules analogous to those set
forth in this definition of Net Income or Net Loss.

"NEW SECURITIES" means (1) any rights, options, warrants or
convertible or exchangeable securities having the right to subscribe for or
purchase REIT Shares or other shares of capital stock of the General Partner,
excluding grants under any Stock Plan, or (ii) any Debt issued by the General
Partner that provides any of the rights described in clause (i).

"NONRECOURSE DEDUCTIONS" shall have the meaning set forth in
Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for
a Partnership Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(c).

"NONRECOURSE LIABILITY" shall have the meaning set forth in
Regulations Section 1.752-1(a)(2).

"NOTICE OF REDEMPTION" means the Notice of Redemption substantially in
the form of Exhibit B to this Agreement.

"PARTNER" means a General Partner or a Limited Partner, and "PARTNERS"
means the General Partner and the Limited Partners.

"PARTNER MINIMUM GAIN" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).

"PARTNER NONRECOURSE DEBT" shall have the meaning set forth in
Regulations Section 1.704-2(b)(4).

"PARTNER NONRECOURSE DEDUCTIONS" shall have the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership Year
shall be determined in accordance with the rules of Regulations Section 1.704-
2(i)(2).

"PARTNERSHIP" means the limited partnership formed under the Act and
pursuant to this Agreement, and any successor thereto.

"PARTNERSHIP INTEREST" means, an ownership interest in the Partnership
of either a Limited Partner or the General Partner and includes any and all
benefits to which the holder of such a Partnership Interest may be entitled as
provided in this Agreement, together with all obligations of such Person to
comply with the terms and provisions of this Agreement. There may be one or
more classes of Partnership Interests as provided in Section 4.3. A Partnership
Interest may be expressed as a number of Partnership Units. Unless otherwise
expressly provided for by the General Partner at the time of the original
issuance of any Partnership Interests, all Partnership Interests (whether of a
Limited Partner or a General Partner) shall be of the same class.

<PAGE>

"PARTNERSHIP MINIMUM GAIN" shall have the meaning set forth in
Regulations Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain,
as well as any net increase or decrease in Partnership Minimum Gain, for a
Partnership Year shall be determined in accordance with the rules of Regulations
Section 1.704-2(d).

"PARTNERSHIP RECORD DATE" means the record date established by the
General Partner for the distribution of Available Cash pursuant to Section 5.1
hereof which record date shall be the same as the record date established by the
General Partner for a distribution to its stockholders of some or all of its
portion of such distribution.

"PARTNERSHIP UNIT" means, with respect to any class of Partnership
Interest, a fractional, undivided share of such class of Partnership Interest
issued pursuant to Sections 4.1 and 4.3. The ownership of Partnership Units may
be evidenced by a certificate for units substantially in the form of Exhibit D
hereto or as the General Partner may determine with respect to any class of
Partnership Units issued from time to time under Section 4.1 and 4.3.

"PARTNERSHIP YEAR" means the fiscal year of the Partnership, which
shall be the calendar year.

"PERCENTAGE INTEREST" means, as to a Partner holding a class of
Partnership Interests, its interest in the Partnership as determined by dividing
the Partnership Units of such class owned by such Partner by the total number of
Partnership Units of such class then outstanding as specified in Exhibit A
attached hereto, as such Exhibit may be amended from time to time.

"PERSON" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.

"PLEDGE" shall have the meaning set forth in Section 11.3.A.

"PROPERTIES" means such interests in real property and personal
property including without limitation, fee interests, interests, in ground
leases, interests in joint ventures, interests in mortgages, and Debt
instruments as the Partnership may hold from time to time.

"PRO RATA CONTRIBUTION" shall have the meaning set forth in Section
4.3.F.

"PRO RATA PARTICIPATION" shall have the meaning set forth in Section
4.3.F.

"QUALIFIED REIT SUBSIDIARY" means any Subsidiary of the General
Partner that is a "qualified REIT subsidiary" within the meaning of Section
856(i) of the Code.

"QUALIFIED TRANSFEREE" means an "Accredited Investor" as defined in
Rule 501 promulgated under the Securities Act.

"REDEMPTION" shall have the meaning set forth in Section 8.6.A.

<PAGE>

"REGULATIONS" means the Income Tax Regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).

"REGULATORY ALLOCATIONS" shall have the meaning set forth in Section
6.3.A(viii) of this Agreement.

"REIT" means a real estate investment trust under Section 856 of the
Code.

"REIT REQUIREMENTS" shall have the meaning set forth in Section 5.1.

"REIT SHARE" means a share of common stock of the General Partner.

"REIT SHARES AMOUNT" means, as of any date, an aggregate number of
REIT Shares equal to the number of Tendered Units, as adjusted pursuant to
Section 7.5 (in the event the General Partner acquires material assets, other
than on behalf of the Partnership) and for stock dividends and distributions,
stock splits and subdivisions, reverse stock splits and combinations,
distributions of rights, warrants or options, and distributions of evidences of
indebtedness or assets relating to assets not received by the General Partner
pursuant to a PRO RATA distribution by the Partnership.

"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder.

"SECURITIES EXCHANGE ACT" means the Securities Act of 1934, as
amended, and the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.

"SPECIFIED LIMITED PARTNER" means Richard S. Ziman so long as Mr.
Ziman serves as the Chief Executive Officer of the General Partner.

"SPECIFIED REDEMPTION DATE" means the day of receipt by the General
Partner of a Notice of Redemption.

"STOCK PLAN" means any stock incentive, stock option, stock ownership
or employee benefits plan of the General Partner.

"SUBSIDIARY" means, with respect to any Person, any corporation or
other entity of which a majority of (i) the voting power of the voting equity
securities or (ii) the outstanding equity interests is owned, directly or
indirectly, by such Person.

"SUBSIDIARY PARTNERSHIP" means any partnership that is a Subsidiary of
the Partnership.

"SUBSTITUTED LIMITED PARTNER" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4.

<PAGE>

"TAX ITEMS" shall have the meaning set forth in Section 6.4.A.

"TENANT" means any tenant from which the General Partner derives rent
either directly or indirectly through partnerships, including the Partnership.

"TENDERED UNITS" shall have the meaning set forth in Section 8.6.A.

"TENDERING PARTNER" shall have the meaning set forth in Section 8.6.A.

"TERMINATING CAPITAL TRANSACTION" means any sale or other disposition
of all or substantially all of the assets of the Partnership or a related series
of transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Partnership.

ARTICLE 2
ORGANIZATIONAL MATTERS

Section 2.1 ORGANIZATION

The Partnership is a limited partnership formed pursuant to the
provisions of the Act and upon the terms and conditions set forth in this
Agreement. Except as expressly provided herein, the rights and obligations of
the Partners and the administration and termination of the Partnership shall be
governed by the Act. The Partnership Interest of each Partner shall be personal
property for all purposes.

Section 2.2 NAME

The name of the Partnership is Arden Realty Limited Partnership. The
Partnership's business may be conducted under any other name or names deemed
advisable by the General Partner, including the name of the General Partner or
any Affiliate thereof. The words "Limited Partnership," "L.P.," "Ltd." or
similar words or letters shall be included in the Partnership's name where
necessary for the purposes of complying with the laws of any jurisdiction that
so requires. The General Partner in its sole and absolute discretion may change
the name of the Partnership at any time and from time to time and shall notify
the Limited Partners of such change in the next regular communication to the
Limited Partners.

Section 2.3 RESIDENT AGENT; PRINCIPAL OFFICE

The name and address of the resident agent of the Partnership in the
State of Maryland are The Corporation Trust Incorporated, 32 South Street,
Baltimore, Maryland 21202. The address of the principal office of the
Partnership in the State of Maryland is c/o The Corporation Trust Incorporated
at such address. The principal office of the Partnership is located at 9100
Wilshire Boulevard, East Tower, Suite 700, Beverly Hills, California 90212, or
such other place as the General Partner may from time to time designate by
notice to the

<PAGE>

Limited Partners. The Partnership may maintain offices at such other place or
places within or outside the State of Maryland as the General Partner deems
advisable.

Section 2.4 POWER OF ATTORNEY

A. Each Limited Partner and each Assignee constitutes and appoints
the General Partner, any Liquidator, and authorized officers and attorneys-in-
fact of each, and each of those acting singly, in each case with full power of
substitution, as its true and lawful agent and attorney-in-fact, with full power
and authority in its name, place and stead to:

(1) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (a) all certificates, documents and
other instruments (including, without limitation, this Agreement
and the Certificate and all amendments or restatements thereof)
that the General Partner or the Liquidator deems appropriate or
necessary to form, qualify or continue the existence or
qualification of the Partnership as a limited partnership (or a
partnership in which the Limited Partners have limited liability)
in the State of Maryland and in all other jurisdictions in which
the Partnership may conduct business or own property; (b) all
instruments that the General Partner or any Liquidator deems
appropriate or necessary to reflect any amendment, change,
modification or restatement of this Agreement in accordance with
its terms; (c) all conveyances and other instruments or documents
that the General Partner or any Liquidator deems appropriate or
necessary to reflect the dissolution and liquidation of the
Partnership pursuant to the terms of this Agreement, including,
without limitation, a certificate of cancellation; (d) all
instruments relating to the admission, withdrawal, removal or
substitution of any Partner pursuant to, or other events
described in, Article 11, 12 or 13 hereof or the Capital
Contribution of any Partner; and (e) all certificates, documents
and other instruments relating to the determination of the
rights, preferences and privileges of Partnership Interests; and

(2) execute, swear to, acknowledge and file all ballots, consents,
approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole and absolute discretion of
the General Partner or any Liquidator, to make, evidence, give,
confirm or ratify any vote, consent, approval, agreement or other
action which is made or given by the Partners hereunder or is
consistent with the terms of this Agreement or appropriate or
necessary, in the sole discretion of the General Partner or any
Liquidator, to effectuate the terms or intent of this Agreement.

Nothing contained herein shall be construed as authorizing the General Partner
or any Liquidator to amend this Agreement except in accordance with Article 14
hereof or as may be otherwise expressly provided for in this Agreement.

<PAGE>

B. The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, in recognition of the fact
that each of the Partners will be relying upon the power of the General Partner
and any Liquidator to act as contemplated by this Agreement in any filing or
other action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and the
transfer of all or any portion of such Limited Partner's or Assignee's
Partnership Units and shall extend to such Limited Partner's or Assignee's
heirs, successors, assigns and personal representatives. Each such Limited
Partner or Assignee hereby agrees to be bound by any representation made by the
General Partner or any Liquidator, acting in good faith pursuant to such power
of attorney; and each such Limited Partner or Assignee hereby waives any and all
defenses which may be available to contest, negate or disaffirm the action of
the General Partner or any Liquidator, taken in good faith under such power of
attorney. Each Limited Partner or Assignee shall execute and deliver to the
General Partner or any Liquidator, within 15 days after receipt of the General
Partner's or Liquidator's request therefor, such further designation, powers of
attorney and other instruments as the General Partner or the Liquidator, as the
case may be, deems necessary to effectuate this Agreement and the purposes of
the Partnership.

Section 2.5 TERM

The term of the Partnership commenced on May 20, 1996 and shall
continue until December 31, 2096 unless it is dissolved sooner pursuant to the
provisions of Article 13 or as otherwise provided by law.

Section 2.6 NUMBER OF PARTNERS

The Partnership shall not at any time have more than 100 partners
(including as partners those persons indirectly owning an interest in the
Partnership through a partnership, limited liability company, S corporation or
grantor trust (such entity, a "flow through entity"), but only if substantially
all of the value of such person's interest in the flow through entity is
attributable to the flow through entity's interest (direct or indirect) in the
Partnership).

ARTICLE 3
PURPOSE

Section 3.1 PURPOSE AND BUSINESS

The purpose and nature of the business to be conducted by the
Partnership is (i) to conduct any business that may be lawfully conducted by a
limited partnership organized pursuant to the Act, PROVIDED, HOWEVER, that such
business shall be limited to and conducted in such a manner as to permit the
General Partner at all times to be classified as a REIT for federal income tax
purposes, unless the General Partner ceases to qualify as a REIT for reasons
other than the conduct of the business of the Partnership, (ii) to enter into
any partnership, joint venture or other similar arrangement to engage in any
business described in the foregoing clause (i) or to own interests in any entity
engaged, directly or indirectly, in any such business and (iii) to do anything
necessary or incidental to the foregoing. In connection with the foregoing,

<PAGE>

and without limiting the General Partner's right in its sole discretion to cease
qualifying as a REIT, the Partners acknowledge that the General Partner's
current status as a REIT inures to the benefit of all the Partners and not
solely the General Partner.

Section 3.2 POWERS

The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described herein and
for the protection and benefit of the Partnership, including, without
limitation, full power and authority, directly or through its ownership interest
in other entities, to enter into, perform and carry out contracts of any kind,
borrow money and issue evidences of indebtedness, whether or not secured by
mortgage, deed of trust, pledge or other lien, acquire and develop real
property, and lease, sell, transfer and dispose of real property; PROVIDED,
HOWEVER, that the Partnership shall not take, or refrain from taking, any action
which, in the judgment of the General Partner, in its sole and absolute
discretion, (i) could adversely affect the ability of the General Partner to
continue to qualify as a REIT, (ii) could subject the General Partner to any
taxes under Section 857 or Section 4981 of the Code, or (iii) could violate any
law or regulation of any governmental body or agency having jurisdiction over
the General Partner or its securities, unless any such action (or inaction)
under (i), (ii) or (iii) shall have been specifically consented to by the
General Partner in writing.

Section 3.3 PARTNERSHIP ONLY FOR PURPOSES SPECIFIED

The Partnership shall be a partnership only for the purposes specified
in Section 3.1 hereof, and this Agreement shall not be deemed to create a
partnership among the Partners with respect to any activities whatsoever other
than the activities within the purposes of the Partnership as specified in
Section 3.1 hereof. Except as otherwise provided in this Agreement, no Partner
shall have any authority to act for, bind, commit or assume any obligation or
responsibility on behalf of the Partnership, its properties or any other
Partner. No Partner, in its capacity as a Partner under this Agreement, shall
be responsible or liable for any indebtedness or obligation of another Partner,
nor shall the Partnership be responsible or liable for any indebtedness or
obligation of any Partner, incurred either before or after the execution and
delivery of this Agreement by such Partner, except as to those responsibilities,
liabilities, indebtedness or obligations incurred pursuant to and as limited by
the terms of this Agreement and the Act.

Section 3.4 REPRESENTATIONS AND WARRANTIES BY THE PARTIES

A. Each Partner that is an individual represents and warrants to
each other Partner that (i) such Partner has the legal capacity to enter into
this Agreement and perform such Partner's obligations hereunder, (ii) the
consummation of the transactions contemplated by this Agreement to be performed
by such Partner will not result in a breach or violation of, or a default under,
any agreement by which such Partner or any of such Partner's property is or are
bound, or any statute, regulation, order or other law to which such Partner is
subject, (iii) such Partner is neither a "foreign person" within the meaning of
Section 1445(f) of the Code nor a

<PAGE>

"foreign partner" within the meaning of Section 1446(e) of the Code, and
(iv) this Agreement is binding upon, and enforceable against, such Partner in
accordance with its terms.

B. Each Partner that is not an individual represents and warrants to
each other Partner that (i) all transactions contemplated by this Agreement to
be performed by it have been duly authorized by all necessary action, including
without limitation, that of its general partner(s), committee(s), trustee(s),
beneficiaries, directors and/or stockholder(s), as the case may be, as required,
(ii) the consummation of such transactions shall not result in a breach or
violation of, or a default under, its partnership agreement, trust agreement,
charter or by-laws, as the case may be, any agreement by which such Partner or
any of such Partner's properties or any of its partners, beneficiaries, trustees
or stockholders, as the case may be, is or are bound, or any statute,
regulation, order or other law to which such Partner or any of its partners,
trustees, beneficiaries or stockholders, as the case may be, is or are subject,
(iii) such Partner is neither a "foreign person" within the meaning of Section
1445(f) of the Code nor a "foreign partner" within the meaning of Section
1446(e) of the Code, and (iv) this Agreement is binding upon, and enforceable
against, such Partner in accordance with its terms.

C. Each Partner represents, warrants and agrees that it has acquired
and continues to hold its interest in the Partnership for its own account for
investment only and not for the purpose of, or with a view toward, the resale or
distribution of all or any part thereof, nor with a view toward selling or
otherwise distributing such interest or any part thereof at any particular time
or under any predetermined circumstances. Each Partner further represents and
warrants that it is a sophisticated investor, able and accustomed to handling
sophisticated financial matters for itself, particularly real estate
investments, and that it has a sufficiently high net worth that it does not
anticipate a need for the funds it has invested in the Partnership in what it
understands to be a highly speculative and illiquid investment.

D. Each Partner further represents, warrants and agrees as follows:

(i) Except as provided in Exhibit E, it does not and will not,
without the prior written consent of the General Partner, actually own or
Constructively Own (a) with respect to any Tenant that is a corporation, any
stock of such Tenant, and (b) with respect to any Tenant that is not a
corporation, any interests in either the assets or net profits of such Tenant;
PROVIDED, HOWEVER, that so long as there are fewer than 20 Partners, each
Partner may own or Constructively Own (x) with respect to any Tenant that is a
corporation, stock of such Tenant possessing up to, but not more than, one-half
of one percent (0.5%) of the total combined voting power of all classes of stock
entitled to vote and one-half of one percent (0.5%) of the total number of
shares of all classes of stock of such Tenant and (y) with respect to any Tenant
that is not a corporation, interests in such Tenant representing up to, but not
more than, one-half of one percent (0.5%) of the assets and one-half of one
percent (0.5%) of the net profits of such Tenant, so long as such actual or
Constructive Ownership otherwise permitted under clause (x) or (y) would not
cause the General Partner to receive amounts described in Section 856 (d)(2)(B)
of the Code.

(ii) Except as provided in Exhibit F, it does not, and agrees
that it will not without the prior written consent of the General Partner,
actually own or Constructively

<PAGE>

Own, any stock in the General Partner, other than any REIT Shares or other
shares of capital stock of the General Partner such Partner may acquire (a) as a
result of an exchange of Tendered Units pursuant to Section 8.6, (b) upon the
exercise of options granted or delivery of REIT Shares pursuant to any Stock
Plan or (c) pursuant to the Miscellaneous Rights Agreement.

(iii) Upon request of the General Partner, it will disclose
to the General Partner the amount of REIT Shares or other shares of capital
stock of the General Partner that it actually owns or Constructively Owns.

(iv) It understands that if, for any reason, (a) the
representations, warranties or agreements set forth in D(i) or (ii) above are
violated, or (b) the Partnership's actual or Constructive ownership of REIT
Shares or other shares of capital stock of the General Partner violates the
limitations set forth in the Charter, then (1) some or all of the Redemption
rights of the Partners may become non-exercisable, and (2) some or all of the
REIT Shares owned by the Partners may be automatically transferred to a trust
for the benefit of a charitable beneficiary, as provided in the Charter.

E. The representations and warranties contained in Sections 3.4.A,
3.4.B, 3.4.C and 3.4.D hereof shall survive the execution and delivery of this
Agreement by each Partner and the dissolution and wind up of the Partnership.

F. Each Partner hereby acknowledges that no representations as to
potential profit, cash flows, funds from operations or yield, if any, in respect
of the Partnership or the General Partner have been made by any Partner or any
employee or representative or Affiliate of any Partner, and that projections and
any other information, including, without limitation, financial and descriptive
information and documentation, which may have been in any manner submitted to
such Partner shall not constitute any representation or warranty of any kind or
nature, express or implied.

ARTICLE 4
CAPITAL CONTRIBUTIONS

Section 4.1 CAPITAL CONTRIBUTIONS OF THE PARTNERS

At the time of their respective execution of this Agreement, the
Partners shall make Capital Contributions as set forth in Exhibit A to this
Agreement. The Partners shall own Partnership Units of the class and in the
amounts set forth in Exhibit A and shall have a Percentage Interest in the
Partnership as set forth in Exhibit A, which Percentage Interest shall be
adjusted in Exhibit A from time to time by the General Partner to the extent
necessary to reflect accurately exchanges, redemptions, Capital Contributions,
the issuance of additional Partnership Units or similar events having an effect
on a Partner's Percentage Interest. Except as required by law or as otherwise
provided in Sections 4.3, 4.4 and 10.5, no Partner shall be required or
permitted to make any additional Capital Contributions or loans to the
Partnership. Unless otherwise specified by the General Partner at the time of
the creation of any class of

<PAGE>

Partnership Interests, the corresponding class of capital stock for any
Partnership Units issued shall be REIT Shares.

Section 4.2 LOANS BY THIRD PARTIES

Subject to Section 4.3, the Partnership may incur Debt, or enter into
other similar credit, guarantee, financing or refinancing arrangements for any
purpose (including, without limitation, in connection with any further
acquisition of Properties) with any Person that is not the General Partner upon
such terms as the General Partner determines appropriate; PROVIDED THAT, the
Partnership shall not incur any Debt that is recourse to the General Partner,
except to the extent otherwise agreed to by the General Partner in its sole
discretion.

Section 4.3 ADDITIONAL FUNDING AND CAPITAL CONTRIBUTIONS

A. GENERAL. The General Partner may, at any time and from time to
time determine that the Partnership requires additional funds ("Additional
Funds") for the acquisition of additional Properties or for such other
Partnership purposes as the General Partner may determine. Additional Funds may
be raised by the Partnership, at the election of the General Partner, in any
manner provided in, and in accordance with, the terms of this Section 4.3. No
Person shall have any preemptive, preferential or similar right or rights to
subscribe for or acquire any Partnership Interest, except as set forth in this
Section 4.3.

B. FUNDING NOTICE. The General Partner shall give written notice
(the "Funding Notice") to the Specified Limited Partner of the need for
Additional Funds and the anticipated source(s) thereof. No notice shall be
given to any Partners with respect to Capital Contributions pursuant to Section
4.4 below.

C. GENERAL PARTNER LOANS. Upon delivery of a Funding Notice to the
Specified Limited Partner, the General Partner, subject to Section 4.3.F below,
may enter into a Funding Debt, including, without limitation, a Funding Debt
that is convertible into REIT shares, and lend the Additional Funds to the
Partnership (a "General Partner Loan"); PROVIDED, HOWEVER, that the General
Partner shall not be obligated to lend the net proceeds of any Funding Debt to
the Partnership in a manner that would be inconsistent with the General
Partner's ability to remain qualified as a REIT. If the General Partner enters
into such a Funding Debt, the General Partner Loan will consist of the net
proceeds from such Funding Debt and will be on comparable terms and conditions,
including interest rate, repayment schedule and costs and expenses, as shall be
applicable with respect to or incurred in connection with such Funding Debt.

D. ISSUANCE OF ADDITIONAL PARTNERSHIP INTERESTS. Upon delivery of a
Funding Notice to the Specified Limited Partner, the General Partner, in its
sole and absolute discretion, may raise all or any portion of the Additional
Funds by accepting additional Capital Contributions, subject to Section 4.3.F in
the event additional Capital Contributions are made in cash. In connection with
any such additional Capital Contributions (of cash or property), the General
Partner is hereby authorized to cause the Partnership from time to time to issue
to Partners (including the General Partner) or other persons (including, without
limitation, in

<PAGE>

connection with the contribution of property to the Partnership) additional
Partnership Units or other Partnership Interests in one or more classes, or one
or more series of any of such classes, with such designations, preferences and
relative, participating, optional or other special rights, powers, and duties,
including rights, powers, and duties senior to then existing Limited Partnership
Interests, all as shall be determined by the General Partner in its sole and
absolute discretion subject to Maryland law, including without limitation, (i)
the allocations of items of Partnership income, gain, loss, deduction, and
credit to such class or series of Partnership Interests; (ii) the right of each
such class or series of Partnership Interests to share in Partnership
distributions; and (iii) the rights of each such class or series of Partnership
Interests upon dissolution and liquidation of the Partnership; PROVIDED THAT no
such additional Partnership Units or other Partnership Interests shall be issued
to the General Partner unless either (a) the additional Partnership Interests
are issued in connection with the grant, award, or issuance of shares of the
General Partner pursuant to Section 4.3.E below, which shares have designations,
preferences, and other rights (except voting rights) such that the economic
interests attributable to such shares are substantially similar to the
designations, preferences and other rights of the additional Partnership
Interests issued to the General Partner in accordance with this Section 4.3.D,
or (b) the additional Partnership Interests are issued to all Partners holding
Partnership Interests in the same class in proportion to their respective
Percentage Interests in such class. In the event that the Partnership issues
additional Partnership Interests pursuant to this Section 4.3.D, the General
Partner shall make such revisions to this Agreement (including but not limited
to the revisions described in Section 5.5, Section 6.2.B, and Section 8.6) as it
determines are necessary to reflect the issuance of such additional Partnership
Interests.

E. ISSUANCE OF REIT SHARES OR OTHER SECURITIES BY THE GENERAL
PARTNER. The General Partner shall not issue any additional REIT Shares (other
than REIT Shares issued pursuant to Section 8.6 hereof or pursuant to a dividend
or distribution (including any stock split) of REIT Shares to all of its
stockholders), other shares of capital stock of the General Partner or New
Securities unless (i) the General Partner shall make a Capital Contribution of
the net proceeds from the issuance of such additional REIT Shares, other shares
of capital stock or New Securities, as the case may be, and from the exercise of
the rights contained in such additional New Securities, as the case may be, and
(ii) except with respect to securities to be issued pursuant to any Stock Plan
or dividend reinvestment plan, the General Partner shall have delivered to the
Specified Limited Partner a Funding Notice regarding the securities to be
issued.

F. PARTICIPATION RIGHTS OF SPECIFIED LIMITED PARTNER. The Funding
Notice delivered by the General Partner prior to its making or accepting (on
behalf of the Partnership) any additional cash Capital Contributions pursuant to
Section 4.3.D or 4.3.E hereof herein shall contain the total amount of
additional Capital Contributions sought to be made to the Partnership, and the
terms and conditions pertaining thereto. Provided that the Specified Limited
Partner is then holding a Limited Partner Interest, the Specified Limited
Partner may elect to make an additional Capital Contribution not to exceed the
product of (i) the total amount of additional Capital Contributions being
sought, and (ii) the Specified Limited Partner's Percentage Interest (with such
product deemed the "Pro Rata Contribution"). For purposes of determining the
Specific Limited Partner's Pro Rata Contribution (or the Pro Rata Participation
(as defined below)), the Specified Limited Partner's Percentage Interest shall
mean the Percentage Interest with respect to the class of Partnership Interests
issued to the Specified Limited Partner on the

<PAGE>

Effective Date, whether the Partnership proposes to issue the same class or a
new class of Partnership Interests in connection with such additional Capital
Contributions. The Funding Notice delivered by the General Partner prior to its
making any loans to the Partnership pursuant to Section 4.3.C herein shall
contain the total amount of the loan to be made to the Partnership. Provided
that the Specified Limited Partner is then holding a Limited Partner Interest,
the Specified Limited Partner may elect to participate in such loan in an amount
not to exceed the product of (i) the total amount of the loan, and (ii) the
Specified Limited Partner's Percentage Interest (with such product deemed the
"Pro Rata Participation"). Either such election shall be made, if at all, by
providing written notice thereof (the "Election Notice") to the General Partner
within five (5) days after delivery of the Funding Notice. Failure to respond
to such Funding Notice shall be deemed to be an election by the Specified
Limited Partner not to make such Capital Contribution or participate in such
loan. Such Election Notice shall contain the amount of the additional Capital
Contribution or the loan participation, if any, the Specified Limited Partner is
to make (such additional Capital Contribution not to exceed the Pro Rata
Contribution and such loan participation not to exceed the Pro Rata
Participation) equal to all or any portion of its Pro Rata Contribution or Pro
Rata Participation. Notwithstanding anything in this Section 4.3.F to the
contrary, (a) the Pro Rata Contribution right and the Pro Rata Participation
right of the Specified Limited Partner under this Section 4.3.F shall be reduced
to the extent that the Specified Limited Partner has exercised rights under the
Miscellaneous Rights Agreement with respect to the issuance of REIT Shares or
other shares of capital stock of the General Partner that has resulted in an
additional Capital Contribution by the General Partner; and (b) if, at any time,
the Specified Limited Partner ceases to serve as the Chief Executive Officer of
the General Partner, then effective as of such time, the Specified Limited
Partner shall no longer be entitled to the Pro Rata Contribution right or the
Pro Rata Participation right under this Section 4.3.F. or entitled to receive
Funding Notices pursuant to Sections 4.3.B. or 4.3.C.

G. PERCENTAGE INTEREST ADJUSTMENTS IN THE CASE OF CAPITAL
CONTRIBUTIONS FOR PARTNERSHIP UNITS. Upon the acceptance of additional Capital
Contributions in exchange for Partnership Units, the Percentage Interest related
thereto shall be equal to a fraction, the numerator of which is equal to the
amount of cash and the Agreed Value of the Property contributed as of the
Business Day immediately preceding the date on which the additional Capital
Contributions are made (an "Adjustment Date") and the denominator of which is
equal to the sum of (i) the Deemed Value of the Partnership Interests of such
class (computed as of the Business Day immediately preceding the Adjustment
Date) and (ii) the aggregate amount of additional Capital Contributions
contributed to the Partnership on such Adjustment Date in respect of such class
of Partnership Interests. The Percentage Interest of each other Partner holding
Partnership Interests of such class not making a full PRO RATA Capital
Contribution shall be adjusted to equal to a fraction, the numerator of which is
equal to the sum of (i) the Deemed Partnership Interest Value of such Limited
Partner of such class (computed as of the Business Day immediately preceding the
Adjustment Date) and (ii) the amount of additional Capital Contributions made by
such Partner to the Partnership in respect of such class of Partnership
Interests as of such Adjustment Date, and the denominator of which is equal to
the sum of (i) the Deemed Value of the Partnership Interests of such class
(computed as of the Business Day immediately preceding the Adjustment Date),
PLUS (ii) the aggregate amount of additional Capital Contributions contributed
by all Partners and/or third parties to the Partnership on such Adjustment Date
in respect of such class. Provided, however, solely for purposes of calculating

<PAGE>

a Partner's Percentage Interest pursuant to this Section 4.3.G, cash Capital
Contributions by the General Partner will be deemed to equal the cash
contributed by the General Partner plus, in the case of cash contributions
funded by an offering of any capital stock of the General Partner, the offering
costs attributable to the cash contributed to the Partnership. The General
Partner shall promptly give each Partner written notice of its Percentage
Interest, as adjusted.

Section 4.4 STOCK PLAN

If at any time or from time to time the General Partner sells REIT
Shares pursuant to any Stock Plan, the General Partner shall contribute the
proceeds therefrom to the Partnership as an additional Capital Contribution
pursuant to Section 4.3 in exchange for an amount of additional Partnership
Units equal to the number of REIT Shares so sold. The General Partner's Capital
Account shall be increased by the amount of cash so contributed.

Section 4.5 OTHER CONTRIBUTION PROVISIONS

In the event that any Partner is admitted to the Partnership and is
given a Capital Account in exchange for services rendered to the Partnership,
such transaction shall be treated by the Partnership and the affected Partner as
if the Partnership had compensated such Partner in cash, and the Partner had
contributed such cash to the capital of the Partnership. In addition, with the
consent of the General Partner, one or more Limited Partners may enter into
contribution agreements with the Partnership which have the effect of providing
a guarantee of certain obligations of the Partnership.

ARTICLE 5
DISTRIBUTIONS

Section 5.1 REQUIREMENT AND CHARACTERIZATION OF DISTRIBUTIONS

The General Partner shall cause the Partnership to distribute
quarterly all, or such portion as the General Partner may in its discretion
determine, of Available Cash generated by the Partnership during such quarter to
the Partners who are Partners on the Partnership Record Date with respect to
such quarter, (1) first, with respect to any Partnership Interests that are
entitled to any preference in distribution, in accordance with the rights of
such class of Partnership Interests (and within such class, pro rata in
proportion to the respective Percentage Interests on such Partnership Record
Date), and, (2) second, with respect to Partnership Interests that are not
entitled to any preference in distribution, pro rata to each such class in
accordance with the terms of such class (and within each such class, pro rata in
proportion with the respective Percentage Interests on such Partnership Record
Date). Unless otherwise expressly provided for herein or in an agreement at the
time a new class of Partnership Interests is created in accordance with Article
4 hereof, no Partnership Interest shall be entitled to a distribution in
preference to any other Partnership Interest. The General Partner shall take
such reasonable efforts, as determined by it in its sole and absolute discretion
and consistent with its qualification as a REIT, to cause the Partnership to
distribute sufficient amounts to enable the General Partner to pay stockholder
dividends that will (a) satisfy the requirements for qualifying as a REIT under

<PAGE>

the Code and Regulations ("REIT Requirements"), and (b) avoid any federal income
or excise tax liability of the General Partner.

Section 5.2 DISTRIBUTIONS IN KIND

No right is given to any Partner to demand and receive property other
than cash. The General Partner may determine, in its sole and absolute
discretion, to make a distribution in kind to the Partners of Partnership
assets, and such assets shall be distributed in such a fashion as to ensure that
the fair market value is distributed and allocated in accordance with
Articles 5, 6 and 10.

Section 5.3 DISTRIBUTIONS UPON LIQUIDATION

Proceeds from a Terminating Capital Transaction shall be distributed
to the Partners in accordance with Section 13.2.

Section 5.4 DISTRIBUTIONS TO REFLECT ISSUANCE OF ADDITIONAL
PARTNERSHIP INTERESTS. In the event that the Partnership issues additional
Partnership Interests to the General Partner or any Additional Limited Partner
pursuant to Section 4.3.D or 4.4 hereof, the General Partner shall make such
revisions to this Article 5 as it determines are necessary to reflect the
issuance of such additional Partnership Interests.

ARTICLE 6
ALLOCATIONS

Section 6.1 TIMING AND AMOUNT OF ALLOCATIONS OF NET INCOME AND NET
LOSS

Net Income and Net Loss of the Partnership shall be determined and
allocated with respect to each fiscal year of the Partnership as of the end of
each such year. Subject to the other provisions of this Article 6, an
allocation to a Partner of a share of Net Income or Net Loss shall be treated as
an allocation of the same share of each item of income, gain, loss or deduction
that is taken into account in computing Net Income or Net Loss.

Section 6.2 GENERAL ALLOCATIONS

A. IN GENERAL. Except as otherwise provided in this Article 6, Net
Income and Net Loss shall be allocated to each of the Partners holding the same
class of Partnership Interests in accordance with their respective Percentage
Interest of such class.

B. ALLOCATIONS TO REFLECT ISSUANCE OF ADDITIONAL PARTNERSHIP
INTERESTS. In the event that the Partnership issues additional Partnership
Interests to the General Partner, the Specified Limited Partner or any
Additional Limited Partner pursuant to Section 4.3 or 4.4 hereof, the General
Partner shall make such revisions to this Section 6.2 as it determines are
necessary to reflect the terms of the issuance of such additional Partnership
Interests, including making preferential allocations to certain classes of
Partnership Interests.

<PAGE>

C. Notwithstanding Section 6.2.A., but subject to the other
provisions of this Article 6, the following special allocations shall be made:

(i) The deduction attributable to the Partnership's payment of
specified interest under certain loans made to predecessor entities, which
were assumed or taken subject to by the Partnership, shall be allocated as
set forth in Exhibit G.

(ii) The cancellation of indebtedness income of the Partnership
attributable to the repayment of certain loans made to predecessor
entities, which were assumed or taken subject to by the Partnership, shall
be allocated as set forth in Exhibit H.

Section 6.3 ADDITIONAL ALLOCATION PROVISIONS

Notwithstanding the foregoing provisions of this Article 6:

A. REGULATORY ALLOCATIONS.

(i) MINIMUM GAIN CHARGEBACK. Except as otherwise provided in
Regulations Section 1.704-2(f), notwithstanding the provisions of Section
6.2 of the Agreement, or any other provision of this Article 6, if there is
a net decrease in Partnership Minimum Gain during any fiscal year, each
Partner shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to
such Partner's share of the net decrease in Partnership Minimum Gain, as
determined under Regulations Section 1.704-2(g). Allocations pursuant to
the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each Partner pursuant thereto. The items to be
allocated shall be determined in accordance with Regulations Sections
1.704-2(f)(6) and 1.704-2(j)(2). This Section 6.3.A(i) is intended to
qualify as a "minimum gain chargeback" within the meaning of Regulation
Section 1.704-2(f) which shall be controlling in the event of a conflict
between such Regulation and this Section 6.3.A(i).

(ii) PARTNER MINIMUM GAIN CHARGEBACK. Except as otherwise
provided in Regulations Section 1.704-2(i)(4), and notwithstanding the
provisions of Section 6.2 of the Agreement, or any other provision of this
Article 6 (except Section 6.3.A(i)), if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any fiscal
year, each Partner who has a share of the Partner Minimum Gain attributable
to such Partner Nonrecourse Debt, determined in accordance with Regulations
Section 1.704-2(i)(5), shall be specially allocated items of Partnership
income and gain for such year (and, if necessary, subsequent years) in an
amount equal to such Partner's share of the net decrease in Partner Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to
the previous sentence shall be made in proportion to the respective amounts
required to be allocated to each General Partner and Limited Partner
pursuant thereto. The items to be so allocated shall be determined in
accordance with Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This
Section 6.3.A(ii) is intended

<PAGE>

to qualify as a "chargeback of partner nonrecourse debt minimum gain"
within the meaning of Regulation Section 1.704-2(i) which shall be
controlling in the event of a conflict between such Regulation and this
Section 6.3.A(ii).

(iii) NONRECOURSE DEDUCTIONS AND PARTNER NONRECOURSE DEDUCTIONS.
Any Nonrecourse Deductions for any fiscal year shall be specially allocated
to the Partners in accordance with their Percentage Interests. Any Partner
Nonrecourse Deductions for any fiscal year shall be specially allocated to
the Partner(s) who bears the economic risk of loss with respect to the
Partner Nonrecourse Debt to which such Partner Nonrecourse Deductions are
attributable, in accordance with Regulations Sections 1.704-2(b)(4) and
1.704-2(i).

(iv) QUALIFIED INCOME OFFSET. If any Partner unexpectedly
receives an adjustment, allocation or distribution described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Partnership income
and gain shall be allocated, in accordance with Regulations Section 1.704-
1(b)(2)(ii)(d), to the Partner in an amount and manner sufficient to
eliminate, to the extent required by such Regulations, the Adjusted Capital
Account Deficit of the Partner as quickly as possible provided that an
allocation pursuant to this Section 6.3.A(iv) shall be made if and only to
the extent that such Partner would have an Adjusted Capital Account Deficit
after all other allocations provided in this Article 6 have been
tentatively made as if this Section 6.3.A(iv) were not in the Agreement.
It is intended that this Section 6.3.A(iv) qualify and be construed as a
"qualified income offset" within the meaning of Regulations 1.704-
1(b)(2)(ii)(d), which shall be controlling in the event of a conflict
between such Regulations and this Section 6.3.A(iv).

(v) GROSS INCOME ALLOCATION. In the event any Partner has a
deficit Capital Account at the end of any fiscal year which is in excess of
the sum of (1) the amount (if any) such Partner is obligated to restore to
the Partnership, and (2) the amount such Partner is deemed to be obligated
to restore pursuant to Regulations Section 1.704-1(b)(2)(ii)(c) or the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-
2(i)(5), each such Partner shall be specially allocated items of
Partnership income and gain in the amount of such excess as quickly as
possible, PROVIDED THAT an allocation pursuant to this Section 6.3.A(v)
shall be made if and only to the extent that such Partner would have a
deficit Capital Account in excess of such sum after all other allocations
provided in this Article 6 have been tentatively made as if this Section
6.3.A(v) and Section 6.3.A(iv) were not in the Agreement.

(vi) LIMITATION ON ALLOCATION OF NET LOSS. To the extent any
allocation of Net Loss would cause or increase an Adjusted Capital Account
Deficit as to any Partner, such allocation of Net Loss shall be reallocated
among the other Partners in accordance with their respective Percentage
Interests, subject to the limitations of this Section 6.3.A(vi).

(vii) SECTION 754 ADJUSTMENT. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Code Section 734(b)
or Code

<PAGE>

Section 743(b) is required, pursuant to Regulations Section 1.704-
1(b)(2)(iv)(m)(2) or Regulations Section 1.704-1(b)(2)(iv)(m)(4), to be
taken into account in determining Capital Accounts as the result of a
distribution to a Partner in complete liquidation of his interest in the
Partnership, the amount of such adjustment to the Capital Accounts shall be
treated as an item of gain (if the adjustment increases the basis of the
asset) or loss (if the adjustment decreases such basis) and such gain or
loss shall be specially allocated to the Partners in accordance with their
interests in the Partnership in the event that Regulations Section 1.704-
1(b)(2)(iv)(m)(2) applies, or to the Partners to whom such distribution was
made in the event that Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.

(viii) CURATIVE ALLOCATION. The allocations set forth in
Sections 6.3.A(i), (ii), (iii), (iv), (v), (vi), and (vii) (the "Regulatory
Allocations") are intended to comply with certain regulatory requirements,
including the requirements of Regulations Sections 1.704-1(b) and 1.704-2.
Notwithstanding the provisions of Sections 6.1 and 6.2, the Regulatory
Allocations shall be taken into account in allocating other items of
income, gain, loss and deduction among the Partners so that, to the extent
possible, the net amount of such allocations of other items and the
Regulatory Allocations to each Partner shall be equal to the net amount
that would have been allocated to each such Partner if the Regulatory
Allocations had not occurred.

B. For purposes of determining a Partner's proportional share of the
"excess nonrecourse liabilities" of the Partnership within the meaning of
Regulations Section 1.752-3(a)(3), each Partner's interest in Partnership
profits shall be such Partner's Percentage Interest.

Section 6.4 TAX ALLOCATIONS

A. IN GENERAL. Except as otherwise provided in this Section 6.4,
for income tax purposes each item of income, gain, loss and deduction
(collectively, "Tax Items") shall be allocated among the Partners in the same
manner as its correlative item of "book" income, gain, loss or deduction is
allocated pursuant to Sections 6.2 and 6.3.

B. ALLOCATIONS RESPECTING SECTION 704(C) REVALUATIONS.
Notwithstanding Section 6.4.A, Tax Items with respect to Partnership property
that is contributed to the Partnership by a Partner shall be shared among the
Partners for income tax purposes pursuant to Regulations promulgated under
Section 704(c) of the Code, so as to take into account the variation, if any,
between the basis of the property to the Partnership and its initial Gross Asset
Value. With respect to Partnership property that is initially contributed to
the Partnership upon its formation pursuant to Section 4.1, such variation
between basis and initial Gross Asset Value shall be taken into account under
the "_____________ method" as described in Regulations Section 1.704-3. With
respect to properties subsequently contributed to the Partnership, the
Partnership shall account for such variation under any method approved under
Section 704(c) of the Code and the applicable regulations as chosen by the
General Partner. In the event the Gross Asset Value of any Partnership asset is
adjusted pursuant to subparagraph (b) of the definition of Gross Asset Value
(provided in Article 1 of this Agreement), subsequent allocations of Tax Items
with respect to such asset shall take account of the variation, if any, between
the

<PAGE>

adjusted basis of such asset and its Gross Asset Value in the same manner as
under Section 704(c) of the Code and the applicable regulations consistent with
the requirements of Regulations Section 1.704-1(b)(2)(iv)(g) using any method
approved under 704(c) of the Code and the applicable regulations as chosen by
the General Partner.

ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS

Section 7.1 MANAGEMENT

A. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership are
exclusively vested in the General Partner, and no Limited Partner shall have any
right to participate in or exercise control or management power over the
business and affairs of the Partnership. The General Partner may not be removed
by the Limited Partners with or without cause, except with the consent of the
General Partner. In addition to the powers now or hereafter granted a general
partner of a limited partnership under applicable law or which are granted to
the General Partner under any other provision of this Agreement, the General
Partner, subject to the other provisions hereof including Section 7.3, shall
have full power and authority to do all things deemed necessary or desirable by
it to conduct the business of the Partnership, to exercise all powers set forth
in Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1
hereof, including, without limitation:

(1) the making of any expenditures, the lending or borrowing of money
(including, without limitation, making prepayments on loans and
borrowing money to permit the Partnership to make distributions
to its Partners in such amounts as will permit the General
Partner (so long as the General Partner has determined to qualify
as a REIT) to avoid the payment of any federal income tax
(including, for this purpose, any excise tax pursuant to Section
4981 of the Code) and to make distributions to its stockholders
sufficient to permit the General Partner to maintain REIT
status), the assumption or guarantee of, or other contracting
for, indebtedness and other liabilities, the issuance of
evidences of indebtedness (including the securing of same by
mortgage, deed of trust or other lien or encumbrance on the
Partnership's assets) and the incurring of any obligations it
deems necessary for the conduct of the activities of the
Partnership;

(2) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies
having jurisdiction over the business or assets of the
Partnership;

(3) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any assets of the Partnership or the
merger or other combination of the Partnership with or into
another entity;

<PAGE>

(4) the mortgage, pledge, encumbrance or hypothecation of any assets
of the Partnership, and the use of the assets of the Partnership
(including, without limitation, cash on hand) for any purpose
consistent with the terms of this Agreement and on any terms it
sees fit, including, without limitation, the financing of the
conduct or the operations of the General Partner or the
Partnership, the lending of funds to other Persons (including,
without limitation, the General Partner (if necessary to permit
the financing or capitalization of a subsidiary of the General
Partner or the Partnership) or any Subsidiaries of the
Partnership) and the repayment of obligations of the Partnership,
any of its Subsidiaries and any other Person in which it has an
equity investment;

(5) the negotiation, execution, and performance of any contracts,
leases, conveyances or other instruments that the General Partner
considers useful or necessary to the conduct of the Partnership's
operations or the implementation of the General Partner's powers
under this Agreement;

(6) the distribution of Partnership cash or other Partnership assets
in accordance with this Agreement;

(7) the selection and dismissal of employees of the Partnership
(including, without limitation, employees having titles such as
"president," "vice president," "secretary" and "treasurer"), and
agents, outside attorneys, accountants, consultants and
contractors of the Partnership, the determination of their
compensation and other terms of employment or hiring, including
waivers of conflicts of interest and the payment of their
expenses and compensation out of the Partnership's assets;

(8) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or
appropriate;

(9) the formation of, or acquisition of an interest in, and the
contribution of property to, any further limited or general
partnerships, joint ventures or other relationships that it deems
desirable (including, without limitation, the acquisition of
interests in, and the contributions of property to any Subsidiary
and any other Person in which it has an equity investment from
time to time); PROVIDED THAT, as long as the General Partner has
determined to continue to qualify as a REIT, the Partnership may
not engage in any such formation, acquisition or contribution
that would cause the General Partner to fail to qualify as a
REIT;

(10) the control of any matters affecting the rights and obligations
of the Partnership, including the conduct of litigation and the
incurring of legal expense and the settlement of claims and
litigation, and the indemnification of any Person against
liabilities and contingencies to the extent permitted by law;

<PAGE>

(11) the undertaking of any action in connection with the
Partnership's direct or indirect investment in any Person
(including, without limitation, contributing or loaning
Partnership funds to, incurring indebtedness on behalf of, or
guarantying the obligations of any such Persons);

(12) subject to the other provisions in this Agreement, the
determination of the fair market value of any Partnership
property distributed in kind using such reasonable method of
valuation as it may adopt, PROVIDED THAT such methods are
otherwise consistent with requirements of this Agreement;

(13) the management, operation, leasing, landscaping, repair,
alteration, demolition or improvement of any real property or
improvements owned by the Partnership or any Subsidiary of the
Partnership or any Person in which the Partnership has made a
direct or indirect equity investment;

(14) holding, managing, investing and reinvesting cash and other
assets of the Partnership;

(15) the collection and receipt of revenues and income of the
Partnership;

(16) the exercise, directly or indirectly through any attorney-in-fact
acting under a general or limited power of attorney, of any
right, including the right to vote, appurtenant to any asset or
investment held by the Partnership;

(17) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of or in connection with
any Subsidiary of the Partnership or any other Person in which
the Partnership has a direct or indirect interest, or jointly
with any such Subsidiary or other Person;

(18) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of any Person in which the
Partnership does not have an interest pursuant to contractual or
other arrangements with such Person; and

(19) the making, execution and delivery of any and all deeds, leases,
notes, deeds to secure debt, mortgages, deeds of trust, security
agreements, conveyances, contracts, guarantees, warranties,
indemnities, waivers, releases or legal instruments or agreements
in writing necessary or appropriate in the judgment of the
General Partner for the accomplishment of any of the powers of
the General Partner enumerated in this Agreement.

B. Each of the Limited Partners agrees that the General Partner is
authorized to execute, deliver and perform the above-mentioned agreements and
transactions on behalf of the Partnership without any further act, approval or
vote of the partners, notwithstanding any

<PAGE>

other provisions of this Agreement (except as provided in Section 7.3), the Act
or any applicable law, rule or regulation. The execution, delivery or
performance by the General Partner or the Partnership of any agreement
authorized or permitted under this Agreement shall not constitute a breach by
the General Partner of any duty that the General Partner may owe the Partnership
or the Limited Partners or any other Persons under this Agreement or of any duty
stated or implied by law or equity.

C. At all times from and after the date hereof, the General Partner
may cause the Partnership to obtain and maintain (i) casualty, liability and
other insurance on the properties of the Partnership and (ii) liability
insurance for the Indemnities hereunder.

D. At all times from and after the date hereof, the General Partner
may cause the Partnership to establish and maintain working capital reserves in
such amounts as the General Partner, in it sole and absolute discretion, deems
appropriate and reasonable from time to time.

E. In exercising its authority under this Agreement, the General
Partner may, but shall be under no obligation to, take into account the tax
consequences to any Partner (including the General Partner) of any action taken
by it. The General Partner and the Partnership shall not have liability to a
Partner under any circumstances as a result of an income tax liability incurred
by such Limited Partner as a result of an action (or inaction) by the General
Partner pursuant to its authority under this Agreement.

Section 7.2 CERTIFICATE OF LIMITED PARTNERSHIP

To the extent that such action is determined by the General Partner to
be reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate and do all the things to
maintain the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) under the laws of the State of Maryland
and each other state, the District of Columbia or other jurisdiction, in which
the Partnership may elect to do business or own property. Subject to the terms
of Section 8.5.A(4) hereof, the General Partner shall not be required, before or
after filing, to deliver or mail a copy of the Certificate or any amendment
thereto to any Limited Partner. The General Partner shall use all reasonable
efforts to cause to be filed such other certificates or documents as may be
reasonable and necessary or appropriate for the formation, continuation,
qualification and operation of a limited partnership (or a partnership in which
the limited partners have limited liability) in the State of Maryland, any other
state, or the District of Columbia or other jurisdiction, in which the
Partnership may elect to do business or own property.

Section 7.3 RESTRICTIONS ON GENERAL PARTNER'S AUTHORITY

A. The General Partner may not take any action in contravention of
an express prohibition or limitation of this Agreement, including, without
limitation:

(1) take any action that would make it impossible to carry on the
ordinary business of the Partnership, except as otherwise
provided in this Agreement;

<PAGE>

(2) possess Partnership property, or assign any rights in specific
Partnership property, for other than a Partnership purpose except
as otherwise provided in this Agreement;

(3) admit a Person as a Partner, except as otherwise provided in this
Agreement;

(4) perform any act that would subject a Limited Partner to liability
as a general partner in any jurisdiction or any other liability
except as provided herein or under the Act; or

(5) enter into any contract, mortgage, loan or other agreement that
expressly prohibits or restricts the ability of a Limited Partner
to exercise its rights to a Redemption in full, except with the
written consent of such Limited Partner.

B. The General Partner shall not, without the prior Consent of the
Partners, undertake, on behalf of the Partnership, any of the following actions
or enter into any transaction which would have the effect of such transactions:

(1) except as provided in Section 7.3.C, amend, modify or terminate
this Agreement other than to reflect the admission, substitution,
termination or withdrawal of partners pursuant to Article 12
hereof;

(2) make a general assignment for the benefit of creditors or appoint
or acquiesce in the appointment of a custodian, receiver or
trustee for all or any part of the assets of the Partnership;

(3) institute any proceeding for bankruptcy on behalf of the
Partnership;

(4) confess a judgment against the Partnership;

(5) approve or acquiesce to the transfer of the Partnership Interest
of the General Partner to any Person other than the Partnership;
or

(6) admit into the Partnership any Additional or Substitute General
Partners.

C. Notwithstanding Section 7.3.B, the General Partner shall have the
exclusive power to amend this Agreement as may be required to facilitate or
implement any of the following purposes:

(1) to add to the obligations of the General Partner or surrender any
right or power granted to the General Partner or any Affiliate of
the General Partner for the benefit of the Limited Partners;

<PAGE>

(2) to reflect the issuance of additional Partnership Interests
pursuant to Section 4.3.D or the admission, substitution,
termination, or withdrawal of Partners in accordance with this
Agreement;

(3) to reflect a change that is of an inconsequential nature and does
not adversely affect the Limited Partners in any material
respect, or to cure any ambiguity, correct or supplement any
provision in this Agreement not inconsistent with law or with
other provisions, or make other changes with respect to matters
arising under this Agreement that will not be inconsistent with
law or with the provisions of this Agreement;

(4) to satisfy any requirements, conditions, or guidelines contained
in any order, directive, opinion, ruling or regulation of a
federal or state agency or contained in federal or state law;

(5) to reflect such changes as are reasonably necessary for the
General Partner to maintain status as a REIT, including changes
which may be necessitated due to a change in applicable law (or
an authoritative interpretation thereof) or a ruling of the IRS;
and

(6) to modify, as set forth in the definition of "Capital Account,"
the manner in which Capital Accounts are computed.

The General Partner will provide notice to the Limited Partners when any action
under this Section 7.3.C is taken.

D. Notwithstanding Section 7.3.B and 7.3.C hereof, this Agreement
shall not be amended with respect to any Partner adversely affected, and no
action may be taken by the General Partner, without the Consent of such Partner
adversely affected if such amendment or action would (i) convert a Limited
Partner's interest in the Partnership into a general partner's interest (except
as the result of the General Partner acquiring such interest), (ii) modify the
limited liability of a Limited Partner, (iii) alter rights of the Partner to
receive distributions pursuant to Article 5 or Section 13.2.A(4), or the
allocations specified in Article 6 (except as permitted pursuant to Section 4.3
and Section 7.3.C(3) hereof), (iv) materially alter or modify the rights to a
Redemption or the REIT Shares Amount as set forth in Section 8.6, and related
definitions hereof or (v) amend this Section 7.3.D. Further, no amendment may
alter the restrictions on the General Partner's authority set forth elsewhere in
this Section 7.3 without the Consent specified in such section. This Section
7.3D does not require unanimous consent of all Partners adversely affected
unless the amendment is to be effective against all partners adversely affected.

E. So long as the Limited Partners own at least 5% of the aggregate
Percentage Interests of the Partnership, the General Partner shall not, on
behalf of the Partnership, take any of the following actions without the prior
Consent of the Limited Partners:

<PAGE>

(1) dissolve the Partnership, other than incident to (i) a sale,
disposition, conveyance or other transfer of all or substantially
all of the assets of the Partnership, in one or a series of
related transactions (an "Asset Sale"), (ii) a merger,
consolidation, reorganization or other business combination to
which the Partnership is a party, or (iii) a Termination
Transaction (as defined in Section 11.2); or

(2) prior to the expiration of seven (7) years from the Effective
Date, sell, dispose, convey or otherwise transfer or refinance
the Partnership's property located at 9911 West Pico Boulevard,
Los Angeles, California and commonly known as Century Park
Center, other than incident to a merger, consolidation,
reorganization or other business combination to which the
Partnership is a party or an Asset Sale.

Section 7.4 REIMBURSEMENT OF THE GENERAL PARTNER

A. Except as provided in this Section 7.4 and elsewhere in this
Agreement (including the provisions of Articles 5 and 6 regarding distributions,
payments and allocations to which it may be entitled), the General Partner shall
not be compensated for its services as general partner of the Partnership.

B. Subject to Section 15.11, the General Partner shall be reimbursed
on a monthly basis, or such other basis as the General Partner may determine in
its sole and absolute discretion, for all expenses it incurs relating to the
ownership of interests in and operation of, or for the benefit of, the
Partnership. The Limited Partners acknowledge that the General Partner's sole
business is the ownership of interests in and operation of the Partnership and
that such expenses are incurred for the benefit of the Partnership; PROVIDED
THAT, the General Partner shall not be reimbursed for expenses it incurs
relating to the organization of the Partnership and the General Partner or the
initial public offering or subsequent public offerings of REIT Shares, other
shares of capital stock or Funding Debt by the General Partner, but shall be
reimbursed for expenses it incurs with respect to any other issuance of
additional Partnership Interests pursuant to the provisions hereof. Such
reimbursements shall be in addition to any reimbursement to the General Partner
as a result of indemnification pursuant to Section 7.7 hereof.

C. If and to the extent any reimbursements to the General Partner
pursuant to this Section 7.4 constitute gross income of the General Partner (as
opposed to the repayment of advances made by the General Partner on behalf of
the Partnership), such amounts shall constitute guaranteed payments within the
meaning of Section 707(c) of the Code, shall be treated consistently therewith
by the Partnership and all Partners, and shall not be treated as distributions
for purposes of computing the Partners' Capital Accounts.

Section 7.5 OUTSIDE ACTIVITIES OF THE GENERAL PARTNER

A. Except in connection with a transaction authorized in Section
11.2 hereof, without the Consent of the Limited Partners, the General Partner
shall not, directly or indirectly,

<PAGE>

enter into or conduct any business, other than in connection with the ownership,
acquisition and disposition of Partnership Interests as a General Partner and
the management of the business of the Partnership, its operation as a public
reporting company with a class (or classes) of securities registered under the
Exchange Act, its operation as a REIT and such activities as are incidental to
the same. Without the Consent of the Limited Partners, the General Partner
shall not, directly or indirectly, participate in or otherwise acquire any
interest in any real or personal property, except its General Partner Interest,
its minority interest in any Subsidiary Partnership(s) (held directly or
indirectly through a Qualified REIT Subsidiary) that the General Partner holds
in order to maintain such Subsidiary Partnership's status as a partnership, and
such bank accounts, similar instruments or other short-term investments as it
deems necessary to carry out its responsibilities contemplated under this
Agreement and the Charter. Any Limited Partner Interests acquired by the
General Partner, whether pursuant to exercise by a Limited Partner of its right
of Redemption, or otherwise, shall be automatically converted into a General
Partner Interest comprised of an identical number of Partnership Units of the
same class. If, at any time, the General Partner acquires material assets
(other than on behalf of the Partnership) the definition of "REIT Shares Amount"
shall be adjusted, as reasonably agreed to by the General Partner and the
Limited Partners, to reflect the relative Fair Market Value of a share of
capital stock of the General Partner relative to the Deemed Partnership Interest
Value of the related Partnership Unit. The General Partner's General Partner
Interest in the Partnership, its minority interest in any Subsidiary
Partnership(s) (held directly or indirectly through a Qualified REIT Subsidiary)
that the General Partner holds in order to maintain such Subsidiary
Partnership's status as a partnership, and interests in such short-term liquid
investments, bank accounts or similar instruments as the General Partner deems
necessary to carry out its responsibilities contemplated under this Agreement
and the Charter are interests which the General Partner is permitted to acquire
and hold for purposes of this Section 7.5.A.

B. In the event the General Partner exercises its rights under the
Charter to purchase REIT Shares, then the General Partner shall cause the
Partnership to purchase from it a number of Partnership Units of the appropriate
class as determined based on the REIT Shares Amount equal to the number of REIT
Shares so purchased on the same terms that the General Partner purchased such
REIT Shares.

Section 7.6 CONTRACTS WITH AFFILIATES

A. The Partnership may lend or contribute to Persons in which it has
an equity investment, and such Persons may borrow funds from the Partnership, on
terms and conditions established in the sole and absolute discretion of the
General Partner. The foregoing authority shall not create any right or benefit
in favor of any Person.

B. Except as provided in Section 7.5.A, the Partnership may transfer
assets to joint ventures, other partnerships, corporations or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions consistent with this Agreement and applicable law.

C. The General Partner, in its sole and absolute discretion and
without the approval of the Limited Partners, may propose and adopt on behalf of
the Partnership employee

<PAGE>

benefit plans funded by the Partnership for the benefit of employees of the
General Partner, the Partnership, Subsidiaries of the Partnership or any
Affiliate of any of them in respect of services performed, directly or
indirectly, for the benefit of the Partnership, the General Partner, or any of
the Partnership's Subsidiaries. The General Partner also is expressly
authorized to cause the Partnership to issue to it Partnership Units
corresponding to REIT Shares issued by the General Partner pursuant to any Stock
Plan or any similar or successor plan and to repurchase such Partnership Units
from the General Partner to the extent necessary to permit the General Partner
to repurchase such REIT Shares in accordance with such plan.

D. The General Partner is expressly authorized to enter into, in the
name and on behalf of the Partnership, a right of first opportunity arrangement
and other conflict avoidance agreements with various Affiliates of the
Partnership and the General Partner, on such terms as the General Partner, in
its sole and absolute discretion, believes are advisable.

Section 7.7 INDEMNIFICATION

A. The Partnership shall indemnify an Indemnitee from and against
any and all losses, claims, damages, liabilities, joint or several, expenses
(including legal fees and expenses), judgments, fines, settlements, and other
amounts arising from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, that relate to the operations
of the Partnership as set forth in this Agreement in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it is
established that: (i) the act or omission of the Indemnitee was material to the
matter giving rise to the proceeding and either was committed in bad faith or
was the result of active and deliberate dishonesty; (ii) the Indemnitee actually
received an improper personal benefit in money, property or services; or
(iii) in the case of any criminal proceeding, the Indemnitee had reasonable
cause to believe that the act or omission was unlawful. Without limitation, the
foregoing indemnity shall extend to any liability of any Indemnitee, pursuant to
a loan guaranty or otherwise, for any indebtedness of the Partnership or any
Subsidiary of the Partnership (including, without limitation, any indebtedness
which the Partnership or any Subsidiary of the Partnership has assumed or taken
subject to), and the General Partner is hereby authorized and empowered, on
behalf of the Partnership, to enter into one or more indemnity agreements
consistent with the provisions of this Section 7.7 in favor of any Indemnitee
having or potentially having liability for any such indebtedness. The
termination of any proceeding by judgment, order or settlement does not create a
presumption that the Indemnitee did not meet the requisite standard of conduct
set forth in this Section 7.7.A. The termination of any proceeding by
conviction or upon a plea of nolo contendere or its equivalent, or any entry of
an order of probation prior to judgment, creates a rebuttable presumption that
the Indemnitee acted in a manner contrary to that specified in this Section
7.7.A. Any indemnification pursuant to this Section 7.7 shall be made only out
of the assets of the Partnership.

B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding may be paid or reimbursed by the Partnership in advance of the final
disposition of the proceeding upon receipt by the Partnership of (i) a written
affirmation by the Indemnitee of the Indemnitee's good faith belief that the
standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 7.7.A has been met, and (ii) a written undertaking

<PAGE>

by or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.

C. The indemnification provided by this Section 7.7 shall be in
addition to any other rights to which an Indemnitee or any other Person may be
entitled under any agreement, pursuant to any vote of the Partners, as a matter
of law or otherwise, and shall continue as to an Indemnitee who has ceased to
serve in such capacity.

D. The Partnership may purchase and maintain insurance, on behalf of
the Indemnities and such other Persons as the General Partner shall determine,
against any liability that may be asserted against or expenses that may be
incurred by such Person in connection with the Partnership's activities,
regardless of whether the Partnership would have the power to indemnify such
Person against such liability under the provisions of this Agreement.

E. For purposes of this Section 7.7, the Partnership shall be deemed
to have requested an Indemnitee to serve as fiduciary of an employee benefit
plan whenever the performance by it of its duties to the Partnership also
imposes duties on, or otherwise involves services by, it to the plan or
participants or beneficiaries of the plan; excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall constitute fines within the meaning of Section 7.7; and actions taken or
omitted by the Indemnitee with respect to an employee benefit plan in the
performance of its duties for a purpose reasonably believed by it to be in the
interest of the participants and beneficiaries of the plan shall be deemed to be
for a purpose which is not opposed to the best interests of the Partnership.

F. In no event may an Indemnitee subject the Limited Partners to
personal liability by reason of the indemnification provisions set forth in this
Agreement.

G. An Indemnitee shall not be denied indemnification in whole or in
part under this Section 7.7 because the Indemnitee had an interest in the
transaction with respect to which the indemnification applies if the transaction
was otherwise permitted by the terms of this Agreement.

H. The provisions of this Section 7.7 are for the benefit of the
Indemnities, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.7 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the
Partnership's liability to any Indemnitee under this Section 7.7 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.

I. If and to the extent any reimbursements to the General Partner
pursuant to this Section 7.7 constitute gross income of the General Partner (as
opposed to the repayment of advances made by the General Partner on behalf of
the Partnership) such amounts shall constitute guaranteed payments within the
meaning of Section 707(c) of the Code, shall be

<PAGE>

treated consistently therewith by the Partnership and all Partners, and shall
not be treated as distributions for purposes of computing the Partners' Capital
Accounts.

J. Any indemnification hereunder is subject to, and limited by, the
provisions of Section 10-107 of the Act.

Section 7.8 LIABILITY OF THE GENERAL PARTNER

A. Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner shall not be liable or accountable in damages or
otherwise to the Partnership, any Partners or any Assignees for losses
sustained, liabilities incurred or benefits not derived as a result of errors in
judgment or mistakes of fact or law or any act or omission if the General
Partner acted in good faith.

B. The Limited Partners expressly acknowledge that the General
Partner is acting for the benefit of the Partnership, the Limited Partners and
the General Partner's stockholders collectively, that the General Partner is
under no obligation to give priority to the separate interests of the Limited
Partners or the General Partner's stockholders (including, without limitation,
the tax consequences to Limited Partners or Assignees or to stockholders) in
deciding whether to cause the Partnership to take (or decline to take) any
actions and that the General Partner shall not be liable to the Partnership or
to any Partner for monetary damages for losses sustained, liabilities incurred,
or benefits not derived by Limited Partners in connection with such decisions,
PROVIDED THAT the General Partner has acted in good faith.

C. Subject to its obligations and duties as General Partner set
forth in Section 7.1.A hereof, the General Partner may exercise any of the
powers granted to it by this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through its agents. The General
Partner shall not be responsible for any misconduct or negligence on the part of
any such agent appointed by it in good faith.

D. Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the General Partner's liability to the Partnership and the
Limited Partners under this Section 7.8 as in effect immediately prior to such
amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.

Section 7.9 OTHER MATTERS CONCERNING THE GENERAL PARTNER

A. The General Partner may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture, or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper party or parties.

B. The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers and other consultants and
advisers

<PAGE>

selected by it, and any act taken or omitted to be taken in reliance upon the
opinion of such Persons as to matters which such General Partner reasonably
believes to be within such Person's professional or expert competence shall be
conclusively presumed to have been done or omitted in good faith and in
accordance with such opinion.

C. The General Partner shall have the right, in respect of any of
its powers or obligations hereunder, to act through any of its duly authorized
officers and a duly appointed attorney or attorneys-in-fact. Each such attorney
shall, to the extent provided by the General Partner in the power of attorney,
have full power and authority to do and perform all and every act and duty which
is permitted or required to be done by the General Partner hereunder.

D. Notwithstanding any other provisions of this Agreement or any
non-mandatory provision of the Act, any action of the General Partner on behalf
of the Partnership or any decision of the General Partner to refrain from acting
on behalf of the Partnership, undertaken in the good faith belief that such
action or omission is necessary or advisable in order (i) to protect the ability
of the General Partner to continue to qualify as a REIT or (ii) to avoid the
General Partner incurring any taxes under Section 857 or Section 4981 of the
Code, is expressly authorized under this Agreement and is deemed approved by all
of the Limited Partners.

Section 7.10 TITLE TO PARTNERSHIP ASSETS

Title to Partnership assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the Partnership
as an entity, and no Partners, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof. Title to
any or all of the Partnership assets may be held in the name of the Partnership,
the General Partner or one or more nominees, as the General Partner may
determine, including Affiliates of the General Partner. The General Partner
hereby declares and warrants that any Partnership assets for which legal title
is held in the name of the General Partner or any nominee or Affiliate of the
General Partner shall be held by the General Partner for the use and benefit of
the Partnership in accordance with the provisions of this Agreement; PROVIDED,
HOWEVER, that the General Partner shall use its best efforts to cause beneficial
and record title to such assets to be vested in the Partnership as soon as
reasonably practicable. All Partnership assets shall be recorded as the
property of the Partnership in its books and records, irrespective of the name
in which legal title to such Partnership assets is held.

Section 7.11 RELIANCE BY THIRD PARTIES

Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority to encumber, sell or otherwise use in any
manner any and all assets of the Partnership and to enter into any contracts on
behalf of the Partnership, and such Person shall be entitled to deal with the
General Partner as if it were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies which may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with

<PAGE>

the General Partner or its representatives be obligated to ascertain that the
terms of this Agreement have been complied with or to inquire into the necessity
or expedience of any act or action of the General Partner or its
representatives. Each and every certificate, document or other instrument
executed on behalf of the Partnership by the General Partner or its
representatives shall be conclusive evidence in favor of any and every Person
relying thereon or claiming thereunder that (i) at the time of the execution and
delivery of such certificate, document or instrument, this Agreement was in full
force and effect, (ii) the Person executing and delivering such certificate,
document or instrument was duly authorized and empowered to do so for and on
behalf of the Partnership and (iii) such certificate, document or instrument was
duly executed and delivered in accordance with the terms and provisions of this
Agreement and is binding upon the Partnership.

ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS

Section 8.1 LIMITATION OF LIABILITY

The Limited Partners shall have no liability under this Agreement
except as expressly provided in this Agreement or under the Act.

Section 8.2 MANAGEMENT OF BUSINESS

No Limited Partner or Assignee (other than the General Partner, any of
its Affiliates or any officer, director, employee, partner, agent or trustee of
the General Partner, the Partnership or any of their Affiliates, in their
capacity as such) shall take part in the operations, management or control
(within the meaning of the Act) of the Partnership's business transact any
business in the Partnership's name or have the power to sign documents for or
otherwise bind the Partnership. The transaction of any such business by the
General Partner, any of its Affiliates or any officer, director, employee,
partner, agent or trustee of the General Partner, the Partnership or any of
their Affiliates, in their capacity as such, shall not affect, impair or
eliminate the limitations on the liability of the Limited Partners or Assignees
under this Agreement.

Section 8.3 OUTSIDE ACTIVITIES OF LIMITED PARTNERS

Subject to any agreements entered into by a Limited Partner or its
Affiliates with the General Partner, Partnership or a Subsidiary, any Limited
Partner and any officer, director, employee, agent, trustee, Affiliate or
stockholder of any Limited Partner shall be entitled to and may have business
interests and engage in business activities in addition to those relating to the
Partnership, including business interests and activities in direct competition
with the Partnership or that are enhanced by the activities of the Partnership.
Neither the Partnership nor any Partners shall have any rights by virtue of this
Agreement in any business ventures of any Limited Partner or Assignee. Subject
to such agreements, none of the Limited Partners nor any other Person shall have
any rights by virtue of this Agreement or the partnership relationship
established hereby in any business ventures of any other Person, other than the
Limited Partners

<PAGE>

benefitting from the business conducted by the General Partner, and such Person
shall have no obligation pursuant to this Agreement to offer any interest in any
such business ventures to the Partnership, any Limited Partner or any such other
Person, even if such opportunity is of a character which, if presented to the
Partnership, any Limited Partner or such other Person, could be taken by such
Person.

Section 8.4 RETURN OF CAPITAL

Except pursuant to the rights of Redemption set forth in Section 8.6,
no Limited Partner shall be entitled to the withdrawal or return of his or her
Capital Contribution, except to the extent of distributions made pursuant to
this Agreement or upon termination of the Partnership as provided herein. No
Limited Partner or Assignee shall have priority over any other Limited Partner
or Assignee either as to the return of Capital Contributions, or otherwise
expressly provided in this Agreement, as to profits, losses, distributions or
credits.

Section 8.5 RIGHTS OF LIMITED PARTNERS RELATING TO THE PARTNERSHIP

A. In addition to other rights provided by this Agreement or by the
Act, and except as limited by Section 8.5.C hereof, each Limited Partner shall
have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon written demand with a
statement of the purpose of such demand and at the Partnership's expense:

(1) to obtain a copy of the most recent annual and quarterly reports
filed with the Securities and Exchange Commission by the General
Partner pursuant to the Securities Exchange Act, and each
communication sent to the stockholders of the General Partner;

(2) to obtain a copy of the Partnership's federal, state and local
income tax returns for each Partnership Year;

(3) to obtain a current list of the name and last known business,
residence or mailing address of each Partner;

(4) to obtain a copy of this Agreement and the Certificate and all
amendments thereto, together with executed copies of all powers
of attorney pursuant to which this Agreement, the Certificate and
all amendments thereto have been executed; and

(5) to obtain true and full information regarding the amount of cash
and a description and statement of any other property or services
contributed by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a
Partner.

<PAGE>

B. The Partnership shall notify each Limited Partner in writing of
any adjustment made in the calculation of the REIT Shares Amount within 10
Business Days of the date such change becomes effective.

C. Notwithstanding any other provision of this Section 8.5, the
General Partner may keep confidential from the Limited Partners, for such period
of time as the General Partner determines in its sole and absolute discretion to
be reasonable, any information that (i) the General Partner believes to be in
the nature of trade secrets or other information the disclosure of which the
General Partner in good faith believes is not in the best interests of the
Partnership or (ii) the Partnership or the General Partner is required by law or
by agreements with unaffiliated third parties to keep confidential.

Section 8.6 REDEMPTION RIGHTS

A. On or after the date one year after the Effective Date, each
Limited Partner shall have the right (subject to the terms and conditions set
forth herein) to require the Partnership to redeem all or a portion of the
Partnership Units held by such Limited Partner (such Partnership Units being
hereafter referred to as "Tendered Units") in exchange for the Cash Amount (a
"Redemption"); provided that the terms of such Partnership Units do not provide
that such Partnership Units are not entitled to a right of Redemption. Unless
otherwise expressly provided in this Agreement or in a separate agreement
entered into between the Partnership and the holders of such Partnership Units,
all Partnership Units shall be entitled to a right of Redemption hereunder. Any
Redemption shall be exercised pursuant to a Notice of Redemption delivered to
the General Partner by the Limited Partner who is exercising the right (the
"Tendering Partner"). The Cash Amount shall be delivered as a certified check
payable to the Tendering Partner within ten (10) days of the Specified
Redemption Date.

B. Notwithstanding Section 8.6.A above, if a Limited Partner has
delivered to the General Partner a Notice of Redemption then the General Partner
may, in its sole and absolute discretion, (subject to the limitations on
ownership and transfer of REIT Shares set forth in the Charter) elect to acquire
some or all of the Tendered Units from the Tendering Partner in exchange for the
REIT Shares Amount (as of the Specified Redemption Date) and, if the General
Partner so elects, the Tendering Partner shall sell the Tendered Units to the
General Partner in exchange for the REIT Shares Amount. In such event, the
Tendering Partner shall have no right to cause the Partnership to redeem such
Tendered Units. The General Partner shall promptly give such Tendering Partner
written notice of its election, and the Tendering Partner may elect to withdraw
its redemption request at any time prior to the acceptance of the cash or REIT
Shares Amount by such Tendering Partner.

C. The REIT Shares Amount, if applicable, shall be delivered as duly
authorized, validly issued, fully paid and nonassessable REIT Shares and, if
applicable, free of any pledge, lien, encumbrance or restriction, other than
those provided in the Charter, the Bylaws of the General Partner, the Securities
Act, relevant state securities or blue sky laws and any applicable registration
rights agreement with respect to such REIT Shares entered into by the Tendering
Partner. Notwithstanding any delay in such delivery (but subject to Section
8.6.D), the Tendering Partner shall be deemed the owner of such REIT Shares for
all purposes,

<PAGE>

including without limitation, rights to vote or consent, and receive dividends,
as of the Specified Redemption Date.

D. Notwithstanding the provisions of Section 8.6.A, 8.6.B, 8.6.C or
any other provision of this Agreement, a Limited Partner (i) shall not be
entitled to effect a Redemption for cash or an exchange for REIT Shares to the
extent the ownership or right to acquire REIT Shares pursuant to such exchange
by such Partner on the Specified Redemption Date would cause such Partner or any
other Person to violate the restrictions on ownership and transfer of REIT
Shares set forth in the Charter and (ii) shall have no rights under this
Agreement to acquire REIT Shares which would otherwise be prohibited under the
Charter. To the extent any attempted Redemption or exchange for REIT Shares
would be in violation of this Section 8.6.D, it shall be null and void AB INITIO
and such Limited Partner shall not acquire any rights or economic interest in
the cash otherwise payable upon such Redemption or the REIT Shares otherwise
issuable upon such exchange.

E. Notwithstanding anything herein to the contrary (but subject to
Section 8.6.D), with respect to any Redemption or exchange for REIT Shares
pursuant to this Section 8.6:

(1) All Partnership Units acquired by the General Partner pursuant
thereto shall automatically, and without further action required,
be converted into and deemed to be General Partner Interests
comprised of the same number and class of Partnership Units.

(2) Without the consent of the General Partner, each Limited Partner
may not effect a Redemption for less than 500 Partnership Units
or, if the Limited Partner holds less than 500 Partnership Units,
all of the Partnership Units held by such Limited Partner.

(3) Without the consent of the General Partner, each Limited Partner
may not effect a Redemption during the period after the
Partnership Record Date with respect to a distribution and before
the record date established by the General Partner for a
distribution to its stockholders of some or all of its portion of
such distribution.

(4) The consummation of any Redemption or exchange for REIT Shares
shall be subject to the expiration or termination of the
applicable waiting period, if any, under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.

<PAGE>

(5) Each Tendering Partner shall continue to own all Partnership
Units subject to any Redemption or exchange for REIT Shares, and
be treated as a Limited Partner with respect to such Partnership
Units for all purposes of this Agreement, until such Partnership
Units are transferred to the General Partner and paid for or
exchanged on the Specified Redemption Date. Until a Specified
Redemption Date, the Tendering Partner shall have no rights as a
stockholder of the General Partner with respect to such Tendering
Partner's Partnership Units.

F. In the event that the Partnership issues additional Partnership
Interests to any Additional Limited Partner pursuant to Section 4.3.D hereof,
the General Partner shall make such revisions to this Section 8.6 as it
determines are necessary to reflect the issuance of such additional Partnership
Interests.

ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS

Section 9.1 RECORDS AND ACCOUNTING

The General Partner shall keep or cause to be kept at the principal
office of the Partnership appropriate books and records with respect to the
Partnership's business, including without limitation, all books and records
necessary to provide to the Limited Partners any information, lists and copies
of documents required to be provided pursuant to Section 9.3 hereof. Any
records maintained by or on behalf of the Partnership in the regular course of
its business may be kept on, or be in the form of, punch cards, magnetic tape,
photographs, micrographics or any other information storage device, PROVIDED
THAT the records so maintained are convertible into clearly legible written form
within a reasonable period of time. The books of the Partnership shall be
maintained, for financial and tax reporting purposes, on an accrual basis in
accordance with generally accepted accounting principles.

Section 9.2 FISCAL YEAR

The fiscal year of the Partnership shall be the calendar year.

Section 9.3 REPORTS

A. As soon as practicable, but in no event later than 105 days after
the close of each Partnership Year, or such earlier date as they are filed with
the Securities and Exchange Commission, the General Partner shall cause to be
mailed to each Limited Partner as of the close of the Partnership Year, an
annual report containing financial statements of the Partnership, or of the
General Partner if such statements are prepared solely on a consolidated basis
with the General Partner, for such Partnership Year, presented in accordance
with generally accepted accounting principles, such statements to be audited by
a nationally recognized firm of independent public accountants selected by the
General Partner.

<PAGE>

B. As soon as practicable, but in no event later than 45 days after
the close of each calendar quarter (except the last calendar quarter of each
year), or such earlier date as they are filed with the Securities and Exchange
Commission, the General Partner shall cause to be mailed to each Limited Partner
as of the last day of the calendar quarter, a report containing unaudited
financial statements of the Partnership, or of the General Partner, if such
statements are prepared solely on a consolidated basis with the applicable law
or regulation, or as the General Partner determines to be appropriate.

ARTICLE 10
TAX MATTERS

Section 10.1 PREPARATION OF TAX RETURNS

The General Partner shall arrange for the preparation and timely
filing of all returns of Partnership income, gains, deductions, losses and other
items required of the Partnership for federal and state income tax purposes and
shall use all reasonable efforts to furnish, within 90 days of the close of each
taxable year, the tax information reasonably required by Limited Partners for
federal and state income tax reporting purposes.

Section 10.2 TAX ELECTIONS

Except as otherwise provided herein, the General Partner shall, in its
sole and absolute discretion, determine whether to make any available election
pursuant to the Code, including the election under Section 754 of the Code. The
General Partner shall have the right to seek to revoke any such election
(including without limitation, any election under Section 754 of the Code) upon
the General Partner's determination in its sole and absolute discretion that
such revocation is the best interests of the Partners.

Section 10.3 TAX MATTERS PARTNER

A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section 6223(c) of the
Code, upon receipt of notice from the IRS of the beginning of an administrative
proceeding with respect to the Partnership, the tax matters partner shall
furnish the IRS with the name, address and profit interest of each of the
Limited Partners and Assignees; PROVIDED, HOWEVER, that such information is
provided to the Partnership by the Limited Partners and Assignees.

B. The tax matters partner is authorized, but not required:

(1) to enter into any settlement with the IRS with respect to any
administrative or judicial proceedings for the adjustment of
Partnership items required to be taken into account by a Partner
for income tax purposes (such administrative proceedings being
referred to as a "tax audit" and such judicial proceedings being
referred to as "judicial review"), and in the settlement
agreement the tax matters partner may expressly state that such

<PAGE>

agreement shall bind all Partners, except that such settlement
agreement shall not bind any Partner (i) who (within the time
prescribed pursuant to the Code and Regulations) files a
statement with the IRS providing that the tax matters partner
shall not have the authority to enter into a settlement agreement
on behalf of such Partner or (ii) who is a "notice partner" (as
defined in Section 6231 of the Code) or a member of a "notice
group" (as defined in Section 6223(b)(2) of the Code);

(2) in the event that a notice of a final administrative adjustment
at the Partnership level of any item required to be taken into
account by a Partner for tax purposes (a "final adjustment") is
mailed to the tax matters partner, to seek judicial review of
such final adjustment, including the filing of a petition for
readjustment with the Tax Court or the United States Claims
Court, or the filing of a complaint for refund with the District
Court of the United States for the district in which the
Partnership's principal place of business is located;

(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;

(4) to file a request for an administrative adjustment with the IRS
at any time and, if any part of such request is not allowed by
the IRS, to file an appropriate pleading (petition or complaint)
for judicial review with respect to such request;

(5) to enter into an agreement with the IRS to extend the period for
assessing any tax which is attributable to any item required to
be taken into account by a Partner for tax purposes, or an item
affected by such item; and

(6) to take any other action on behalf of the Partners of the
Partnership in connection with any tax audit or judicial review
proceeding to the extent permitted by applicable law or
regulations.

The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole and absolute discretion of the tax
matters partner and the provisions relating to indemnification of the General
Partner set forth in Section 7.7 of this Agreement shall be fully applicable to
the tax matters partner in its capacity as such.

C. The tax matters partner shall receive no compensation for its
services. All third party costs and expenses incurred by the tax matters
partner in performing his duties as such (including legal and accounting fees)
shall be borne by the Partnership. Nothing herein shall be construed to
restrict the Partnership from engaging an accounting firm to assist the tax
matters partner in discharging his duties hereunder, so long as the compensation
paid by the Partnership for such services is reasonable.

<PAGE>

Section 10.4 ORGANIZATIONAL EXPENSES

The Partnership shall elect to deduct expenses, if any, incurred by it
in organizing the Partnership ratably over a 60-month period as provided in
Section 709 of the Code.

Section 10.5 WITHHOLDING

Each Limited Partner hereby authorizes the Partnership to withhold
from or pay on behalf of or with respect to such Limited Partner any amount of
federal, state, local, or foreign taxes that the General Partner determines that
the Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Sections 1441, 1442, 1445 or 1446 of the Code. Any
amount paid on behalf of or with respect to a Limited Partner shall constitute a
loan by the Partnership to such Limited Partner, which loan shall be repaid by
such Limited Partner within 15 days after notice from the General Partner that
such payment must be made unless (i) the Partnership withholds such payment from
a distribution which would otherwise be made to the Limited Partner or (ii) the
General Partner determines, in its sole and absolute discretion, that such
payment may be satisfied out of the available funds of the Partnership which
would, but for such payment, be distributed to the Limited Partner. Any amounts
withheld pursuant to the foregoing clauses (i) or (ii) shall be treated as
having been distributed to such Limited Partner. Each Limited Partner hereby
unconditionally and irrevocably grants to the Partnership a security interest in
such Limited Partner's Partnership Interest to secure such Limited Partner's
obligation to pay to the Partnership any amounts required to be paid pursuant to
this Section 10.5. In the event that a Limited Partner fails to pay any amounts
owed to the Partnership pursuant to this Section 10.5 when due, the General
Partner may, in its sole and absolute discretion, elect to make the payment to
the Partnership on behalf of such defaulting Limited Partner, and in such event
shall be deemed to have loaned such amount to such defaulting Limited Partner
and shall succeed to all rights and remedies of the Partnership as against such
defaulting Limited Partner (including, without limitation, the right to receive
distributions). Any amounts payable by a Limited Partner hereunder shall bear
interest at the base rate on corporate loans at large United States money center
commercial banks, as published from time to time in the WALL STREET JOURNAL,
plus two percentage points (but not higher than the maximum lawful rate) from
the date such amount is due (I.E., 15 days after demand) until such amount is
paid in full. Each Limited Partner shall take such actions as the Partnership
or the General Partner shall request in order to perfect or enforce the security
interest created hereunder.

ARTICLE 11
TRANSFERS AND WITHDRAWALS

Section 11.1 TRANSFER

A. The term "transfer," when used in this Article 11 with respect to
a Partnership Interest, shall be deemed to refer to a transaction by which the
General Partner purports to assign its General Partner Interest to another
Person or by which a Limited Partner

<PAGE>

purports to assign its Limited Partnership Interest to another Person, and
includes a sale, assignment, gift (outright or in trust), pledge, encumbrance,
hypothecation, mortgage, exchange or any other disposition by law or otherwise.
The term "transfer" when used in this Article 11 does not include any Redemption
or exchange for REIT Shares pursuant to Section 8.6. No part of the interest of
a Limited Partner shall be subject to the claims of any creditor, any spouse for
alimony or support, or to legal process, and may not be voluntarily or
involuntarily alienated or encumbered except as may be specifically provided for
in this Agreement.

B. No Partnership Interest shall be transferred, in whole or in
part, except in accordance with the terms and conditions set forth in this
Article 11. Any transfer or purported transfer of a Partnership Interest not
made in accordance with this Article 11 shall be null and void.

Section 11.2 TRANSFER OF GENERAL PARTNER'S PARTNERSHIP INTEREST

A. Except in connection with a transaction described in Section
11.2.B or Section 11.2.C, the General Partner shall not withdraw from the
Partnership and shall not transfer all or any portion of its interest in the
Partnership (whether by sale, statutory merger or consolidation, liquidation or
otherwise) without the consent of all of the Limited Partners, which may be
given or withheld by each Limited Partner in its sole and absolute discretion,
and only upon the admission of a successor General Partner pursuant to Section
12.1. Upon any transfer of a Partnership Interest in accordance with the
provisions of this Section 11.2, the transferee shall become a Substitute
General Partner for all purposes herein, and shall be vested with the powers and
rights of the transferor General Partner, and shall be liable for all
obligations and responsible for all duties of the General Partner, once such
transferee has executed such instruments as may be necessary to effectuate such
admission and to confirm the agreement of such transferee to be bound by all the
terms and provisions of this Agreement with respect to the Partnership Interest
so acquired. It is a condition to any transfer otherwise permitted hereunder
that the transferee assumes, by operation of law or express agreement, all of
the obligations of the transferor General Partner under this Agreement with
respect to such transferred Partnership interest, and no such transfer (other
than pursuant to a statutory merger or consolidation wherein all obligations and
liabilities of the transferor General Partner are assumed by a successor
corporation by operation of law) shall relieve the transferor General Partner of
its obligations under this Agreement without the Consent of the Limited
Partners, in their reasonable discretion. In the event the General Partner
withdraws from the Partnership, in violation of this Agreement or otherwise, or
otherwise dissolves or terminates, or upon the Incapacity of the General
Partner, all of the remaining Partners may elect to continue the Partnership
business by selecting a Substitute General Partner in accordance with the Act.

B. Except as otherwise provided in Section 11.2.C, the General
Partner shall not engage in any merger, consolidation or other combination with
or into another person, sale of all or substantially all of its assets or any
reclassification, recapitalization or change of its outstanding equity interests
("Termination Transaction"), unless the Termination Transaction has been
approved by a Consent of the Partners and in connection with which all Limited
Partners either will receive, or will have the right to elect to receive, for
each Partnership Unit an amount of cash, securities, or other property equal to
the product of the REIT Shares Amount and the

<PAGE>

greatest amount of cash, securities or other property paid to a holder of one
REIT Share in consideration of one REIT Share at any time during the period from
and after the date on which the Termination Transaction is consummated; PROVIDED
THAT, if, in connection with the Termination Transaction, a purchase, tender or
exchange offer shall have been made to and accepted by the holders of more than
fifty percent (50%) of the outstanding REIT Shares, each holder of Partnership
Units shall receive, or shall have the right to elect to receive, the greatest
amount of cash, securities, or other property which such holder would have
received had it exercised its right to Redemption (as set forth in Section 8.6)
and received REIT Shares
in exchange for its Partnership Units immediately prior to the expiration of
such purchase, tender or exchange offer and had thereupon accepted such
purchase, tender or exchange offer; and, PROVIDED FURTHER THAT, unless a Consent
of the Limited Partners has been obtained, no more than forty-nine percent (49%)
of the equity securities of the acquired Person in such Termination Transaction
shall be owned, after consummation of such Termination Transaction, by the
General Partner or Persons who are Affiliates of the Partnership or the General
Partner immediately prior to the date on which the Termination Transaction is
consummated.

C. Notwithstanding Section 11.2.B, the General Partner may merge, or
otherwise combine its assets, with another entity if, immediately after such
merger or other combination, substantially all of the assets of the surviving
entity, other than Partnership Units held by such General Partner, are
contributed to the Partnership as a Capital Contribution in exchange for
Partnership Units with a fair market value, as reasonably determined by the
General Partner, equal to the Agreed Value of the assets so contributed.

D. In connection with any transaction permitted by Section 11.2.B or
Section 11.2.C hereof, the General Partner shall use its commercially reasonable
efforts to structure such Termination Transaction to avoid causing the Limited
Partners to recognize gain for federal income tax purposes by virtue of the
occurrence of or their participation in such Termination Transaction. The sole
remedy for a breach by the General Partner of this section 11.2.D. shall be a
claim for damages.

Section 11.3 LIMITED PARTNERS' RIGHTS TO TRANSFER

A. Prior to the first anniversary of the closing of the initial
public offering of REIT Shares, no Limited Partner shall transfer all or any
portion of its Partnership Interest to any transferee without the consent of the
General Partner, which consent may be withheld in its sole and absolute
discretion; PROVIDED, HOWEVER, that any Limited Partner may, at any time
(whether prior to or after such first anniversary), without the consent of the
General Partner, (i) transfer all or any portion of its Partnership Interest to
the General Partner, (ii) transfer all or any portion of its Partnership
Interest to an Affiliate, another original Limited Partner or to an Immediate
Family member, subject to the provisions of Section 11.6, (iii) transfer all or
any portion of its Partnership Interest to a trust for the benefit of a
charitable beneficiary or to a charitable foundation, subject to the provisions
of Section 11.6, and (iv) subject to the provisions of Section 11.6, pledge (a
"Pledge") all or any portion of its Partnership Interest to a lending
institution, which is not an Affiliate of such Limited Partner, as collateral or
security for a bona fide loan or other extension of credit, and transfer such
pledged Partnership Interest to such lending institution in connection with the
exercise of remedies under such loan or extension or

<PAGE>

credit, and the transfer of such pledged Partnership Interest by the lender to
any transferee. After such first anniversary, each Limited Partner or Assignee
(resulting from a transfer made pursuant to clauses (i)-(iv) of the proviso of
the preceding sentence) shall have the right to transfer all or any portion of
its Partnership Interest, subject to the provisions of Section 11.6 and the
satisfaction of each of the following conditions (in addition to the right of
each such Limited Partner or Assignee to continue to make any such transfer
permitted by clauses (i)-(iv) of such proviso without satisfying either of the
following conditions):

(a) GENERAL PARTNER RIGHT OF FIRST REFUSAL. The transferring Partner
shall give written notice of the proposed transfer to the General
Partner, which notice shall state (i) the identity of the
proposed transferee, and (ii) the amount and type of
consideration proposed to be received for the transferred
Partnership Units. The General Partner shall have ten (10) days
upon which to give the transferring Partner notice of its
election to acquire the Partnership Units on the proposed terms.
If it so elects, it shall purchase the Partnership Units on such
terms within ten (10) days after giving notice of such election.
If it does not so elect, the transferring Partner may transfer
such Partnership Units to a third party, on economic terms no
more favorable to the transferee than the proposed terms, subject
to the other conditions of this Section 11.3.

(b) QUALIFIED TRANSFEREE. Any transfer of a Partnership Interest
shall be made only to Qualified Transferees.

It is a condition to any transfer otherwise permitted hereunder that
the transferee assumes by operation of law or express agreement all of the
obligations of the transferor Limited Partner under this Agreement with respect
to such transferred Partnership Interest and no such transfer (other than
pursuant to a statutory merger or consolidation wherein all obligations and
liabilities of the transferor Partner are assumed by a successor corporation by
operation of law) shall relieve the transferor Partner of its obligations under
this Agreement without the approval of the General Partner, in its reasonable
discretion. Notwithstanding the foregoing, any transferee of any transferred
Partnership Interest shall be subject to any and all ownership limitations
contained in the Charter and the representations in Section 3.4.D. Any
transferee, whether or not admitted as a Substituted Limited Partner, shall take
subject to the obligations of the transferor hereunder. Unless admitted as a
Substitute Limited Partner, no transferee, whether by a voluntary transfer, by
operation of law or otherwise, shall have rights hereunder, other than the
rights of an Assignee as provided in Section 11.5.

B. If a Limited Partner is subject to Incapacity, the executor,
administrator, trustee, committee, guardian, conservator, or receiver of such
Limited Partner's estate shall have all the rights of a Limited Partner, but not
more rights than those enjoyed by other Limited Partners, for the purpose of
settling or managing the estate, and such power as the Incapacitated Limited
Partner possessed to transfer all or any part of his or its interest in the
Partnership. The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.

<PAGE>

C. The General Partner may prohibit any transfer otherwise permitted
under Section 11.3 by a Limited Partner of his or her Partnership Units if, in
the opinion of legal counsel to the Partnership, such transfer would require the
filing of a registration statement under the Securities Act by the Partnership
or would otherwise violate any federal or state securities laws or regulations
applicable to the Partnership or the Partnership Unit.

D. No transfer by a Limited Partner of his or her Partnership Units
(including any Redemption or exchange for REIT Shares pursuant to Section 8.6)
may be made to any person if (i) in the opinion of legal counsel for the
Partnership, it would result in the Partnership being treated as an association
taxable as a corporation, or (ii) such transfer is effectuated through an
"established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of Section 7704 of the Code.

E. No transfer of any Partnership Units may be made to a lender to
the Partnership or any Person who is related (within the meaning of Section
1.752-4(b) of the Regulations) to any lender to the Partnership whose loan
constitutes a Nonrecourse Liability, without the consent of the General Partner,
in its sole and absolute discretion; PROVIDED THAT, as a condition to such
consent, the lender will be required to enter into an arrangement with the
Partnership and the General Partner to redeem or exchange for the REIT Shares
Amount any Partnership Units in which a security interest is held simultaneously
with the time at which such lender would be deemed to be a partner in the
Partnership for purposes of allocating liabilities to such lender under Section
752 of the Code.

Section 11.4 SUBSTITUTED LIMITED PARTNERS

A. No Limited Partner shall have the right to substitute a
transferee as a Limited Partner in his or her place (including any transferee
permitted by Section 11.3). The General Partner shall, however, have the right
to consent to the admission of a transferee of the interest of a Limited Partner
pursuant to this Section 11.4 as a Substituted Limited Partner, which consent
may be given or withheld by the General Partner in its sole and absolute
discretion. The General Partner's failure or refusal to permit a transferee of
any such interests to become a Substituted Limited Partner shall not give rise
to any cause of action against the Partnership or any Partner.

B. A transferee who has been admitted as a Substituted Limited
Partner in accordance with this Article 11 shall have all the rights and powers
and be subject to all the restrictions and liabilities of a Limited Partner
under this Agreement. The admission of any transferee as a Substituted Limited
Partner shall be subject to the transferee executing and delivering to the
Partnership an acceptance of all of the terms and conditions of this Agreement
(including without limitation, the provisions of Section 2.4 and such other
documents or instruments as may be required to effect the admission).

C. Upon the admission of a Substituted Limited Partner, the General
Partner shall amend Exhibit A to reflect the name, address, number of
Partnership Units, and Percentage Interest of such Substituted Limited Partner
and to eliminate or adjust, if necessary, the name, address and interest of the
predecessor of such Substituted Limited Partner.

<PAGE>

Section 11.5 ASSIGNEES

If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee under Section 11.3 as a
Substituted Limited Partner, as described in Section 11.4, such transferee shall
be considered an Assignee for purposes of this Agreement. An Assignee shall be
entitled to all the rights of an assignee of a limited partnership interest
under the Act, including the right to receive distributions from the Partnership
and the share of Net Income, Net Losses, gain and loss attributable to the
Partnership Units assigned to such transferee, the rights to transfer the
Partnership Units provided in this Article 11, and the right of Redemption
provided in Section 8.6, but shall not be deemed to be a holder of Partnership
Units for any other purpose under this Agreement, and shall not be entitled to
effect a Consent with respect to such Partnership Units on any matter presented
to the Limited Partners for approval (such Consent remaining with the transferor
Limited Partner). In the event any such transferee desires to make a further
assignment of any such Partnership Units, such transferee shall be subject to
all the provisions of this Article 11 to the same extent and in the same manner
as any Limited Partner desiring to make an assignment of Partnership Units.

Section 11.6 GENERAL PROVISIONS

A. No Limited Partner may withdraw from the Partnership other than
as a result of (i) a permitted transfer of all of such Limited Partner's
Partnership Units in accordance with this Article 11 and the transferee(s) of
such Units being admitted to the Partnership as a Substituted Limited Partner or
(ii) pursuant to the exercise of its right of Redemption of all of such Limited
Partner's Partnership Units under Section 8.6.

B. Any Limited Partner who shall transfer all of such Limited
Partner's Partnership Units in a transfer permitted pursuant to this Article 11
where such transferee was admitted as a Substituted Limited Partner or pursuant
to the exercise of its rights of Redemption of all of such Limited Partner's
Partnership Units under Section 8.6 shall cease to be a Limited Partner.

C. Transfers pursuant to this Article 11 may only be made on the
first day of a fiscal quarter of the Partnership, unless the General Partner
otherwise agrees.

D. If any Partnership Interest is transferred, assigned or redeemed
during any quarterly segment of the Partnership's fiscal year in compliance with
the provisions of this Article 11 or transferred pursuant to Section 8.6, on any
day other than the first day of a Partnership Year, then Net Income, Net Losses,
each item thereof and all other items attributable to such interest for such
fiscal year shall be divided and allocated between the transferor Partner and
the transferee Partner by taking into account their varying interests during the
fiscal year in accordance with Section 706(d) of the Code, using the interim
closing of the books method. Except as otherwise required by Section 706(d) of
the Code, solely for purposes of making such allocations, each of such items for
the calendar month in which the transfer, assignment or redemption occurs shall
be allocated to the Person who is a Partner as of midnight on the last day of
said month and none of such items for the calendar month in which a redemption
occurs will be allocated to the redeeming Partner. All distributions of
Available

<PAGE>

Cash with respect to which the Partnership Record Date is before the date of
such transfer, assignment or redemption shall be made to the transferor Partner,
and all distributions of Available Cash thereafter, in the case of a transfer or
assignment other than a redemption, shall be made to the transferee Partner.

E. In addition to any other restrictions on transfer herein
contained, including without limitation the provisions of this Article 11 and
Section 2.6, in no event may any transfer or assignment of a Partnership
Interest by any Partner (including by way of a Redemption) be made (i) to any
person or entity who lacks the legal right, power or capacity to own a
Partnership Interest; (ii) in violation of applicable law; (iii) of any
component portion of a Partnership Interest, such as the Capital Account, or
rights to distributions, separate and apart from all other components of a
Partnership Interest; (iv) if in the opinion of legal counsel to the Partnership
such transfer would cause a termination of the Partnership for federal or state
income tax purposes (except as a result of the Redemption or exchange for REIT
Shares of all Partnership Units held by all Limited Partners or pursuant to a
transaction expressly permitted under Section 11.2); (v) if in the opinion of
counsel to the Partnership such transfer would cause the Partnership to cease to
be classified as a partnership for federal income tax purposes (except as a
result of the Redemption or exchange for REIT Shares of all Partnership Units
held by all Limited Partners); (vi) if such transfer would cause the Partnership
to become, with respect to any employee benefit plan subject to Title I of
ERISA, a "party-in-interest" (as defined in Section 3(14) of ERISA) or a
"disqualified person" (as defined in Section 4975(c) of the Code); (vii) if such
transfer would, in the opinion of counsel to the Partnership, cause any portion
of the assets of the Partnership to constitute assets of any employee benefit
plan pursuant to Department of Labor Regulations Section 2510.2-101; (viii) if
such transfer requires the registration of such Partnership Interest pursuant to
any applicable federal or state securities laws; (ix) if such transfer is
effectuated through an "established securities market" or a "secondary market"
(or the substantial equivalent thereof) within the meaning of Section 7704 of
the Code or such transfer causes the Partnership to become a "Publicly Traded
Partnership," as such term is defined in Sections 469(k)(2) or 7704(b) of the
Code; (x) if such transfer subjects the Partnership to be regulated under the
Investment Company Act of 1940, the Investment Advisors Act of 1940 or the
Employee Retirement Income Security Act of 1974, each as amended; (xi) if the
transferee or assignee of such Partnership Interest is unable to make the
representations set forth in Section 3.4.D or such transfer could otherwise
adversely affect the ability of the General Partner to remain qualified as a
REIT; or (xii) if in the opinion of legal counsel for the Partnership such
transfer would adversely affect the ability of the General Partner to continue
to qualify as a REIT or subject the General Partner to any additional taxes
under Section 857 or Section 4981 of the Code.

F. The General Partner shall monitor the transfers of interests in
the Partnership to determine (i) if such interests are being traded on an
"established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of Section 7704 of the Code, and (ii)
whether additional transfers of interests would result in the Partnership being
unable to qualify for at least one of the "safe harbors" set forth in
Regulations Section 1.7704-1 (or such other guidance subsequently published by
the IRS setting forth safe harbors under which interests will not be treated as
"readily tradable on a secondary market (or the substantial equivalent thereof)"
within the meaning of Section 7704 of the Code) (the "Safe

<PAGE>

Harbors"). The General Partner shall take all steps reasonably necessary or
appropriate to prevent any trading of interests or any recognition by the
Partnership of transfers made on such markets and, except as otherwise provided
herein, to insure that at least one of the Safe Harbors is met.

ARTICLE 12
ADMISSION OF PARTNERS

Section 12.1 ADMISSION OF SUCCESSOR GENERAL PARTNER

A successor to all of the General Partner's General Partner Interest
pursuant to Section 11.2 hereof who is proposed to be admitted as a successor
General Partner shall be admitted to the Partnership as the General Partner,
effective upon such transfer. Any such transferee shall carry on the business
of the Partnership without dissolution. In each case, the admission shall be
subject to the successor General Partner executing and delivering to the
Partnership an acceptance of all of the terms and conditions of this Agreement
and such other documents or instruments as may be required to effect the
admission. In the case of such admission on any day other than the first day of
a Partnership Year, all items attributable to the General Partner Interest for
such Partnership Year shall be allocated between the transferring General
Partner and such successor as provided in Article 11 hereof.

Section 12.2 ADMISSION OF ADDITIONAL LIMITED PARTNERS

A. After the admission to the Partnership of the initial Limited
Partners on the date hereof, a Person who makes a Capital Contribution to the
Partnership in accordance with this Agreement shall be admitted to the
Partnership as an Additional Limited Partner only upon furnishing to the General
Partner (i) evidence of acceptance in form satisfactory to the General Partner
of all of the terms and conditions of this Agreement, including, without
limitation, the power of attorney granted in Section 2.4 hereof and (ii) such
other documents or instruments as may be required in the discretion of the
General Partner in order to effect such Person's admission as an Additional
Limited Partner.

B. Notwithstanding anything to the contrary in this Section 12.2, no
Person shall be admitted as an Additional Limited Partner without the consent of
the General Partner, which consent may be given or withheld in the General
Partner's sole and absolute discretion. The admission of any Person as an
Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded on the books and records of the Partnership,
following the receipt of the Capital Contribution in respect of such Limited
Partner and the consent of the General Partner to such admission. If any
Additional Limited Partner is admitted to the Partnership on any day other than
the first day of a Partnership Year, then Net Income, Net Losses, each item
thereof and all other items allocable among Partners and Assignees for such
Partnership Year shall be allocated among such Limited Partner and all other
Partners and Assignees by taking into account their varying interests during the
Partnership Year in accordance with Section 706(d) of the Code, using the
interim closing books method. Solely for purposes of making such allocations,
each of such items for the calendar month in which an

<PAGE>

admission of an Additional Limited Partner occurs shall be allocated among all
the Partners and Assignees including such Additional Limited Partner. All
distributions of Available Cash with respect to which the Partnership Record
Date is before the date of such admission shall be made solely to Partners and
Assignees other than the Additional Limited Partner (other than in its capacity
as an Assignee) and, except as otherwise agreed to by the Additional Limited
Partners and the General Partner, all distributions of Available Cash thereafter
shall be made to all Partners and Assignees including such Additional Limited
Partner.

Section 12.3 AMENDMENT OF AGREEMENT AND CERTIFICATE OF LIMITED
PARTNERSHIP

For the admission to the Partnership of any Partner, the General
Partner shall take all steps necessary and appropriate under the Act to amend
the records of the Partnership and, if necessary, to prepare as soon as
practical an amendment of this Agreement (including an amendment of Exhibit A)
and, if required by law, shall prepare and file an amendment to the Certificate
and may for this purpose exercise the power of attorney granted pursuant to
Section 2.4 hereof.

ARTICLE 13
DISSOLUTION AND LIQUIDATION

Section 13.1 DISSOLUTION

The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the withdrawal of the General Partner, any successor General Partner (selected
as described in Section 13.1.B below) shall continue the business of the
Partnership. The Partnership shall dissolve, and its affairs shall be wound up,
upon the first to occur of any of the following ("Liquidating Events"):

A. the expiration of its term as provided in Section 2.5 hereof;

B. an event of withdrawal of the General Partner, as defined in the
Act, unless, within 90 days after the withdrawal, all of the remaining Partners
agree in writing, in their sole and absolute discretion, to continue the
business of the Partnership and to the appointment, effective as of the date of
withdrawal, of a substitute General Partner;

C. subject to compliance with Section 7.3.E(1) an election to
dissolve the Partnership made by the General Partner, in its sole and absolute
discretion,

D. entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act;

E. the sale of all or substantially all of the assets and properties
of the Partnership for cash or marketable securities;

<PAGE>

F. the Incapacity of the General Partner, unless all of the
remaining Partners in their sole and absolute discretion agree in writing to
continue the business of the Partnership and to the appointment, effective as of
a date prior to the date of such Incapacity, of a substitute General Partner; or

G. the Redemption or exchange for REIT Shares of all Partnership
Units (other than those of the General Partner).

Section 13.2 WINDING UP

A. Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Partners.
No Partner shall take any action that is inconsistent with, or not necessary to
or appropriate for, the winding up of the Partnership's business and affairs.
The General Partner (or, in the event there is no remaining General Partner, any
Person elected by a Majority in Interest of the Limited Partners (the
"Liquidator")) shall be responsible for overseeing the winding up and
dissolution of the Partnership and shall take full account of the Partnership's
liabilities and property and the Partnership property shall be liquidated as
promptly as is consistent with obtaining the fair value thereof, and the
proceeds therefrom (which may, to the extent determined by the General Partner,
include shares of stock in the General Partner) shall be applied and distributed
in the following order:

(1) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors other than the Partners;

(2) Second, to the payment and discharge of all of the Partnership's
debts and liabilities to the General Partner;

(3) Third, to the payment and discharge of all of the Partnership's
debts and liabilities to the other Partners; and

(4) The balance, if any, to the General Partner and Limited Partners
in accordance with their positive Capital Account balances,
determined after taking into account all Capital Account
adjustments for the Partnership taxable year during which the
liquidation occurs (other than those made as a result of the
liquidating distribution set forth in this Section 13.2.A(4)).

The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13 other than reimbursement of its
expenses as provided in Section 7.4.

B. Notwithstanding the provisions of Section 13.2.A hereof which
require liquidation of the assets of the Partnership, but subject to the order
of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator determines that an immediate sale of part or all of
the Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time

<PAGE>

the liquidation of any assets except those necessary to satisfy liabilities of
the Partnership (including to those Partners as creditors) and/or distribute to
the Partners, in lieu of cash, as tenants in common and in accordance with the
provisions of Section 13.2.A hereof, undivided interests in such Partnership
assets as the Liquidator deems not suitable for liquidation. Any such
distributions in kind shall be made only if, in the good faith judgment of the
Liquidator, such distributions in kind are in the best interest of the Partners,
and shall be subject to such conditions relating to the disposition and
management of such properties as the Liquidator deems reasonable and equitable
and to any agreements governing the operation of such properties at such time.
The Liquidator shall determine the fair market value of any property distributed
in kind using such reasonable method of valuation as it may adopt.

Section 13.3 COMPLIANCE WITH TIMING REQUIREMENTS OF REGULATIONS

In the event the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article 13 to the General Partner and Limited Partners who have positive
Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2).
If any Partner has a deficit balance in his or her Capital Account (after giving
effect to all contributions, distributions and allocations for the taxable
years, including the year during which such liquidation occurs), such Partner
shall have no obligation to make any contribution to the capital of the
Partnership with respect to such deficit, and such deficit shall not be
considered a debt owed to the Partnership or to any other Person for any purpose
whatsoever. In the discretion of the General Partner, a pro rata portion of the
distributions that would otherwise be made to the General Partner and Limited
Partners pursuant to this Article 13 may be:

A. distributed to a trust established for the benefit of the General
Partner and Limited Partners for the purposes of liquidating Partnership assets,
collecting amounts owed to the Partnership, and paying any contingent or
unforeseen liabilities or obligations of the Partnership or of the General
Partner arising out of or in connection with the Partnership. The assets of any
such trust shall be distributed to the General Partner and Limited Partners from
time to time, in the reasonable discretion of the General Partner, in the same
proportions and the amount distributed to such trust by the Partnership would
otherwise have been distributed to the General Partner and Limited Partners
pursuant to this Agreement; or

B. withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Partnership, PROVIDED THAT such withheld
amounts shall be distributed to the General Partner and Limited Partners as soon
as practicable.

Section 13.4 DEEMED DISTRIBUTION AND RECONTRIBUTION

Notwithstanding any other provision of this Article 13, in the event
the Partnership is liquidated within the meaning of Regulations Section 1.704-
1(b)(2)(ii)(g) but no Liquidating Event has occurred, the Partnership's property
shall not be liquidated, the Partnership's liabilities shall not be paid or
discharged, and the Partnership's affairs shall not be wound up. Instead, the
Partnership shall be deemed to have distributed the Partnership

<PAGE>

property in kind to the General Partner and Limited Partners, who shall be
deemed to have assumed and taken such property subject to all Partnership
liabilities, all in accordance with their respective Capital Accounts.
Immediately thereafter, the General Partner and Limited Partners shall be deemed
to have recontributed the Partnership property in kind to the Partnership, which
shall be deemed to have assumed and taken such property subject to all such
liabilities.

Section 13.5 RIGHTS OF LIMITED PARTNERS

Except as otherwise provided in this Agreement, each Limited Partner
shall look solely to the assets of the Partnership for the return of his Capital
Contribution and shall have no right or power to demand or receive property from
the General Partner. No Limited Partner shall have priority over any other
Limited Partner as to the return of his Capital Contributions, distributions or
allocations.

Section 13.6 NOTICE OF DISSOLUTION

In the event a Liquidating Event occurs or an event occurs that would,
but for provisions of Section 13.1, result in a dissolution of the Partnership,
the General Partner shall, within 30 days thereafter, provide written notice
thereof to each of the Partners and to all other parties with whom the
Partnership regularly conducts business (as determined in the discretion of the
General Partner) and shall publish notice thereof in a newspaper of general
circulation in each place in which the Partnership regularly conducts business
(as determined in the discretion of the General Partner).

Section 13.7 CANCELLATION OF CERTIFICATE OF LIMITED PARTNERSHIP

Upon the completion of the liquidation of the Partnership cash and
property as provided in Section 13.2 hereof, the Partnership shall be terminated
and the Certificate and all qualifications of the Partnership as a foreign
limited partnership in jurisdictions other than the State of Maryland shall be
cancelled and such other actions as may be necessary to terminate the
Partnership shall be taken.

Section 13.8 REASONABLE TIME FOR WINDING-UP

A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 hereof, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect between the Partners during the period of liquidation.

Section 13.9 WAIVER OF PARTITION

Each Partner hereby waives any right to partition of the Partnership
property.

<PAGE>

ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; CONSENTS

Section 14.1 AMENDMENTS

A. The actions requiring consent or approval of Limited Partners
pursuant to this Agreement, including Section 7.3, or otherwise pursuant to
applicable law, are subject to the procedures in this Article 14.

B. Amendments to this Agreement may be proposed by the General
Partner or by any Limited Partner. Following such proposal, the General Partner
shall submit any proposed amendment to the Limited Partners. The General
Partner shall seek the written consent of the Limited Partners on the proposed
amendment or shall call a meeting to vote thereon and to transact any other
business that it may deem appropriate. For purposes of obtaining a written
consent, the General Partner may require a response within a reasonable
specified time, but not less than 15 days, and failure to respond in such time
period shall constitute a consent which is consistent with the General Partner's
recommendation (if so recommended) with respect to the proposal; PROVIDED, THAT,
an action shall become effective at such time as requisite consents are received
even if prior to such specified time.

Section 14.2 ACTION BY THE PARTNERS

A. Meetings of the Partners may be called by the General Partner and
shall be called upon the receipt by the General Partner of a written request by
Limited Partners holding 25 percent or more of the Partnership Interests held by
Limited Partners. The call shall state the nature of the business to be
transacted. Notice of any such meeting shall be given to all Partners not less
than seven days nor more than 30 days prior to the date of such meeting.
Partners may vote in person or by proxy at such meeting. Whenever the vote or
Consent of the Limited Partners or of the Partners is permitted or required
under this Agreement, such vote or Consent may be given at a meeting of Partners
or may be given in accordance with the procedure prescribed in Section 14.1
hereof.

B. Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting forth the
action so taken is signed by the percentage as is expressly required by this
Agreement for the action in question. Such consent may be in one instrument or
in several instruments, and shall have the same force and effect as a vote of
the Percentage Interests of the Partners (expressly required by this Agreement).
Such consent shall be filed with the General Partner. An action so taken shall
be deemed to have been taken at a meeting held on the effective date so
certified.

C. Each Limited Partner may authorize any Person or Persons to act
for him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of 11 months
from the date thereof unless otherwise provided in the proxy. Every proxy shall
be revocable at the pleasure of the Limited Partner executing it.

<PAGE>

D. Each meeting of Partners shall be conducted by the General
Partner or such other Person as the General Partner may appoint pursuant to such
rules for the conduct of the meeting as the General Partner or such other Person
deems appropriate.

ARTICLE 15
GENERAL PROVISIONS

Section 15.1 ADDRESSES AND NOTICE

Any notice, demand, request or report required or permitted to be
given or made to a Partner or Assignee under this Agreement shall be in writing
and shall be deemed given or made when delivered in person or when sent by first
class United States mail or by other means of written communication to the
Partner or Assignee at the address set forth in Exhibit A or such other address
as the Partners shall notify the General Partner in writing.

Section 15.2 TITLES AND CAPTIONS

All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.

Section 15.3 PRONOUNS AND PLURALS

Whenever the context may require, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural and vice
versa.

Section 15.4 FURTHER ACTION

The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.

Section 15.5 BINDING EFFECT

This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.

Section 15.6 CREDITORS

Other than as expressly set forth herein with respect to Indemnitees,
none of the provisions of this Agreement shall be for the benefit of, or shall
be enforceable by, any creditor of the Partnership.

<PAGE>

Section 15.7 WAIVER

No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon any breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition.

Section 15.8 COUNTERPARTS

This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto.

Section 15.9 APPLICABLE LAW

This Agreement shall be construed in accordance with and governed by
the laws of the State of Maryland, without regard to the principles of conflicts
of law.

Section 15.10 INVALIDITY OF PROVISIONS

If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.

Section 15.11 LIMITATION TO PRESERVE REIT STATUS

To the extent that any amount paid or credited to the General Partner
or its officers, directors, employees or agents pursuant to Section 7.4 or
Section 7.7 would constitute gross income to the General Partner for purposes of
Sections 856(c)(2) or 856(c)(3) of the Code (a "General Partner Payment") then,
notwithstanding any other provision of this Agreement, the amount of such
General Partner Payments for any fiscal year shall not exceed the lesser of:

(i) an amount equal to the excess, if any, of (a) 4.17% of the
General Partners' total gross income (but not including the
amount of any General Partner Payments) for the fiscal year which
is described in subsections (A) through (H) of Section 856(c)(2)
of the Code over (b) the amount of gross income (within the
meaning of Section 856(c)(2) of the Code) derived by the General
Partner from sources other than those described in subsections
(A) through (H) of Section 856(c)(2) of the Code (but not
including the amount of any General Partner Payments); or

(ii) an amount equal to the excess, if any, of (a) 25% of the General
Partners' total gross income (but not including the amount of any
General Partner Payments) for the fiscal year which is described
in subsections (A) through (I) of Section 856(c)(3) of the Code
over (b) the amount of gross

<PAGE>

income (within the meaning of Section 856(c)(3) of the Code)
derived by the General Partner from sources other than those
described in subsections (A) through (I) of Section 856(c)(3) of
the Code (but not including the amount of any General Partner
Payments);

PROVIDED, HOWEVER, that General Partner Payments in excess of the amounts set
forth in subparagraphs (i) and (ii) above may be made if the General Partner, as
a condition precedent, obtains an opinion of tax counsel that the receipt of
such excess amounts would not adversely affect the General Partner's ability to
qualify as a REIT. To the extent General Partner Payments may not be made in a
year due to the foregoing limitations, such General Partner Payments shall carry
over and be treated as arising in the following year, PROVIDED, HOWEVER, that
such amounts shall not carry over for more than five years, and if not paid
within such five year period, shall expire; PROVIDED FURTHER, that (i) as
General Partner Payments are made, such payments shall be applied first to carry
over amounts outstanding, if any, and (ii) with respect to carry over amounts
for more than one Partnership Year, such payments shall be applied to the
earliest Partnership Year first.

Section 15.12 ENTIRE AGREEMENT

This Agreement contains the entire understanding and agreement among
the Partners with respect to the subject matter hereof and supersedes any other
prior written or oral understandings or agreements among them with respect
thereto.

Section 15.13 NO RIGHTS AS STOCKHOLDERS

Nothing contained in this Agreement shall be construed as conferring
upon the holders of Partnership Units any rights whatsoever as stockholders of
the General Partner, including without limitation any right to receive dividends
or other distributions made to stockholders of the General Partner or to vote or
to consent or to receive notice as stockholders in respect of any meeting of
stockholders for the election of directors of the General Partner or any other
matter.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.

ARDEN REALTY LIMITED PARTNERSHIP

By: Arden Realty, Inc.,
a Maryland corporation
Its General Partner

By:
-------------------------------------
Title:
----------------------------------

<PAGE>

-------------------------------------
Victor Coleman

LIMITED PARTNERS:

By: Arden Realty, Inc.
Attorney-in-Fact for the
Limited Partners

By:
-------------------------------------
Title:
----------------------------------

<PAGE>

EXHIBIT A
PARTNERS, CONTRIBUTIONS AND PARTNERSHIP INTERESTS

I. Initial Contributions

<TABLE>
<CAPTION>
Agreed Value of Percentage
Name and Address Cash Contributed Gross Asset Total Partnership Interest
of Partner Contributions Property* Value Contributions Units
---------------- ------------- --------------- ----------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
[1]
GENERAL PARTNER
Arden Realty, Inc. [$1.00] - [$1.00]

- --------------------

LIMITED PARTNERS

Arden Realty, Inc. [$1.00] - [$1.00] [1]
Attorney-in-Fact for
the Limited Partners

- --------------------

- --------------------
</TABLE>

* Net of Debt (if any)

II. Contributions To Be Made On Effective Date

Limited Partners

- --------------------

- --------------------
</TABLE>

* Net of Debt (if any)

A-1

<PAGE>

EXHIBIT B
NOTICE OF REDEMPTION

The undersigned hereby [irrevocably] (i) transfers ____________
Limited Partnership Units in Arden Realty Limited Partnership in accordance with
the terms of the Limited Partnership Agreement of Arden Realty Limited
Partnership and the rights of Redemption referred to therein, (ii) surrenders
such Limited Partnership Units and all right, title and interest therein, and
(iii) directs that the cash (or, if applicable, REIT Shares) deliverable upon
Redemption or exchange be delivered to the address specified below, and if
applicable, that such REIT Shares be registered or placed in the name(s) and at
the address(es) specified below.

Dated:
------------------------
Name of Limited Partner:

---------------------------------------
(Signature of Limited Partner)

---------------------------------------
(Street Address)

---------------------------------------
(City) (State) (Zip Code)

Signature Guaranteed by:

---------------------------------------

Issue REIT Shares to:

Please insert social security or identifying number:

Name:

B-1

<PAGE>

EXHIBIT C
CONSTRUCTIVE OWNERSHIP DEFINITION

The term "Constructively Owns" means ownership determined through the
application of the constructive ownership rules of Section 318 of the Code, as
modified by Section 856(d)(5) of the Code. Generally, these rules provide the
following:

a. an individual is considered as owning the Ownership Interest that is
owned, actually or constructively, by or for his spouse, his children, his
grandchildren, and his parents;

b. an Ownership Interest that is owned, actually or constructively, by or
for a partnership or estate is considered as owned proportionately by its
partners or beneficiaries;

c. an Ownership Interest that is owned, actually or constructively, by or
for a trust is considered as owned by its beneficiaries in proportion to the
actuarial interest of such beneficiaries (provided, however, that in the case of
a "grantor trust" the Ownership Interest will be considered as owned by the
grantors);

d. if 10 percent or more in value of the stock in a corporation is owned,
actually or constructively, by or for any person, such person shall be
considered as owning the Ownership Interest that is owned, actually or
constructively, by or for such corporation in that proportion which the value of
the stock which such person so owns bears to the value of all the stock in such
corporation;

e. an Ownership Interest that is owned, actually or constructively, by or
for a partner of a partnership or a beneficiary of an estate or trust shall be
considered as owned by the partnership, estate, or trust (or, in the case of a
grantor trust, the grantors);

f. if 10 percent or more in value of the stock in a corporation is owned,
actually or constructively, by or for any person, such corporation shall be
considered as owning the Ownership Interest that is owned, actually or
constructively, by or for such person;

g. if any person has an option to acquire an Ownership Interest
(including an option to acquire an option or any one of a series of such
options), such Ownership Interest shall be considered as owned by such person;

h. an Ownership Interest that is constructively owned by a person by
reason of the application of the rules described in paragraphs (a) through (g)
above shall, for purposes of applying paragraphs (a) through (g), be considered
as actually owned by such person provided, however, that (i) an Ownership
Interest constructively owned by an individual by reason of paragraph (a) shall
not be considered as owned by him for purposes of again applying paragraph (a)
in order to make another the constructive owner of such Ownership Interest, (ii)
an Ownership Interest constructively owned by a partnership, estate, trust, or
corporation by reason of the application of paragraphs (e) or (f) shall not be
considered as owned by it for purposes of applying paragraphs (b), (c), or (d)
in order to make another the constructive owner of such Ownership Interest,
(iii) if an Ownership Interest may be considered as owned by an individual under
paragraphs (a) or (g), it shall be considered as owned by him under paragraph
(g), and (iv) for purposes of the above described rules, an S corporation shall
be treated as a partnership and any stockholder of the S corporation shall be
treated as a partner of such partnership except that this rule shall not apply
for purposes of determining whether stock in the S corporation is constructively
owned by any person.

i. For purposes of the above summary of the constructive ownership rules,
the term "Ownership Interest" means the ownership of stock with respect to a
corporation and, with respect to any other type of entity, the ownership of an
interest in either its assets or net profits.

C-1

<PAGE>

EXHIBIT D
FORM OF PARTNERSHIP UNIT CERTIFICATE

CERTIFICATE FOR PARTNERSHIP UNITS OF
ARDEN REALTY LIMITED PARTNERSHIP

No. COMMON UNITS
-------------------- ----------------------

Arden Realty, Inc., as the General Partner of Arden Realty Limited
Partnership, a Maryland limited partnership (the "Operating Partnership"),
hereby certifies that ______________________________________________________ is
a Limited Partner of the Operating Partnership whose Partnership Interests
therein, as set forth in the Agreement of Limited Partnership of Arden Realty
Limited Partnership, (the "Partnership Agreement"), under which the Operating
Partnership is existing and as filed in the office of the Maryland State
Department of Assessments and Taxation (copies of which are on file at the
Operating Partnership's principal office at 9100 Wilshire Boulevard, East Tower,
Suite 700, Beverly Hills, California 90212, represent ______________ units of
limited partnership interest in the Operating Partnership.

THE COMMON UNITS REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION COMPLIES WITH THE PROVISIONS OF THE PARTNERSHIP AGREEMENT AS OF
________________, 1996 AS IT MAY BE AMENDED FROM TIME TO TIME (A COPY OF WHICH
IS ON FILE WITH THE OPERATING PARTNERSHIP). EXCEPT AS OTHERWISE PROVIDED IN
SUCH AGREEMENT, NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THE OP UNITS REPRESENTED BY THIS CERTIFICATE MAY BE MADE EXCEPT
(A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR (B) IF THE OPERATING PARTNERSHIP HAS BEEN
FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL FOR THE HOLDER THAT SUCH
TRANSFER, SALE ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT
FROM THE PROVISIONS OF SECTION 5 OF THE ACT AND THE RULES AND REGULATIONS IN
EFFECT THEREUNDER.

DATED: , 1996.
-----------------------------

ARDEN REALTY, INC..

General Partner of
Arden Realty Limited Partnership
ATTEST:

By: By:
------------------------------- ------------------------------------

D-1

<PAGE>

EXHIBIT E
SCHEDULE OF PARTNERS' OWNERSHIP
WITH RESPECT TO TENANTS

E-1

<PAGE>

EXHIBIT F
SCHEDULE OF REIT SHARES
ACTUALLY OR CONSTRUCTIVELY OWNED BY LIMITED PARTNERS
OTHER THAN THOSE ACQUIRED PURSUANT TO AN EXCHANGE

F-1

<PAGE>

EXHIBIT G
SPECIAL ALLOCATIONS OF DEDUCTIONS
ATTRIBUTABLE TO THE REPAYMENT OF SPECIFIED INTEREST

[Add Description of Each Loan]

Total Interest Deduction to be Specially Allocated $
Allocation of Deduction to Partners: -------
[Name of Partners] $
-------
$
-------
$
-------

G-1

<PAGE>

EXHIBIT H
SPECIAL ALLOCATIONS OF CANCELLATION
OF INDEBTEDNESS INCOME

[Add Description of Each Loan]

Total COD Income $
Allocation of Income to Partners: -------
[Name of Partners] $
-------
$
-------
$
-------

H-1

<PAGE>

THE 1996 STOCK OPTION AND INCENTIVE PLAN

OF ARDEN REALTY, INC.

AND ARDEN REALTY LIMITED PARTNERSHIP

<PAGE>

TABLE OF CONTENTS

Page
----

ARTICLE I - DEFINITIONS................................................. 1
1.1 General....................................................... 1
1.2 Award Limit................................................... 1
1.3 Beneficiary................................................... 1
1.4 Board......................................................... 1
1.5 Capital Stock................................................. 2
1.6 Change in Control............................................. 2
1.7 Code.......................................................... 2
1.8 Committee..................................................... 2
1.9 Common Stock.................................................. 2
1.10 Company....................................................... 2
1.11 Company Employee.............................................. 2
1.12 Company Subsidiary............................................ 2
1.13 Corporate Transaction......................................... 3
1.14 Deferred Stock................................................ 3
1.15 Director...................................................... 3
1.16 Dividend Equivalent........................................... 3
1.17 Employee...................................................... 3
1.18 Exchange Act.................................................. 3
1.19 Fair Market Value............................................. 3
1.20 General Partner Interest...................................... 4
1.21 Grantee....................................................... 4
1.22 Incentive Stock Option........................................ 4
1.23 Independent Director.......................................... 4
1.24 Non-Qualified Stock Option.................................... 4
1.25 Option........................................................ 4
1.26 Optionee...................................................... 4
1.27 Partnership................................................... 4
1.28 Partnership Agreement......................................... 4
1.29 Partnership Employee.......................................... 5
1.30 Partnership Optionee Purchased Shares......................... 5
1.31 Partnership Purchase Price.................................... 5
1.32 Partnership Purchased Shares.................................. 5
1.33 Partnership Subsidiary........................................ 5
1.34 Performance Award............................................. 5
1.35 Plan.......................................................... 5
1.36 QDRO.......................................................... 5
1.37 Restricted Stock.............................................. 5
1.38 Restricted Stockholder........................................ 5
1.39 Rule 16b-3.................................................... 5
1.40 Stock Appreciation Right...................................... 5

i
<PAGE>

Page
----
1.41 Stock Ownership Limit......................................... 5
1.42 Stock Payment................................................. 6
1.43 Subsidiary.................................................... 6
1.44 Termination of Consultancy.................................... 6
1.45 Termination of Directorship................................... 6
1.46 Termination of Employment..................................... 6

ARTICLE II - SHARES SUBJECT TO PLAN..................................... 7
2.1 Shares Subject to Plan........................................ 7
2.2 Add-back of Options and Other Rights.......................... 8

ARTICLE III - GRANTING OF OPTIONS....................................... 8
3.1 Eligibility................................................... 8
3.2 Disqualification for Stock Ownership.......................... 8
3.3 Qualification of Incentive Stock Options...................... 8
3.4 Granting of Options........................................... 8

ARTICLE IV - TERMS OF OPTIONS........................................... 10
4.1 Option Agreement.............................................. 10
4.2 Option Price.................................................. 10
4.3 Option Term................................................... 10
4.4 Option Vesting................................................ 11
4.5 No Right to Continue as Employee or Consultant................ 11
4.6 Exercise of Option after Termination of Employment or
Directorship.................................................. 12
4.7 Consideration................................................. 13

ARTICLE V - EXERCISE OF OPTIONS......................................... 13
5.1 Partial Exercise.............................................. 13
5.2 Manner of Exercise............................................ 13
5.3 Transfer of Shares to a Company Employee or Independent
Director...................................................... 14
5.4 Transfer of Shares to a Partnership Employee.................. 15
5.5 Transfer of Payment to the Partnership........................ 15
5.6 Conditions to Issuance of Stock Certificates.................. 15
5.7 Rights as Stockholders........................................ 16
5.8 Ownership and Transfer Restrictions........................... 16
5.9 Restrictions on Exercise of Option............................ 16

ARTICLE VI - AWARD OF RESTRICTED STOCK.................................. 17
6.1 Award of Restricted Stock..................................... 17
6.2 Restricted Stock Agreement.................................... 17
6.3 Consideration................................................. 17
6.4 Rights as Stockholders........................................ 18
6.5 Restriction................................................... 18
6.6 Repurchase of Restricted Stock................................ 18

ii
<PAGE>
Page
----
6.7 Escrow........................................................ 18
6.8 Legend........................................................ 19

ARTICLE VII - PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS, DEFERRED STOCK,
STOCK PAYMENTS...................................................... 19
7.1 Performance Awards............................................ 19
7.2 Dividend Equivalents.......................................... 19
7.3 Stock Payments................................................ 19
7.4 Deferred Stock................................................ 19
7.5 Performance Award Agreement, Dividend Equivalent Agreement,
Deferred Stock Agreement, Stock Payment Agreement............. 20
7.6 Term.......................................................... 20
7.7 Exercise Upon Termination of Employment....................... 20
7.8 Payment on Exercise........................................... 20
7.9 Consideration................................................. 20

ARTICLE VIII - STOCK APPRECIATION RIGHTS................................ 21
8.1 Grant of Stock Appreciation Rights............................ 21
8.2 Coupled Stock Appreciation Rights............................. 21
8.3 Independent Stock Appreciation Rights......................... 22
8.4 Payment and Limitations on Exercise........................... 22
8.5 Consideration................................................. 22

ARTICLE IX - ADMINISTRATION............................................. 23
9.1 Compensation Committee........................................ 23
9.2 Duties and Powers of Committee................................ 23
9.3 Majority Rule; Unanimous Written Consent...................... 23
9.4 Compensation; Professional Assistance; Good Faith Actions..... 23
9.5 Delegation of Authority....................................... 24
9.6 No Liability.................................................. 24
9.7 Indemnification............................................... 24

ARTICLE X - MISCELLANEOUS PROVISIONS.................................... 25
10.1 Not Transferable.............................................. 25
10.2 Amendment, Suspension or Termination of this Plan............. 25
10.3 Changes in Common Stock or Assets of the Company, Acquisition
or Liquidation of the Company and Other Corporate Events...... 26
10.4 Approval of Plan by Stockholders.............................. 29
10.5 Tax Withholding............................................... 29
10.6 Loans......................................................... 30
10.7 Forfeiture Provisions......................................... 30
10.8 Limitations Applicable to Section 16 Persons and
Performance-Based Compensation................................ 30
10.9 Effect of Plan Upon Options and Compensation Plans............ 31

iii
<PAGE>

Page
----
10.10 Section 83(b) Election Prohibited............................. 31
10.11 Compliance with Laws.......................................... 31
10.12 Titles........................................................ 31
10.13 Governing Law................................................. 32
10.14 Conflicts with Company's Restated Articles.................... 32

iv
<PAGE>

THE 1996 STOCK OPTION AND INCENTIVE PLAN
OF ARDEN REALTY, INC.
AND ARDEN REALTY LIMITED PARTNERSHIP

Arden Realty, Inc., a Maryland corporation, and Arden Realty Limited
Partnership, a Maryland limited partnership, have adopted The 1996 Stock Option
and Incentive Plan of Arden Realty, Inc. and Arden Realty Limited Partnership
(the "Plan"), effective September 27, 1996, for the benefit of their eligible
employees, consultants and directors. The Plan consists of two plans, one for
the benefit of the employees, consultants and directors of Arden Realty, Inc.
and one for the benefit of the employees and consultants of Arden Realty Limited
Partnership.

The purposes of this Plan are as follows:

(1) To provide an additional incentive for directors, key
Employees and consultants to further the growth, development and financial
success of the Company by personally benefiting through the ownership of Company
stock and/or rights which recognize such growth, development and financial
success.

(2) To enable the Company and the Partnership to obtain and
retain the services of directors, key Employees and consultants considered
essential to the long range success of the Company by offering them an
opportunity to own stock in the Company and/or rights which will reflect the
growth, development and financial success of the Company.

ARTICLE I

DEFINITIONS

1.1 GENERAL. Wherever the following terms are used in this Plan
they shall have the meaning specified below, unless the context clearly
indicates otherwise.

1.2 AWARD LIMIT. "Award Limit" shall mean 425,000 shares of
Common Stock.

1.3 BENEFICIARY. "Beneficiary" shall mean the person or persons
properly designated by the Optionee, including his spouse or heirs at law, to
exercise such Optionee's rights under this Plan in the event of the Optionee's
death, or if the Optionee has not designated such person or persons, or such
person or persons shall all have pre-deceased the Optionee, the executor or
administrator of the Optionee's estate. Designation, revocation and
redesignation of Beneficiaries must be made in writing in accordance with rules
established by the Committee and shall be effective upon delivery to the
Committee.

1.4 BOARD. "Board" shall mean the Board of Directors of the
Company.

<PAGE>

1.5 CAPITAL STOCK. "Capital Stock" shall mean all classes or
series of stock of the Company.

1.6 CHANGE IN CONTROL. "Change in Control" shall mean a change
in ownership or control of the Company effected through either of the following
transactions:

(a) any person or related of persons (other than the Company or
a person that directly or indirectly controls, is controlled by, or is
under common control with, the Company) directly or indirectly acquires
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
Act) of securities possessing more than fifty percent (50%) of the total
combined voting power of the Company's outstanding securities pursuant to a
tender or exchange offer made directly to the Company's stockholders which
the Board does not recommend such stockholders to accept; or

(b) there is a change in the composition of the Board over a
period of thirty-six (36) consecutive months (or less) such that a majority
of the Board members (rounded up to the nearest whole number) ceases, by
reason of one or more proxy contests for the election of Board members, to
be comprised of individuals who either (i) have been Board members
continuously since the beginning of such period or (ii) have been elected
or nominated for election as Board members during such period by at least a
majority of the Board members described in clause (i) who were still in
office at the time such election or nomination was approved by the Board.

1.7 CODE. "Code" shall mean the Internal Revenue Code of 1986,
as amended.

1.8 COMMITTEE. "Committee" shall mean the Compensation
Committee of the Board, or another committee, or a subcommittee of the Board,
appointed as provided in Section 9.1.

1.9 COMMON STOCK. "Common Stock" shall mean the common stock of
the Company, par value $.01 per share, and any equity security of the Company
issued or authorized to be issued in the future, but excluding any preferred
stock and any warrants, options or other rights to purchase Common Stock. Debt
securities of the Company convertible into Common Stock shall be deemed equity
securities of the Company.

1.10 COMPANY. "Company" shall mean Arden Realty, Inc., a
Maryland corporation.

1.11 COMPANY EMPLOYEE. "Company Employee" shall mean any officer
or other employee (as defined in accordance with Section 3401(c) of the Code) of
the Company, or of any corporation which is then a Company Subsidiary.

1.12 COMPANY SUBSIDIARY. "Company Subsidiary" shall mean any
corporation in an unbroken chain of corporations beginning with the Company if
each of the corporations other than the last corporation in the unbroken chain
then owns stock possessing

2
<PAGE>

50 percent or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain. Except with respect to
Incentive Stock Options, "Company Subsidiary" shall also mean any partnership
in which the Company and/or any Company Subsidiary owns more than 50 percent
of the capital or profits interests; provided, however, that "Company
Subsidiary" shall not include the Partnership nor any Partnership Subsidiary.

1.13 CORPORATE TRANSACTION. "Corporate Transaction" shall mean
any of the following stockholder-approved transactions to which the Company is a
party:

(a) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State in which the Company is incorporated, form a holding
company or effect a similar reorganization as to form whereupon this Plan
and all Options are assumed by the successor entity;

(b) the sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company, in complete liquidation or
dissolution of the Company in a transaction not covered by the exceptions
to clause (a), above; or

(c) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from those who held such
securities immediately prior to such merger.

1.14 DEFERRED STOCK. "Deferred Stock" shall mean Common Stock
awarded under Article VII of this Plan.

1.15 DIRECTOR. "Director" shall mean a member of the Board.

1.16 DIVIDEND EQUIVALENT. "Dividend Equivalent" shall mean a
right to receive the equivalent value (in cash or Common Stock) of dividends
paid on Common Stock, awarded under Article VII of this Plan.

1.17 EMPLOYEE. "Employee" shall mean any Company Employee or
Partnership Employee.

1.18 EXCHANGE ACT. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.

1.19 FAIR MARKET VALUE. "Fair Market Value" of a share of Common
Stock as of a given date shall be (i) the closing price of a share of Common
Stock on the principal exchange on which shares of Common Stock are then
trading, if any (or as reported on any composite index which includes such
principal exchange), on the trading day previous to such date, or if shares were
not traded on the trading day previous to such date, then on the next preceding
date on which a trade occurred, or (ii) if Common Stock is not traded on an

3
<PAGE>

exchange but is quoted on NASDAQ or a successor quotation system, the mean
between the closing representative bid and asked prices for the Common Stock
on the trading day previous to such date as reported by NASDAQ or such
successor quotation system; or (iii) if Common Stock is not publicly traded
on an exchange and not quoted on NASDAQ or a successor quotation system, the
Fair Market Value of a share of Common Stock as established by the Committee
(or the Board, in the case of Options granted to Independent Directors)
acting in good faith.

1.20 GENERAL PARTNER INTEREST. "General Partner Interest" shall
mean an ownership interest in the Partnership that is a general partner interest
and includes any and all benefits to which the holder of such an interest may be
entitled as provided in the Agreement of Limited Partnership of Arden Realty
Limited Partnership, as amended, together with all obligations of such holder to
comply with the terms and provisions of such agreement.

1.21 GRANTEE. "Grantee" shall mean an Employee or consultant
granted a Performance Award, Dividend Equivalent, Stock Payment or Stock
Appreciation Right, or an award of Deferred Stock, under this Plan.

1.22 INCENTIVE STOCK OPTION. "Incentive Stock Option" shall mean
an option which conforms to the applicable provisions of Section 422 of the Code
and which is designated as an Incentive Stock Option by the Committee.

1.23 INDEPENDENT DIRECTOR. "Independent Director" shall mean a
member of the Board who is not a Company Employee or a Partnership Employee.

1.24 NON-QUALIFIED STOCK OPTION. "Non-Qualified Stock Option"
shall mean an Option which is not designated as an Incentive Stock Option by the
Committee.

1.25 OPTION. "Option" shall mean a stock option granted under
Article III of this Plan. An Option granted under this Plan shall, as
determined by the Committee, be either a Non-Qualified Stock Option or an
Incentive Stock Option; PROVIDED, HOWEVER, that Options granted to Partnership
Employees, Independent Directors and consultants shall be Non-Qualified Stock
Options.

1.26 OPTIONEE. "Optionee" shall mean an Employee, consultant or
Independent Director granted an Option under this Plan.

1.27 PARTNERSHIP. "Partnership" shall mean Arden Realty Limited
Partnership, a Maryland limited partnership.

1.28 PARTNERSHIP AGREEMENT. "Partnership Agreement" shall mean
the amended and restated agreement of limited partnership of the Partnership
dated as of October __, 1996, as the same may be amended, modified or restated
from time to time.

4
<PAGE>

1.29 PARTNERSHIP EMPLOYEE. "Partnership Employee" shall mean any
officer, other employee (as defined in accordance with Section 3401(c) of the
Code) or any self-employed partner of the Partnership, or any entity which is
then a Partnership Subsidiary.

1.30 PARTNERSHIP OPTIONEE PURCHASED SHARES. "Partnership
Optionee Purchased Shares" shall have the meaning set forth in Section 5.4.

1.31 PARTNERSHIP PURCHASE PRICE. "Partnership Purchase Price"
shall have the meaning set forth in Section 5.4.

1.32 PARTNERSHIP PURCHASED SHARES. "Partnership Purchased
Shares" shall have the meaning set forth in Section 5.4.

1.33 PARTNERSHIP SUBSIDIARY. "Partnership Subsidiary" shall mean
any partnership in an unbroken chain of partnerships beginning with the
Partnership if each of the partnerships other than the last partnership in the
unbroken chain then owns more than 50 percent of the capital or profits
interests in one of the other partnerships. "Partnership Subsidiary" shall also
mean any corporation in which the Partnership and/or any Partnership Subsidiary
owns stock possessing 50 percent or more of the total combined voting power of
all classes of stock.

1.34 PERFORMANCE AWARD. "Performance Award" shall mean a cash
bonus, stock bonus or other performance or incentive award that is paid in cash,
Common Stock or a combination of both, awarded under Article VII of this Plan.

1.35 PLAN. "Plan" shall mean The 1996 Stock Option and Incentive
Plan of Arden Realty, Inc. and Arden Realty Limited Partnership.

1.36 QDRO. "QDRO" shall mean a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.

1.37 RESTRICTED STOCK. "Restricted Stock" shall mean Common
Stock awarded under Article VI of this Plan.

1.38 RESTRICTED STOCKHOLDER. "Restricted Stockholder" shall mean
an Employee or consultant granted an award of Restricted Stock under Article VI
of this Plan.

1.39 RULE 16b-3. "Rule 16b-3" shall mean that certain Rule 16b-3
under the Exchange Act, as such Rule may be amended from time to time.

1.40 STOCK APPRECIATION RIGHT. "Stock Appreciation Right" shall
mean a stock appreciation right granted under Article VIII of this Plan.

1.41 STOCK OWNERSHIP LIMIT. "Stock Ownership Limit" shall mean
(i) the restrictions on ownership and transfer of Common Stock provided in
Article VII of the

5
<PAGE>

Company's Articles of Amendment and Restatement (the "Restated Articles");
and (ii) any other restrictions on ownership or transfer set forth in the
Restated Articles.

1.42 STOCK PAYMENT. "Stock Payment" shall mean (i) a payment in
the form of shares of Common Stock, or (ii) an option or other right to purchase
shares of Common Stock, as part of a deferred compensation arrangement, made in
lieu of all or any portion of the compensation, including without limitation,
salary, bonuses and commissions, that would otherwise become payable to a key
Employee or consultant in cash, awarded under Article VII of this Plan.

1.43 SUBSIDIARY. "Subsidiary" shall mean any Company Subsidiary
or Partnership Subsidiary.

1.44 TERMINATION OF CONSULTANCY. "Termination of Consultancy"
shall mean the time when the engagement of an Optionee, Grantee or Restricted
Stockholder as a consultant to the Company, a Company Subsidiary, the
Partnership or a Partnership Subsidiary is terminated for any reason, with or
without cause, including, but not by way of limitation, by resignation,
discharge, death or retirement; but excluding terminations where there is a
simultaneous commencement of employment with the Company, any Company
Subsidiary, the Partnership or any Partnership Subsidiary. The Committee, in
its absolute discretion, shall determine the effect of all matters and questions
relating to Termination of Consultancy, including, but not by way of limitation,
the question of whether a Termination of Consultancy resulted from a discharge
for good cause, and all questions of whether particular leaves of absence
constitute Terminations of Consultancy. Notwithstanding any other provision of
this Plan, the Company, any Company Subsidiary, the Partnership or any
Partnership Subsidiary has an absolute and unrestricted right to terminate a
consultant's service at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in writing.

1.45 TERMINATION OF DIRECTORSHIP. "Termination of Directorship"
shall mean the time when an Optionee who is an Independent Director ceases to be
a Director for any reason, including, but not by way of limitation, a
termination by resignation, failure to be elected, death or retirement. The
Board, in its sole and absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Directorship with respect to
Independent Directors.

1.46 TERMINATION OF EMPLOYMENT. "Termination of Employment"
shall mean the time when the employee-employer relationship between an Optionee,
Grantee or Restricted Stockholder and the Company, a Company Subsidiary, the
Partnership or a Partnership Subsidiary is terminated for any reason, with or
without cause, including, but not by way of limitation, a termination by
resignation, discharge, death, disability or retirement; but excluding
(i) terminations where there is a simultaneous reemployment or continuing
employment of an Optionee, Grantee or Restricted Stockholder by the Company, any
Company Subsidiary, the Partnership or any Partnership Subsidiary, (ii) at the
discretion of the Committee, terminations which result in a temporary severance
of the employee-employer relationship, and (iii) at the discretion of the
Committee, terminations which are followed by

6
<PAGE>

the simultaneous establishment of a consulting relationship by the Company, a
Company Subsidiary the Partnership or a Partnership Subsidiary with the
former employee. The Committee, in its absolute discretion, shall determine
the effect of all matters and questions relating to Termination of
Employment, including, but not by way of limitation, the question of whether
a Termination of Employment resulted from a discharge for good cause, and all
questions of whether particular leaves of absence constitute Terminations of
Employment; PROVIDED, HOWEVER, that, with respect to Incentive Stock Options,
a leave of absence, change in status from an employee to an independent
contractor or other change in the employee-employer relationship shall
constitute a Termination of Employment if, and to the extent that, such leave
of absence, change in status or other change interrupts employment for the
purposes of Section 422(a)(2) of the Code and the then applicable regulations
and revenue rulings under said Section. Notwithstanding any other provision
of this Plan, the Company, any Company Subsidiary, the Partnership or any
Partnership Subsidiary has an absolute and unrestricted right to terminate an
Employee's employment at any time for any reason whatsoever, with or without
cause, except to the extent expressly provided otherwise in writing.

ARTICLE II

SHARES SUBJECT TO PLAN

2.1 SHARES SUBJECT TO PLAN.

(a) The shares of stock subject to Options, awards of Restricted
Stock, Performance Awards, Dividend Equivalents, awards of Deferred Stock, Stock
Payments or Stock Appreciation Rights shall be Common Stock, initially shares of
the Company's Common Stock, par value $.01 per share. The aggregate number of
such shares which may be issued upon exercise of such options or rights or upon
any such awards under the Plan shall not exceed one million five hundred
thousand (1,500,000). The shares of Common Stock issuable upon exercise of such
options or rights or upon any such awards may be either previously authorized
but unissued shares or treasury shares.

(b) The maximum number of shares which may be subject to options
or Stock Appreciation Rights granted under the Plan to any individual in any
fiscal year shall not exceed the Award Limit. To the extent required by Section
162(m) of the Code, shares subject to Options which are canceled continue to be
counted against the Award Limit and if, after grant of an Option, the price of
shares subject to such Option is reduced, the transaction is treated as a
cancellation of the Option and a grant of a new Option and both the Option
deemed to be canceled and the Option deemed to be granted are counted against
the Award Limit. Furthermore, to the extent required by Section 162(m) of the
Code, if, after grant of a Stock Appreciation Right, the base amount on which
stock appreciation is calculated is reduced to reflect a reduction in the Fair
Market Value of the Company's Common Stock, the transaction is treated as a
cancellation of the Stock Appreciation Right and a grant of a new Stock
Appreciation Right and both the Stock Appreciation Right deemed to be canceled
and the Stock Appreciation Right deemed to be granted are counted against the
Award Limit.

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<PAGE>

2.2 ADD-BACK OF OPTIONS AND OTHER RIGHTS. If any Option, or other
right to acquire shares of Common Stock under any other award under this
Plan, expires or is canceled without having been fully exercised, or is
exercised in whole or in part for cash as permitted by this Plan, the number
of shares subject to such Option or other right but as to which such Option
or other right was not exercised prior to its expiration, cancellation or
exercise may again be optioned, granted or awarded hereunder, subject to the
limitations of Section 2.1. Shares of Common Stock which are delivered by
the Optionee or Grantee or withheld by the Company upon the exercise of any
Option or other award under this Plan, in payment of the exercise price
thereof, may again be optioned, granted or awarded hereunder, subject to the
limitations of Section 2.1; PROVIDED, HOWEVER, that, no shares of Common
Stock delivered or withheld upon the exercise of an Incentive Stock Option,
in payment of the exercise thereof, may again be optioned, granted or awarded
if such action would cause the Option to fail to qualify as an Incentive
Stock Option under Section 422 of the Code. If any share of Restricted Stock
is forfeited by the Grantee or repurchased by the Company pursuant to Section
6.6 hereof, such share may again be optioned, granted or awarded hereunder,
subject to the limitations of Section 2.1.

ARTICLE III

GRANTING OF OPTIONS

3.1 ELIGIBILITY. Any Employee or consultant selected by the
Committee pursuant to Section 3.4(a)(i) shall be eligible to be granted an
Option. Each Independent Director of the Company shall be eligible to be
granted Options at the times and in the manner set forth in Section 3.4(d).

3.2 DISQUALIFICATION FOR STOCK OWNERSHIP. No person may be
granted an Incentive Stock Option under this Plan if such person, at the time
the Incentive Stock Option is granted, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any then existing Company Subsidiary unless such Incentive Stock
Option conforms to the applicable provisions of Section 422 of the Code.

3.3 QUALIFICATION OF INCENTIVE STOCK OPTIONS. No Incentive
Stock Option shall be granted unless such Option, when granted, qualifies as an
"incentive stock option" under Section 422 of the Code. No Incentive Stock
Option shall be granted to any person who is not an employee as defined in
Section 3401(c) of the Code.

3.4 GRANTING OF OPTIONS.

(a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of this Plan:

(i) Determine which Employees are key Employees and select from
among the key Employees or consultants (including Employees or consultants
who

8
<PAGE>

have previously received Options or other awards under this Plan) such
of them as in its opinion should be granted Options;

(ii) Subject to the Award Limit and the Stock Ownership Limit,
determine the number of shares to be subject to such Options granted to the
selected key Employees or consultants;

(iii) Determine whether such Options are to be Incentive
Stock Options or Non-Qualified Stock Options and whether such Options are
to qualify as performance-based compensation as described in Section
162(m)(4)(C) of the Code; and

(iv) Determine the terms and conditions of such Options,
consistent with this Plan; PROVIDED, HOWEVER, that the terms and conditions
of Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall include, but not be
limited to, such terms and conditions as may be necessary to meet the
applicable provisions of Section 162(m) of the Code.

(b) Upon the selection of a key Employee or consultant to be
granted an Option, the Committee shall instruct the Secretary of the Company to
issue the Option and may impose such conditions on the grant of the Option as it
deems appropriate. Without limiting the generality of the preceding sentence,
the Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition on the grant of an Option to an Employee or consultant
that the Employee or consultant surrender for cancellation some or all of the
unexercised Options, awards of Restricted Stock or Deferred Stock, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments or
other rights which have been previously granted to him under this Plan or
otherwise. An Option, the grant of which is conditioned upon such surrender,
may have an option price lower (or higher) than the exercise price of such
surrendered Option or other award, may cover the same (or a lesser or greater)
number of shares as such surrendered Option or other award, may contain such
other terms as the Committee deems appropriate, and shall be exercisable in
accordance with its terms, without regard to the number of shares, price,
exercise period or any other term or condition of such surrendered Option or
other award.

(c) Any Incentive Stock Option granted under this Plan may be
modified by the Committee to disqualify such option from treatment as an
"incentive stock option" under Section 422 of the Code.

(d) During the term of the Plan and subject to the Stock
Ownership Limit, each person who is an Independent Director as of the date of
the consummation of the initial public offering of Common Stock automatically
shall be granted (i) an Option to purchase ten thousand (10,000) shares of
Common Stock (subject to adjustment as provided in Section 10.3) on the date of
such initial public offering. During the term of the Plan, a person who is
initially elected to the Board after the consummation of the initial public
offering of Common Stock and who is an Independent Director at the time of such
initial election automatically shall be granted (i) an Option to purchase ten
thousand (10,000) shares of

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<PAGE>

Common Stock (subject to adjustment as provided in Section 10.3) on the date
of such initial election. Members of the Board who are employees of the
Company who subsequently retire from the Company and remain on the Board will
not receive an initial Option grant pursuant to clause (i) of the preceding
sentence, but to the extent that they are otherwise eligible, will receive,
after retirement from employment with the Company, Options as described in
clause (ii) of the preceding sentence. All the foregoing Option grants
authorized by this Section 3.4(d) are subject to stockholder approval of the
Plan.

ARTICLE IV

TERMS OF OPTIONS

4.1 OPTION AGREEMENT. Each Option shall be evidenced by a
written Stock Option Agreement, which shall be executed by the Optionee and an
authorized officer of the Company and which shall contain such terms and
conditions as the Committee (or the Board, in the case of Options granted to
Independent Directors) shall determine, consistent with this Plan. Stock Option
Agreements evidencing Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code. Stock Option Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.

4.2 OPTION PRICE. The price per share of the shares subject to
each Option shall be set by the Committee; PROVIDED, HOWEVER, that such price
shall be no less than the par value of a share of Common Stock unless otherwise
permitted by applicable state law, and (i) in the case of Incentive Stock
Options and Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code, such price shall not be less than
100% of the Fair Market Value of a share of Common Stock on the date the Option
is granted; (ii) in the case of Incentive Stock Options granted to an individual
then owning (within the meaning of Section 424(d) of the Code) more than 10% of
the total combined voting power of all classes of stock of the Company or any
Company Subsidiary such price shall not be less than 110% of the Fair Market
Value of a share of Common Stock on the date the Option is granted; and (iii) in
the case of Options granted to Independent Directors, such price shall equal
100% of the Fair Market Value of a share of Common Stock on the date the Option
is granted; PROVIDED, HOWEVER, that the price of each share subject to each
Option granted to Independent Directors on the date of the initial public
offering of Common Stock shall equal the initial public offering price (net of
underwriting discounts and commissions) per share of Common Stock.

4.3 OPTION TERM. The term of an Option shall be set by the
Committee in its discretion; PROVIDED, HOWEVER, that, (i) in the case of
Options granted to Independent Directors, the term shall be ten (10) years
from the date the Option is granted, without variation or acceleration
hereunder, and (ii) in the case of Incentive Stock Options, the term shall
not be more than ten (10) years from the date the Incentive Stock Option is
granted, or

10
<PAGE>

five (5) years from such date if the Incentive Stock Option is granted to an
individual then owning (within the meaning of Section 424(d) of the Code)
more than 10% of the total combined voting power of all classes of stock of
the Company or any Company Subsidiary. Except as limited by requirements of
Section 422 of the Code and regulations and rulings thereunder applicable to
Incentive Stock Options, the Committee may extend the term of any outstanding
Option in connection with any Termination of Employment or Termination of
Consultancy of the Optionee, or amend any other term or condition of such
Option relating to such a termination.

4.4 OPTION VESTING.

(a) The period during which the right to exercise an Option in
whole or in part vests in the Optionee shall be set by the Committee and the
Committee may determine that an Option may not be exercised in whole or in part
for a specified period after it is granted; PROVIDED, HOWEVER, that, unless the
Committee otherwise provides in the terms of the Option or otherwise, no Option
shall be exercisable by any Optionee who is then subject to Section 16 of the
Exchange Act within the period ending six months and one day after the date the
Option is granted; and provided, further, that Options granted to Independent
Directors shall become exercisable in cumulative annual installments of 25% on
each of the first, second, third and fourth anniversaries of the date of Option
grant, without variation or acceleration hereunder except as provided in Section
10.3(c). At any time after grant of an Option, the Committee may, in its sole
and absolute discretion and subject to whatever terms and conditions it selects,
accelerate the period during which an Option (except an Option granted to an
Independent Director) vests.

(b) No portion of an Option which is unexercisable at
Termination of Employment, Termination of Directorship or Termination of
Consultancy, as applicable, shall thereafter become exercisable, except as may
be otherwise provided by the Committee in the case of Options granted to
Employees or consultants either in the Stock Option Agreement or by action of
the Committee following the grant of the Option.

(c) To the extent that the aggregate Fair Market Value of stock
with respect to which "incentive stock options" (within the meaning of
Section 422 of the Code, but without regard to Section 422(d) of the Code)
are exercisable for the first time by an Optionee during any calendar year
(under the Plan and all other incentive stock option plans of the Company and
any Company Subsidiary) exceeds $100,000, such Options shall be treated as
Non-Qualified Options to the extent required by Section 422 of the Code. The
rule set forth in the preceding sentence shall be applied by taking Options
into account in the order in which they were granted. For purposes of this
Section 4.4(c), the Fair Market Value of stock shall be determined as of the
time the Option with respect to such stock is granted.

4.5 NO RIGHT TO CONTINUE AS EMPLOYEE OR CONSULTANT. Nothing in
this Plan or in any Stock Option Agreement hereunder shall confer upon any
Optionee any right to continue in the employ of, or as a consultant for, the
Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary,
or as a director of the Company, or shall

11
<PAGE>

interfere with or restrict in any way the rights of the Company, any Company
Subsidiary, the Partnership and any Partnership Subsidiary, which are hereby
expressly reserved, to discharge any Optionee at any time for any reason
whatsoever, with or without good cause.

4.6 EXERCISE OF OPTION AFTER TERMINATION OF EMPLOYMENT OR
DIRECTORSHIP.

(a) An Option granted to an Employee is exercisable by an
Optionee only while the Optionee is an Employee. The preceding notwithstanding,
the Committee may determine that an Option granted to an Employee may be
exercised subsequent to an Optionee's Termination of Employment, subject to the
following limitations:

(i) If the Optionee dies while an Option is exercisable under
the terms of this Plan, the Optionee's Beneficiary may exercise such
rights, to the extent the Optionee could have done so immediately
preceding his death. Any such Option must be exercised within
twelve (12) months after the Optionee's death and the Committee may
in its sole and absolute discretion extend such period to
accommodate such exercise; or

(ii) If the Optionee's Termination of Employment is due to the
Optionee's permanent and total disability, as defined in Section
22(e)(3) of the Code, the Optionee may exercise his Option, to the
extent exercisable as of the Optionee's Termination of Employment,
within twelve (12) months after termination; or

(iii) If the Optionee's employment is terminated for any
reason other than those set forth in subsections (i) or (ii) above,
the Optionee may exercise his Option, to the extent exercisable as
of his Termination of Employment, within three (3) months after
Termination of Employment, unless the Employee dies within said
three-month period.

(iv) Notwithstanding (i) through (iii) above, an Option may not
be exercised later than the Option's Expiration Date.

(b) No Option granted to an Independent Director may be
exercised to any extent by anyone after the first to occur of the following
events:

(i) The expiration of twelve (12) months from the date of the
Optionee's death; or

(ii) The expiration of twelve (12) months from the date of the
Optionee's Termination of Directorship by reason of his permanent
and total disability (within the meaning of Section 22(e)(3) of the
Code); or

(iii) The expiration of three (3) months from the date of the
Optionee's Termination of Directorship for any reason other than
such

12
<PAGE>

Optionee's death or his permanent and total disability, unless
the Optionee dies within said three-month period.

(iv) Notwithstanding (i) through (iii) above, an Option may not
be exercised later than the Option's Expiration Date.

4.7 CONSIDERATION. In consideration of the granting of a
Non-Qualified Stock Option, the Optionee shall agree, in the written Stock
Option Agreement, to remain in the employ of the Company, a Company Subsidiary,
the Partnership or a Partnership Subsidiary (or to serve as an Independent
Director of the Company) for a period of at least one year after the
Non-Qualified Stock Option is granted (or until the next annual meeting of the
stockholders of the Company, in the case of an Independent Director). In
consideration of the granting of an Incentive Stock Option, the Optionee shall
agree, in the written Stock Option Agreement, to remain in the employ of the
Company or a Company Subsidiary for a period of at least one year after the
Incentive Stock Option is granted. Nothing in this Plan or in any Stock Option
Agreement hereunder shall confer upon any Optionee any right to continue in the
employ of the Company, any Company Subsidiary, the Partnership or any
Partnership Subsidiary or as a director of the Company.

ARTICLE V

EXERCISE OF OPTIONS

5.1 PARTIAL EXERCISE. An exercisable Option may be exercised in
whole or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Committee (or the Board, in the case of Options
granted to Independent Directors) may require that, by the terms of the Option,
a partial exercise be with respect to a minimum number of shares.

5.2 MANNER OF EXERCISE. All or a portion of an exercisable
Option shall be deemed exercised upon delivery of all of the following to the
Secretary of the Company or his office:

(a) A written notice complying with the applicable rules
established by the Committee (or the Board in the case of Options granted to
Independent Directors), the Company or the Partnership stating that the Option,
or a portion thereof, is exercised. The notice shall be signed by the Optionee
or other person then entitled to exercise the Option or such portion;

(b) Such representations and documents as the Committee (or the
Board, in the case of Options granted to Independent Directors), in its absolute
discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations. The Committee or Board may, in
its absolute discretion, also take whatever additional actions it

<PAGE>

deems appropriate to effect such compliance including, without limitation,
placing legends on share certificates and issuing stop-transfer notices to
agents and registrars;

(c) In the event that the Option shall be exercised pursuant to
Section 10.1 by any person or persons other than the Optionee, appropriate proof
of the right of such person or persons to exercise the Option; and

(d) Full cash payment to (i) the Secretary of the Company for
the shares with respect to which the Option, or portion thereof, is exercised.
However, the Committee (or the Board, in the case of Options granted to
Independent Directors), may in its discretion (i) allow a delay in payment up to
thirty (30) days from the date the Option, or portion thereof, is exercised;
(ii) allow payment, in whole or in part, through the delivery of shares of
Common Stock owned by the Optionee, duly endorsed for transfer to the Company
with a Fair Market Value on the date of delivery equal to the aggregate exercise
price of the Option or exercised portion thereof; (iii) allow payment, in whole
or in part, through the surrender of shares of Common Stock then issuable upon
exercise of the Option having a Fair Market Value on the date of Option exercise
equal to the aggregate exercise price of the Option or exercised portion
thereof; (iv) allow payment, in whole or in part, through the delivery of
property of any kind which constitutes good and valuable consideration;
(v) allow payment, in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Committee or the Board; (vi) allow payment, in whole
or in part, through the delivery of a notice that the Optionee has placed a
market sell order with a broker with respect to shares of Common Stock then
issuable upon exercise of the Option, and that the broker has been directed to
pay a sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price; or (vii) allow payment through any
combination of the consideration provided in the foregoing subparagraphs (ii),
(iii), (iv), (v) and (vi). In the case of a promissory note, the Committee (or
the Board, in the case of Options granted to Independent Directors) may also
prescribe the form of such note and the security to be given for such note. The
Option may not be exercised, however, by delivery of a promissory note or by a
loan from the Company when or where such loan or other extension of credit is
prohibited by law.

5.3 TRANSFER OF SHARES TO A COMPANY EMPLOYEE OR INDEPENDENT
DIRECTOR. As soon as practicable after receipt by the Company, pursuant to
Section 5.2(d), of payment for the shares with respect to which an Option (which
in the case of a Company Employee was issued to and is held by such Company
Employee in his or her capacity as a Company Employee), or portion thereof, is
exercised by an Optionee who is a Company Employee or Independent Director, with
respect to each such exercise, the Company shall transfer to the Optionee the
number of shares equal to

(a) the amount of the payment made by the Optionee to the
Company pursuant to Section 5.2(d), DIVIDED BY

(b) the price per share of the shares subject to the Option as
determined pursuant to Section 4.2.

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<PAGE>

5.4 TRANSFER OF SHARES TO A PARTNERSHIP EMPLOYEE. As soon as
practicable after receipt by the Company, pursuant to Section 5.2(d), of payment
for the shares with respect to which an Option (which was issued to and is held
by a Partnership Employee in his or her capacity as a Partnership Employee), or
portion thereof, is exercised by an Optionee who is a Partnership Employee, with
respect to each such exercise:

(a) the Company shall transfer to the Optionee the number of
shares equal to (A) the amount of the payment made by the Optionee to the
Company pursuant to Section 5.2(d) DIVIDED BY (B) the Fair Market Value of
a share of Common Stock at the time of exercise (the "Partnership Optionee
Purchased Shares"); and

(b) the Company shall sell to the Partnership the number of
shares (the "Partnership Purchased Shares") equal to the excess of (A) the
amount obtained by dividing (i) the amount of the payment made by the
Optionee to the Company pursuant to Section 5.2(d) by (ii) the price per
share of the shares subject to the Option as determined pursuant to Section
4.2., over (B) the Partnership Optionee Purchased Shares;

The price to be paid by the Partnership to the Company for the Partnership
Purchased Shares (the "Partnership Purchase Price") shall be an amount
equal to the product of (A) the number of Partnership Purchased Shares
MULTIPLIED BY (B) the Fair Market Value of a share of Common Stock at the
time of the exercise;

(c) As soon as practicable after receipt of the Partnership
Purchased Shares by the Partnership, the Partnership shall transfer such
shares to the Optionee at no additional cost, as additional compensation.

5.5 TRANSFER OF PAYMENT TO THE PARTNERSHIP. As soon as
practicable after receipt by the Company (i) of the amount described in Section
5.2(d) and (ii) the Partnership Purchase Price described in Section 5.4, the
Company shall contribute to the Partnership an amount of cash equal to such
payment and the Partnership shall issue an additional General Partner Interest
to the Company on the terms set forth in the Partnership Agreement.

5.6 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES. The Company
or the Partnership shall not be required to issue or deliver any certificate or
certificates for shares of stock purchased upon the exercise of any Option or
portion thereof prior to fulfillment of all of the following conditions:

(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;

(b) The completion of any registration or other qualification of
such shares under any state or federal law, or under the rulings or
regulations of the Securities and Exchange Commission or any other
governmental regulatory body which the Committee or Board shall, in its
absolute discretion, deem necessary or advisable;

15
<PAGE>

(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee or Board shall, in
its absolute discretion, determine to be necessary or advisable;

(d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee or Board may establish from time to
time for reasons of administrative convenience; and

(e) The receipt by the Company or the Partnership of full
payment for such shares, including payment of any applicable withholding
tax.

5.7 RIGHTS AS STOCKHOLDERS. The holders of Options shall not
be, nor have any of the rights or privileges of, stockholders of the Company in
respect of any shares purchasable upon the exercise of any part of an Option
unless and until certificates representing such shares have been issued by the
Company to such holders.

5.8 OWNERSHIP AND TRANSFER RESTRICTIONS. Shares acquired
through the exercise of an Option shall be subject to the restrictions on
ownership and transfer set forth in the Company's Amended and Restated Charter.
The Committee (or the Board, in the case of Options granted to Independent
Directors), in its absolute discretion, may impose such additional restrictions
on the ownership and transferability of the shares purchasable upon the exercise
of an Option as it deems appropriate. Any such restriction shall be set forth
in the respective Stock Option Agreement and may be referred to on the
certificates evidencing such shares. The Committee may require the Employee to
give the Company prompt notice of any disposition of shares of Common Stock
acquired by exercise of an Incentive Stock Option within (i) two years from the
date of granting such Option to such Employee or (ii) one year after the
transfer of such shares to such Employee. The Committee (or the Board, in the
case of Options granted to Independent Directors) may direct that the
certificates evidencing shares acquired by exercise of an Option refer to such
requirement to give prompt notice of disposition.

5.9 RESTRICTIONS ON EXERCISE OF OPTION. An Option is not
exercisable if in the sole and absolute discretion of the Committee the exercise
of such Option would likely result in any of the following:

(a) the Optionee's or any other person's ownership of Capital
Stock being in violation of the Stock Ownership Limit;

(b) income to the Company that could impair the Company's status
as a real estate investment trust, within the meaning of Sections 856
through 860 of the Code; or

16
<PAGE>

ARTICLE VI

AWARD OF RESTRICTED STOCK

6.1 AWARD OF RESTRICTED STOCK.

(a) The Committee may from time to time, in its absolute
discretion:

(i) Select from among the key Employees or consultants
(including Employees or consultants who have previously received other
awards under this Plan) such of them as in its opinion should be awarded
Restricted Stock; and

(ii) Determine the purchase price, if any, and other terms and
conditions applicable to such Restricted Stock, consistent with this Plan.

(b) The Committee shall establish the purchase price, if any,
and form of payment for Restricted Stock; PROVIDED, HOWEVER, that such purchase
price shall be no less than the par value of the Common Stock to be purchased
unless otherwise permitted by applicable state law. In all cases, legal
consideration shall be required for each issuance of Restricted Stock.

(c) Upon the selection of a key Employee or consultant to be
awarded Restricted Stock, the Committee shall instruct the Secretary of the
Company to issue such Restricted Stock and may impose such conditions on the
issuance of such Restricted Stock as it deems appropriate.

6.2 RESTRICTED STOCK AGREEMENT. Restricted Stock shall be
issued only pursuant to a written Restricted Stock Agreement, which shall be
executed by the selected key Employee or consultant and an authorized officer of
the Company and which shall contain such terms and conditions as the Committee
shall determine, consistent with this Plan.

6.3 CONSIDERATION. As consideration for the issuance of
Restricted Stock, in addition to payment of any purchase price, the Restricted
Stockholder shall agree, in the written Restricted Stock Agreement, to remain in
the employ of, or to consult for, the Company, a Company Subsidiary, the
Partnership or a Partnership Subsidiary (whichever is applicable) for a period
of at least one year after the Restricted Stock is issued (or such shorter
period as may be fixed in the Restricted Stock Agreement or by action of the
Committee following grant of the Restricted Stock). Nothing in this Plan or in
any Restricted Stock Agreement hereunder shall confer on any Restricted
Stockholder any right to continue in the employ of, or as a consultant for, the
Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary
or shall interfere with or restrict in any way the rights of the Company, any
Company Subsidiary, the Partnership or any Partnership Subsidiary, which are
hereby expressly reserved, to discharge any Restricted Stockholder at any time
for any reason whatsoever, with or without good cause.

17
<PAGE>

6.4 RIGHTS AS STOCKHOLDERS. Upon delivery of the shares of
Restricted Stock to the escrow holder pursuant to Section 6.7, the Restricted
Stockholder shall have, unless otherwise provided by the Committee, all the
rights of a stockholder with respect to said shares, subject to the restrictions
in his Restricted Stock Agreement, including the right to receive all dividends
and other distributions paid or made with respect to the shares; PROVIDED,
HOWEVER, that in the discretion of the Committee, any extraordinary
distributions with respect to the Common Stock shall be subject to the
restrictions set forth in Section 6.5.

6.5 RESTRICTION. All shares of Restricted Stock issued under
this Plan (including any shares received by holders thereof with respect to
shares of Restricted Stock as a result of stock dividends, stock splits or any
other form of recapitalization) shall, in the terms of each individual
Restricted Stock Agreement, be subject to such restrictions as the Committee
shall provide, which restrictions may include, without limitation, restrictions
concerning voting rights and transferability and restrictions based on duration
of employment with the Company, Company performance and individual performance;
PROVIDED, HOWEVER, that, unless the Committee otherwise provides in the terms of
the Restricted Stock Agreement or otherwise, no share of Restricted Stock
granted to a person subject to Section 16 of the Exchange Act shall be sold,
assigned or otherwise transferred until at least six months have elapsed from
(but excluding) the date on which the Restricted Stock was issued, and PROVIDED,
FURTHER, that by action taken after the Restricted Stock is issued, the
Committee may, on such terms and conditions as it may determine to be
appropriate, remove any or all of the restrictions imposed by the terms of the
Restricted Stock Agreement. Restricted Stock may not be sold or encumbered
until all restrictions are terminated or expire. Unless provided otherwise by
the Committee, if no consideration was paid by the Restricted Stockholder upon
issuance, a Restricted Stockholder's rights in unvested Restricted Stock shall
lapse upon Termination of Employment or, if applicable, upon Termination of
Consultancy with the Company or the Partnership.

6.6 REPURCHASE OF RESTRICTED STOCK. The Committee shall provide
in the terms of each individual Restricted Stock Agreement that the Company
shall have the right to repurchase from the Restricted Stockholder the
Restricted Stock then subject to restrictions under the Restricted Stock
Agreement immediately upon a Termination of Employment or, if applicable, upon a
Termination of Consultancy between the Restricted Stockholder and the Company,
at a cash price per share equal to the price paid by the Restricted Stockholder
for such Restricted Stock; PROVIDED, HOWEVER, that provision may be made that no
such right of repurchase shall exist in the event of a Termination of Employment
or Termination of Consultancy without cause, or following a change in control of
the Company or the Partnership, or because of the Restricted Stockholder's
retirement, death or disability, or otherwise.

6.7 ESCROW. The Secretary of the Company or such other escrow
holder as the Committee may appoint shall retain physical custody of each
certificate representing Restricted Stock until all of the restrictions imposed
under the Restricted Stock Agreement with respect to the shares evidenced by
such certificate expire or shall have been removed.

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6.8 LEGEND. In order to enforce the restrictions imposed upon
shares of Restricted Stock hereunder, the Committee shall cause a legend or
legends to be placed on certificates representing all shares of Restricted Stock
that are still subject to restrictions under Restricted Stock Agreements, which
legend or legends shall make appropriate reference to the conditions imposed
thereby.

ARTICLE VII

PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
DEFERRED STOCK, STOCK PAYMENTS

7.1 PERFORMANCE AWARDS. Any key Employee or consultant selected
by the Committee may be granted one or more Performance Awards. The value of
such Performance Awards may be linked to the market value, book value, net
profits or other measure of the value of Common Stock or other specific
performance criteria determined appropriate by the Committee, in each case on a
specified date or dates or over any period or periods determined by the
Committee, or may be based upon the appreciation in the market value, book
value, net profits or other measure of the value of a specified number of shares
of Common Stock over a fixed period or periods determined by the Committee. In
making such determinations, the Committee shall consider (among such other
factors as it deems relevant in light of the specific type of award) the
contributions, responsibilities and other compensation of the particular key
Employee or consultant.

7.2 DIVIDEND EQUIVALENTS. Any key Employee or consultant
selected by the Committee may be granted Dividend Equivalents based on the
dividends declared on Common Stock, to be credited as of dividend payment dates,
during the period between the date an Option, Stock Appreciation Right, Deferred
Stock or Performance Award is granted, and the date such Option, Stock
Appreciation Right, Deferred Stock or Performance Award is exercised, vests or
expires, as determined by the Committee. Such Dividend Equivalents shall be
converted to cash or additional shares of Common Stock by such formula and at
such time and subject to such limitations as may be determined by the Committee.
With respect to Dividend Equivalents granted with respect to Options intended to
be qualified performance-based compensation for purposes of Section 162(m), such
Dividend Equivalents shall be payable regardless of whether such Option is
exercised.

7.3 STOCK PAYMENTS. Any key Employee or consultant selected by
the Committee may receive Stock Payments in the manner determined from time to
time by the Committee. The number of shares shall be determined by the
Committee and may be based upon the Fair Market Value, book value, net profits
or other measure of the value of Common Stock or other specific performance
criteria determined appropriate by the Committee, determined on the date such
Stock Payment is made or on any date thereafter.

7.4 DEFERRED STOCK. Any key Employee or consultant selected by
the Committee may be granted an award of Deferred Stock in the manner determined
from time to time by the Committee. The number of shares of Deferred Stock
shall be determined by

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the Committee and may be linked to the market value, book value, net profits
or other measure of the value of Common Stock or other specific performance
criteria determined to be appropriate by the Committee, in each case on a
specified date or dates or over any period or periods determined by the
Committee. Common Stock underlying a Deferred Stock award will not be issued
until the Deferred Stock award has vested, pursuant to a vesting schedule or
performance criteria set by the Committee. Unless otherwise provided by the
Committee, a Grantee of Deferred Stock shall have no rights as a Company
stockholder with respect to such Deferred Stock until such time as the award
has vested and the Common Stock underlying the award has been issued.

7.5 PERFORMANCE AWARD AGREEMENT, DIVIDEND EQUIVALENT AGREEMENT,
DEFERRED STOCK AGREEMENT, STOCK PAYMENT AGREEMENT. Each Performance Award,
Dividend Equivalent, award of Deferred Stock and/or Stock Payment shall be
evidenced by a written agreement, which shall be executed by the Grantee and an
authorized Officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan.

7.6 TERM. The term of a Performance Award, Dividend Equivalent,
award of Deferred Stock and/or Stock Payment shall be set by the Committee in
its discretion.

7.7 EXERCISE UPON TERMINATION OF EMPLOYMENT. A Performance
Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment is
exercisable or payable only while the Grantee is an Employee or consultant;
provided that the Committee may determine that the Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment may be exercised or
paid subsequent to Termination of Employment or Termination of Consultancy
without cause, or following a change in control of the Company or the
Partnership, or because of the Grantee's retirement, death or disability, or
otherwise.

7.8 PAYMENT ON EXERCISE. Payment of the amount determined under
Section 7.1 or 7.2 above shall be in cash, in Common Stock or a combination of
both, as determined by the Committee. To the extent any payment under this
Article VII is effected in Common Stock, it shall be made subject to
satisfaction of all provisions of Section 5.6 and 5.8.

7.9 CONSIDERATION. In consideration of the granting of a
Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock
Payment, the Grantee shall agree, in a written agreement, to remain in the
employ of, or to consult for, the Company or any Subsidiary for a period of at
least one year after such Performance Award, Dividend Equivalent, award of
Deferred Stock and/or Stock Payment is granted (or such shorter period as may be
fixed in such agreement or by action of the Committee following such grant).

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ARTICLE VIII

STOCK APPRECIATION RIGHTS

8.1 GRANT OF STOCK APPRECIATION RIGHTS. A Stock Appreciation
Right may be granted to any key Employee or consultant selected by the
Committee. A Stock Appreciation Right may be granted (i) in connection and
simultaneously with the grant of an Option, (ii) with respect to a previously
granted Option, or (iii) independent of an Option. A Stock Appreciation Right
shall be subject to such terms and conditions not inconsistent with this Plan as
the Committee shall impose and shall be evidenced by a written Stock
Appreciation Right Agreement, which shall be executed by the Grantee and an
authorized officer of the Company. The Committee, in its discretion, may
determine whether a Stock Appreciation Right is to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code and Stock
Appreciation Right Agreements evidencing Stock Appreciation Rights intended to
so qualify shall contain such terms and conditions as may be necessary to meet
the applicable provisions of section 162(m) of the Code. Without limiting the
generality of the foregoing, the Committee may, in its discretion and on such
terms as it deems appropriate, require as a condition of the grant of a Stock
Appreciation Right to an Employee or consultant that the Employee or consultant
surrender for cancellation some or all of the unexercised Options, awards of
Restricted Stock or Deferred Stock, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments, or other rights which have been
previously granted to him under this Plan or otherwise. A Stock Appreciation
Right, the grant of which is conditioned upon such surrender, may have an
exercise price lower (or higher) than the exercise price of the surrendered
Option or other award, may cover the same (or a lesser or greater) number of
shares as such surrendered Option or other award, may contain such other terms
as the Committee deems appropriate, and shall be exercisable in accordance with
its terms, without regard to the number of shares, price, exercise period or any
other term or condition of such surrendered Option or other award.

8.2 COUPLED STOCK APPRECIATION RIGHTS.

(a) A Coupled Stock Appreciation Right ("CSAR") shall be related
to a particular Option and shall be exercisable only when and to the extent the
related Option is exercisable.

(b) A CSAR may be granted to the Grantee for no more than the
number of shares subject to the simultaneously or previously granted Option to
which it is coupled.

(c) A CSAR shall entitle the Grantee (or other person entitled
to exercise the Option pursuant to this Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the extent
then exercisable pursuant to its terms) and to receive from the Company or the
Partnership, as provided in the CSAR agreement, in exchange therefor an amount
determined by multiplying the difference obtained by subtracting the Option
exercise price from the Fair Market Value of a share of Common Stock on the date
of exercise of the CSAR by the number of shares of Common Stock with

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<PAGE>

respect to which the CSAR shall have been exercised, subject to any
limitations the Committee may impose.

8.3 INDEPENDENT STOCK APPRECIATION RIGHTS.

(a) An Independent Stock Appreciation Right ("ISAR") shall be
unrelated to any Option and shall have a term set by the Committee. An ISAR
shall be exercisable in such installments as the Committee may determine. An
ISAR shall cover such number of shares of Common Stock as the Committee may
determine; provided, however, that unless the Committee otherwise provides in
the terms of the ISAR or otherwise, no ISAR granted to a person subject to
Section 16 of the Exchange Act shall be exercisable until at least six months
have elapsed from (but excluding) the date on which the Option was granted. The
exercise price per share of Common Stock subject to each ISAR shall be set by
the Committee. An ISAR is exercisable only while the Grantee is an Employee or
consultant; provided that the Committee may determine that the ISAR may be
exercised subsequent to Termination of Employment or Termination of Consultancy
without cause, or following a change in control of the Company or the
Partnership, or because of the Grantee's retirement, death or disability, or
otherwise.

(b) An ISAR shall entitle the Grantee (or other person entitled
to exercise the ISAR pursuant to this Plan) to exercise all or a specified
portion of the ISAR (to the extent then exercisable pursuant to its terms) and
to receive from the Company or the Partnership, as provided in the ISAR
agreement, an amount determined by multiplying the difference obtained by
subtracting the exercise price per share of the ISAR from the Fair Market Value
of a share of Common Stock on the date of exercise of the ISAR by the number of
shares of Common Stock with respect to which the ISAR shall have been exercised,
subject to any limitations the Committee may impose.

8.4 PAYMENT AND LIMITATIONS ON EXERCISE.

(a) Payment of the amount determined under Section 8.2(c) and
8.3(b) above shall be in cash, in Common Stock (based on its Fair Market Value
as of the date the Stock Appreciation Right is exercised) or a combination of
both, as determined by the Committee. To the extent such payment is effected in
Common Stock it shall be made subject to satisfaction of all provisions of
Section 5.6 and Section 5.8 hereinabove pertaining to Options.

(b) Grantees of Stock Appreciation Rights may be required to
comply with any timing or other restrictions with respect to the settlement or
exercise of a Stock Appreciation Right, including a window-period limitation, as
may be imposed in the discretion of the Board or Committee.

8.5 CONSIDERATION. In consideration of the granting of a Stock
Appreciation Right, the Grantee shall agree, in the written Stock Appreciation
Right Agreement, to remain in the employ of, or to consult for, the Company or
any Subsidiary for a period of at least one year after the Stock Appreciation
Right is granted (or such shorter period as may be

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<PAGE>

fixed in the Stock appreciation Right Agreement or by action of the Committee
following grant of the Restricted Stock).

ARTICLE IX

ADMINISTRATION

9.1 COMPENSATION COMMITTEE. Prior to the Company's initial
registration of Common Stock under Section 12 of the Exchange Act, the
Compensation Committee shall consist of the entire Board. Following such
registration, the Compensation Committee (or another committee or a subcommittee
of the Board assuming the functions of the Committee under this Plan) shall
consist solely of two or more Independent Directors appointed by and holding
office at the pleasure of the Board, each of whom is both a "non-employee
director" as defined by Rule 16b-3 and an "outside director" for purposes of
Section 162(m) of the Code. Appointment of Committee members shall be effective
upon acceptance of appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the Committee may be
filled by the Board.

9.2 DUTIES AND POWERS OF COMMITTEE. It shall be the duty of the
Committee to conduct the general administration of this Plan in accordance with
its provisions. The Committee shall have the power to interpret this Plan and
the agreements pursuant to which Options, awards of Restricted Stock or Deferred
Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments are granted or awarded, and to adopt such rules for the
administration, interpretation, and application of this Plan as are consistent
therewith and to interpret, amend or revoke any such rules. Notwithstanding the
foregoing, the full Board, acting by a majority of its members in office, shall
conduct the general administration of the Plan with respect to Options granted
to Independent Directors. Any such grant or award under this Plan need not be
the same with respect to each Optionee, Grantee or Restricted Stockholder. Any
such interpretations and rules with respect to Incentive Stock Options shall be
consistent with the provisions of Section 422 of the Code. In its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights and duties of the Committee under this Plan except with respect to
matters which under Rule 16b-3 or Section 162(m) of the Code, or any regulations
or rules issued thereunder, are required to be determined in the sole discretion
of the Committee.

9.3 MAJORITY RULE; UNANIMOUS WRITTEN CONSENT. The Committee
shall act by a majority of its members in attendance at a meeting at which a
quorum is present or by a memorandum or other written instrument signed by all
members of the Committee.

9.4 COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS.
Members of the Committee shall receive such compensation for their services as
members as may be determined by the Board. All expenses and liabilities which
members of the Committee incur in connection with the administration of this
Plan shall be borne by the Company. The Committee may, with the approval of the
Board, employ attorneys, consultants, accountants,

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appraisers, brokers, or other persons. The Committee, the Company and the
Company's officers and Directors shall be entitled to rely upon the advice,
opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or the Board in good
faith shall be final and binding upon all Optionees, Grantees, Restricted
Stockholders, the Company, the Partnership and all other interested persons.
No members of the Committee or Board shall be personally liable for any
action, determination or interpretation made in good faith with respect to
this Plan, Options, awards of Restricted Stock or Deferred Stock, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments,
and all members of the Committee and the Board shall be fully protected by
the Company in respect of any such action, determination or interpretation.

9.5 DELEGATION OF AUTHORITY. The Committee may in its sole and
absolute discretion delegate to the Chief Financial Officer of the Company or
the Secretary of the Company, or both, any or all of the administrative duties
and authority of the Committee under this Plan, other than the authority to make
grants or awards under this Plan to Employees who are officers of the Company
within the meaning of Rule 16(a)-1(b) of the Exchange Act or whose total
compensation is required to be reported to the Company's stockholders under the
Exchange Act, to determine the price, timing or amount of such grants or awards
or to determine any other matter required by Rule 16b-3 or Code Section 162(m)
to be determined in the sole and absolute discretion of the Committee.

9.6 NO LIABILITY. No member of the Board or the Committee, or
director, officer or employee of the Company, any Company Subsidiary, the
Partnership or any Partnership Subsidiary shall be liable, responsible or
accountable in damages or otherwise for any determination made or other action
taken or any failure to act by such person so long as such person is not
determined to be guilty by a final adjudication of willful misconduct with
respect to such determination, action or failure to act.

9.7 INDEMNIFICATION. To the fullest extent permitted by law,
each of the members of the Board and the Committee and each of the directors,
officers and employees of the Company, any Company Subsidiary, the Partnership
and any Partnership Subsidiary shall be held harmless and be indemnified by the
Company for any liability, loss (including amounts paid in settlement), damages
or expenses (including reasonable attorneys' fees) suffered by virtue of any
determinations, acts or failures to act, or alleged acts or failures to act, in
connection with the administration of this Plan so long as such person is not
determined by a final adjudication to be guilty of willful misconduct with
respect to such determination, action or failure to act.

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ARTICLE X

MISCELLANEOUS PROVISIONS

10.1 NOT TRANSFERABLE. Options, Restricted Stock awards,
Deferred Stock awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws of descent
and distribution or pursuant to a QDRO, unless and until such rights or awards
have been exercised, or the shares underlying such rights or awards have been
issued, and all restrictions applicable to such shares have lapsed. No Option,
Restricted Stock award, Deferred Stock award, Performance Award, Stock
Appreciation Right, Dividend Equivalent or Stock Payment or interest or right
therein shall be liable for the debts, contracts or engagements of the Optionee,
Grantee or Restricted Stockholder or his successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.

During the lifetime of the Optionee or Grantee, only he may exercise
an Option or other right or award (or any portion thereof) granted to him under
the Plan, unless it has been disposed of pursuant to a QDRO. After the death of
the Optionee or Grantee, any exercisable portion of an Option or other right or
award may, prior to the time when such portion becomes unexercisable under the
Plan or the applicable Stock Option Agreement or other agreement, be exercised
by his personal representative or by any person empowered to do so under the
deceased Optionee's or Grantee's will or under the then applicable laws of
descent and distribution.

10.2 AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN. Except
as otherwise provided in this Section 10.2, this Plan may be wholly or
partially amended or otherwise modified, suspended or terminated at any time
or from time to time by the Board or the Committee. However, without
approval of the Company's stockholders given within twelve months before or
after the action by the Board or the Committee, no action of the Board or the
Committee may, except as provided in Section 10.3, increase the limits
imposed in Section 2.1 on the maximum number of shares which may be issued
under this Plan or modify the Award Limit, and no action of the Committee may
be taken that would otherwise require stockholder approval as a matter of
applicable law, regulation or rule. No amendment, suspension or termination
of this Plan shall, without the consent of the holder of Options, Restricted
Stock awards, Deferred Stock awards, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments, alter or impair any rights or
obligations under any Options, Restricted Stock awards, Deferred Stock
awards, Performance Awards, Stock Appreciation Rights, Dividend Equivalents
or Stock Payments theretofore granted or awarded, unless the award itself
otherwise expressly so provides. No Options, Restricted Stock, Deferred
Stock, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments may be granted or awarded during any period of suspension

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<PAGE>

or after termination of this Plan, and in no event may any Incentive Stock
Option be granted under this Plan after the first to occur of the following
events:

(a) The expiration of ten years from the date the Plan is
adopted by the Board; or

(b) The expiration of ten years from the date the Plan is
approved by the Company's stockholders under Section 10.4.

10.3 CHANGES IN COMMON STOCK OR ASSETS OF THE COMPANY,
ACQUISITION OR LIQUIDATION OF THE COMPANY AND OTHER CORPORATE EVENTS.

(a) Subject to Section 10.3(e), in the event that the Committee
(or the Board, in the case of Options granted to Independent Directors)
determines that any dividend or other distribution (whether in the form of cash,
Common Stock, other securities, or other property), recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase, liquidation,
dissolution, or sale, transfer, exchange or other disposition of all or
substantially all of the assets of the Company (including, but not limited to, a
Corporate Transaction), or exchange of Common Stock or other securities of the
Company, issuance of warrants or other rights to purchase Common Stock or other
securities of the Company, or other similar corporate transaction or event, in
the Committee's sole discretion (or in the case of Options granted to
Independent Directors, the Board's sole discretion), affects the Common Stock
such that an adjustment is determined by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan or with respect to an Option,
Restricted Stock award, Performance Award, Stock Appreciation Right, Dividend
Equivalent, Deferred Stock award or Stock Payment, then the Committee (or the
Board, in the case of Options granted to Independent Directors) shall, in such
manner as it may deem equitable, adjust any or all of

(i) the number and kind of shares of Common Stock (or other
securities or property) with respect to which Options, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments may be
granted under the Plan, or which may be granted as Restricted Stock or
Deferred Stock (including, but not limited to, adjustments of the
limitations in Section 2.1 on the maximum number and kind of shares which
may be issued and adjustments of the Award Limit),

(ii) the number and kind of shares of Common Stock (or other
securities or property) subject to outstanding Options, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents, or Stock Payments, and in
the number and kind of shares of outstanding Restricted Stock or Deferred
Stock, and

(iii) the grant or exercise price with respect to any Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent or Stock
Payment.

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<PAGE>

(b) Subject to Section 10.3(e), in the event of any corporate
transaction or other transaction or event described in Section 10.3(a) which
results in shares of Common Stock being exchanged for or converted into cash,
securities (including securities of another corporation) or other property, the
Committee will have the right to terminate this Plan as of the date of the event
or transaction, in which case all options, rights and other awards granted under
this Plan shall become the right to receive such cash, securities or other
property, net of any applicable exercise price.

(c) Subject to Sections 10.3(c)(vii) and 10.3(e), in the event
of any Corporate Transaction or other transaction or event described in Section
10.3(a) or any unusual or nonrecurring transactions or events affecting the
Company, any affiliate of the Company, or the financial statements of the
Company or any affiliate, or of changes in applicable laws, regulations, or
accounting principles, the Committee (or the Board, in the case of Options
granted to Independent Directors) in its discretion is hereby authorized to take
any one or more of the following actions whenever the Committee (or the Board,
in the case of Options granted to Independent Directors) determines that such
action is appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan or
with respect to any option, right or other award under this Plan, to facilitate
such transactions or events or to give effect to such changes in laws,
regulations or principles:

(i) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either by
the terms of the agreement or by action taken prior to the occurrence of
such transaction or event and either automatically or upon the optionee's
request, for either the purchase of any such Option, Performance Award,
Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or any
Restricted Stock or Deferred Stock for an amount of cash equal to the
amount that could have been attained upon the exercise of such option,
right or award or realization of the optionee's rights had such option,
right or award been currently exercisable or payable or fully vested as the
replacement of such option, right or award with other rights or property
selected by the Committee (or the Board, in the case of Options granted to
Independent Directors) in its sole discretion;

(ii) In its sole and absolute discretion, the Committee (or the
Board, in the case of Options granted to Independent Directors) may
provide, either by the terms of such Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent, or Stock Payment, or Restricted
Stock or Deferred Stock or by action taken prior to the occurrence of such
transaction or event that it cannot be exercised after such event;

(iii) In its sole and absolute discretion, and on such terms
and conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either by
the terms of such Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred
Stock or by action taken prior to the

27
<PAGE>

occurrence of such transaction or event, that for a specified period of time
prior to such transaction or event, such option, right or award shall be
exercisable as to all shares covered thereby, notwithstanding anything to
the contrary in (i) Section 4.4 or (ii) the provisions of such Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent, or Stock
Payment, or Restricted Stock or Deferred Stock;

(iv) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may provide, either by
the terms of such Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent, or Stock Payment, or Restricted Stock or Deferred
Stock or by action taken prior to the occurrence of such transaction or
event, that upon such event, such option, right or award be assumed by the
successor or survivor corporation, or a parent or subsidiary thereof, or
shall be substituted for by similar options, rights or awards covering the
stock of the successor or survivor corporation, or a parent or subsidiary
thereof, with appropriate adjustments as to the number and kind of shares
and prices;

(v) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee (or the Board, in the
case of Options granted to Independent Directors) may make adjustments in
the number and type of shares of Common Stock (or other securities or
property) subject to outstanding Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents, or Stock Payments, and in the
number and kind of outstanding Restricted Stock or Deferred Stock and/or in
the terms and conditions of (including the grant or exercise price), and
the criteria included in, outstanding options, rights and awards and
options, rights and awards which may be granted in the future;

(vi) In its sole and absolute discretion, and on such terms and
conditions as it deems appropriate, the Committee may provide either by the
terms of a Restricted Stock award or Deferred Stock award or by action
taken prior to the occurrence of such event that, for a specified period of
time prior to such event, the restrictions imposed under a Restricted Stock
Agreement or a Deferred Stock Agreement upon some or all shares of
Restricted Stock or Deferred Stock may be terminated, and, in the case of
Restricted Stock, some or all shares of such Restricted Stock may cease to
be subject to repurchase under Section 6.6 or forfeiture under Section 6.5
after such event; and

(vii) None of the foregoing discretionary terms of this
Section 10.3(c) shall be permitted with respect to Options granted under
Section 3.4(d) to Independent Directors to the extent that such discretion
would be inconsistent with the applicable exemptive conditions of
Rule 16b-3. In the event of a Change in Control or a Corporate Transaction,
to the extent that the Board does not have the ability under Rule 16b-3 to
take or to refrain from taking the discretionary actions set forth above,
each Option granted to an Independent Director shall be exercisable as to
all shares covered thereby upon such Change in Control or during the five
days immediately preceding the consummation of such Corporate Transaction
and subject to such

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<PAGE>

consummation, notwithstanding anything to the contrary in Section 4.4 or
the vesting schedule of such Options. In the event of a Corporate
Transaction, to the extent that the Board does not have the ability under
Rule 16b-3 to take or to refrain from taking the discretionary actions set
forth above, no Option granted to an Independent Director may be exercised
following such Corporate Transaction; unless such Option is in connection
with such Corporate Transaction either assumed by the successor or survivor
corporation (or parent or subsidiary thereof) or replaced with a comparable
right with respect to shares of the capital stock of the successor or
survivor corporation (or parent or subsidiary thereof).

(d) Subject to Section 10.3(e) and 10.8, the Committee (or the Board,
in the case of Options granted to Independent Directors) may, in its discretion,
include such further provisions and limitations in any Option, Performance
Award, Stock Appreciation Right, Dividend Equivalent, or Stock Payment, or
Restricted Stock or Deferred Stock agreement or certificate, as it may deem
equitable and in the best interests of the Company.

(e) With respect to Incentive Stock Options and Options and Stock
Appreciation Rights intended to qualify as performance-based compensation under
Section 162(m), no adjustment or action described in this Section 10.3 or in any
other provision of the Plan shall be authorized to the extent that such
adjustment or action would cause the Plan to violate Section 422(b)(1) of the
Code or would cause such option or stock appreciation right to fail to so
qualify under Section 162(m), as the case may be, or any successor provisions
thereto. Furthermore, no such adjustment or action shall be authorized to the
extent such adjustment or action would result in short-swing profits liability
under Section 16 or violate the exemptive conditions of Rule 16b-3 unless the
Committee (or the Board, in the case of Options granted to Independent
Directors) determines that the option or other award is not to comply with such
exemptive conditions. The number of shares of Common Stock subject to any
option, right or award shall always be rounded to the next whole number.

10.4 APPROVAL OF PLAN BY STOCKHOLDERS. This Plan will be
submitted for the approval of the Company's stockholders within twelve months
after the date of the Board's initial adoption of this Plan. Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments may be granted and Restricted Stock or Deferred Stock may be awarded
prior to such stockholder approval, provided that such Options, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments shall
not be exercisable and such Restricted Stock or Deferred Stock shall not vest
prior to the time when this Plan is approved by the stockholders, and provided
further that if such approval has not been obtained at the end of said
twelve-month period, all Options, Performance Awards, Stock Appreciation Rights,
Dividend Equivalents or Stock Payments previously granted and all Restricted
Stock or Deferred Stock previously awarded under this Plan shall thereupon be
canceled and become null and void.

10.5 TAX WITHHOLDING. The Company and the Partnership shall be
entitled to require payment in cash or deduction from other compensation payable
to each Optionee, Grantee or Restricted Stockholder of any sums required by
federal, state or local tax law to

29
<PAGE>

be withheld with respect to the issuance, vesting or exercise of any Option,
Restricted Stock, Deferred Stock, Performance Award, Stock Appreciation
Right, Dividend Equivalent or Stock Payment. The Committee (or the Board, in
the case of Options granted to Independent Directors) may in its discretion
and in satisfaction of the foregoing requirement allow such Optionee, Grantee
or Restricted Stockholder to elect to have the Company withhold shares of
Common Stock otherwise issuable under such Option or other award (or allow
the return of shares of Common Stock) having a Fair Market Value equal to the
sums required to be withheld.

10.6 LOANS. The Committee may, in its discretion, extend one or
more loans to key Employees in connection with the exercise or receipt of an
Option, Performance Award, Stock Appreciation Right, Dividend Equivalent or
Stock Payment granted under this Plan, or the issuance of Restricted Stock or
Deferred Stock awarded under this Plan. The terms and conditions of any such
loan shall be set by the Committee.

10.7 FORFEITURE PROVISIONS. Pursuant to its general authority to
determine the terms and conditions applicable to awards under the Plan, the
Committee (or the Board, in the case of Options granted to Independent
Directors) shall have the right (to the extent consistent with the applicable
exemptive conditions of Rule 16b-3) to provide, in the terms of Options or other
awards made under the Plan, or to require the recipient to agree by separate
written instrument, that (i) any proceeds, gains or other economic benefit
actually or constructively received by the recipient upon any receipt or
exercise of the award, or upon the receipt or resale of any Common Stock
underlying such award, must be paid to the Company, and (ii) the award shall
terminate and any unexercised portion of such award (whether or not vested)
shall be forfeited, if (a) a Termination of Employment, Termination of
Consultancy or Termination of Directorship occurs prior to a specified date, or
within a specified time period following receipt or exercise of the award, or
(b) the recipient at any time, or during a specified time period, engages in any
activity in competition with the Company, or which is inimical, contrary or
harmful to the interests of the Company, as further defined by the Committee (or
the Board, as applicable).

10.8 LIMITATIONS APPLICABLE TO SECTION 16 PERSONS AND
PERFORMANCE-BASED COMPENSATION. Notwithstanding any other provision of this
Plan, this Plan, and any Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment granted, or Restricted Stock or Deferred
Stock awarded, to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
the Plan, Options, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents, Stock Payments, Restricted Stock and Deferred Stock granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule. Furthermore,

30
<PAGE>

notwithstanding any other provision of this Plan, any Option or Stock
Appreciation Right intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code shall be subject to any
additional limitations set forth in Section 162(m) of the Code (including any
amendment to Section 162(m) of the Code) or any regulations or rulings issued
thereunder that are requirements for qualification as performance-based
compensation as described in Section 162(m)(4)(C) of the Code, and this Plan
shall be deemed amended to the extent necessary to conform to such requirements.

10.9 EFFECT OF PLAN UPON OPTIONS AND COMPENSATION PLANS. The
adoption of this Plan shall not affect any other compensation or incentive plans
in effect for the Company, any Company Subsidiary, the Partnership or any
Partnership Subsidiary. Nothing in this Plan shall be construed to limit the
right of the Company or the Partnership (i) to establish any other forms of
incentives or compensation for Employees, Directors or Consultants of the
Company, any Company Subsidiary, the Partnership or any Partnership Subsidiary
or (ii) to grant or assume options or other rights otherwise than under this
Plan in connection with any proper corporate purpose including but not by way of
limitation, the grant or assumption of options in connection with the
acquisition by purchase, lease, merger, consolidation or otherwise, of the
business, stock or assets of any corporation, partnership, firm or association.

10.10 SECTION 83(b) ELECTION PROHIBITED. No Grantee, Optionee or
Restricted Stockholder may make an election under Section 83(b) of the Code with
respect to any award or grant under this Plan.

10.11 COMPLIANCE WITH LAWS. This Plan, the granting and vesting
of Options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments under this
Plan and the issuance and delivery of shares of Common Stock and the payment of
money under this Plan or under Options, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments granted or Restricted Stock or
Deferred Stock awarded hereunder are subject to compliance with all applicable
federal and state laws, rules and regulations (including but not limited to
state and federal securities law and federal margin requirements) and to such
approvals by any listing, regulatory or governmental authority as may, in the
opinion of counsel for the Company, be necessary or advisable in connection
therewith. Any securities delivered under this Plan shall be subject to such
restrictions, and the person acquiring such securities shall, if requested by
the Company, provide such assurances and representations to the Company as the
Company may deem necessary or desirable to assure compliance with all applicable
legal requirements. To the extent permitted by applicable law, the Plan,
Options, Restricted Stock awards, Deferred Stock awards, Performance Awards,
Stock Appreciation Rights, Dividend Equivalents or Stock Payments granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such laws, rules and regulations.

10.12 TITLES. Titles are provided herein for convenience only and
are not to serve as a basis for interpretation or construction of this Plan.

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<PAGE>

10.13 GOVERNING LAW. This Plan and any agreements hereunder shall
be administered, interpreted and enforced under the internal laws of the State
of Maryland without regard to conflicts of laws thereof.

10.14 CONFLICTS WITH COMPANY'S RESTATED ARTICLES. Notwithstanding
any other provision of this Plan, the Optionee shall not acquire or have any
right to acquire any Common Stock, and shall have no other rights under this
Plan, which are prohibited under the Company's Restated Articles.

IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers duly authorized on this ___ day of September,
1996.

Arden Realty, Inc., a Maryland
corporation.

By ______________________________________
Richard S. Ziman
Chief Executive Officer

Attest:

_________________________________
Michele Byer
Secretary

Arden Realty Limited Partnership, a
Maryland limited partnership.

By ______________________________________
Richard S. Ziman
Chief Executive Officer
On Behalf of Arden Realty, Inc., a
Maryland corporation, in its capacity
as General Partner

_________________________________
Michele Byer
Secretary

<PAGE>

Exhibit 10.3

INDEMNIFICATION AGREEMENT

This Indemnification Agreement, dated effective as of
, 1996, is made by and between Arden Realty, Inc., a Maryland
corporation (the "Company"), and ______________ (the "Indemnitee").

RECITALS

A. The Company is a corporation organized under the General Laws of
the State of Maryland;

B. The charter of the Company (the "Charter") provides that the
Company has the power, to the maximum extent permitted by Maryland law in effect
from time to time, to obligate itself to indemnify the directors, officers and
employees of the Company;

C. The bylaws of the Company (the "Bylaws") provide that each
officer and director of the Company shall be indemnified by the Company to the
maximum extent permitted by Maryland law in effect from time to time; and

D. Indemnitee has been elected as of the
Company and the Company desires to fulfill its obligations to indemnify the
officers and directors to the maximum extent permitted by the Charter and the
Bylaws.

NOW, THEREFORE, the parties hereto are entering into this
Indemnification Agreement (the "Agreement") as of the date hereof to evidence
the obligation of the Company to indemnify the Indemnitee.

Section.1. DEFINITIONS. In this Agreement the following words have
the meanings indicated.

(1) "Company" includes any domestic or foreign predecessor entity of
the Company in a merger, consolidation or other transaction in which the
predecessors existence ceased upon consummation of the transaction.

(2) "Director" means any person who is or was a director of the
Company and any person who, while a director of the Company, is or was serving
at the request of the Company as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, other enterprise, or employee benefit plan.

(3) "Expenses" include attorneys' fees.

<PAGE>
(4) "Official Capacity" means the following:

(i) When used with respect to a Director, the office of director
in the Company;

(ii) When used with respect to a person other than a Director as
contemplated in Section 9, the elective or appointive office in the Company held
by the officer, or the employment or agency relationship undertaken by the
employee or agent on behalf of the Company; and

(iii) "Official Capacity" does not include service for any
other foreign or domestic corporation or any partnership, joint venture, trust,
other enterprise, or employee benefit plan.

(5) "Party" includes a person who was, is or is threatened to be made
a named defendant or respondent in a proceeding.

(6) "Proceeding" means any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative.

Section 2. INDEMNIFICATION OF DIRECTOR.

(1) Provided the determination required under Section 5 has been
made, the Company shall indemnify any Director made a Party to any Proceeding by
reason of service in that Director's Official Capacity unless it is established
that:

(i) The act or omission of the Director was material to the
matter giving rise to the proceeding; and

1. Was committed in bad faith; or

2. Was the result of active and deliberate dishonesty; or

(ii) The Director actually received an improper personal benefit
in money, property, or services; or

(iii) In the case of any criminal proceeding, the Director
had reasonable cause to believe that the act or omission was unlawful.

(2) (i) Indemnification shall be against judgments, penalties,
fines, settlements, and reasonable Expenses actually incurred by the Director in
connection with the Proceeding.

(ii) However, if the Proceeding was one by, or in the right of,
the Company, indemnification shall be made only against reasonable Expenses and
may not be made in respect of any liability to the Company.

<PAGE>

(3) (i) The termination of any Proceeding by judgment, order, or
settlement does not create a presumption that the Director did not meet the
requisite standard of conduct set forth in this Section 2.

(ii) The termination of any Proceeding by conviction, or a plea
of nolo contendere or its equivalent, or an entry of an order of probation prior
to judgment, creates a rebuttable presumption that the Director did not meet the
requisite standard of conduct set forth in this Section 2.

Section 3. NO INDEMNIFICATION OF DIRECTOR LIABILITY FOR IMPROPER
PERSONAL BENEFIT. A Director shall not be indemnified under Section 2 in
respect of any Proceeding charging improper personal benefit to the Director,
whether or not involving action in the Director's Official Capacity, in which
the Director was adjudged to be liable on the basis that personal benefit was
improperly received.

Section 4. REQUIRED INDEMNIFICATION AGAINST EXPENSES INCURRED IN
SUCCESSFUL DEFENSE.

(1) A Director who has been successful, on the merits or otherwise,
in the defense of any Proceeding shall be indemnified against reasonable
Expenses incurred by the Director in connection with the Proceeding.

(2) Nothing in this Agreement shall limit the power of a court of
appropriate jurisdiction to order indemnification of a Director to the maximum
extent permitted by Maryland law in effect from time to time, including the
right to recover the Expenses of securing such reimbursement.

Section 5. DETERMINATION THAT INDEMNIFICATION WAS PROPER.

(1) Indemnification for a specific Proceeding under Section 2 shall
not be made by the Company unless such indemnification is authorized for the
specific Proceeding after a determination has been made that indemnification of
the Director is permissible in the circumstances because the Director has met
the standard of conduct set forth in Section 2.

(2) Such determination shall be made:

(i) By the Board of Directors of the Company (the "Board") by a
majority vote of a quorum consisting of Directors not, at the time, Parties to
the Proceeding, or, if such a quorum cannot be obtained, then by a majority vote
of a committee of the Board consisting solely of two or more Directors not, at
the time, Parties to such Proceeding and who were fully designated to act in the
matter by a majority vote of the full Board in which the designated Directors
who are Parties may participate;

(ii) By special legal counsel selected by the Board or a
committee of the Board by vote as set forth in subparagraph (i) of this
paragraph, or, if the requisite quorum of the full Board cannot be obtained
therefor and the committee cannot be established, by a majority vote of the full
Board in which Directors who are Parties may participate; or

(iii) By the stockholders.

<PAGE>

(3) Authorization of indemnification and determination as to
reasonableness of Expenses shall be made in the same manner as the determination
that indemnification is permissible. However, if the determination that
indemnification is permissible is made by the special legal counsel,
authorization of indemnification and determination as to the unreasonableness of
Expenses shall be made in the manner specified in subparagraph (ii) of paragraph
(2) of this Section 5 for selection of such counsel.

(4) Shares held by Directors who are Parties to the Proceeding shall
not be voted on the subject matter under this Section 5.

Section 6. PAYMENT OF EXPENSES IN ADVANCE OF FINAL DISPOSITION OF
ACTION.

(1) Reasonable Expenses incurred by a Director who is a Party to a
Proceeding shall be paid or reimbursed by the Company in advance of the final
disposition of the Proceeding, upon receipt by the Company of:

(i) A written affirmation by the Director of the Director's good
faith belief that the standard of conduct necessary for indemnification by the
Company as authorized in this Agreement has been met; and

(ii) A written undertaking by or on behalf of the Director to
repay the amount if it shall ultimately be determined that the standard of
conduct has not been met.

(2) The undertaking required by subparagraph (ii) of paragraph (1) of
this Section 6 shall be an unlimited general obligation of the Director but need
not be secured and may be accepted without reference to financial ability to
make the repayment.

Section 7. REIMBURSEMENT OF DIRECTOR'S EXPENSES INCURRED WHILE
APPEARING AS WITNESS. The Company shall pay or reimburse Expenses incurred by a
Director in connection with an appearance as a witness in a Proceeding at a time
when the Director has not been made a named defendant or respondent in the
Proceeding.

Section 8. DIRECTOR'S SERVICE TO EMPLOYEE BENEFIT PLAN. For purposes
of this Agreement:

(1) The Company shall be deemed to have requested a Director to serve
an employee benefit plan where the performance of the Director's duties to the
Company also imposes duties on, or otherwise involves services by, the Director
to the plan or participants or beneficiaries of the plan.

(2) Excise taxes assessed on a Director with respect to an employee
benefit plan pursuant to applicable law shall be deemed fines; and

(3) Action taken or omitted by the Director with respect to an
employee benefit plan in the performance of the Director's duties for a purpose
reasonably believed by the Director to be in the interest of the participants
and beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the Company.

<PAGE>

Section 9. OFFICER, EMPLOYEE OR AGENT.

(1) The Company shall indemnify and advance Expenses to an officer,
employee, or agent of the Company to the same extent that it shall indemnify
Directors under this Agreement.

Section 10. NON-EXCLUSIVITY. The indemnification and advancement of
Expenses provided or authorized by this Agreement may not be deemed exclusive of
any other rights by indemnification or otherwise, to which a Director may be
entitled under the Charter, the Bylaws, a resolution of stockholders or
directors, an agreement or otherwise, both as to action in an Official Capacity
and as to action in another capacity while holding office.

Section 11. INSURANCE. The Company may purchase and maintain
insurance on behalf of any person who is or was a Director, officer, employee,
or agent of the Company, or who, while a Director, officer, employee, or agent
of the Company, is or was serving at the request of the Company as a director,
officer, partner, trustee, employee, or agent of another foreign or domestic
corporation, partnership, joint venture, trust, other enterprise, or employee
benefit plan against any liability asserted against and incurred by such person
in any such capacity or arising out of such person's position, whether or not
the Company would have the power to indemnify against liability under the
provisions of this Agreement or under Maryland law in effect from time to time.

Section 12. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Maryland applicable to
agreements to be made and to be performed entirely within such State.

Section 13. CAPTIONS. The captions assigned to provisions of this
Agreement are for convenience only and shall be disregarded in construing this
Agreement.

Section 14. NUMBER AND GENDER. Use of the singular in this Agreement
includes the plural, use of the plural includes the singular, and use of one
gender includes both genders, as the context may require.

Section 15. CROSS REFERENCES AND EXHIBITS. Any reference in this
Agreement to a "Section" or "paragraph" shall be construed, respectively, as
referring to a Section of this Agreement, or a paragraph of the Section of this
Agreement in which the reference appears.

Section 16. SUCCESSORS. This Agreement shall be binding upon and
inure to the benefit of the successors of the Company.

Section 17. SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity of any other
provision, and all other provisions shall remain in full force and effect.

<PAGE>
Section 18. ENTIRE AGREEMENT. This Agreement, the Charter and the
Bylaws contain the entire agreement between the parties as to the rights granted
and the obligations assumed in this instrument. This Agreement may be amended
only by a subsequent written instrument signed by both parties.

Section 19. NON-ASSIGNABILITY. This Agreement may not be assigned by
either party hereto, and any purported assignment of this Agreement shall be
null and void.

Section 20. WAIVER. Any forbearance by a party to this Agreement in
exercising any right or remedy under this Agreement or otherwise afforded by
applicable law shall not be a waiver of or preclude the exercise of that or any
other right or remedy.

The parties hereto have entered into this Agreement effective as of
the date first above written.

COMPANY: INDEMNITEE:

ARDEN REALTY, INC.
a Maryland corporation ________________________________________

________________________________________
(Print Name)
By:_____________________________
Name:___________________________
Title:__________________________

<PAGE>

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
____________________, 1996, by and between ARDEN REALTY LIMITED PARTNERSHIP, a
Maryland limited partnership (the "Company"), ARDEN REALTY, INC., a Maryland
corporation and the Company's general partner ("Arden" or the "General Partner")
and RICHARD S. ZIMAN ("Executive").

1. EMPLOYMENT

The Company and Arden (hereinafter referred to collectively as the
"Employers") hereby employ Executive and Executive hereby accepts employment
upon the terms and conditions set forth below.

2. TERM AND RENEWAL

2.1 TERM. The term of this Agreement shall commence on the date of this
Agreement (the "Effective Date"), and shall continue for three years from the
Effective Date (the "Original Employment Term"), on the terms and conditions set
forth below, unless sooner terminated as provided in Section 5.

2.2 EXTENSION. Following the expiration of the Original Employment Term
and provided that this Agreement has not been terminated pursuant to Section 5,
and every year thereafter, the Agreement shall be automatically renewed for an
additional 12-month period, effective on each anniversary date of the Effective
Date.

3. COMPENSATION

3.1 BASE COMPENSATION. For the services to be rendered by Executive under
this Agreement, Executive shall be entitled to receive, commencing as of the
Effective Date, an initial annual base compensation ("Base Compensation") of
$300,000, payable in substantially equal semi-monthly installments. The Base
Compensation shall be reviewed and adjusted annually as determined by the
Compensation Committee (the "Compensation Committee") of the Board of Directors
(the "Board") of the General Partner.

3.2 BONUS COMPENSATION. The Compensation Committee shall review
Executive's performance at least annually during each year of the Original
Employment Term and during any periods of automatic extension of this Agreement
pursuant to Section 2.2 and cause the Employers to award Executive a cash bonus
which the Compensation Committee shall reasonably determine as fairly
compensating and rewarding Executive for services rendered to the Employers
and/or as an incentive for continued service to the Employers. The amount of
such cash bonus shall be determined in the sole and absolute discretion of the
Compensation

<PAGE>

Committee and shall be dependent on, among other things, the achievement of
certain performance levels by the Employers, including, without limitation,
growth in funds from operations, and Executive's performance and contribution
to increasing the funds from operations.

3.3 "GROSS-UP" OF COMPENSATION. The amount of the Base Compensation and
any bonus payable to Executive pursuant to Section 3.1 and 3.2 above, shall be
"grossed up" as necessary (on an after-tax basis) to compensate for any
additional withholding taxes or other expenses due as a result of Executive's
employment by both the Company and Arden and the implementation of the
Compensation Split (as defined in Section 10 below) with respect to the
financial obligations of the Company and Arden, respectively.

3.4 BENEFITS.

(a) MEDICAL INSURANCE. The Employers shall provide to Executive,
Executive's spouse and children, at its sole cost, such health, dental and
optical insurance as the Employers may from time to time make available to their
other executive employees.

(b) LIFE AND DISABILITY INSURANCE. The Employers shall provide
Executive such disability and/or life insurance as the Employers in their sole
discretion may from time to time make available to their other executive
employees.

(c) PENSION PLANS, ETC. The Executive shall be entitled to
participate in all pension, 401(k) and other employee plans and benefits
established by the Employers on at least the same terms as the Employers' other
executive employees.

3.5 AUTOMOBILE ALLOWANCE. The Employers shall provide Executive with a
reasonable automobile allowance during the term of Executive's employment with
the Employers.

3.6 METHOD OF PAYMENT. The monetary compensation payable and any benefits
due to Executive hereunder may be paid or provided in whole or in part, from
time to time, by the Employers and/or their respective subsidiaries and
affiliates, but shall at all times remain the responsibility of the Employers.

4. POSITION AND DUTIES

4.1 POSITION. Executive shall serve as Chairman of the Board and Chief
Executive Officer of the Employers. The Employers agree that the duties that
may be assigned Executive shall be the usual and customary duties of the offices
of Chairman of the Board and Chief Executive Officer. Executive shall have such
executive power and authority as shall reasonably be required to enable
Executive to discharge the duties of such offices. Executive may, at
Executive's discretion, serve the Employers and/or their respective subsidiaries
and affiliates in other offices and capacities in addition to the foregoing, but
shall not be required to do so. In the event the Employers and Executive
mutually agree that Executive shall terminate Executive's service in any one or
more of the aforementioned capacities, or Executive's service in one or

2
<PAGE>

more of the aforementioned capacities is terminated, Executive's compensation,
as specified in this Agreement, shall not be diminished or reduced in any
manner.

4.2 DEVOTION OF TIME AND EFFORT. Executive shall use Executive's good
faith best efforts and judgment in performing Executive's duties as required
hereunder and to act in the best interests of the Employers. Executive shall
devote such time, attention and energies to the business of the Employers as are
reasonably necessary to satisfy Executive's required responsibilities and duties
hereunder.

4.3 OTHER ACTIVITIES. Executive may engage in other activities for
Executive's own account while employed hereunder, including without limitation
charitable, community and other business activities, provided that such other
activities do not materially interfere with the performance of Executive's
duties hereunder.

4.4 VACATION. It is understood and agreed that Executive shall be
entitled to six weeks vacation per year. During such vacation periods,
Executive shall not be relieved of Executive's duties under this Agreement and
there will be no abatement or reduction of Executive's compensation hereunder.

4.5 BUSINESS EXPENSES. The Employers shall promptly, but in no event
later than ten days after submission of a claim of expenditure, reimburse
Executive for all reasonable business expenses including, without limitation,
business seminar fees, professional association dues, bar dues, country club
membership fees and other reasonable entertainment expenses incurred by
Executive in connection with the business of the Employers and/or their
respective subsidiaries and affiliates, upon presentation to the Employers of
written receipts for such expenses. Such reimbursement shall also include, but
not be limited to, reimbursement for all reasonable travel expenses, including
all airfare, hotel and rental car expenses, incurred by Executive in travelling
in connection with the business of the Employers.

4.6 EMPLOYERS' OBLIGATIONS. The Employers shall provide Executive with
any and all necessary or appropriate current financial information and access to
current information and records regarding all material transactions involving
the Employers and/or their representative subsidiaries and affiliates, including
but not limited to acquisition of assets, personnel contracts, dispositions of
assets, service agreements and registration statements or other state or federal
filings or disclosures, reasonably necessary for Executive to carry out
Executive's duties and responsibilities hereunder. In addition, the Employers
agree to provide Executive, as a condition to Executive's services hereunder,
such staff, equipment and office space as is reasonably necessary for Executive
to perform Executive's duties hereunder.

5. TERMINATION

5.1 BY EMPLOYERS WITHOUT CAUSE. The Employers may terminate this
Agreement without "cause" (as hereinafter defined) at any time following the
second anniversary of the Effective Date, provided that the Employers first
deliver to Executive the Employers' written election to terminate this Agreement
at least 90 days prior to the effective date of termination.

3
<PAGE>

5.2 SEVERANCE PAYMENT.

(a) AMOUNT. In the event the Employers terminate Executive's
services hereunder pursuant to Section 5.1, Executive shall continue to render
services to the Employers pursuant to this Agreement until the date of
termination and shall continue to receive compensation, as provided hereunder,
through the termination date. In addition to other compensation payable to
Executive for services rendered through the termination date, the Employers
shall pay Executive no later than the date of such termination, as a single
severance payment, an amount equal to the sum of: (i) two times Executive's
average annual Base Compensation paid hereunder for the preceding thirty-six
month period (or, if Executive has been employed less than thirty-six months,
the average annual Base Compensation for the period employed) plus (ii) an
amount equal to two times the highest annual bonus received by Executive during
the preceding thirty-six month period (or during the period Executive has been
employed hereunder if shorter than thirty-six months) (collectively, the
"Severance Amount").

(b) BENEFITS. In the event Executive's employment hereunder is
terminated by the Employers without cause pursuant to Section 5.1 or by
Executive pursuant to Section 5.4 or 5.6, then in addition to paying Executive
the Severance Amount, the Employers shall continue to provide to Executive and
Executive's spouse and children, as applicable, all of the benefits described in
Section 3.3 for a period of two years commencing on the date of such termination
(the "Severance Benefits").

(c) LIMITATION. The foregoing notwithstanding, the total of such
severance payments shall be reduced to the extent that the payment of such
amount would cause Executive's total termination benefits (as determined by
Executive's tax advisor) to constitute an "excess" parachute payment under
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and
by reason of such excess parachute payment Executive would be subject to an
excise tax under Section 4999(a) of the Code, but only if Executive determines
that the after-tax value of the termination benefits calculated with the
foregoing restriction exceed those calculated without the foregoing restriction.

5.3 BY THE EMPLOYERS FOR CAUSE. The Employers may terminate Executive for
cause at any time, upon written notice to Executive. For purposes of this
Agreement, "cause" shall mean:

(a) Executive's conviction for commission of a felony or a crime
involving moral turpitude;

(b) Executive's willful commission of any act of theft,
embezzlement or misappropriation against the Employers which, in any
such case, is materially and demonstrably injurious to the Employers;

(c) Executive's willful and continued failure to substantially
perform Executive's duties hereunder (other than such failure resulting
from Executive's incapacity due to physical or mental illness), which
failure is not remedied within a reasonable time after demand for
substantial performance is delivered by the Employers

4
<PAGE>

which specifically identifies the manner in which the Employers believe
that Executive has not substantially performed Executive's duties; or

(d) Executive's death or Disability (as hereinafter defined).

In the event Executive is terminated for cause pursuant to this Section 5.3,
Executive shall have the right to receive Executive's compensation as otherwise
provided under this Agreement through the effective date of termination.
Executive shall have no further right to receive compensation or other
consideration from the Employers or have any other remedy whatsoever against the
Employers as a result of this Agreement or the termination of Executive pursuant
to this Section 5.3, except as set forth below with respect to a termination due
to Executive's Disability.

In the event Executive is terminated by reason of Executive's Disability
(but not death), the Employers shall immediately pay Executive a single
severance payment equal to the Severance Amount. Said payment shall be in
addition to any disability insurance payments to which Executive is otherwise
entitled and any other compensation earned by Executive hereunder. For purposes
of this Agreement, the term "Disability" shall mean a physical or mental
incapacity as a result of which Executive becomes unable to continue the proper
performance of Executive's duties hereunder for six consecutive calendar months
or for shorter periods aggregating 180 business days in any 12 month period, but
only to the extent that such definition does not violate the Americans with
Disabilities Act.

5.4 BY EXECUTIVE FOR GOOD REASON. Executive may terminate this Agreement
for good reason upon at least 10 days prior written notice to the Employers.
For purposes of this Agreement, "good reason" shall mean:

(a) the Employers' material breach of any of their respective
obligations hereunder and either such breach is incurable or, if curable,
has not been cured within fifteen (15) days following receipt of written
notice by Executive to the Employers of such breach by either of the
Employers;

(b) any removal of Executive from one or more of the offices
specified in the first sentence of Section 4.1 without cause and without
Executive's prior written consent; or

(c) any material decrease in Executive's authority or
responsibilities hereunder without Executive's prior written consent.

In the event that Executive terminates this Agreement for good reason
pursuant to this Section 5.4, Executive shall have the right to receive
Executive's compensation as provided hereunder through the effective date of
termination and shall also have the same rights and remedies against the
Employers as Executive would have had if the Employers had terminated
Executive's employment without cause pursuant to Section 5.1 (including the
right to receive the Severance Amount payable and the Severance Benefits to be
provided under Section 5.2).

5
<PAGE>

5.5 EXECUTIVE'S VOLUNTARY TERMINATION. Executive may, at any time,
terminate this Agreement without good reason upon written notice delivered to
the Employers at least ninety (90) days prior to the effective date of
termination. In the event of such voluntary termination of this Agreement by
Executive: (i) Executive shall have the right to receive Executive's
compensation as provided hereunder through the effective date of termination,
and (ii) the Employers on the one hand, and Executive, on the other hand, shall
not have any further right or remedy against one another except as provided in
Sections 6, 7 and 8 hereof which shall remain in full force and effect.

5.6 CHANGE OF CONTROL. Executive may terminate this Agreement, upon at
least ten (10) days' prior written notice to the Employers at any time within
two (2) years after a "change in control" (as hereinafter defined) of the
Employers. In the event Executive terminates this Agreement within two (2)
years after a change in control pursuant to this Section 5.6, (i) Executive
shall continue to render services pursuant hereto and shall continue to receive
compensation, as provided hereunder, through the termination date, (ii) the
Employers shall pay Executive no later than the date of such termination, as a
single severance payment, an amount equal to the Severance Amount and (iii)
following such termination, the Employers shall provide the Severance Benefits
as required by Section 5.2. For purposes of this Agreement, a "change in
control" shall mean the occurrence of any of the following events:

(a) the individuals constituting the Board as of the date of the
General Partner's initial public offering of common stock (the "Incumbent
Board") cease for any reason to constitute at least two-thirds (2/3rds) of
the Board; provided, however, that if the election, or nomination for
election by the General Partner's stockholders, of any new director was
approved by a vote of at least two-thirds (2/3rds) of the Incumbent Board,
such new director shall be considered a member of the Incumbent Board;

(b) an acquisition of any voting securities of the General Partner
(the "Voting Securities") by any "person" (as the term "person" is used for
purposes of Section 13(d) or Section 14(d) of the Securities Exchange Act
of 1934, as amended (the "1934 Act")) immediately after which such person
has "beneficial ownership" (within the meaning of Rule 13d-3 promulgated
under the 1934 Act) ("Beneficial Ownership") of 20% or more of the combined
voting power of the General Partner's then outstanding Voting Securities
unless such acquisition was approved by a vote of at least two-thirds
(2/3rds) of the Incumbent Board; or

(i) a merger, consolidation, share exchange or reorganization
involving the General Partner, unless

(A) the stockholders of the General Partner, immediately
before such merger, consolidation, share exchange or
reorganization, own, directly or indirectly immediately following
such merger, consolidation, share exchange or reorganization, at
least 80% of the combined voting power of the outstanding voting
securities of the corporation that is the

6
<PAGE>

successor in such merger, consolidation, share exchange or
reorganization (the "Surviving Company") in substantially the same
proportion as their ownership of the Voting Securities immediately
before such merger, consolidation, share exchange or
reorganization;

(B) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement providing for
such merger, consolidation, share exchange or reorganization
constitute at least two-thirds (2/3rds) of the members of the
board of directors of the Surviving Company;

(ii) a complete liquidation or dissolution of the General
Partner; or

(iii) an agreement for the sale or other disposition of all
or substantially all of the assets of the Company or the General
Partner.

6. CONFIDENTIALITY

During the term of Executive's employment under this Agreement, Executive
will have access to and become acquainted with various information relating to
the Employers' business operations, marketing data, business plans, strategies,
employees, contracts, financial records and accounts, projections and budgets,
and similar information. Executive agrees that to the extent such information
is not generally available to the public and gives either of the Employers an
advantage over competitors who do not know of or use such information, such
information and documents constitute "trade secrets" of the Employers.
Executive further agrees that all such information and documents relating to the
business of the Employers whether they are prepared by Executive or come into
Executive's possession in any other way, are owned by the Employers and shall
remain the exclusive property of the Employers. Executive shall not misuse,
misappropriate or disclose any trade secrets of the Employers directly or
indirectly, or use them for Executive's own benefit, either during the term of
this Agreement or at any time thereafter, except as may be necessary or
appropriate in the course of Executive's employment with the Employers unless
such action is either previously agreed to in writing by the Employers or
required by law.

7. NON-SOLICITATION

For a period of one (1) year following the date Executive's employment
hereunder is terminated, Executive shall not solicit or induce any of the
Employers' employees, agents or independent contractors to end their
relationship with either of the Employers, or recruit, hire or otherwise induce
any such person to perform services for Executive, or any other person, firm or
company. The restrictions set forth in this Section 7 shall not apply if
Executive's employment is terminated pursuant to Section 5.1, 5.4 or 5.6.

7
<PAGE>

8. NON-COMPETITION AFTER TERMINATION

For a period of one (1) year following the date Executive's employment
hereunder is terminated, Executive shall not engage in the acquisition,
renovation, management or leasing of any office properties in the Los Angeles,
Orange and San Diego counties of Southern California. In addition, Executive
shall not engage in any active or passive investment in or reasonably relating
to the acquisition, renovation, management or leasing of office properties in
the Los Angeles, Orange and San Diego counties of Southern California for a
period of one (1) year following the date of termination, with the exception of
the ownership of up to one percent (1%) of the securities of any publicly-traded
companies involved in such activities. Nothing herein shall relieve or limit
Executive's obligation to comply with Sections 6 and 7. The restrictions set
forth in this Section 8 shall not apply if Executive's employment is terminated
pursuant to Section 5.1, 5.4 or 5.6.

9. INDEMNIFICATION

To the fullest extent permitted under applicable law, the Employers shall
indemnify, defend and hold Executive harmless from and against any and all
causes of action, claims, demands, liabilities, damages, costs and expenses of
any nature whatsoever (collectively, "Damages") directly or indirectly arising
out of or relating to Executive discharging Executive's duties hereunder on
behalf of the Employers and/or their respective subsidiaries and affiliates, so
long as Executive acted in good faith within the course and scope of Executive's
duties with respect to the matter giving rise to the claim or Damages for which
Executive seeks indemnification.

10. PAYMENT OF FINANCIAL OBLIGATIONS BY EMPLOYERS

The payment or provision to the Executive by the Employers of any
remuneration, benefits or other financial obligations pursuant to this
Agreement, including, without limitation, the payment of Executive's Base
Compensation, any cash bonuses, the provision of benefits enumerated in Section
3.3, the reimbursement of business expenses pursuant to Section 4.5, the payment
(if applicable) of the Severance Amount and provision of the Severance Benefits
and any indemnification obligations, shall be allocated (the "Compensation
Split") 80% to the Company and 20% to Arden initially, subject to adjustment
from time to time by the Compensation Committee.

11. GENERAL PROVISIONS

11.1 ASSIGNMENT; BINDING EFFECT. None of the Employers or Executive may
assign, delegate or otherwise transfer this Agreement or any of their respective
rights or obligations hereunder without the prior written consent of the other
party. Any attempted prohibited assignment or delegation shall be void. This
Agreement shall be binding upon and inure to the

8
<PAGE>

benefit of any permitted successors or assigns of the parties and the heirs,
executors, administrators and/or personal representatives of Executive.

11.2 NOTICES. All notices, requests, demands and other communications that
are required or may be given under this Agreement shall be in writing and shall
be deemed to have been duly given when received if personally delivered; when
transmitted if transmitted by telecopy, electronic or digital transmission
method with electronic confirmation of receipt; the day after it is sent, if
sent for next-day delivery to a domestic address by recognized overnight
delivery service (E.G., FEDEX); and upon receipt, if sent by certified or
registered mail, return receipt requested. In each case notice shall be sent
to:

If to the Company
or Arden: Arden Realty, Inc.
9100 Wilshire Boulevard
East Tower, Suite 700
Beverly Hills, CA 90212
Attention: President
Facsimile: (310) 274-6218

If to Executive: Richard S. Ziman
9100 Wilshire Boulevard
East Tower, Suite 700
Beverly Hills, CA 90212
Facsimile: (310) 274-6218

Any party may change its address for the purpose of this Section 11.2 by
giving the other party written notice of its new address in the manner set forth
above.

11.3 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
the parties, and supersedes all prior agreements, understandings and
negotiations, whether written or oral, between the Employers and Executive with
respect to the employment of Executive by the Employers.

11.4 AMENDMENTS; WAIVERS. This Agreement may be amended or modified, and
any of the terms and covenants may be waived, only by a written instrument
executed by the parties hereto, or, in the case of a waiver, by the party
waiving compliance. Any waiver by any party in any one or more instances of any
term or covenant contained in this Agreement shall neither be deemed to be nor
construed as a further or continuing waiver of any such term or covenant of this
Agreement.

11.5 PROVISIONS SEVERABLE. In case any one or more provisions of this
Agreement shall be invalid, illegal or unenforceable, in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not, in any way, be affected or impaired thereby. If any provision
hereof is determined by any court of competent jurisdiction to be invalid or
unenforceable by reason of such provision extending the covenants and agreements
contained

9
<PAGE>

herein for too great a period of time or over too great a geographical area, or
being too extensive in any other respect, such provision shall be interpreted
to extend only over the maximum period of time and geographical area, and to the
maximum extent in all other respects, as to which it is valid and enforceable,
all as determined by such court in such action.

11.6 ATTORNEY'S FEES. If any legal action, arbitration or other
proceeding, is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach or default in connection with any of the provisions of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and other costs incurred in that action or proceeding, including
any appeal of such action or proceeding, in addition to any other relief to
which that party may be entitled.

11.7 GOVERNING LAW. This Agreement shall be construed, performed and
enforced in accordance with, and governed by the laws of the State of California
without giving effect to the principles of conflict of laws thereof.

11.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same instrument.

10
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first written above.

THE COMPANY:

ARDEN REALTY LIMITED
PARTNERSHIP, a Maryland
limited partnership

By: ARDEN REALTY, INC.,
a Maryland corporation
Its General Partner

By:______________________
Name:_________________
Title:________________

ARDEN:

ARDEN REALTY, INC.,
a Maryland corporation

By:___________________________
Name:______________________
Title:_____________________

EXECUTIVE:

______________________________
Richard S. Ziman

<PAGE>

EXHIBIT 10.7

EMPLOYMENT AGREEMENT

1. EMPLOYMENT

The Company and Arden (hereinafter referred to collectively as the
"Employers") hereby employ Executive and Executive hereby accepts employment
upon the terms and conditions set forth below.

2. TERM AND RENEWAL

3. COMPENSATION

3.1 BASE COMPENSATION. For the services to be rendered by Executive under
this Agreement, Executive shall be entitled to receive, commencing as of the
Effective Date, an initial annual base compensation ("Base Compensation") of
$250,000, payable in substantially equal semi-monthly installments. The Base
Compensation shall be reviewed and adjusted annually as determined by the
Compensation Committee (the "Compensation Committee") of the Board of Directors
(the "Board") of General Partner.

<PAGE>
Committee and shall be dependent on, among other things, the achievement of
certain performance levels by the Employers, including, without limitation,
growth in funds from operations, and Executive's performance and contribution
to increasing the funds from operations.

3.4 BENEFITS.

3.5 AUTOMOBILE ALLOWANCE. The Employers shall provide Executive with a
reasonable automobile allowance during the term of Executive's employment with
the Employers.

4. POSITION AND DUTIES

4.1 POSITION. Executive shall serve as President, Chief Operating Officer
and Director of the Employers. The Employers agree that the duties that may be
assigned Executive shall be the usual and customary duties of the offices of
President, Chief Operating Officer and Director. Executive shall have such
executive power and authority as shall reasonably be required to enable
Executive to discharge the duties of such offices. Executive may, at
Executive's discretion, serve the Employers and/or their respective subsidiaries
and affiliates in other offices and capacities in addition to the foregoing, but
shall not be required to do so. In the event the Employers and Executive
mutually agree that Executive shall terminate Executive's service in any one or
more of the aforementioned capacities, or Executive's service in one or more of
the

<PAGE>
aforementioned capacities is terminated, Executive's compensation, as
specified in this Agreement, shall not be diminished or reduced in any manner.

5. TERMINATION

<PAGE>

5.2 SEVERANCE PAYMENT.

5.3 BY THE EMPLOYERS FOR CAUSE. The Employers may terminate Executive for
cause at any time, upon written notice to Executive. For purposes of this
Agreement, "cause" shall mean:

(a) Executive's conviction for commission of a felony or a crime
involving moral turpitude;

(b) Executive's willful commission of any act of theft,
embezzlement or misappropriation against the Employers which, in any
such case, is materially and demonstrably injurious to the Employers;

<PAGE>

which specifically identifies the manner in which the Employers believe that
Executive has not substantially performed Executive's duties; or

(d) Executive's death or Disability (as hereinafter defined).

In the event Executive is terminated for cause pursuant to this Section 5.3,
Executive shall have the right to receive Executive's compensation as
otherwise provided under this Agreement through the effective date of
termination. Executive shall have no further right to receive compensation or
other consideration from the Employers, or have any other remedy whatsoever
against the Employers, as a result of this Agreement or the termination of
Executive pursuant to this Section 5.3, except as set forth below with respect
to a termination due to Executive's Disability.

(b) any removal of Executive from one or more of the offices
specified in the first sentence of Section 4.1 without cause and without
Executive's prior written consent; or

(c) any material decrease in Executive's authority or
responsibilities hereunder without Executive's prior written consent.

<PAGE>

5.5 EXECUTIVE'S VOLUNTARY TERMINATION. Executive may, at any time,
terminate this Agreement without good reason upon written notice delivered to
the Employers at least ninety (90) days prior to the effective date of
termination. In the event of such voluntary termination of this Agreement by
Executive: (i) Executive shall have the right to receive Executive's
compensation as provided hereunder through the effective date of termination,
and (ii) the Employers, on the one hand, and Executive, on the other hand, shall
not have any further right or remedy against one another except as provided in
Sections 6, 7 and 8 hereof which shall remain in full force and effect.

5.6 CHANGE OF CONTROL. Executive may terminate this Agreement, upon at
least ten (10) days' prior written notice to the Employers, at any time within
two (2) years after a "change in control" (as hereinafter defined) of the
Employers. In the event Executive terminates this Agreement within two (2)
years after a change in control pursuant to this Section 5.6, (i) Executive
shall continue to render services pursuant hereto and shall continue to receive
compensation, as provided hereunder, through the termination date, (ii) the
Employers shall pay Executive no later than the date of such termination, as a
single severance payment, an amount equal to the Severance Amount and (iii)
following such termination, the Employers shall provide the Severance Benefits
as required by Section 5.2. For purposes of this Agreement, a "change in
control" shall mean the occurrence of any of the following events:

(i) a merger, consolidation, share exchange or reorganization
involving the General Partner, unless

<PAGE>
successor in such merger, consolidation, share exchange or
reorganization (the "Surviving Company") in substantially the
same proportion as their ownership of the Voting Securities
immediately before such merger, consolidation, share exchange
or reorganization;

(ii) a complete liquidation or dissolution of the General
Partner; or

(iii) an agreement for the sale or other disposition of all
or substantially all of the assets of the Company or the General
Partner.

6. CONFIDENTIALITY

During the term of Executive's employment under this Agreement, Executive
will have access to and become acquainted with various information relating to
the Employers' business operations, marketing data, business plans, strategies,
employees, contracts, financial records and accounts, projections and budgets,
and similar information. Executive agrees that to the extent such information
is not generally available to the public and gives the either of the Employers
an advantage over competitors who do not know of or use such information, such
information and documents constitute "trade secrets" of the Employers.
Executive further agrees that all such information and documents relating to the
business of the Employers, whether they are prepared by Executive or come into
Executive's possession in any other way, are owned by the Employers and shall
remain the exclusive property of the Employers. Executive shall not misuse,
misappropriate or disclose any trade secrets of the Employers, directly or
indirectly, or use them for Executive's own benefit, either during the term of
this Agreement or at any time thereafter, except as may be necessary or
appropriate in the course of Executive's employment with the Employers, unless
such action is either previously agreed to in writing by the Employers or
required by law.

7. NON-SOLICITATION

<PAGE>

8. NON-COMPETITION AFTER TERMINATION

9. INDEMNIFICATION

10. PAYMENT OF FINANCIAL OBLIGATIONS BY EMPLOYERS

11. GENERAL PROVISIONS

<PAGE>

benefit of any permitted successors or assigns of the parties and the heirs,
executors, administrators and/or personal representatives of Executive.

If to the Company
or Arden: Arden Realty, Inc.
9100 Wilshire Boulevard
East Tower, Suite 700
Beverly Hills, CA 90212
Attention: President
Facsimile: (310) 274-6218

If to Executive: Victor J. Coleman
9100 Wilshire Boulevard
East Tower, Suite 700
Beverly Hills, CA 90212
Facsimile: (310) 274-6218

Any party may change its address for the purpose of this Section 11.2 by
giving the other party written notice of its new address in the manner set forth
above.

<PAGE>

herein for too great a period of time or over too great a geographical area,
or being too extensive in any other respect, such provision shall be
interpreted to extend only over the maximum period of time and geographical
area, and to the maximum extent in all other respects, as to which it is
valid and enforceable, all as determined by such court in such action.

11.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute the same instrument.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first written above.

THE COMPANY:

ARDEN REALTY LIMITED
PARTNERSHIP, a Maryland
limited partnership

By: ARDEN REALTY, INC.,
a Maryland corporation
Its General Partner

By: _____________________
Name: _______________
Its: ________________

ARDEN:

ARDEN REALTY, INC.,
a Maryland corporation

By: _____________________
Name: _______________
Its: ________________

EXECUTIVE:

___________________________________________
Victor J. Coleman

<PAGE>

MISCELLANEOUS RIGHTS AGREEMENT

THIS MISCELLANEOUS RIGHTS AGREEMENT, dated as of September ___, 1996,
is entered into by and among Arden Realty, Inc., a Maryland corporation (the
"Company" or the "REIT"), Arden Realty Limited Partnership, a Maryland limited
partnership (the "Operating Partnership"), NAMIZ, Inc. (formerly Arden Realty,
Inc.), a California corporation ("Arden") and Richard S. Ziman.

RECITALS

WHEREAS, in connection with the initial public offering of shares of
the Company's common stock, par value $.01 per share (the "Common Stock"), the
Company, the Operating Partnership and Arden, together with the partners and
members of certain Arden-affiliated entities (the "Arden Predecessors") and
other parties which hold ownership interests in certain office properties (the
"Properties") (collectively the "Participants") will engage in certain
formation transactions whereby: (i) certain Participants will contribute to the
Operating Partnership, their interests in the Arden Predecessors (the
"Partnership Interests") and in certain of the Properties and (ii) Arden will
contribute to the Operating Partnership certain of its assets, including
management contracts relating to certain of the Properties and the contract
rights to purchase 303 Glenoaks and 12501 East Imperial Highway (the
"Acquisition Properties") and transfer certain of its liabilities
(collectively, the "Contributions");

WHEREAS, Arden and such Participants will receive units of limited
partnership interests ("OP Units") in the Operating Partnership in exchange for
the Contributions and the Company will be the general partner of the Operating
Partnership;

WHEREAS, pursuant to the Partnership Agreement (as defined below) OP
Units owned by Arden Persons (as defined below) will be redeemable for cash or
exchangeable for shares of Common Stock of the Company upon the terms and
subject to the conditions contained therein;

WHEREAS, Arden and the Participants are willing to make the
Contributions in consideration of receiving the registration rights and, with
respect to Richard S. Ziman, the proportional purchase rights provided for in
this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

ARTICLE I
DEFINITIONS

SECTION 1.1. DEFINITIONS. In addition to the definitions set forth
above, the following terms, as used herein, have the following meanings:

"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under common control with such
Person. For the purposes of this definition,

<PAGE>

"control" when used with respect to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

"Agreement" means this Miscellaneous Rights Agreement, as it may be
amended, supplemented or restated from time to time.

"Arden Persons" mean (i) Arden and the Arden Predecessors and (ii)
the current and future stockholders of Arden, any Affiliates of such
stockholders and the Immediate Family of such stockholders.

"Articles of Incorporation" means the Amended and Restated Articles
of Incorporation of the Company as filed with the Secretary of State of the
State of Maryland on May 1, 1996, as the same may be amended, modified or
restated from time to time.

"Business Day" means any day except a Saturday, Sunday or other day
on which commercial banks in The City of New York or Los Angeles, California
are authorized by law to close.

"Code" means the Internal Revenue Code of 1986, as amended from time
to time or any successor statute thereto, as interpreted by the applicable
regulations thereunder.

"Commission" means the Securities and Exchange Commission.

"Convertible Securities" means any evidence of indebtedness, shares
of stock, options, warrants or other securities which are convertible into or
exchangeable, with or without payment of additional consideration of cash or
property, for shares of Common Stock or rights to acquire shares of Common
Stock, either immediately or on a specified date or the happening of a
specified event.

"Demand Registration" means a Demand Registration as defined in
Section 2.2.

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Exchangeable OP Units" means OP Units which may be redeemable for
cash or exchangeable for Common Stock pursuant to Section 8.6 of the
Partnership Agreement (without regard to any limitations on the exercise of
such exchange right as a result of the Ownership Limit Provisions).

"General Partner" means the Company or its successors as general
partner of the Operating Partnership.

"Holder" means any Arden Person who is the record or beneficial owner
of any Registrable Security or any assignee or transferee of such Registrable
Security (including assignments or transfers of Registrable Securities to such
assignees or transferees as a result of the foreclosure on any loans secured by
such Registrable Securities) unless such Registrable

2
<PAGE>

Security is acquired in a public distribution pursuant to a registration
statement under the Securities Act or pursuant to transactions exempt from
registration under the Securities Act where securities sold in such
transaction may be resold without subsequent registration under the
Securities Act.

"Immediate Family" of any individual means such individual's estate
and heirs, spouse, children (whether natural or adoptive or by marriage), and
any trust or estate, all the beneficiaries of which consist of such individual
or any of the foregoing.

"Incapacitated" shall have the meaning set forth in the Partnership
Agreement.

"Initial Public Offering" means the offering of the Company's Common
Stock pursuant to the Form S-11 Registration Statement (No. 333-8163) filed by
the Company with the Commission under the Securities Act.

"Market Value" means, with respect to the Common Stock, the average
of the daily market price for the ten (10) consecutive trading days immediately
preceding the date of a written request for registration pursuant to Section
2.2(a). The market price for each such trading day shall be: (i) if the Common
Stock is listed or admitted to trading on any securities exchange or the NASDAQ-
National Market System, the closing price, regular way, on such day, or if no
such sale takes place on such day, the average of the closing bid and asked
prices on such day, in either case as reported in the principal consolidated
transaction reporting system, (ii) if the Common Stock is not listed or
admitted to trading on any securities exchange or the NASDAQ-National Market
System, the last reported sale price on such day or, if no sale takes place on
such day, the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the Company, or (iii) if
the Common Stock is not listed or admitted to trading on any securities
exchange or the NASDAQ-National Market System and no such last reported sale
price or closing bid and asked prices are available, the average of the
reported high bid and low asked prices on such day, as reported by a reliable
quotation source designated by the Company, or if there shall be no bid and
asked prices on such day, the average of the high bid and low asked prices, as
so reported, on the most recent day (not more than (10) days prior to the date
in question) for which prices have been so reported; PROVIDED THAT if there are
no bid and asked prices reported during the ten (10) days prior to the date in
question, the Market Value of the Common Stock shall be determined by the
Company acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate.

"Ownership Limit Provisions" mean the various provisions of the
Company's Charter set forth in ARTICLE SEVENTH thereof restricting the
ownership of Common Stock by certain Persons to specified percentages of the
outstanding Common Stock.

"Partnership Agreement" means the amended and restated agreement of
limited partnership of the Operating Partnership dated as of September ___,
1996, as the same may be amended, modified or restated from time to time.

3
<PAGE>

"Person" means an individual or a corporation, partnership, limited
liability company, association, trust, or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.

"Piggy-Back Registration" means a Piggy-Back Registration as defined
in Section 2.3.

"Purchase Percentage" means at any time, with respect to any Arden
Person, the ratio (expressed as a decimal and rounded to the nearest thousandth
with five ten thousandths being rounded upwards) of (i) the sum of (a) the
number of shares of Common Stock then owned directly or indirectly by such
Arden Person and (b) the REIT Shares Amount applicable to the Exchangeable OP
Units then owned directly or indirectly by such Arden Person, over (ii) the sum
of (a) the total number of shares of Common Stock then outstanding and (b) the
REIT Shares Amount applicable to all Exchangeable OP Units then outstanding.

"REIT" means a real estate investment trust under Section 856 of the
Code.

"REIT Share" means a share of common stock of the General Partner

"REIT Shares Amount" means, as of any date, an aggregate number of
REIT Shares equal to the number of Tendered Units (assuming all Holders of
Exchangeable OP Units have tendered all of their Exchangeable OP Units), as
adjusted pursuant to Section 7.5 of the Partnership Agreement (in the event the
General Partner acquires material assets, other than on behalf of the Operating
Partnership) and for stock dividends and distributions, stock splits and
subdivisions, reverse stock splits and combinations, distributions of rights,
warrants or options, and distributions of evidences of indebtedness or assets
relating to assets not received by the General Partner pursuant to a PRO RATA
distribution by the Operating Partnership.

"Registrable Securities" means shares of Common Stock of the Company
at any time owned, either of record or beneficially, by any Arden Person and no
matter how acquired (including, without limitation, shares of Common Stock
issuable upon exchange of Exchangeable OP Units) until (i) a registration
statement covering such security has been declared effective by the Commission
and it has been disposed of pursuant to such effective registration statement,
(ii) it is sold under circumstances in which all of the applicable conditions
of Rule 144 (or any similar provisions then in force) under the Securities Act
are met or under which it may be sold pursuant to Rule 144(k) or (iii) it has
been otherwise transferred in a transaction that would constitute a sale
thereof under the Securities Act, the Company has delivered a new certificate
or other evidence of ownership for it not bearing the Securities Act restricted
stock legend and it may be resold without subsequent registration under the
Securities Act.

"Securities Act" means the Securities Act of 1933, as amended.

"Selling Holder" means a Holder who is selling Registrable Securities
pursuant to a registration statement under the Securities Act.

"Tendered Units" shall have the meaning set forth in Section 8.6.A of
the Partnership Agreement.

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"Underwriter" means a securities dealer who purchases any
Registrable Securities as principal and not as part of such dealer's
market-making activities.

ARTICLE II
REGISTRATION RIGHTS

SECTION 2.1. SHELF REGISTRATION. Commencing on or after the first
anniversary of the date that the Common Stock is first offered to the public in
the Initial Public Offering, the Company shall prepare and file a "shelf"
registration statement with respect to shares of Common Stock issuable upon the
exchange of Exchangeable OP Units on an appropriate form for an offering to be
made on a continuous basis pursuant to Rule 415 under the Securities Act (the
"Shelf Registration Statement") and shall use its best efforts to cause the
Shelf Registration Statement to be declared effective on or as soon as
practicable after such first anniversary, and to keep such Shelf Registration
Statement continuously effective for a period ending when all shares of Common
Stock covered by the Shelf Registration Statement have been issued and resold.
In the event that the Company fails to file, or if filed fails to maintain the
effectiveness of, a Shelf Registration Statement, Holders of shares of Common
Stock issuable upon the exchange of Exchange OP Units may make a written
request for a Demand Registration (as defined below) pursuant to Section 2.2
herein; PROVIDED, FURTHER, that if and so long as a Shelf Registration
Statement is on file and effective, then the Company shall have no obligation
to effect a Demand Registration.

SECTION 2.2. DEMAND REGISTRATION.

(a) REQUEST FOR REGISTRATION. Commencing on or after the first
anniversary of the date that the Common Stock is first offered to the public in
the Initial Public Offering, Holders of Registrable Securities may make a
written request for registration under the Securities Act of all or part of its
or their Registrable Securities (a "Demand Registration"); PROVIDED, that the
Company shall not be obligated to effect more than one Demand Registration in
any calendar year; and PROVIDED, FURTHER, that the number of shares of
Registrable Securities proposed to be sold by the Holders making such written
request shall have a Market Value of at least $5,000,000. Subject to the
foregoing, the number of Demand Registrations which may be made pursuant to
this Section 2.2 shall be unlimited. Any such request will specify the number
of shares of Registrable Securities proposed to be sold and will also specify
the intended method of disposition thereof. Within 10 days after receipt of
such request, the Company will give written notice of such registration request
to all other Holders of the Registrable Securities and include in such
registration all such Registrable Securities with respect to which the Company
has received written requests for inclusion therein within 20 Business Days
after the receipt by the applicable Holder of the Company's notice. Each such
request will also specify the number of shares of Registrable Securities to be
registered and the intended method of disposition thereof. Unless the Holder
or Holders of a majority of the Registrable Securities to be registered in such
Demand Registration shall consent in writing, no other party, including the
Company (but excluding another Holder of a Registrable Security), shall be
permitted to offer securities under any such Demand Registration.

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(b) EFFECTIVE REGISTRATION. A registration will not count as a
Demand Registration until it has become effective.

(c) SELLING HOLDERS BECOME PARTY TO AGREEMENT. Each Holder
acknowledges that by asserting or participating in its registration rights
pursuant to this Article 2, he or she may become a Selling Holder and thereby
will be deemed a party to this Agreement and will be bound by each of its
terms.

(d) PRIORITY ON DEMAND REGISTRATIONS. If the Holders of a
majority of shares of the Registrable Securities to be registered in a Demand
Registration so elect by written notice to the Company, the offering of such
Registrable Securities pursuant to such Demand Registration shall be in the
form of an underwritten offering. The Holders of a majority of the shares of
the Registrable Securities making such Demand Registration shall select the
book-running managing Underwriter in connection with such offering; PROVIDED
that such managing Underwriter must be reasonably satisfactory to the Company.
The Company may select any additional investment banks and managers to be used
in connection with the offering; provided that such additional investment
bankers and managers must be reasonably satisfactory to a majority of the
Holders making such Demand Registration. To the extent 10% or more of the
Registrable Securities so requested to be registered are excluded from the
offering in accordance with Section 2.3, the Holders of such Registrable
Securities as a shall have the right to one additional Demand Registration
under this Section in such calendar year with respect to such Registrable
Securities.

SECTION 2.3. PIGGY-BACK REGISTRATION. If the Company proposes to
file a registration statement under the Securities Act with respect to an
equity offering by the Company for its own account or for the account of any of
its respective securityholders of any class of security (other than (i) any
registration statement filed by the Company under the Securities Act relating
to an offering of Common Stock for its own account as a result of the exercise
of the exchange rights set forth in Section 8.6 of the Partnership Agreement,
(ii) any registration statement filed in connection with a Demand Registration
except as set forth in Section 2.2 hereof or (iii) a registration statement on
Form S-4 or S-8 (or any substitute form that may be adopted by the Commission)
or filed in connection with an exchange offer or offering of securities solely
to the Company's existing securityholders), then the Company shall give written
notice of such proposed filing to the Holders of Registrable Securities as soon
as practicable (but in no event less than 10 days before the anticipated filing
date), and such notice shall offer such Holders the opportunity to register
such number of shares of Registrable Securities as each such Holder may request
(a "Piggy-Back Registration"). The Company shall use its commercially
reasonable efforts to cause the managing Underwriter or Underwriters of a
proposed underwritten offering to permit the Registrable Securities requested
to be included in a Piggy-Back Registration to be included on the same terms
and conditions as any similar securities of the Company included therein.

SECTION 2.4. REDUCTION OF OFFERING. Notwithstanding anything
contained herein, if the managing Underwriter or Underwriters of an offering
described in Section 2.2 or 2.3 deliver a written opinion to the Company and
the Holders of the Registrable Securities included in such offering that (i)
the size of the offering that the Holders, the Company and such other

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<PAGE>

persons intend to make or (ii) the kind of securities that the Holders, the
Company and any other persons or entities intend to include in such offering
are such that the success of the offering would be materially and adversely
affected by inclusion of the Registrable Securities requested to be included,
then (A) if the size of the offering is the basis of such Underwriter's
opinion, the amount of securities to be offered for the accounts of Holders
shall be reduced pro rata (according to the Registrable Securities proposed
for registration) to the extent necessary to reduce the total amount of
securities to be included in such offering to the amount recommended by such
managing Underwriter or Underwriters; PROVIDED that, in the case of a
Piggy-Back Registration, if securities are being offered for the account of
other persons or entities as well as the Company, then with respect to the
Registrable securities intended to be offered by Holders, the proportion by
which the amount of such class of securities intended to be offered by
Holders is reduced shall not exceed the proportion by which the amount of
such class of securities intended to be offered by such other persons or
entities is reduced; and (B) if the combination of securities to be offered
is the basis of such Underwriter's opinion, (x) the Registrable Securities to
be included in such offering shall be reduced as described in clause (A)
above (subject to the proviso in clause (A)) or, (y) if the actions described
in clause (x) would, in the judgment of the managing Underwriter, be
insufficient to substantially eliminate the adverse effect that inclusion of
the Registrable Securities requested to be included would have on such
offering, such Registrable Securities will be excluded from such offering.

SECTION 2.5. REGISTRATION PROCEDURES; FILINGS; INFORMATION. In
connection with any Shelf Registration Statement under Section 2.1 or whenever
Holders request that any Registrable Securities be registered pursuant to
Section 2.2 hereof, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof as quickly as practicable, and in
connection with any such request:

(a) The Company will as expeditiously as possible prepare and
file with the Commission a registration statement on any form for which the
Company then qualifies or which counsel for the Company shall deem appropriate
and which form shall be available for the sale of the Registrable Securities to
be registered thereunder in accordance with the intended method of distribution
thereof, and use its best efforts to cause such filed registration statement to
become and remain effective for a period of not less than 270 days; PROVIDED
that if the Company shall furnish to the Holders making a request pursuant to
Section 2.2 a certificate signed by either its Chairman, Vice Chairman, Chief
Executive Officer or President stating that in his good faith judgment it would
be significantly disadvantageous to the Company or its shareholders for such a
registration statement to be filed as expeditiously as possible, the Company
shall have a period of not more than 180 days within which to file such
registration statement measured from the date of receipt of the request in
accordance with Section 2.2.

(b) The Company will, if requested, prior to filing a
registration statement or prospectus or any amendment or supplement thereto,
furnish to each Selling Holder and each Underwriter, if any, of the Registrable
Securities covered by such registration statement copies of such registration
statement as proposed to be filed, and thereafter furnish to such Selling
Holder and Underwriter, if any, such number of conformed copies of such
registration statement, each amendment and supplement thereto (in each case
including all exhibits thereto and

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<PAGE>

documents incorporated by reference therein), the prospectus included in such
registration statement (including each preliminary prospectus) and such other
documents as such Selling Holder or Underwriter may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by
such Selling Holder.

(c) After the filing of the registration statement, the Company
will promptly notify each Selling Holder of Registrable Securities covered by
such registration statement of any stop order issued or threatened by the
Commission and take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered.

(d) The Company will use its best efforts to (i) register or
qualify the Registrable Securities under such other securities or blue sky laws
of such jurisdictions in the United States as any Selling Holder or managing
Underwriter or Underwriters, if any, reasonably (in light of such Selling
Holder's intended plan of distribution) requests and (ii) cause such
Registrable Securities to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company and do any and all other acts and things
that may be reasonably necessary or advisable to enable such Selling Holder to
consummate the disposition of the Registrable Securities owned by such Selling
Holder; PROVIDED that the Company will not be required to (A) qualify generally
to do business in any jurisdiction where it would not otherwise be required to
qualify but for this paragraph (d), (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in any such
jurisdiction.

(e) The Company will immediately notify each Selling Holder of
such Registrable Securities, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the occurrence of an
event requiring the preparation of a supplement or amendment to such prospectus
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and promptly make
available to each Selling Holder any such supplement or amendment.

(f) The Company will enter into customary agreements (including
an underwriting agreement, if any, in customary form) and take such other
actions as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities.

(g) The Company will make available for inspection by any
Selling Holder of such Registrable Securities, any Underwriter participating
in any disposition pursuant to such registration statement and any attorney,
accountant or other professional retained by any such Selling Holder or
Underwriter (collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "Records") as shall be reasonably necessary to enable them
to exercise their due diligence responsibility, and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any Inspectors in connection with such registration statement.
Records which the Company determines, in good faith, to be confidential and
which it notifies the Inspectors are confidential shall not be disclosed by
the Inspectors unless (i) the disclosure of such Records is

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<PAGE>

necessary to avoid or correct a misstatement or omission in such registration
statement or (ii) the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction. Each Selling
Holder of such Registrable Securities agrees that information obtained by it
as a result of such inspections shall be deemed confidential and shall not be
used by it as the basis for any market transactions in the securities of the
company or its Affiliates unless and until such is made generally available
to the public. Each Selling Holder of such Registrable Securities further
agrees that it will, upon learning that disclosure of such Records is sought
in a court of competent jurisdiction, give notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential.

(h) The Company will furnish to each Selling Holder and to each
Underwriter, if any, a signed counterpart, addressed to such Selling Holder or
Underwriter, of (i) an opinion or opinions of counsel to the Company and (ii) a
comfort letter or comfort letters from the Company's independent public
accountants, each in customary form and covering such matters of the type
customarily covered by opinions or comfort letters, as the case may be, as the
Holders of a majority of the Registrable Securities included in such offering
or the managing Underwriter or Underwriters therefor reasonably requests.

(i) The Company will otherwise use its best efforts to comply
with all applicable rules and regulations of the Commission, and make available
to its securityholders, as soon as reasonably practicable, an earnings
statement covering a period of 12 months, beginning within three months after
the effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and Rule
158 of the Commission promulgated thereunder (or any successor rule or
regulation hereafter adopted by the Commission).

(j) The Company will use its best efforts to cause all such
Registrable Securities to be listed on each securities exchange on which
similar securities issued by the Company are then listed.

The Company may require each Selling Holder of Registrable
Securities to promptly furnish in writing to the Company such information
regarding the distribution of the Registrable Securities as the Company may
from time to time reasonably request and such other information as may be
legally required in connection with such registration.

Each Selling Holder agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in Section
2.5(e) hereof, such Selling Holder will forthwith discontinue disposition of
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Selling Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 2.5(e) hereof, and,
if so directed by the Company, such Selling Holder will deliver to the Company
all copies, other than permanent file copies then in such Selling Holder's
possession, of the most recent prospectus covering such Registrable Securities
at the time of receipt of such notice. Each Selling Holder of Registrable
Securities agrees that it will immediately notify the Company at any time when
a prospectus relating to the registration of such Registrable securities is
required to be

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delivered under the Securities Act of the happening of an event as a result
of which information previously furnished by such Selling Holder to the
Company in writing for inclusion in such prospectus contains an untrue
statement of a material fact or omits to state any material fact required to
be stated therein or necessary to make the statements therein not misleading
in light of the circumstances in which they were made. In the event the
Company shall give such notice, the Company shall extend the period during
which such registration statement shall be maintained effective (including
the period referred to in Section 2.5(a) hereof) by the number of days during
the period from and including the date of the giving of notice pursuant to
Section 2.5(e) hereof to the date when the Company shall make available to
the Selling Holders of Registrable Securities covered by such registration
statement a prospectus supplemented or amended to conform with the
requirements of Section 2.5(e) hereof.

SECTION 2.6. REGISTRATION EXPENSES. In connection with any
registration statement required to be filed hereunder, the Company shall pay
the following registration expenses incurred in connection with the
registration hereunder (the "Registration Expenses"): (i) all registration and
filing fees, (ii) fees and expenses of compliance with securities or blue sky
laws (including reasonable fees and disbursements of counsel in connection with
blue sky qualifications of the Registrable Securities), (iii) printing
expenses, (iv) internal expenses (including, without limitation, all salaries
and expenses of its officers and employees performing legal or accounting
duties), (v) the fees and expenses incurred in connection with the listing of
the Registrable Securities, (vi) reasonable fees and disbursements of counsel
for the Company and customary fees and expenses for independent certified
public accountants retained by the Company (including the expenses of any
comfort letters or costs associated with the delivery by independent certified
public accountants of a comfort letter or comfort letters requested pursuant to
Section 2.5(h) hereof), (vii) the reasonable fees and expenses of any special
experts retained by the Company in connection with such registration, and
(viii) reasonable fees and expenses of one counsel (who shall be reasonably
acceptable to the Company) for the Selling Holders. The Company shall have no
obligation to pay any underwriting fees, discounts or commissions attributable
to the sale of Registrable Securities, or any out-of-pocket expenses of the
Holders (or the agents who manage their accounts).

SECTION 2.7. INDEMNIFICATION BY THE COMPANY. The Company agrees
to indemnify and hold harmless each Selling Holder of Registrable Securities,
its officers, directors and agents, and each Person, if any, who controls
such Selling Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act from and against any and all losses, claims,
damages and liabilities caused by any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Securities (as amended or supplemented
if the Company shall have furnished any amendments or supplements thereto) or
any preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages or liabilities are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information
furnished in writing to the Company by such Selling Holder or on such Selling
Holder's behalf expressly for inclusion therein. The Company also agrees to
indemnify any Underwriters of the Registrable Securities, their officers and
directors and each Person who controls such underwriters within the meaning
of Section 15 of the Securities Act or Section 20

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<PAGE>

of the Exchange Act on substantially the same basis as that of the
indemnification of the Selling Holders provided in this Section 2.7 provided
that the foregoing indemnity with respect to any preliminary prospectus shall
not inure to the benefit of any Underwriter of the Registrable Securities
from whom the person asserting any such losses, claims, damages or
liabilities purchased the Registrable Securities which are the subject
thereof if such person did not receive a copy of the prospectus (or the
prospectus as supplemented) at or prior to the confirmation of the sale of
such Registrable Securities to such person in any case where such delivery is
required by the Securities Act and the untrue statement or omission of a
material fact contained in such preliminary prospectus was corrected in the
prospectus (or the prospectus as supplemented).

SECTION 2.8. INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES.
Each Selling Holder agrees, severally but not jointly, to indemnify and hold
harmless the Company, its officers, directors and agents and each Person, if
any, who controls the Company within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to such Selling Holder, but only with
respect to information relating to such Selling Holder furnished in writing by
such Selling Holder or on such Selling Holder's behalf expressly for use in any
registration statement or prospectus relating to the Registrable Securities, or
any amendment or supplement thereto, or any preliminary prospectus. In case
any action or proceeding shall be brought against the Company or its officers,
directors or agents or any such controlling person, in respect of which
indemnity may be sought against such Selling Holder, such Selling Holder shall
have the rights and duties given to the Company, and the Company or its
officers, directors or agents or such controlling person shall have the rights
and duties given to such Selling Holder, by Section 2.7. Each Selling Holder
also agrees to indemnify and hold harmless Underwriters of the Registrable
Securities, their officers and directors and each Person who controls such
Underwriters within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act on substantially the same basis as that of the
indemnification of the Company provided in this Section 2.8.

SECTION 2.9. CONDUCT OF INDEMNIFICATION PROCEEDINGS. In case any
proceeding (including any governmental investigation) shall be instituted
involving any person in respect of which indemnity may be sought pursuant to
Section 2.7 or 2.8, such person (an "Indemnified Party") shall promptly
notify the person against whom such indemnity may be sought (an "Indemnifying
Party") in writing and the Indemnifying Party shall assume the defense
thereof, including the employment of counsel reasonably satisfactory to such
Indemnified Party, and shall assume the payment of all fees and expenses. In
any such proceeding, any Indemnified Party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party unless (i) the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the retention of such counsel
or (ii) the named parties to any such proceeding (including any impleaded
parties) include both the Indemnified Party and the Indemnifying Party and
representation of both parties by the same counsel would be inappropriate due
to actual or potential differing interests between them. It is understood
that the Indemnifying Party shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (in addition to
any local counsel) at any time for all such Indemnified Parties, and that all
such fees and expenses shall be reimbursed as they are incurred. In the case
of any such separate firm for the Indemnified Parties, such firm shall be
designated in writing by (i) in the case of Persons

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<PAGE>

indemnified pursuant to Section 2.7, Arden if Arden was a Selling Holder or
if Arden was not a Selling Holder, by the Selling Holders which owned a
majority of the Registrable Securities sold under the applicable registration
statement and (ii) in the case of Persons indemnified pursuant to Section
2.8, the Company. The Indemnifying Party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent, or if there be a final judgment for the plaintiff,
the Indemnifying Party shall indemnify and hold harmless such Indemnified
Parties from and against any loss or liability (to the extent stated above)
by reason of such settlement or judgment. Notwithstanding the foregoing
sentence, if at any time an Indemnified Party shall have requested an
Indemnifying Party to reimburse the Indemnified Party for fees and expenses
of counsel as contemplated by the third sentence of this paragraph, the
Indemnifying Party agrees that it shall be liable for any settlement of any
proceeding effected without its written consent if (i) such settlement is
entered into more than 30 Business Days after receipt by such Indemnifying
Party of the aforesaid request and (ii) such Indemnifying Party shall not
have reimbursed the Indemnified Party in accordance with such request prior
to the date of such settlement. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending or threatened proceeding in respect of with any Indemnified Party is
or could have been a party and indemnity could have been sought hereunder by
such Indemnified Party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability arising out of such
proceeding.

SECTION 2.10. CONTRIBUTION. If the indemnification provided for
in Section 2.7 or 2.8 hereof is unavailable to an Indemnified Party or
insufficient in respect of any losses, claims, damages or liabilities
referred to herein, then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such losses, claims, damages
or liabilities (i) as between the Company and the Selling Holders on the one
hand and the Underwriters on the other, in such proportion as is appropriate
to reflect the relative benefits received by the Company and the Selling
Holders on the one hand and the Underwriters on the other from the offering
of the securities, or if such allocation is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative
benefits but also the relative fault of the Company and the Selling Holders
on the one hand and of the Underwriters on the other in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as any other relevant equitable considerations and (ii)
as between the Company on the one hand and each Selling Holder on the other,
in such proportion as is appropriate to reflect the relative fault of the
Company and of each Selling Holder in connection with such statements or
omissions which resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits
received by the Company and the Selling Holders on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as the
total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by the Company and the
Selling Holders bear to the total underwriting discounts and commissions
received by the Underwriters, in each case as set forth in the table on the
cover page of the prospectus. The relative fault of the Company and the
Selling Holders on the one hand and of the Underwriters on the other shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the Company and the
Selling Holders or by the

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<PAGE>

Underwriters. The relative fault of the Company on the one hand and of each
Selling Holder on the other shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to
information supplied by such party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.

The Company and the Selling Holders agree that it would not be just
and equitable if contribution pursuant to this Section 2.10 were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. The amount paid or payable by an Indemnified Party as a result of
the losses, claims, damages or liabilities referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such
Indemnified Party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 2.10, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price at which the securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and no Selling Holder
shall be required to contribute any amount in excess of the amount by which the
total price at which the securities of such Selling Holder were offered to the
public exceeds the amount of any damages which such Selling Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Selling Holder's obligations to contribute
pursuant to this Section 2.10 are several in proportion to the proceeds of the
offering received by such Selling Holder bears to the total proceeds of the
offering received by all the Selling Holders and not joint.

SECTION 2.11. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No
Person may participate in any underwritten registration hereunder unless such
Person (a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and these
registration rights provided for in this Article II.

SECTION 2.12. RULE 144. The Company covenants that it will file any
reports required to be filed by it under the Securities Act and the Exchange
Act and that it will take such further action as any Holder may reasonably
request, all to the extent required from time to time to enable Holders to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144 under the Securities Act,
as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any
Holder, the Company will deliver to such Holder a written statement as to
whether it has complied with such requirements.

13
<PAGE>

SECTION 2.13. HOLDBACK AGREEMENTS.

(a) RESTRICTIONS ON PUBLIC SALE BY HOLDER OF REGISTRABLE
SECURITIES. To the extent not inconsistent with applicable law, each Holder
whose securities are included in a registration statement agrees not to effect
any sale or distribution of the issue being registered or a similar security of
the Company, or any securities convertible into or exchangeable or exercisable
for such securities, including a sale pursuant to Rule 144 under the Securities
Act, during the 14 days prior to, and during the 90-day period beginning on,
the effective date of such registration statement (except as part of such
registration), if and to the extent requested in writing by the Company in the
case of a non-underwritten public offering or if and to the extent requested in
writing by the managing underwriter or Underwriters in the case of an
underwritten public offering.

(b) RESTRICTIONS ON PUBLIC SALE BY THE COMPANY AND OTHERS. The
Company agrees (i) not to effect any sale or distribution of any securities
similar to those being registered in accordance with Section 2.2 or Section 2.3
hereof, or any securities convertible into or exchangeable or exercisable for
such securities, during the 14 days prior to, and during the 90-day period
beginning on, the effective date of any registration statement (except as part
of such registration statement where the Holders of a majority of the
Registrable Securities to be included in such registration statement consent or
as part of registration statements filed as set forth in Section 2.3(i) or
(iii)) or the commencement of a public distribution of Registrable Securities,
if and to the extent requested in writing by the Company in the case of a non-
underwritten public offering or if and to the extent requested in writing by
the managing Underwriter or Underwriters in the case of an underwritten public
offering; and (ii) that any agreement entered into after the date of the
Agreement pursuant to which the Company issues or agrees to issue any privately
placed securities shall contain a provision under which holders of such
securities agree not to effect any sale or distribution of any such securities
during the periods described in (i) above, in each case including a sale
pursuant to Rule 144 under the Securities Act (except as part of any such
registration, if permitted); PROVIDED, however, that the provisions of this
paragraph (b) shall not prevent the conversion or exchange of any securities
pursuant to their terms into or for other securities.

(c) If the Company determines in its good faith judgment that
the filing of the Shelf Registration Statement under Section 2.1 or a Demand
Registration under Section 2.2 hereof or the use of any related prospectus
would require the disclosure of material information that the Company has a
bona fide business purpose for preserving as confidential or the disclosure of
which would impede the Company's ability to consummate a significant
transaction, and that the Company is not otherwise required by applicable
securities laws or regulations to disclose, upon written notice of such
determination by the Company, the rights of the Holders to offer, sell or
distribute any Registrable Securities pursuant to the Shelf Registration
Statement or a Demand Registration or to require the Company to take action
with respect to the registration or sale of any Registrable Securities pursuant
to the Shelf Registration Statement or a Demand Registration shall be suspended
until the date upon which the Company notifies the Holders in writing that
suspension of such rights for the grounds set forth in this Section 2.12(c) is
no longer necessary, and the Company agrees to give such notice as promptly as
practicable following the date that such suspension of rights is no longer
necessary.

14
<PAGE>

(d) If all reports required to be filed by the Company pursuant
to the Exchange Act have not been filed by the required date without regard to
any extension, or if the consummation of any business combination by the
Company has occurred or is probable for purposes of Rule 3-05 or Article 11 of
Regulation S-X under the Act, upon written notice thereof by the Company to the
Holders, the rights of the Holders to offer, sell or distribute any Registrable
Securities pursuant to the Shelf Registration Statement or a Demand
Registration or to require the Company to take action with respect to the
registration or sale of any Registrable Securities pursuant to the Shelf
Registration Statement or a Demand Registration shall be suspended until the
date on which the Company has filed such reports or obtained and filed the
financial information required by Rule 3-05 or Article 11 of Regulation S-X to
be included or incorporated by reference, as applicable, in the Shelf
Registration Statement, and the Company shall notify the Holders as promptly as
practicable when such suspension is no longer required.

ARTICLE III
PROPORTIONAL PURCHASE

SECTION 3.1. PROPORTIONAL PURCHASE RIGHTS. If from time to
time the Purchase Percentage owned directly or indirectly by Richard S. Ziman
would be reduced as a result of any issuance of Common Stock by the Company or
could be reduced as a result of any issuance of Convertible Securities
(assuming, in the case of Convertible Securities, the conversion, exchange, or
exercise at such time of the all Convertible Securities to be issued in such
issuance) by the Company (in either case, whether for cash, property or
otherwise) and so long as Mr. Ziman serves as the Company's Chief Executive
Officer, the Company shall so notify Mr. Ziman in writing not less than 5 days
prior to the proposed date of (a) circulation of any offering memorandum or
prospectus relating to any such issuance or (b) if no offering memorandum or
prospectus will be used, any such issuance and shall offer to sell to Mr.
Ziman, and, if such offer is accepted in writing by the (i) day prior to the
date of any circulation of any offering memorandum or prospectus or (ii) if no
offering memorandum or prospectus will be used (x) if such issuance is made
pursuant to an underwriting or private placement purchase agreement, the day
such agreement is executed (it being understood that the Company will give Mr.
Ziman at least one Business Day's prior notice of such date of execution) or
(y) if such issuance is not made pursuant to such an agreement, the Business
Day prior to the proposed date of such issuance, the Company shall sell Mr.
Ziman, that number of shares of Common Stock or the number or amount of
Convertible Securities to be issued which would result in the Purchase
Percentage of Mr. Ziman immediately after such issuance equaling the Purchase
Percentage owned directly or indirectly by Mr. Ziman immediately prior to such
issuance (assuming, in the case of Convertible Securities, the conversion,
exchange or exercise at such time of all Convertible Securities to be issued in
such issuance), or any lesser amount of Common Stock or Convertible Securities
to be issued in such issuance as may be designated by Mr. Ziman, in either case
at a price per share or other trading unit of such Common Stock or Convertible
Securities, as the case may be, to be received by the Company in such issuance,
less any underwriting discounts and commissions, and otherwise on the same
terms as may be applicable to such issuance; PROVIDED, HOWEVER, that this
Section 3.1 shall not be applicable to (i) any issuance of Common Stock in the
Initial Public Offering or (ii) any issuance of Common Stock or Convertible
Securities to directors, officers or employees of the Company or any of its
subsidiaries (including the Operating Partnership) pursuant to any employee
benefit plan or dividend reinvestment plan,

15
<PAGE>

(iii) any issuance of Common Stock by the Company as a result of the exercise
of the exchange rights set forth in Section 8.6 of the Partnership Agreement
or (iv) any issuance of Common Stock or OP Units incident to an acquisition
of properties, assets or a business. Notwithstanding anything to the contrary
herein, Mr. Ziman shall not be permitted to exercise the rights provided by
this Section 3.1 to the extent that such exercise would result in a violation
of the Ownership Limit Provisions.

ARTICLE IV
MISCELLANEOUS

SECTION 4.1. NEW YORK STOCK EXCHANGE LISTING. In the event that the
Company shall issue any Common Stock in exchange for OP Units pursuant to
Section 8.6 of the Partnership Agreement, then in any such case the Company
agrees to cause any such shares of Common Stock to be listed on the New York
Stock Exchange prior to or concurrently with the issuance thereof by the
Company.

SECTION 4.2. REMEDIES. In addition to being entitled to exercise
all rights provided herein and granted by law, including recovery of damages,
the Arden Persons shall be entitled to specific performance of the rights under
this Agreement; provided that only Mr. Ziman may enforce his rights under
Article III. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the
provisions of this Agreement and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.

SECTION 4.3. AMENDMENTS AND WAIVERS. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given unless the Company has obtained the written
consent of Arden or its representative if Arden is Incapacitated. No failure
or delay by any party to insist upon the strict performance of any covenant,
duty, agreement or condition of this Agreement or to exercise any right or
remedy consequent upon any breach thereof shall constitute waiver of any such
breach or any other covenant, duty, agreement or condition.

SECTION 4.4. NOTICES. All notices and other communications in
connection with this Agreement shall be made in writing by hand delivery,
registered first-class mail, telex, telecopier, or air courier guaranteeing
overnight delivery:

(1) if to any Arden Person, initially c/o NAMIZ, Inc., 9100 Wilshire
Boulevard, Suite 700E, Beverly Hills, California 90212 (Attention: Chief
Executive Officer), or to such other address and to such other Persons as Arden
may hereafter specify in writing; and

(2) if to the Company, initially at 9100 Wilshire Boulevard, Suite
700E, Beverly Hills, California 90212 (Attention: President), or to such other
address as the Company may hereafter specify in writing.

16
<PAGE>

All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; when received if
deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if telecopied; and on the next business
day, if timely delivered to an air courier guaranteeing overnight delivery.

SECTION 4.5. SUCCESSORS AND ASSIGNS. Except as expressly provided
in this Agreement the rights and obligations of the Arden Persons under this
Agreement shall not be assignable by any Arden Person to any Person that is not
an Arden Person. This Agreement shall be binding upon the parties hereto and
their respective successors and assigns.

SECTION 4.6. COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. Each party shall
become bound by this Agreement immediately upon affixing its signature hereto.

SECTION 4.7. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California
without regard to the choice of law provisions thereof.

SECTION 4.8. SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be affected or impaired
thereby.

SECTION 4.9. ENTIRE AGREEMENT. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties or undertakings, other than those set forth
or referred to herein with respect to the registration rights granted by the
Company with respect to the Registrable Securities. This Agreement supersedes
all prior agreements and understandings between the parties with respect to
such subject matter.

SECTION 4.10. HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

SECTION 4.11. NO THIRD PARTY BENEFICIARIES. Nothing express or
implied herein is intended or shall be construed to confer upon any person or
entity, other than the parties hereto and their respective successors and
assigns, any rights, remedies or other benefits under or by reason of this
Agreement.

17
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.

ARDEN REALTY, INC.,
a Maryland corporation

By:
-----------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------

ARDEN REALTY LIMITED PARTNERSHIP, a Maryland
limited partnership

By: Arden Realty, Inc.
General Partner

By:
-----------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------

NAMIZ, INC.,
a California corporation

By:
----------------------------------------
Name:
----------------------------------
Title:
----------------------------------

RICHARD S. ZIMAN

--------------------------------------------

<PAGE>

Exhibit 10.14

ARDEN REALTY GROUP, INC.
9100 WILSHIRE BOULEVARD
SUITE 700 - EAST TOWER
BEVERLY HILLS, CALIFORNIA 90212
(310) 246-2941 FAX
(310) 271-8600

June 17, 1996

Arthur Gilbert
Broad Base Investments Two, LLC
9536 Wilshire Boulevard, Suite 420
Beverly Hills, California 90212

Re: CONFIDENTIAL OFFER TO PURCHASE PARTNERSHIP INTERESTS

Dear Arthur:

Arden Realty Group ("Arden") is currently engaged in the process of
forming a real estate investment trust known as Arden Realty Group, Inc. (the
"Company" or the "REIT") to continue and expand the real estate business of
Arden, its principals and their affiliates which are engaged in owning,
acquiring, renovating, managing and leasing office properties in Southern
California.

The Company will operate as a self-administered and self-managed real
estate investment trust ("REIT") and expects to qualify as a REIT for federal
income tax purposes. The operations of the Company will be carried on solely
through Arden Realty Group Limited Partnership (the "Operating Partnership"), of
which the Company will be the sole general partner.

The Company and its Operating Partnership have been formed to
consolidate the ownership of a portfolio of office properties (the
"Participating Properties") located in Southern California through a series of
transactions (the "Formation Transactions") whereby the Operating Partnership
will acquire direct interests in certain of the Participating Properties (the
"Property Interests") and all of the interests in certain limited partnerships,
certain limited liability companies and certain other entities (collectively the
"Participating Partnerships and LLCs") which currently own directly or
indirectly the Participating Properties (the "Consolidation").

The Company is currently engaged in finalizing the Formation
Transactions whereby (i) the owners of the Property Interests and the partners
and members of the Participating Partnerships and LLCs will either transfer
their Property Interests and interests in the Participating Partnerships and
LLCs to the Company in exchange for cash (the "Cash Participants") or contribute
such interests directly to the Operating Partnership (the "OP Participants") in
exchange for an interest in the Operating Partnership ("OP Units") and

<PAGE>

June 17, 1996
Page 2

(ii) Arden will contribute certain of its assets and liabilities to the
Operating Partnership in exchange for OP Units. In addition, the Company will
make a public offering (the "Public Offering") of its common stock (the "REIT
Shares" or "Common Stock") and use the proceeds therefrom, either directly or
through the Operating Partnership, to effectuate the Consolidation, among other
things. Beginning one year after completion of the Public Offering, the OP
Units will be redeemable for cash (based upon the fair market value of an
equivalent number of shares of Common Stock of the Company at the time of such
redemption) or, at the election of the Company, exchangeable for shares of
Common Stock on a one-for-one basis.

The Company wishes to include in its Consolidation interests Broad
Base Investments Two, LLC ("Broad Base") owns in certain of the Participating
Partnerships and LLCs as set forth on Exhibit A of the attached Option Agreement
(the "Partnerships") which own directly or indirectly interests in certain of
the Participating Properties also as set forth on Exhibit A (the "Properties").
As such, the Company respectfully requests Broad Base's cooperation in
effectuating the Consolidation and hereby offers to purchase for cash (the
"Offer"), on the terms and conditions described in more detail below, all of
Broad Base's right, title and interest, as a partner (or member) of the
Partnerships, including, without limitation, all of Broad Base's voting rights
and interests in the capital, profits and losses of the Partnerships or any
property distributable therefrom, constituting all of Broad Base's interests in
the Partnerships (such right, title and interest are hereinafter collectively
referred to as the "Partnership Interest").

For the reasons set forth below, the Company and the General Partners
of the Partnerships believe that the Offer is fair and recommend that Broad Base
accept the Offer.

In considering the Offer, the Arden principals and the Company
strongly encourage you to carefully read this confidential Offer and all
appendices hereto which are hereby incorporated by reference as if set forth
fully herein. If you have any questions concerning any of the matters addressed
in this confidential Offer, or would like to receive copies of the Partnerships'
limited partnership agreements (or limited liability company operating
agreements, as applicable) or other information, please feel free to contact
Victor Coleman of Arden Realty Group, Inc. at (310) 271-8600.

AFTER YOU HAVE CAREFULLY REVIEWED THIS CONFIDENTIAL OFFER AND ALL
APPENDICES HERETO, IF YOU DECIDE TO ACCEPT THE OFFER PLEASE SIGN THE ENCLOSED
OPTION AGREEMENT SIGNATURE PAGE (AT P. A-11 OF APPENDIX A) AND RETURN IT TO
ARDEN REALTY GROUP, INC. IN THE ENCLOSED POSTAGE-PAID, PRE-ADDRESSED ENVELOPE AS
SOON AS POSSIBLE, BUT IN NO EVENT LATER THAN JUNE 21, 1996.

2
<PAGE>

June 17, 1996
Page 3

THE OFFER AND THE OPTION AGREEMENT

The terms and conditions of the Offer are set forth in the Option
Agreement (the "Option Agreement") to be entered into by the Company (the
"Offeror") and you, as a partner (or member) of the Partnerships (the
"Offeree"). The discussion set forth below is a summary of such terms and
conditions. The Option Agreement is attached hereto as Appendix A and is hereby
incorporated by reference.

OPTION, PURCHASE PRICE AND TERMS OF OPTION. The Company, is offering
to acquire for the Option Fee (as defined below) an option (the "Option") to
purchase all of Broad Base's Partnership Interest for a cash amount (the
"Purchase Price") equal to the "Total Minimum Consideration" figure indicated on
Exhibit A. The Company and the General Partners of the Partnerships believe
that the Purchase Price represents a fair value for Broad Base's Partnership
Interests. The Option will expire on December 31, 1996. Upon Broad Base's
acceptance of the Offer, the Company will pay you a nonrefundable option payment
equal to $100.00 (the "Option Fee"). Upon the final closing following the
Company's exercise of the Option, you will receive the Purchase Price in
exchange for Broad Base's Partnership Interest and the execution of an
Assignment and Assumption Agreement in favor of the Company.

CONDITIONS TO CLOSING ON THE OPTION. Exercise of the Option and
closing of the sale of the Partnership Interest pursuant to the Option will not
occur unless, among other things, (i) the Public Offering is consummated and the
net proceeds therefrom are sufficient to enable Offeror to consummate the
Formation Transactions including the acquisition of the Partnership Interest;
(ii) the transfer of the Partnership Interest and equity interests in the other
Participating Partnerships and LLCs is approved by their respective partners and
members to the extent such approval is required by the applicable limited
partnership agreements and LLC operating agreements; (iii) the absence of any
material breach of the parties' respective representations and warranties made
in the Option Agreement; (iv) the consent of certain third parties, including
certain lenders, to the Formation Transactions; and (v) the execution and
delivery by Offeree, directly or through the Attorney-in-Fact (see Article 5 of
the Option Agreement), of the Closing Documents. These conditions may be waived
in whole or in part by the Offeror.

CLOSING ON THE OPTION. If the Option is exercised, a place and time
for the closing of the purchase of Offeree's Partnership Interest will be set.
At an initial closing, Offeree will deliver, or have delivered on Offeree's
behalf through the Attorney-in-Fact, executed closing documents, including a
document that conveys to Offeror the Offeree's Partnership Interest (the
"Closing Documents"). If the Public Offering occurs and the other conditions to
closing are met, Offeree will receive the cash to which such Offeree is entitled
(i.e., the Purchase Price) and the purchase and sale of Offeree's Partnership
Interest will be complete.

<PAGE>

June 17, 1996
Page 4

POWER OF ATTORNEY AND PROXY. Among the provisions of the Option
Agreement is an irrevocable power of attorney and proxy giving each of Offeror
and its designee the authority to act on behalf of Offeree with respect to all
matters of the Partnerships related to the Formation Transactions, including:
(i) to vote the Offeree's Partnership Interest with respect to any matter
relating to the Formation Transactions, (ii) to provide information about the
Offer to the Securities and Exchange Commission (the "SEC") and/or to other
partners in the Partnerships and other partnerships or limited liability
companies being considered for participation in the Formation Transactions, and
(iii) to make, execute and deliver contracts, receipts and certificates in
connection with, and take all other actions necessary to carry out, the
transactions contemplated by the Option Agreement. Offeror intends to use the
proxy granted to it by each Offeree who accepts the Offer to vote all
Partnership Interests subject to the proxy in favor of the Formation
Transactions (and to amend the Partnerships' limited partnership agreements, if
required) and in favor of all actions by the Partnerships deemed necessary or
desirable by Offeror to consummate the Formation Transactions.

EFFECT OF ACCEPTANCE OF THE OFFER. Assuming the Option is exercised
and the sale of the Partnership Interest is completed, Offeree will receive the
Purchase Price for his Partnership Interest tendered, will no longer have any
interests in the Partnerships, and will not receive any interest in the
Operating Partnership. Offeree will recognize income or loss for federal income
tax purposes in connection with the sale of the Partnership Interest pursuant to
the Offer. See Appendix D, "Certain Federal Income Tax Consequences."

PURCHASE PRICE

Provided the entire Partnership Interest is transferred at Closing,
the Purchase Price will be a cash amount at least equal to the value of the
"Total Minimum Consideration" indicated on Exhibit A to the Option Agreement
which represents the sum of the minimum cash consideration values attributed to
each of the interests which collectively constitute the Partnership Interest to
be transferred upon the exercise of the Option.

If at Closing, the aggregate value of the cash available to all Cash
Participants exceeds the sum of the Total Minimum Consideration values (after
all adjustments set forth in the following paragraph) of all Cash Participants
(the "Additional Consideration"), then the Additional Consideration or a portion
thereof, if any, shall be allocated among the Cash Participants (including the
Offeree) based upon the relative values of the Offeree's Partnership Interest
and the interests contributed by each of the other Cash Participants, in each
case as determined in my sole discretion.

The Offeror reserves the right not to acquire any particular interest
that constitutes part of the Partnership Interest, if in good faith the Offeror
determines that the ownership of such interest or the underlying Properties
would be inappropriate for the Operating Partnership for any reason whatsoever.
In such an event, the Offeree's Total

<PAGE>

June 17, 1996
Page 5

Minimum Consideration may be reduced by an amount determined in my sole
discretion to reflect the reduction in total value of the Partnership Interest
ultimately transferred by the Offeree.

BENEFITS OF THE OFFER

Certain of the potential benefits to Offeree of the sale of its
Partnership Interest for cash are described below.

OPPORTUNITY TO LIQUIDATE INVESTMENT. The Offer will provide the
Offeree with an opportunity to liquidate its investment in the Partnerships for
cash. The Partnership Interest is a relatively illiquid investment. Generally,
the Partnership Interest cannot be sold except with the consent of the General
Partners of the Partnerships and an opinion of counsel for the Partnerships
stating that such sale is in compliance with all applicable laws, rules and
regulations of the federal and applicable state securities commissions and does
not jeopardize the Partnerships' tax status. Because the Partnership Interest
is not freely transferable, and because there is no public market for the
Partnership Interest, an investment in the Partnership Interest is not readily
convertible to cash. The Offer provides the opportunity for liquidity to the
Offeree. This is an opportunity that the General Partners cannot assure will be
available again in the foreseeable future. The availability to third-party
purchasers of attractive financing to acquire single-property real estate
investments remains limited under current market conditions. Traditional
sources of debt financing for single-property investments with traditionally
high levels of leverage have been reduced in recent years, in part because of
the difficulties encountered by financial institutions that made large numbers
of real estate loans in the past. The anticipated ability of Arden to undertake
the Public Offering puts it in a position to obtain equity financing to acquire
the Participating Properties for a combination of cash, OP Units and the
assumption or repayment of debt. No assurance can be made that the equity
markets will continue to be available in the future on terms that would make it
feasible to dispose of the Partnerships' Properties for the same consideration
proposed to be paid in the Formation Transactions.

ELIMINATION OF RISK OF REAL ESTATE OWNERSHIP. Ownership of the
Partnership Interest is subject to the risks inherent in the ownership of real
estate in general and office properties in particular, which include changes in
general or local economic conditions, changes in the supply of or demand for
competing properties in the area of the Partnerships' Properties, changes in
interest rates, the need to maintain the properties and to provide for
substantial costs of major repairs, replacements, improvements, and other
capital expenditures, and changes in the availability of mortgage funds (any or
all of which may render difficult the sale or refinancing of the Properties).
The Offer would enable Offerees to terminate their investments in the
Partnerships and thereby eliminate these risks.

<PAGE>

June 17, 1996
Page 6

ALTERNATIVES CONSIDERED

In reaching the conclusion to recommend that the Offeree accept the
Offer, the Company and Arden principals have considered the following
alternatives:

CONTINUATION OF THE PARTNERSHIPS. The Partnerships could continue
their operations, seeking to maximize the value of their properties. Continuing
the Partnerships without change would not allow them to seek other investment
opportunities in the foreseeable future, as cash flow is not sufficient to
permit the Partnerships to borrow funds for additional property acquisitions.
In addition, continuing the Partnerships would not relieve the Partnerships of
their existing debt obligations or provide their partners with liquidity.

SALE OF THE PROPERTIES TO OTHER PURCHASERS AND LIQUIDATION OF THE
PARTNERSHIPS. The Partnerships could seek other purchasers to acquire their
properties, repay their debts, and, after establishing required reserves,
distribute the balance of the sale proceeds to limited partners and general
partners in accordance with the distribution provisions of the Partnerships'
limited partnership agreements. However, the Arden principals have neither
solicited any third-party offers nor received any attractive third-party offers
to purchase the Partnerships' Properties.

MISCELLANEOUS

To assist you in considering the attractiveness of this confidential
Offer certain "Special Considerations" have been enumerated in Appendix B, a
disclosure of certain "Conflicts of Interest" is attached as Appendix C, and a
discussion of "Certain Federal Income Tax Consequences" of the proposed
transactions is attached as Appendix D.

PENDING THE PUBLIC ANNOUNCEMENT OF THE FORMATION TRANSACTIONS AND THE
PUBLIC OFFERING, IT IS IMPERATIVE THAT YOU KEEP ALL INFORMATION CONTAINED IN
THIS LETTER AND THE APPENDICES ATTACHED HERETO ABSOLUTELY CONFIDENTIAL.

We thank you in advance for Broad Base's cooperation and careful
consideration of this liquidity opportunity as we move forward with the
formation of the REIT. As always, please do not hesitate to contact us if you
have any questions.

Sincerely,

Richard S. Ziman
Arden Realty Group, Inc.

<PAGE>

APPENDIX A

OPTION AGREEMENT

This Option Agreement (hereinafter referred to as the "OPTION
AGREEMENT") is made by and between Arden Realty Group, Inc., a Maryland
corporation ("OPTIONEE"), and Broad Base Investments Two, LLC, a Nevada limited
liability company ("OPTIONOR").

RECITALS

A. Arden Realty Group Limited Partnership, a Maryland limited
partnership (the "OPERATING PARTNERSHIP"), of which Optionee is the sole general
partner, desires to consolidate the ownership of a portfolio of office
properties (the "PARTICIPATING PROPERTIES") located in Southern California
through a series of transactions (the "FORMATION TRANSACTIONS") whereby the
Operating Partnership will acquire direct interests in certain of the
Participating Properties (the "PROPERTY INTERESTS") and all of the interests in
certain limited partnerships, certain limited liability companies and certain
other entities (collectively the "PARTICIPATING PARTNERSHIPS AND LLCS") which
currently own directly or indirectly the Participating Properties (the
"CONSOLIDATION").

B. The Formation Transactions relate to the proposed initial public
offering (the "PUBLIC OFFERING") of the common stock of Optionee which will
operate as a self-administered and self-managed real estate investment trust
("REIT") and will be the sole general partner of the Operating Partnership.

C. The owners of the Property Interests and the partners and members
of the Participating Partnerships and LLCs will either transfer their Property
Interests and interests in the Participating Partnerships and LLCs to the
Company in exchange for cash (the "CASH PARTICIPANTS") or contribute such
interests directly to the Operating Partnership in exchange for an interest in
the Operating Partnership (the "OP PARTICIPANTS").

D. The Optionor owns interests in certain of the Participating
Partnerships and LLCs as set forth on EXHIBIT "A" (the "PARTNERSHIPS") which
Partnerships own directly or indirectly interests in certain of the
Participating Properties also as set forth on EXHIBIT "A" (the "PROPERTIES").

E. The Optionee desires to acquire from Optionor, and Optionor
desires to grant to Optionee, an option to purchase on the terms and conditions
set forth herein all of Optionor's right, title and interest, as a partner (or
member) of the Partnerships, including, without limitation, all of its voting
rights and interests in the capital, profits and losses of the Partnerships or
any property distributable therefrom, constituting all of its interests in the
Partnerships (such right, title and interest are hereinafter collectively
referred to as the "PARTNERSHIP INTEREST").

A-1

<PAGE>

F. The parties acknowledge that Optionee's purchase of Optionor's
Partnership Interest is in connection with and subject to the consummation of
the Formation Transactions and the Public Offering.

NOW, THEREFORE, in consideration of payment of $100.00 in cash (the
"OPTION FEE"), the mutual covenants and conditions set forth herein and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Optionee and Optionor agree as follows:

ARTICLE I
THE OPTION

1.1 GRANT OF OPTION. Optionor hereby grants to Optionee an option to
purchase (the "PURCHASE OPTION") all right, title and interest of such Optionor
in all of Optionor's Partnership Interest on the terms and conditions set forth
herein.

1.2 TERM AND EXERCISE OF OPTION. The Purchase Option may be
exercised at any time through December 31, 1996 (the "OPTION TERMINATION DATE")
by notice by Optionee to Optionor. If Optionee does not exercise the Purchase
Option by the Option Termination Date, Optionor's Purchase Option shall
terminate, Optionor shall be entitled to retain the Option Fee, and neither
party shall have any further obligations hereunder.

1.3 PURCHASE PRICE AND PAYMENT. Subject to ARTICLES 1.4 AND 1.5
below, the purchase price for Optionor's Partnership Interest (the "PURCHASE
PRICE") upon the exercise of the Purchase Option will be an amount equal to the
value indicated on Exhibit A as Optionor's "TOTAL MINIMUM CONSIDERATION".

1.4 ADDITIONAL CONSIDERATION. Subject to ARTICLE 1.5 below, in the
event that, at Closing (as defined in ARTICLE 2.2 below) the aggregate value of
the cash available to all Cash Participants exceeds the sum of the Total Minimum
Consideration values (after all adjustments set forth in ARTICLE 1.5) of all
Cash Participants (the "ADDITIONAL CONSIDERATION"), then the Additional
Consideration or a portion thereof, if any, shall be allocated among the Cash
Participants (including the Optionor) based upon the relative values of the
Optionor's Partnership Interest and the interests contributed by each of the
other Cash Participants, in each case as determined by Richard S. Ziman, in his
sole discretion.

1.5 ADJUSTED CONSIDERATION. The Optionee reserves the right not to
acquire any particular interest that constitutes part of the Partnership
Interest, if in good faith the Optionee determines that the ownership of such
interest or the underlying Properties would be inappropriate for the Operating
Partnership for any reason whatsoever. Optionor hereby agrees that, in such
event, the Optionor's Total Minimum Consideration may be reduced by an amount
determined by Richard S. Ziman, in his sole discretion, to reflect the reduction
in total value of the Partnership Interest ultimately transferred by Optionor.

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<PAGE>

1.6 AUTHORIZATION. Optionor hereby authorizes Richard S. Ziman to
make any and all determinations to be made by him pursuant to ARTICLES 1.4 AND
1.5 hereof, and any and all such determinations shall be final and binding on
all parties.

1.7 CONTRIBUTION OF CERTAIN RIGHTS. Effective upon the Closing,
Optionor hereby assigns to the Optionee all of its rights and interests, if any,
including rights to indemnification in favor of the Optionor, if any, under the
agreements pursuant to which the Optionor or its affiliates initially acquired
the Partnership Interest transferred pursuant to this Option Agreement.

ARTICLE II
PURCHASE AND CLOSING

2.1 PURCHASE AND SALE. Optionee, in its sole discretion, may
exercise the Purchase Option to purchase all of Optionor's Partnership Interest.
Upon such exercise, Optionor shall sell, transfer, assign, and convey to
Optionee, and Optionee shall purchase, for the Purchase Price, all right, title
and interest of Optionor in such Partnership Interest free and clear of all
Encumbrances (as defined in ARTICLE 3.3).

2.2 CLOSING. In connection with or at any time after the exercise by
Optionee of the Purchase Option, Optionee will specify a date for the closing
(the "CLOSING") of the purchase and sale of the Partnership Interest. At or
before such Closing, which shall be held at a place and time determined by
Optionee in its sole discretion, Optionee and Optionor (itself or through the
Attorney-in-Fact (see ARTICLE 5)) will execute all closing documents (the
"CLOSING DOCUMENTS") required by Optionee including without limitation (i) an
Assignment and Assumption Agreement substantially in the form attached hereto as
EXHIBIT B, (ii) an individual quitclaim deed fully executed and duly
acknowledged from Optionor substantially in the form attached hereto as EXHIBIT
C, and (iii) any other documents deemed by Optionee to be necessary or desirable
to assign, transfer and convey Optionor's Partnership Interest, to confirm the
accuracy of Optionor's representations and warranties made hereby and the
compliance by Optionor of Optionor's covenants and agreements made hereby, and
to effectuate the transactions contemplated hereby. Subject to the Conditions
to Closing in ARTICLE 2.3 below, at Closing Optionee will pay to Optionor a cash
amount equal to the Purchase Price in consideration for the sale, transfer,
assignment and conveyance of the Partnership Interest.

2.3 CONDITIONS TO CLOSING. Optionee will purchase the Partnership
Interest only if (i) the Public Offering is consummated and the net proceeds
therefrom are sufficient to enable Optionee to consummate the Formation
Transactions including the acquisition of the Partnership Interest; (ii) the
transfer of the Partnership Interest and equity interests in the other
Participating Partnerships and LLCs is approved by their respective partners and
members to the extent such approval is required by the applicable limited
partnership agreements and LLC operating agreements; (iii) the absence of any
material breach of the parties' respective representations and warranties made
in the Option Agreement; (iv) the consent of certain third parties, including
certain lenders, to the Formation Transactions; and (v) the execution and

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<PAGE>

delivery by Optionor, directly or through the Attorney-in-Fact (see ARTICLE 5
hereof), of the Closing Documents. These conditions may be waived in whole or
in part by the Optionee.

2.4 TRANSFER TAXES. Optionee agrees to pay all transfer taxes
arising from the sale of Optionor's Partnership Interest pursuant to the
exercise by Optionee of the Purchase Option.

2.5 PRORATIONS. At the Closing, or as promptly as practicable
following the Closing, to the extent such matters are not the right or
responsibility of all tenants of a given Property, all revenue and all charges
that are customarily prorated in transactions of this nature, including accrued
rent currently due and payable, overpaid taxes or fees, real and personal
property taxes, common area maintenance charges and other similar periodic
charges payable or receivable with respect to such Property shall be ratably
prorated between the partners of the Partnership which holds such Property prior
to the Closing and the Optionee on and after the Closing, effective as of the
Closing. After providing for such prorations, (i) if any of the Partnerships
has a resultant cash surplus, the Purchase Price to be exchanged for Optionor's
Partnership Interest shall be increased in proportion to Optionor's ratable
share of such cash surplus and (ii) if any of the Partnerships has a resultant
cash deficit, the Purchase Price to be exchanged for Optionor's Partnership
Interest shall be reduced in proportion to Optionor's ratable share of such cash
deficit, unless such deficit is cured prior to Closing.

2.6 FURTHER ASSURANCES. Optionor will, from time to time, execute
and deliver to Optionee (or its designee) all such other and further instruments
and documents and take or cause to be taken all such other and further action as
Optionee (or its designee) may reasonably request in order to effect the
transactions contemplated by this Option Agreement, including instruments or
documents deemed necessary or desirable by Optionee (or its designee) to effect
and evidence the conveyance of Optionor's Partnership Interest in accordance
with the terms of this Option Agreement.

ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF OPTIONOR

Optionor hereby makes to Optionee each of the following
representations and warranties which are true as of the date hereof and will be
true as of the date of the Closing:

3.1 ORGANIZATION; AUTHORITY. The Optionor (A) if a natural
person, has the legal capacity to enter the Option Agreement; if not a natural
person, is duly formed, validly existing and in good standing (to the extent
applicable) under the laws of the jurisdiction of its formation, and (B) has all
requisite power and authority to own, lease or operate its property and to carry
on its business as presently conducted and, to the extent required under
applicable law, is qualified to do business and is in good standing in each
jurisdiction in which the nature of its business or the character of its
property make such qualification necessary.

3.2 DUE AUTHORIZATION. The execution, delivery and performance of
the Option Agreement by the Optionor has been duly and validly authorized by all
necessary action

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<PAGE>

of the Optionor. This Option Agreement and each agreement, document and
instrument executed and delivered by or on behalf of Optionor pursuant to this
Option Agreement constitutes, or when executed and delivered will constitute,
the legal, valid and binding obligation of Optionor, each enforceable against
the Optionor in accordance with its terms.

3.3 TITLE TO PARTNERSHIP INTEREST. Optionor is the sole owner of the
Partnership Interest and owns beneficially and of record free and clear of any
claim, lien, pledge, voting agreement, option, charge, security interest,
mortgage, deed of trust, encumbrance, rights of assignment, purchase rights or
other rights of any nature whatsoever of any third party (collectively,
"ENCUMBRANCES"), and has full power and authority to convey free and clear of
any Encumbrances, its Partnership Interest and, upon payment for such
Partnership Interest, Optionee (or its designee) will acquire good and valid
title thereto, free and clear of any Encumbrances except Encumbrances created in
favor of Optionee by the transactions contemplated hereby. Optionor has no
equity interest, either direct or indirect, in the Properties or the
Partnerships except for the Partnership Interest which is the subject of this
Option Agreement.

3.4 CASH FLOW AND OPERATIONS DATA. Optionor has been provided
quarterly cash flow and operations data for the Properties (additional copies of
which have been made available by Optionee upon request) and has had the
opportunity to conduct its own independent valuation of the Properties.

3.5 CONSENTS AND APPROVALS. Optionor has full right, authority,
power and capacity, and no consent, waiver, approval or authorization of any
governmental entity, lender or other third party is required for Optionor:
(i) to enter into this Option Agreement and each agreement, document and
instrument to be executed and delivered by or on behalf of Optionor pursuant to
this Option Agreement; (ii) to carry out the transactions contemplated hereby
and thereby; and (iii) to transfer, sell and deliver all of Optionor's
Partnership Interest to Optionee (or its designee) upon exercise by Optionee of
the Purchase Option and payment therefor in accordance with this Option
Agreement.

3.6 NO VIOLATION. None of the execution, delivery or performance of
the Option Agreement and the transactions contemplated hereby does or will, with
or without the giving of notice, lapse of time, or both, (i) violate, conflict
with, result in a breach of, or constitute a default under or give to others any
right of termination or cancellation of (A) the organizational documents,
including the charters and bylaws, if any, of the Optionor, (B) any material
agreement, document or instrument to which the Optionor is a party or by which
the Optionor or its Partnership Interest is bound or (C) any term or provision
of any judgment, order, writ, injunction, or decree of any governmental or
regulatory authority binding on the Optionor or by which the Optionor or any of
its assets or properties are bound or subject or (ii) result in the creation of
any Encumbrance upon the Partnership Interest.

3.7 NON-FOREIGN STATUS. The Optionor is not a foreign person,
foreign corporation, foreign partnership, foreign trust or foreign estate (as
defined in the Internal Revenue Code of 1986, as amended and hereinafter
referred to as the "CODE"), and is, therefore,

A-5

<PAGE>

not subject to the provisions of the Code relating to the withholding of sales
proceeds to foreign persons.

3.8 WITHHOLDING. The Optionor shall execute at Closing such
certificates or affidavits reasonably necessary to document the inapplicability
of any federal or state withholding provisions, including those referred to in
ARTICLE 3.7 above and similar provisions under California law. If Optionor
fails to provide such certificates or affidavits, Optionee may withhold a
portion of the Purchase Price as required by the Code or California law.

3.9 LITIGATION. There is no litigation or proceeding, either
judicial or administrative, pending or threatened, affecting all or any portion
of Optionor's Partnership Interest or Optionor's ability to consummate the
transactions contemplated hereby.

3.10 NO OTHER AGREEMENTS TO SELL. Except for the Purchase Option
granted hereby, Optionor has made no agreement and has no obligation (absolute
or contingent) to sell, transfer or in any way encumber any of Optionor's
Partnership Interest or not to sell Optionor's Partnership Interest.

3.11 NO BROKERS. Neither the Optionor nor any of its officers,
directors or employees has employed or made any agreement with any broker,
finder or similar agent or any person or firm which will result in the
obligation of the Optionee or any of its affiliates to pay any finder's fee,
brokerage fees or commission or similar payment in connection with the
transactions contemplated by this Option Agreement.

3.12 COVENANT TO REMEDY BREACHES. Optionor covenants to use its
best efforts (i) to prevent the breach of any representation or warranty of
Optionor hereunder, (ii) to satisfy all covenants of Optionor hereunder and
(iii) to promptly cure any breach of a representation, warranty or covenant of
Optionor hereunder upon its learning of same.

ARTICLE IV
RELEASES AND WAIVERS

Each of the releases and waivers enumerated in this ARTICLE 4 shall
become effective only upon the Closing of the purchase and sale of the
Partnership Interest pursuant to ARTICLE 2 herein.

4.1 GENERAL RELEASE OF OPTIONEE. As of the Closing, Optionor
irrevocably waives, releases and forever discharges the Optionee and Optionee's
affiliates, executive officers (including Richard S. Ziman and Victor J.
Coleman), agents, attorneys, successors and assigns of and from, any and all
charges, complaints, claims, liabilities, damages, actions, causes of action,
losses and costs of any nature whatsoever (collectively, "OPTIONOR CLAIMS"),
known or unknown, suspected or unsuspected, arising out of or relating to any
partnership agreement or limited liability company operating agreement governing
the Partnership Interest (collectively, the "PARTNERSHIP AGREEMENTS"), this
Option Agreement or any other matter which exists at the

A-6

<PAGE>

Closing, except for Optionor Claims arising from the breach of any
representation, warranty, covenant or obligation under this Option Agreement.

4.2 GENERAL RELEASE OF OPTIONOR. As of the Closing, Optionee
irrevocably waives, releases and forever discharges the Optionor and Optionor's
agents, attorneys, successors and assigns of and from, any and all charges,
complaints, claims, liabilities, damages, actions, causes of action, losses and
costs of any nature whatsoever (collectively, "OPTIONEE CLAIMS"), known or
unknown, suspected or unsuspected, arising out of or relating to the Partnership
Agreements, this Option Agreement or any other matter which exists at the
Closing, except for Optionee Claims arising from the breach of any
representation, warranty, covenant or obligation under this Option Agreement.

4.3 WAIVER OF SECTION 1542 PROTECTIONS. As of the Closing,
Optionor and Optionee each expressly waives and relinquishes all rights and
benefits afforded by Section 1542 of the California Civil Code and do so
understanding and acknowledging the significance and consequence of such
specific waiver of Section 1542 which provides:

A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him
must have materially affected the settlement with the
debtor.

4.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT. As of the
Closing, the Optionor waives and relinquishes all rights and benefits otherwise
afforded to Optionor under the Partnership Agreements including, without
limitation, any right to consent to or approve of the sale or contribution by
the other partners (or members) of the Partnerships of their partnership
interests to the Company or the Operating Partnership.

ARTICLE V
POWER OF ATTORNEY

5.1 GRANT OF POWER OF ATTORNEY. Optionor does hereby irrevocably
appoint Optionee (or its designee) and each of them individually and any
successor thereof from time to time (such Optionee or designee or any such
successor of any of them acting in his, her or its capacity as attorney-in-fact
pursuant hereto, the "ATTORNEY-IN-FACT") as the true and lawful attorney-in-fact
and agent of Optionor, to act in the name, place and stead of Optionor to make,
execute, acknowledge and deliver all such other contracts, orders, receipts,
notices, requests, instructions, certificates, consents, letters and other
writings (including without limitation the execution of any Closing Documents or
other documents relating to the acquisition by Optionee of Optionor's
Partnership Interest), to provide information to the Securities and Exchange
Commission and others about the transactions contemplated hereby and, in
general, to do all things and to take all actions which the Attorney-in-Fact in
its sole discretion may consider necessary or proper in connection with or to
carry out the transactions contemplated by this Option Agreement, as fully as
could Optionor if personally present and acting. Further, Optionor hereby
grants to Attorney-in-Fact a proxy (the "PROXY") to vote Optionor's Partnership

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<PAGE>

Interest on any matter related to the Formation Transactions presented to the
Partnerships' partners for a vote, including, but not limited to, the transfer
of interests in the Partnerships by other partners.

Each of the Power of Attorney and Proxy and all authority granted
hereby shall be coupled with an interest and therefore shall be irrevocable and
shall not be terminated by any act of Optionor, by operation of law or by the
occurrence of any other event or events, and if any other such act or events
shall occur before the completion of the transactions contemplated by this
Option Agreement, the Attorney-in-Fact shall nevertheless be authorized and
directed to complete all such transactions as if such other act or events had
not occurred and regardless of notice thereof. Optionor agrees that, at the
request of Optionee it will promptly execute a separate power of attorney and
proxy on the same terms set forth in this ARTICLE 5, such execution to be
witnessed and notarized. Optionor hereby authorizes the reliance of third
parties on each of the Power of Attorney and Proxy.

Optionor acknowledges that Optionee has, and any designee or successor
thereof acting as Attorney-in-Fact may have, an economic interest in the
transactions contemplated by this Option Agreement.

5.2 LIMITATION ON LIABILITY. It is understood that the Attorney-
in-Fact assumes no responsibility or liability to any person by virtue of the
Power of Attorney or Proxy granted by Optionor hereby. The Attorney-in-Fact
makes no representations with respect to and shall have no responsibility for
the Formation Transactions or the Public Offering, or the acquisition of the
Partnership Interest by Optionee and shall not be liable for any error or
judgment or for any act done or omitted or for any mistake of fact or law except
for its own gross negligence or bad faith. Optionor agrees to indemnify the
Attorney-in-Fact for and to hold the Attorney-in-Fact harmless against any loss,
claim, damage or liability incurred on its part arising out of or in connection
with it acting as the Attorney-in-Fact under the Power of Attorney or Proxy
created by Optionor hereby, as well as the cost and expense of investigating and
defending against any such loss, claim, damage or liability, except to the
extent such loss, claim, damage or liability is due to the gross negligence or
bad faith of the Attorney-in-Fact. Optionor agrees that the Attorney-in-Fact
may consult with counsel of its own choice (who may be counsel for Optionee or
its successors or affiliates), and it shall have full and complete authorization
and protection for any action taken or suffered by it hereunder in good faith
and in accordance with the opinion of such counsel. It is understood that the
Attorney-in-Fact may, without breaching any express or implied obligation to
Optionor hereunder, release, amend or modify any other power of attorney or
proxy granted by any other person under any related agreement.

ARTICLE VI
MISCELLANEOUS

6.1 AMENDMENT. Any amendment hereto shall be effective only
against those parties who have acknowledged in writing their consent to such
amendment. No waiver of any provisions of this Option Agreement shall be valid
unless in writing and signed by the party against whom enforcement is sought.

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<PAGE>

6.2 ENTIRE AGREEMENT; COUNTERPARTS; APPLICABLE LAW. This Option
Agreement (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof, (b) may be executed in one or more
counterparts, each of which will be deemed an original and all of which shall
constitute but one and the same instrument and (c) shall be governed in all
respects by the laws of California without giving effect to the conflict of law
provisions thereof.

6.3 ASSIGNABILITY. Neither this Option Agreement nor any of the
rights or obligations hereunder may be assigned by Optionor without the prior
written consent of Optionee or by Optionee without the prior written consent of
Optionor, except that Optionee may, without such consent, assign such rights and
such obligations to any affiliate of Optionee, provided that such assignment
shall not affect Optionee's obligations hereunder.

6.4 SEVERABILITY. If any provision of this Option Agreement, or
the application thereof, is for any reason held to any extent to be invalid or
unenforceable, the remainder of this Option Agreement and application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Option Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of the void or unenforceable provision and
to execute any amendment, consent or agreement deemed necessary or desirable by
Optionee to effect such replacement.

6.5 EQUITABLE REMEDIES. The parties hereto agree that irreparable
damage would occur if any provision of this Option Agreement was not performed
in accordance with its specific terms or was otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Option Agreement and to enforce
specifically the terms and provisions hereof in any federal or state court
located in the California (as to which the parties agree to submit to
jurisdiction for the purposes of such action), this being in addition to any
other remedy to which they are entitled at law or in equity.

6.6 NOTICES; EXERCISE OF OPTIONOR'S PURCHASE OPTION. Any notice or
demand which must or may be given under this Option Agreement (including the
exercise by Optionee of the Purchase Option) or by law shall, except as
otherwise provided, be in writing and shall be deemed to have been given
(i) when physically received by personal delivery (which shall include the
confirmed receipt of a telecopied facsimile transmission), or (ii) three
business days after being deposited in the United States certified or registered
mail, return receipt requested, postage prepaid, or (iii) one business day after
being deposited with a nationally known commercial courier service providing
next day delivery service (such as Federal Express).

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<PAGE>

Any such notice shall be addressed and delivered or telecopied (a) in
the case of a notice to Optionee at the following address and facsimile number:

Arden Realty Group, Inc.
9100 Wilshire Boulevard
East Tower, Suite 700
Beverly Hills, California 90212
Phone: (310) 271-8600
Facsimile: (310) 274-6218
Attn: President

and (b), in the case of a notice to Optionor, to the address and facsimile
number set forth on the Option Agreement Signature Page hereof.

6.7 SURVIVAL. It is the express intention and agreement of the
parties hereto that the representations, warranties and covenants of Optionor
set forth in this Option Agreement shall survive the consummation of the
transactions contemplated hereby.

6.8 INDEMNIFICATION. Optionee shall cause the Operating
Partnership to indemnify and hold harmless the Optionor and its partners,
directors, officers, employees, agents, representatives and affiliates (each of
which is an "INDEMNIFIED PARTY") from and against any and all claims, losses,
damages, liabilities and expenses, including without limitation, amounts paid in
settlement, reasonable attorneys' fees, costs of investigation and remediation,
costs of investigative judicial or administrative proceedings or appeals
therefrom and costs of attachment or similar bonds (collectively, "LOSSES")
asserted against, imposed upon or incurred by the Indemnified Party in
connection with: (i) any liabilities or obligations incurred, arising from or
out of, in connection with or as a result of any claims made or actions brought
by or against the Optionor, the Operating Partnership, the Property or an
Indemnified Party, that arise from or out of, in connection with or as a result
of any contamination or other environmental liability of the Property regardless
of when or how occurring; and fees, costs and expenses of the Operating
Partnership in connection with the transactions contemplated by the Option
Agreement, including without limitation any and all costs associated with the
transfers contemplated herein.

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<PAGE>

OPTION AGREEMENT
SIGNATURE PAGE

IN WITNESS WHEREOF, each of the parties hereto has executed this
Option Agreement as of this __ day of June, 1996.

OPTIONOR

BROAD BASE INVESTMENTS TWO, LLC,
a Nevada limited liability company

By:/s/ ARTHUR GILBERT
- ------------------------------
Arthur Gilbert

By: Gilbert Foundation

/s/ ARTHUR GILBERT
- ------------------------------
Arthur Gilbert
President

OPTIONOR'S NOTICE ADDRESS

Broad Base Investments Two, LLC
9536 Wilshire Boulevard, Suite 420
Beverly Hills, California 90212
Facsimile: (310) 273-5421

OPTIONEE

ARDEN REALTY GROUP, INC.,
a Maryland corporation

By:/s/ RICHARD S. ZIMAN
- ------------------------------
Richard S. Ziman
Chief Executive Officer

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<PAGE>

EXHIBIT A
TO
OPTION AGREEMENT

CONSTITUENT INTERESTS OF
OPTIONOR'S PARTNERSHIP INTEREST

PROPERTIES HELD BY MINIMUM
PARTNERSHIPS PARTNERSHIPS CONSIDERATION
------------ ------------------ -------------

LAOP IV, LLC 5601 Lindero Canyon
Westwood Terrace
Calabasas Commerce Center
The New Wilshire
70 South Lake
SkyView Center
4811 Airport Plaza Drive
4900/10 Airport Plaza Drive $8,507,349
-------------
TOTAL MINIMUM CONSIDERATION $8,507,349
-------------
-------------

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<PAGE>

EXHIBIT B
TO
OPTION AGREEMENT

ASSIGNMENT AND ASSUMPTION AGREEMENT

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, the undersigned hereby assigns, transfers, sells
and conveys to ARDEN REALTY GROUP, INC. a Maryland corporation (the "Company"),
its entire legal and beneficial right, title and interest in and to
______________________________, a __________________________________ [(the
"Partnership"/"LLC")], including, without limitation, all right, title and
interest, if any, of the undersigned in and to the [Partnership's/LLC's] assets
and the right to receive distributions of money, profits and other assets from
the [Partnership/LLC], presently existing or hereafter at any time arising or
accruing (such right, title and interest are hereinafter collectively referred
to as the ["Partnership Interest/LLC Interest"]), TO HAVE AND TO HOLD the same
unto the Company, its successors and assigns, forever.

Upon the execution and delivery hereof, the Company assumes all
obligations in respect of the [Partnership Interest/LLC Interest].

The [Partnership/LLC] owns certain real property as described in
Attachment "1" attached hereto.

Executed: _____________ __, 1996

By:
------------------------------------------
Name:
-----------------------------------------
Title:
----------------------------------------

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<PAGE>

EXHIBIT C
TO
OPTION AGREEMENT

Order No.
Escrow No.
Loan No.
- --------------------------------------------------------------------------------

WHEN RECORDED MAIL TO:

MAIL TAX STATEMENTS TO: SPACE ABOVE THIS LINE FOR RECORDER'S USE

DOCUMENTARY TRANSFER TAX $

. . . . .Computed on the consideration or value of
property conveyed; OR

. . . . .Computed on the consideration or value less
liens or encumbrances remaining at time of
sale.

----------------------------------------------------------------------
Signature of Declarant of Agent determining tax -Firm Name
- --------------------------------------------------------------------------------

QUITCLAIM DEED

FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,
do(es) hereby REMISE, RELEASE and FOREVER QUITCLAIM to
Arden Realty Group, Inc., a Maryland corporation
the real property in the City of _________, County of ________, State of
California, described as

Dated __________________________________

STATE OF CALIFORNIA )
) COUNTY OF__________________
)

On _________________________________________________________________before me,

_______________________________________________________________________________

personally appeared____________________________________________________________

Personally known to me (or proved to me on the basis of satisfactory
evidence) to be the person(s) whose names(s) is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacity(ies), and that by his/her/their
signature(s) on the instrument the person(s) or the entity upon behalf of
which the person(s) acted, executed the instrument. (This area for official
notarial

WITNESS my hand and official seal.

Signature_____________________________________________________________________

_______________________________________________________________________________

(THIS AREA FOR OFFICIAL SEAL.)

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<PAGE>
APPENDIX B

SPECIAL CONSIDERATIONS

NO FAIRNESS OPINIONS OR APPRAISALS

No third-party fairness opinions of the transactions contemplated by
the Option Agreement were sought or obtained. In addition, no third-party
appraisals of the fair market value of the Partnership Interest, or the
Partnerships' Properties were sought or obtained. There can be no assurance
that the consideration paid in connection with the Offer is equivalent to the
fair market value of such Partnership Interest or Properties.

NO INDEPENDENT REPRESENTATIVE FOR PARTNERS OF THE PARTNERSHIPS

The terms of the Offer have been established by the Arden principals
on behalf of the REIT. The partners of the Partnerships were not separately
represented in structuring and negotiating the terms of such transactions,
either by representative groups of limited partners or outside experts and
consultants, such as investment bankers, legal counsel, accountants and
financial experts. Had independent representation been arranged for such
partners, the terms of such transactions might have been different and possibly
more favorable to such partners.

POTENTIAL DIFFERENCE IN VALUE RECEIVED BY OFFEREE AND THE OP PARTICIPANTS

Depending upon prevailing market conditions, the OP Participants who
will receive OP Units for their Partnership Interest, may receive greater value
(on the basis of the trading prices for the Offeror's common stock after the
Public Offering) for their Partnership Interest in the Formation Transactions
than the Offerees will receive for their Partnership Interest pursuant to the
Offer. In addition, the OP Participants will receive from the Operating
Partnership distributions of cash and allocations of income and loss, including
allocations of certain interest expenses attributable to loans which will be
transferred by the Partnerships to the Operating Partnership. The Offerees will
not receive such benefits. As holders of OP Units, however, the OP Participants
will own an investment with substantial limits on transferability for at least
one year during which the OP Units may not be transferred, or redeemed for cash
or REIT Shares and will bear the risk of fluctuations in value.

BENEFITS TO ARDEN PRINCIPALS RELATING TO THE FORMATION OF THE OPERATING
PARTNERSHIP

The Arden principals may realize substantial financial benefits from
their participation in the formation of the Operating Partnership and from the
consummation of the Formation Transactions. The Arden principals will receive
OP Units and cash in exchange for their interests in the Partnerships, other
Participating Partnerships and LLCs and the assets of Arden. Although the
consideration paid to the Arden principals in connection with the Formation
Transactions is intended to be based on the value of the assets contributed,
such consideration may not necessarily be indicative of the actual value of
these assets.

B-1

<PAGE>

TAX CONSEQUENCES TO OFFEREE

The sale of Partnership Interest will be a taxable transaction for the
Offeree. The Offeree will recognize gain or loss with respect to its
Partnership Interest equal to the difference between the "amount realized" with
respect to such Partnership Interest (which includes both the cash received and
the Offeree's share of the Partnerships' liabilities as determined for tax
purposes) and its adjusted tax basis in such Partnership Interest. Such gain
may exceed the Purchase Price. It is extremely important that each Offeree
consult with his tax advisor regarding the consequences of the Offer. See
"CERTAIN FEDERAL INCOME TAX CONSIDERATIONS" in APPENDIX D.

LOSS OF OPPORTUNITY TO BENEFIT FROM POTENTIAL FUTURE APPRECIATION OF PROPERTY

The determination of the Purchase Price has been based in part on
current market conditions. There can be no assurance that the real estate
market in general will not improve following the Formation Transactions,
creating an environment for a more favorable disposition of the Properties or
Offeree's Partnership Interest in the future.

B-2

<PAGE>

APPENDIX C

CONFLICTS OF INTEREST

A number of conflicts of interest are inherent in the relationships
among the Arden principals, the Participating Partnerships and LLCs, the
Operating Partnership, the REIT and its directors and officers. Certain of
these conflicts of interest are summarized below.

COMMON GENERAL PARTNERS

State law in each of the jurisdictions in which the Participating
Partnerships and LLCs have been formed, including California and Nevada, imposes
certain fiduciary duties upon the general partners or managing members of each
of the Participating Partnerships and LLCs that go beyond the specific duties
and obligations imposed upon them under their respective limited partnership
agreements or LLC Operating Agreement. The general partners and managing
partners, in handling the affairs of each Participating Partnership and LLC, are
expected to exercise good faith, to use care and prudence and to act with an
undivided duty of loyalty to the limited partners of the respective
Participating Partnerships and LLCs. The Arden principals serve with others as
general partners or managing members for many of the Participating Partnerships
and LLCs. The general partners and managing members of each Participating
Partnership and LLC have an independent obligation to ensure that the
participation of the limited partners or members in the Option Agreement
transactions is fair and equitable. The Arden principals have sought to
discharge faithfully their fiduciary obligation to each of the Participating
Partnerships and LLCs, but it should be borne in mind that the Arden principals
who are the general partners of several of the Partnerships may serve in a
similar capacity with respect to each of the Participating Partnerships and
LLCs.

LACK OF INDEPENDENT REPRESENTATION

The Participating Partnerships and LLCs have not retained an
unaffiliated representative to negotiate the terms and conditions under which
their properties shall be transferred to the Operating Partnership. The Arden
principals, who are affiliates of the Operating Partnership and the REIT, have
acted on behalf of the Operating Partnership and the Participating Partnerships
and LLCs to structure the transactions and determine the Purchase Price.
Consequently, the terms of such transactions are not the result of arm's-length
negotiations, and no fairness opinion concerning the Offer has been obtained.

Further, because the Arden principals and their affiliates have a
significant financial interest in consummating the Formation Transactions and no
independent entity approved such Formation Transactions on behalf of the
Participating Partnerships and LLCs, there is an inherent conflict of interest
in the Arden principals' structuring of the terms and conditions of the
Formation Transactions.

C-1

<PAGE>

SUBSTANTIAL BENEFITS TO THE ARDEN PRINCIPALS

The Arden principals have the following interests in the Formation
Transactions and the Public Offering, which may conflict with the interests of
the Offeree, the Participating Partnerships and their partners:

PARTNERS IN PARTICIPATING PARTNERSHIPS AND OWNERSHIP OF OP UNITS.
Certain of the partners in the Participating Partnerships and LLCs, including
in many cases the Arden principals and/or their affiliates, are contributing
their interests in the Participating Partnerships and LLCs to the Operating
Partnership in exchange for OP Units in tax free transactions. In addition,
Arden will contribute its assets to the Operating Partnership in exchange for OP
Units. The Arden principals, therefore, will hold substantial numbers of OP
Units following the Formation Transactions and thus may receive a long-term
direct financial benefit from the Formation Transactions.

IMPROVED FINANCIAL POSITION OF THE ARDEN PRINCIPALS. Aside from the
direct monetary benefits described above, following the consummation of the
Formation Transactions, certain of the Arden principals will (i) enter into
employment agreements with the Operating Partnership and will receive salary,
other compensation such as bonuses and benefit plan awards, and options to
acquire additional OP Units and/or REIT Shares; (ii) receive increased liquidity
of their interests in the Participating Partnerships and LLCs due to the
conversion of these interests to OP Units that may ultimately be converted into
cash or REIT Shares; (iii) receive increased diversification of their
investments; and (iv) receive the release of certain personal guarantees of
mortgage indebtedness on certain of these properties.

c-2

<PAGE>

APPENDIX D

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of certain of the federal income tax
consequences associated with the sale by the Offeree of its Partnership
Interest. It is impractical, however, to set forth in this confidential Offer
all aspects of federal tax law which may have tax consequences with respect to a
partner's participation in the Partnership Interest sale transaction. The
following discussion does not purport to deal with all aspects of taxation that
may be relevant to particular partners in light of their personal investment or
tax circumstances, or to certain types of partners (including insurance
companies, tax-exempt organizations, financial institutions or broker-dealers,
foreign corporations and persons who are not citizens or residents of the United
States) subject to special treatment under the federal income tax laws.
Furthermore, the discussion of various aspects of federal income taxation
discussed herein is based on the Code, existing laws, judicial decisions and
administrative regulations, rulings and practice, all of which are subject to
change at any time. Any such changes may be retroactive. Consequently, no
assurance can be given that the federal income tax consequences to a partner
described herein will not be altered in the future. This summary is not
intended to be a complete discussion of all tax consequences of the sale of the
Partnership Interest to the REIT or a substitute for careful tax planning, and
does not address the possible consequences to the Offeree under the tax laws of
the states and localities where the Offeree resides or otherwise does business
or where the Partnerships may operate. Further, the federal income tax
consequences to an Offeree may be affected by matters not discussed below. The
discussion set forth below is based upon the assumption that interests held by
the Offeree constitute capital assets in the hands of such investor. In
addition, this discussion assumes that each of the Partnerships is classified
for federal income tax purposes as a partnership rather than as an "association"
taxable as a corporation or a publicly traded partnership. EACH OFFEREE IS
URGED TO CONSULT HIS OWN TAX ADVISOR WITH RESPECT TO THE FEDERAL, STATE, LOCAL
AND FOREIGN TAX CONSEQUENCES TO HIM OF PARTICIPATING IN THE OFFER AND SALE OF
HIS PARTNERSHIP INTERESTS.

TAXATION OF OFFEREES RESULTING FROM THE SALE OF THEIR PARTNERSHIP INTERESTS

The sale of a Partnership Interest will be a taxable transaction for
the Offerees who accept the Offer. Upon the sale of a Partnership Interest for
cash, Offerees will recognize gain or, subject to certain limitations, loss with
respect to such Partnership Interest in an amount equal to the excess (or
deficit) of (i) their "amount realized" with respect to such Partnership
Interest, and (ii) their adjusted tax basis in such Partnership Interest. An
Offeree's "amount realized" with respect to a Partnership Interest for this
purpose will equal the sum of the cash consideration paid for such Partnership
Interest (I.E., the Purchase Price plus the Option Fee) plus the Offeree's
"share" (as determined for tax purposes) of the liabilities of the Partnerships.
Therefore, depending upon an Offeree's adjusted tax basis in the Partnership
Interest and his share of the Partnerships' liabilities, the gain recognized by
a particular Offeree may be in excess of the amount of cash received. Any gain
recognized on the sale of the Partnership Interest pursuant to the Offer
generally will constitute capital gain;

D-1
<PAGE>

provided, however, that to the extent the amount received for the Partnership
Interest is attributable to the Offeree's share of "substantially appreciated
inventory" or "unrealized receivables" (within the meaning of Section 751 of the
Code) of the Partnerships (including the Partnerships' previously allowed
depreciation and cost recovery deductions subject to recapture), the gain
resulting therefrom will be treated as ordinary income.

Any gain recognized by the Offerees who do not "materially
participate" (as defined in the Code) in a Participating Partnership in
connection with the sale of their Partnership Interests in such partnership will
constitute "passive activity income" for purposes of the "passive activity loss"
rules. Accordingly, such income generally may be offset by losses from all
sources, including suspended "passive activity losses" with respect to the
Partnerships, and "passive" or "active" losses from other activities. There are
exceptions to this rule, however, and each Offeree should consult with his or
her own tax advisor concerning whether, and the extent to which, he or she has
available suspended "passive" losses from either the Partnerships or other
investments that may be used to offset gain resulting from the sale of
Partnership Interests. Any gain recognized by an offeree who "materially
participates" (as defined in the Code) in a Participating Partnership may not be
offset by suspended "passive activity losses."

STATE AND OTHER TAX CONSIDERATIONS

Offerees who sell their Partnership Interests may be subject to other
taxes, such as state and local income taxes or transfer taxes that may be
imposed by various jurisdictions. Each Offeree is urged to consult with his own
tax advisor for advice as to state, local, or other taxes which may be payable
in connection with his acceptance of the Offer.

THE FOREGOING IS MERELY A SUMMARY OF CERTAIN OF THE FEDERAL
INCOME TAX CONSEQUENCES TO PARTICIPANTS IN THE SALE OF
PARTNERSHIP INTERESTS TO THE OFFEROR. IT DOES NOT PURPORT TO BE
EITHER A COMPLETE ANALYSIS OR A COMPETE LISTING OF ALL POTENTIAL
TAX CONSIDERATIONS OR TAX RISKS INHERENT IN THE OFFER AND SALE,
AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING. ACCORDINGLY,
OFFEREES ARE URGED TO CONSULT THEIR PERSONAL TAX ADVISORS WITH
RESPECT TO THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES
OF PARTICIPATING IN THE SALE OF THEIR PARTNERSHIP INTERESTS.

D-2

<PAGE>

EXHIBIT 10.17
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

CONTRIBUTION AGREEMENT

by and between

RICHARD S. ZIMAN,
an individual

and

ARDEN REALTY GROUP LIMITED PARTNERSHIP
a Maryland limited partnership

Dated as of June 17, 1996

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

<PAGE>

TABLE OF CONTENTS

PAGE
----

RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR OP UNITS. . . . . 2

1.1 Contribution Transaction . . . . . . . . . . . . . . . . . . . . . 2
1.2 Minimum Consideration and Exchange of OP Units . . . . . . . . . . 2
1.3 Additional Consideration . . . . . . . . . . . . . . . . . . . . . 2
1.4 Adjusted Consideration . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6 Contribution of Certain Rights . . . . . . . . . . . . . . . . . . 3
1.7 Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 Treatment as Contribution. . . . . . . . . . . . . . . . . . . . . 4

2. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2.1 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . 4
2.2 Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Closing Deliveries . . . . . . . . . . . . . . . . . . . . . . . . 5
2.4 Closing Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . 6

3. REPRESENTATIONS AND WARRANTIES AND INDEMNITIES. . . . . . . . . . . . . 6

3.1 Representations and Warranties of the Operating Partnership. . . . 6
3.2 Representations and Warranties of Contributor. . . . . . . . . . . 7
3.3 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . 7

4. COVENANTS OF CONTRIBUTOR. . . . . . . . . . . . . . . . . . . . . . . . 7

5. RELEASES AND WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . 8

5.1 General Release of Operating Partnership . . . . . . . . . . . . . 8
5.2 General Release of Contributor . . . . . . . . . . . . . . . . . . 9
5.3 Waiver of Section 1542 Protections . . . . . . . . . . . . . . . . 9
5.4 Waiver of Rights Under Partnership Agreement . . . . . . . . . . . 9

6. POWER OF ATTORNEY

6.1 Grant of Power of Attorney . . . . . . . . . . . . . . . . . . . . 9
6.2 Limitation on Liability. . . . . . . . . . . . . . . . . . . . . . 10

7. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

7.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 11
7.2 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
7.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

<PAGE>

EXHIBIT LIST

SECTION FIRST
EXHIBITS REFERENCED
------------

A Constituent Interests of Contributor's Partnership Interest . . .Recital D

B Contribution and Assumption Agreement . . . . . . . . . . . . . . . . 1.1

C Form of Quitclaim . . . . . . . . . . . . . . . . . . . . . . . . . 2.1

D Representations and Warranties of Contributor . . . . . . . . . . . . 3.2

Attachment 1. . . . . . . . . . . . . . . . . List of Portfolio Agreements

<PAGE>

CONTRIBUTION AGREEMENT

THIS CONTRIBUTION AGREEMENT (hereinafter referred to as the
"CONTRIBUTION AGREEMENT") is made and entered into as of June 17, 1996 by and
between Arden Realty Group Limited Partnership, a Maryland limited partnership
(the "OPERATING PARTNERSHIP"), and Richard S. Ziman, an individual (the
"CONTRIBUTOR").

RECITALS

A. The Operating Partnership desires to consolidate the ownership
of a portfolio of office properties (the "PARTICIPATING PROPERTIES") located
in Southern California through a series of transactions (the "FORMATION
TRANSACTIONS") whereby the Operating Partnership will acquire direct
interests in certain of the Participating Properties (the "PROPERTY
INTERESTS") and all of the interests in certain limited partnerships, certain
limited liability companies and certain other entities (collectively the
"PARTICIPATING PARTNERSHIPS AND LLCS") which currently own directly or
indirectly the Participating Properties (the "CONSOLIDATION").

B. The Formation Transactions relate to the proposed initial
public offering (the "PUBLIC OFFERING") of the common stock of Arden Realty
Group, Inc., a Maryland corporation (the "COMPANY"), which will operate as a
self-administered and self-managed real estate investment trust ("REIT") and
will be the sole general partner of the Operating Partnership.

C. The owners of the Property Interests and the partners and
members of the Participating Partnerships and LLCs will either transfer their
Property Interests and interests in the Participating Partnerships and LLCs
to the Company in exchange for cash (the "CASH PARTICIPANTS") or contribute
such interests directly to the Operating Partnership in exchange for an
interest in the Operating Partnership (the "OP PARTICIPANTS").

D. The Contributor owns interests in certain of the Participating
Partnerships and LLCs as set forth on EXHIBIT "A" (the "PARTNERSHIPS") which
Partnerships own directly or indirectly interests in certain of the
Participating Properties also as set forth on Exhibit A (the "PROPERTY" or
the "PROPERTIES"). As used herein, "PARTNERSHIP AGREEMENT" means the
partnership agreement or membership agreement, as applicable, under which
each such Partnership was formed.

E. The Contributor desires to, and the Operating Partnership
desires the Contributor to, contribute to the Operating Partnership, all of
its right, title and interest, as a partner (or member) of the Partnerships,
including, without limitation, all of its voting rights and interests in the
capital, profits and losses of the Partnerships or any property distributable
therefrom, constituting all of its interests in the Partnerships (such right,
title and interest are hereinafter collectively referred to as the
"PARTNERSHIP INTEREST"), in exchange for partnership units in the Operating
Partnership (the "OP UNITS"), on the terms and subject to the conditions set
forth herein.

<PAGE>

NOW, THEREFORE, for and in consideration of the foregoing premises, and
the mutual undertakings set forth below, the parties hereto agree as follows:

TERMS OF AGREEMENT

1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR OP UNITS

1.1 CONTRIBUTION TRANSACTION

1.2 MINIMUM CONSIDERATION AND EXCHANGE OF OP UNITS.

Subject to ARTICLES 1.3 AND 1.4 below, the Operating Partnership
shall, in exchange for the Partnership Interest, transfer to the Contributor
the number of OP Units having a value, based on one OP Unit being equal in
value to the Public Offering price for one share of the Company's common
stock, equal to the value indicated on Exhibit A as Contributor's "Total
Minimum Consideration." The transfer of the OP Units to the Contributor shall
be evidenced by either an amendment (the "AMENDMENT") to the OP Agreement or
by certificates relating to such units (the "CERTIFICATES") in either case,
as shall be acceptable to the Contributor. The parties shall take such
additional actions and execute such additional documentation as may be
required by the Partnership Agreement and the OP Agreement in order to effect
the transactions contemplated hereby.

1.3 ADDITIONAL CONSIDERATION

Subject to ARTICLE 1.4 below, in the event that, at Closing the
aggregate value (determined as provided in ARTICLE 1.2) of the OP Units
available to all OP Participants exceeds the sum of the Total Minimum
Consideration values (after all adjustments set forth in ARTICLE 1.4) of all
OP Participants (the "ADDITIONAL CONSIDERATION"), then the Additional
Consideration or a portion thereof, if any, shall be allocated among the OP
Participants (including the Contributor) based upon the relative values of
the Contributor's Partnership

<PAGE>

Interest and the interests contributed by each of the other OP Participants,
in each case as determined by Richard S. Ziman, in his sole discretion.

1.4 ADJUSTED CONSIDERATION

The Operating Partnership reserves the right not to acquire any
particular interest that constitutes part of the Partnership Interest, if in
good faith the Operating Partnership determines that the ownership of such
interest or the underlying Property would be inappropriate for the Operating
Partnership for any reason whatsoever. Contributor hereby agrees that, in
such event, the Contributor's Total Minimum Consideration may be reduced by
an amount determined by Richard S. Ziman, in his sole discretion, to reflect
the reduction in total value of the Partnership Interest ultimately
contributed by the Contributor.

1.5 AUTHORIZATION

Contributor hereby authorizes Richard S. Ziman to make any and all
determinations to be made by him pursuant to ARTICLES 1.3 AND 1.4 hereof, and
any and all such determinations shall be final and binding on all parties.

1.6 CONTRIBUTION OF CERTAIN RIGHTS

Effective upon the Closing, the Contributor hereby contributes to
the Operating Partnership all of its rights and interests, if any, including
rights to indemnification in favor of the Contributor, if any, under the
agreements pursuant to which the Contributor or its affiliates initially
acquired the Partnership Interest transferred pursuant to this Contribution
Agreement.

1.7 PRORATIONS

At the Closing, or as promptly as practicable following the
Closing, to the extent such matters are not the right or responsibility of
all tenants of a given Property, all revenue and all charges that are
customarily prorated in transactions of this nature, including accrued rent
currently due and payable, overpaid taxes or fees, real and personal property
taxes, common area maintenance charges and other similar periodic charges
payable or receivable with respect to such Property shall be ratably prorated
between the partners of the Partnership which holds such Property prior to
the Closing and the Operating Partnership on and after the Closing, effective
as of the Closing. After providing for such prorations, (i) if any of the
Partnerships has a resultant cash surplus, the value of the Contributor's
Partnership Interest shall be increased in proportion to Contributor's
ratable share of such cash surplus and additional OP Units (based on the
initial Public Offering price of the Company's common stock) shall be issued
to the Contributor as a valuation adjustment to the Contributor's Total
Minimum Consideration, and (ii) if any of the Partnerships has a resultant
cash deficit, the value of the Contributor's Partnership Interest shall be
reduced in proportion to Contributor's ratable share of such cash deficit,
and fewer OP Units shall be

<PAGE>

issued to the Contributor as a valuation adjustment to the Contributor's
Total Minimum Consideration, unless such deficit is cured prior to Closing.

1.8 TREATMENT AS CONTRIBUTION

The transfer, assignment and exchange of interests effectuated with
respect to the Operating Partnership, pursuant to this Contribution Agreement
shall constitute, a "Capital Contribution" pursuant to Article 4 of the OP
Agreement and is intended to be governed by Section 721(a) of the Internal
Revenue Code of 1986, as amended (the "CODE").

2. CLOSING

2.1 CONDITIONS PRECEDENT

The effectiveness of the Company's registration statement filed
with the Securities and Exchange Commission on Form S-11 (the "REGISTRATION
STATEMENT") is a condition precedent to the obligations of all parties to
this Contribution Agreement to effect the transactions contemplated by this
Contribution Agreement on the Closing Date (as defined below).

The obligations of the Operating Partnership to effect the
transactions contemplated hereby shall be subject to the following additional
conditions:

(a) The representations and warranties of the Contributor
contained in this Contribution Agreement shall have been true and correct in
all material respects on the date such representations and warranties were
made, and shall be true and correct in all material respects on the Closing
Date as if made at and as of such date;

(b) Each of the obligations of the Contributor to be performed by
it shall have been duly performed by it on or before the Closing Date;

(c) Concurrently with the Closing, the Contributor shall have
executed and delivered to the Operating Partnership the documents required to
be delivered pursuant to SECTION 2.3 hereof;

(d) The Contributor shall have obtained all necessary consents or
approvals of governmental authorities or third parties to the consummation of
the transactions contemplated hereby;

(e) The Contributor shall not have breached any of its covenants
contained herein in any material respect;

(f) No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted,
entered, promulgated or enforced by any

<PAGE>

court of competent jurisdiction or governmental or regulatory authority or
instrumentality that prohibits the consummation of the transactions
contemplated hereby, and no litigation or governmental proceeding seeking
such an order shall be pending or threatened;

(g) There shall not have occurred between the date hereof and the
Closing Date any material adverse change in any of the Partnerships'
businesses;

(h) All existing management agreements with respect to the
Properties shall have been contributed to the Operating Partnership prior to
or simultaneously with the Closing; and

(i) All management functions with respect to the Properties
presently conducted by Arden Realty Group, Inc., a Maryland corporation,
shall be assumed by the Operating Partnership.

The foregoing conditions may be waived by the Operating Partnership
in its sole and absolute discretion.

2.2 TIME AND PLACE

The date, time and place of the transactions contemplated hereunder
shall be the day the Operating Partnership receives the proceeds from the
Public Offering from the underwriter(s), at 10:00 a.m. in the office of
Latham & Watkins, 633 West Fifth Street, Sixth Floor, Los Angeles, California
(the "CLOSING" or "CLOSING DATE"). The transfers described in ARTICLES 1.1
AND 1.2 of this Contribution Agreement, and all closing deliveries, and the
consummation of the Public Offering, shall be deemed concurrent for all
purposes.

2.3 CLOSING DELIVERIES

At the Closing, the parties shall make, execute, acknowledge and
deliver, or cause to be made, executed, acknowledged and delivered through
the Attorney-in-Fact (see ARTICLE 6.1 below), the legal documents and other
items (collectively the "CLOSING DOCUMENTS") necessary to carry out the
intention of this Contribution Agreement, which Closing Documents and other
items shall include, without limitation, the following:

(i) A Contribution and Assumption Agreement for each Partnership;

(ii) An individual quitclaim deed for each Property fully executed and
duly acknowledged from each of the individual constituent partners and/or
members of the Contributor, as required by the Operating Partnership;

(iii) The Amendment or the Certificates evidencing the transfer of
OP Units to the Contributor;

<PAGE>

(iv) American Land Title Assurances ("ALTA") policies of title
insurance with appropriate endorsements and levels of reinsurance for the
Properties issued as of the Closing Date or endorsements or other
assurances that the existing policy or policies of title insurance are
sufficient for purposes of this Contribution Agreement, which the
Contributor shall cause the title company to issue to the Operating
Partnership in a form acceptable to the Operating Partnership (the "TITLE
POLICIES") including satisfaction by the Contributor of any and all title
company requirements applicable to it;

(v) The Partnerships' books and records and securities or other
evidences of ownership held by the Contributor; and

(vi) An affidavit from the Contributor, stating under penalty of
perjury, the Contributor's United States Taxpayer Identification Number and
that the Contributor is not a foreign person pursuant to section 1445(b)(2)
of the Code and a comparable affidavit satisfying California and any other
withholding requirements.

2.4 CLOSING COSTS

The Operating Partnership shall pay any documentary transfer taxes,
escrow charges, title charges and recording taxes or fees incurred in
connection with the transactions contemplated hereby.

3. REPRESENTATIONS AND WARRANTIES AND INDEMNITIES

3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING PARTNERSHIP

The Operating Partnership hereby represents and warrants to and
covenants with the Contributor that:

(a) ORGANIZATION; AUTHORITY. The Operating Partnership has been
duly formed and is validly existing with requisite power to enter this
Contribution Agreement and all agreements contemplated hereby. The persons
and entities executing this Contribution Agreement and all agreements
contemplated hereby on behalf of the Operating Partnership have the power
and authority to enter into this Contribution Agreement and such other
contemplated agreements; and

<PAGE>

approval, authorization or order of or qualification with any governmental
body or agency is required for the performance by the Operating Partnership
of its obligations under this Contribution Agreement and all other
agreements contemplated hereby.

3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR

The Contributor represents and warrants to and covenants with the
Operating Partnership as provided in EXHIBIT "D" attached hereto, and
acknowledges and agrees to be bound by the indemnification provisions
contained therein.

3.3 INDEMNIFICATION

The Operating Partnership shall indemnify and hold harmless the
Contributor (the "INDEMNIFIED CONTRIBUTOR PARTY") from and against any and
all claims, losses, damages, liabilities and expenses, including without
limitation, amounts paid in settlement, reasonable attorneys' fees, costs of
investigation and remediation, costs of investigative judicial or
administrative proceedings or appeals therefrom and costs of attachment or
similar bonds (collectively, "LOSSES") asserted against, imposed upon or
incurred by the Indemnified Contributor Party in connection with: (i) any
breach of a representation or warranty of the Operating Partnership contained
in this Contribution Agreement; and (ii) all fees, costs and expenses of the
Operating Partnership in connection with the transactions contemplated by the
Contribution Agreement, including without limitation any and all costs
associated with the transfers contemplated herein.

4. COVENANTS OF CONTRIBUTOR

(a) From the date hereof through the Closing, the Contributor
shall not:

(i) Sell or transfer all or any portion of the Partnership
Interest; or

(ii) Mortgage, pledge or encumber (or permit to become
encumbered) all or any portion of the Partnership Interest.

(b) From the date hereof through the Closing, the Contributor
shall permit each of the Partnerships to conduct its business in the ordinary
course, consistent with past practice, and shall not permit any of the
Partnerships to:

(i) Enter into any material transaction not in the ordinary
course of business;

(ii) Sell or transfer any assets of the Partnerships;

(iii) Mortgage, pledge or encumber (or permit to become
encumbered) any assets of the Partnerships, except (x) liens for taxes not
due,

<PAGE>

(y) purchase money security interests and (z) mechanics' liens being
disputed by any of the Partnerships in good faith and by appropriate
proceedings;

(iv) Amend, modify or terminate any material agreements or other
instruments to which any of the Partnerships are a party;

(v) Materially alter the manner of keeping the Partnerships'
books, accounts or records or the accounting practices therein reflected;
or

(vi) Make any distribution to its partners.

(c) The Contributor shall use its good faith diligent efforts to
obtain any approvals, waivers or other consents of third parties required to
effect the transactions contemplated by this Contribution Agreement.

5. RELEASES AND WAIVERS

Each of the releases and waivers enumerated in this ARTICLE 5 shall
become effective only upon the Closing of the contribution and exchange of
the Partnership Interest pursuant to ARTICLES 1 AND 2 herein.

5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP

As of the Closing, the Contributor irrevocably waives, releases and
forever discharges the Operating Partnership and the Operating Partnership's
affiliates, partners (including Richard S. Ziman and Victor J. Coleman),
agents, attorneys, successors and assigns of and from, any and all charges,
complaints, claims, liabilities, damages, actions, causes of action, losses
and costs of any nature whatsoever (collectively, "CONTRIBUTOR CLAIMS"),
known or unknown, suspected or unsuspected, arising out of or relating to any
of the Partnership Agreements, this Contribution Agreement or any other
matter which exists at the Closing, except for Contributor Claims arising
from the breach of any representation, warranty, covenant or obligation under
this Contribution Agreement.

5.2 GENERAL RELEASE OF CONTRIBUTOR

As of the Closing, the Operating Partnership irrevocably waives,
releases and forever discharges the Contributor and Contributor's agents,
attorneys, successors and assigns of and from, any and all charges,
complaints, claims, liabilities, damages, actions, causes of action, losses
and costs of any nature whatsoever (collectively, "OPERATING PARTNERSHIP
CLAIMS"), known or unknown, suspected or unsuspected, arising out of or
relating to any of the Partnership Agreements, this Contribution Agreement or
any other matter which exists at the Closing, except for Operating
Partnership Claims arising from the breach of any representation, warranty,
covenant or obligation under this Contribution Agreement.

<PAGE>

5.3 WAIVER OF SECTION 1542 PROTECTIONS

As of the Closing, the Contributor and the Operating Partnership
each expressly waives and relinquishes all rights and benefits afforded by
Section 1542 of the California Civil Code and do so understanding and
acknowledging the significance and consequence of such specific waiver of
Section 1542 which provides:

5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT

As of the Closing, the Contributor waives and relinquishes all
rights and benefits otherwise afforded to Contributor under the Partnership
Agreements including, without limitation, any right to consent to or approve
of the sale or contribution by the other partners (or members) of the
Partnerships of their partnership interests to the Company or the Operating
Partnership.

6. POWER OF ATTORNEY

6.1 GRANT OF POWER OF ATTORNEY

Contributor does hereby irrevocably appoint the Operating
Partnership (or its designee) and each of them individually and any successor
thereof from time to time (such Operating Partnership or designee or any such
successor of any of them acting in his, her or its capacity as
attorney-in-fact pursuant hereto, the "ATTORNEY-IN FACT") as the true and
lawful attorney-in-fact and agent of Contributor, to act in the name, place
and stead of Contributor to make, execute, acknowledge and deliver all such
other contracts, orders, receipts, notices, requests, instructions,
certificates, consents, letters and other writings (including without
limitation the execution of any Closing Documents or other documents relating
to the acquisition by the Operating Partnership of Contributor's Partnership
Interest), to provide information to the Securities and Exchange Commission
and others about the transactions contemplated hereby and, in general, to do
all things and to take all actions which the Attorney-in-Fact in its sole
discretion may consider necessary or proper in connection with or to carry
out the transactions contemplated by this Contribution Agreement, as fully as
could Contributor if personally present and acting. Further, Contributor
hereby grants to Attorney-in-Fact a proxy (the "PROXY") to vote Contributor's
Partnership Interest on any matter related to the Formation Transactions
presented to the partners of any of the Partnerships for a vote, including,
but not limited to, the transfer of interests in any of the Partnerships by
the other partners.

<PAGE>

Each of the Power of Attorney and Proxy and all authority granted
hereby shall be coupled with an interest and therefore shall be irrevocable
and shall not be terminated by any act of Contributor, by operation of law or
by the occurrence of any other event or events, and if any other such act or
events shall occur before the completion of the transactions contemplated by
this Contribution Agreement, the Attorney-in-Fact shall nevertheless be
authorized and directed to complete all such transactions as if such other
act or events had not occurred and regardless of notice thereof. Contributor
agrees that, at the request of Operating Partnership it will promptly execute
a separate power of attorney and proxy on the same terms set forth in this
ARTICLE 6, such execution to be witnessed and notarized. Contributor hereby
authorizes the reliance of third parties on each of the Power of Attorney and
Proxy.

Contributor acknowledges that the Operating Partnership has, and
any designee or successor thereof acting as Attorney-in-Fact may have, an
economic interest in the transactions contemplated by this Contribution
Agreement.

6.2 LIMITATION ON LIABILITY

It is understood that the Attorney-in-Fact assumes no
responsibility or liability to any person by virtue of the Power of Attorney
or Proxy granted by Contributor hereby. The Attorney-in-Fact makes no
representations with respect to and shall have no responsibility for the
Formation Transactions or the Public Offering, or the acquisition of the
Partnership Interest by the Operating Partnership and shall not be liable for
any error or judgement or for any act done or omitted or for any mistake of
fact or law except for its own gross negligence or bad faith. Contributor
agrees to indemnify the Attorney-in-Fact for and to hold the Attorney-in-Fact
harmless against any loss, claim, damage or liability incurred on its part
arising out of or in connection with it acting as the Attorney-in-Fact under
the Power of Attorney or Proxy created by Contributor hereby, as well as the
cost and expense of investigating and defending against any such loss, claim,
damage or liability, except to the extend such loss, claim, damage or
liability is due to the gross negligence or bad faith of the
Attorney-in-Fact. Contributor agrees that the Attorney-in-Fact may consult
with counsel of its own choice (who may be counsel for Operating Partnership
or its successors or affiliates), and it shall have full and complete
authorization and protection for any action taken or suffered by it hereunder
in good faith and in accordance with the opinion of such counsel. It is
understood that the Attorney-in-Fact may, without breaching any express or
implied obligation to Contributor hereunder, release, amend or modify any
other power of attorney or proxy granted by any other person under any
related agreement.

7. MISCELLANEOUS

7.1 FURTHER ASSURANCES. The Contributor shall take such other
actions and execute such additional documents following the Closing as the
Operating Partnership may reasonably request in order to effect the
transactions contemplated hereby.

<PAGE>

7.2 COUNTERPARTS. This Contribution Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.

7.3 GOVERNING LAW. This Contribution Agreement shall be governed
by the internal laws of the State of California, without regard to the choice
of laws provisions thereof.

7.4 NOTICES. Any notice to be given hereunder by any party to the
other shall be given in writing by personal delivery or by registered or
certified mail, postage prepaid, return receipt requested, and shall be
deemed communicated as of the date of personal delivery (including delivery
by overnight courier). Mailed notices shall be addressed as set forth below,
but any party may change the address set forth below by written notice to
other parties in accordance with this paragraph.

To the Contributor:

Richard S. Ziman
c/o Arden Realty Group, Inc.
9100 Wilshire Boulevard, Suite 700E
Beverly Hills, CA 90212

To the Operating Partnership:

Arden Realty Group Limited Partnership
c/o Arden Realty Group, Inc.
9100 Wilshire Boulevard, Suite 700E
Beverly Hills, CA 90212

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Contribution
Agreement as of the date first written above.

"OPERATING PARTNERSHIP"

ARDEN REALTY GROUP LIMITED
PARTNERSHIP,
a Maryland limited partnership

By: ARDEN REALTY GROUP, INC.,
a Maryland Corporation,
general partner

By: /s/ Richard S. Ziman
---------------------------
Name: Richard S. Ziman
-------------------------
Title: Chairman/CEO
------------------------

"CONTRIBUTOR"

RICHARD S. ZIMAN,
an individual

By: /s/ Richard S. Ziman
--------------------------------

<PAGE>

EXHIBIT A
to
CONTRIBUTION AGREEMENT

CONSTITUENT INTERESTS OF CONTRIBUTOR'S PARTNERSHIP INTEREST

Properties Held by the Minimum
Partnerships Partnerships Consideration
- -------------------- -------------------------- ---------------

1950 Sawtelle 1950 Sawtelle $ 168,403
Associates, L.P. Boulevard
- -------------------- ---------------------------- ---------------
LAOP IV, LLC 5601 Lindero Canyon; $3,671,678
Westwood Terrace;
Calabasas Commerce Center;
The New Wilshire;
70 South Lake;
Skyview Center;
4811 Airport Plaza Drive;
4900/10 Airport Plaza Drive
- -------------------- ---------------------------- ---------------
LAOP V, LLC 5832 Bolsa Avenue; $ 979,670
400 Corporate Pointe;
9665 Wilshire Boulevard;
Imperial Bank Tower
- -------------------- ---------------------------- ---------------

Arden Broadway 100 West Broadway $4,459,544
Associates, LLC

Total Minimum
Consideration $9,279,295
---------------
---------------

A-1

<PAGE>

EXHIBIT B
to
CONTRIBUTION AGREEMENT

CONTRIBUTION AND ASSUMPTION AGREEMENT

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, the undersigned hereby assigns, transfers,
contributes and conveys to ARDEN REALTY GROUP LIMITED PARTNERSHIP, a Maryland
limited partnership (the "Operating Partnership"), its entire legal and
beneficial right, title and interest in and to _______________________, a
________________________ (the "Partnership"), including, without limitation,
all right, title and interest, if any, of the undersigned in and to the
assets of the Partnership and the right to receive distributions of money,
profits and other assets from the Partnership, presently existing or
hereafter at any time arising or accruing (such right, title and interest are
hereinafter collectively referred to as the "Partnership Interest"), TO HAVE
AND TO HOLD the same unto the Operating Partnership, its successors and
assigns, forever.

Upon the execution and delivery hereof, the Operating Partnership
assumes all obligations in respect of the Partnership Interest.

The Partnership owns certain real property as described in Attachment
"1" attached hereto.

Executed: _____ __, 1996

By:
--------------------------
Richard S. Ziman

B-1

<PAGE>

EXHIBIT C
to
CONTRIBUTION AGREEMENT

Order No.
Escrow No.
Loan No.

WHEN RECORDED MAIL TO:

- -------------------------------------------------------------------------------
MAIL TAX STATEMENTS TO: SPACE ABOVE THIS LINE FOR RECORDER'S USE

DOCUMENTARY TRANSFER TAX $ ....................

..... Computed on the consideration or value of
property conveyed; OR

..... Computed on the consideration or value
less liens or encumbrances remaining at
time of sale.

-----------------------------------------------
Signature of Declarant of Agent determining
tax - Firm Name
- -------------------------------------------------------------------------------
QUITCLAIM DEED

FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,

do(es) hereby REMISE, RELEASE and FOREVER QUITCLAIM to

Arden Realty Group Limited Partnership, a Maryland limited partnership

the real property in the City of ___________, County of ___________, State of
California, described as

Dated __________________________ ________________________________

STATE OF CALIFORNIA } ________________________________
}
COUNTY OF _________________ } ________________________________

On _________________ before me,
______________________________,
personally appeared ___________
_______________________________
personally known to me (or proved to me on
the basis of satisfactory evidence) to be
the person(s) whose names(s) is/are
subscribed to the within instrument and
acknowledged to me that he/she/they
executed the same in his/her/their
authorized capacity(ies), and that by
his/her/their signature(s) on the
instrument the person(s) or the entity upon
behalf of which the person(s) acted,
executed the instrument.

WITNESS my hand and official seal.

Signature ___________________________ (This area for official notarial seal)

C-1

<PAGE>

EXHIBIT D
TO
CONTRIBUTION AGREEMENT

REPRESENTATIONS, WARRANTIES AND INDEMNITIES

ARTICLE 1 - ADDITIONAL DEFINED TERMS

For purposes of this EXHIBIT D, the following terms have the
meanings set forth below. Terms which are not defined below shall have the
meaning set forth for those terms as defined in the Contribution Agreement to
which this EXHIBIT D is attached:

ACTIONS: Means all actions, complaints, charges, accusations,
investigations, petitions, suits or other proceedings, whether civil or
criminal, at law or in equity, or before any arbitrator or Governmental
Entity.

CLAIMS: Means claims, disputes, actions, suits, arbitrations,
proceedings or investigations (collectively "Claims") pending or, to
Knowledge, threatened that directly or indirectly affect any of the
Contributor, the Partnerships or the Properties.

CONTAMINATION: Means emissions, discharges, releases or threatened
releases of "Hazardous Materials," substances, pollutants, contaminants or
hazardous or toxic substances, materials or wastes whether solid, liquid or
gaseous in nature, into the air, surface water, ground water or land, or
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of substances, pollutants,
contaminants or hazardous or toxic substances, materials, or wastes, whether
solid, liquid or gaseous in nature.

CONTRIBUTION AGREEMENT: Means the Contribution Agreement to which
this EXHIBIT D is attached.

ENVIRONMENTAL LAW: Means all applicable statutes, regulations,
rules, ordinances, codes, licenses, permits, orders, demands, approvals,
authorizations and similar items of all governmental agencies, departments,
commissions, boards, bureaus or instrumentalities of the United States,
states and political subdivisions thereof and all applicable judicial,
administrative and regulatory decrees, judgments and orders relating to the
protection of human health or the environment as in effect on the Closing
Date, including all requirements as of the Closing Date, including but not
limited to those pertaining to reporting, licensing, permitting,
investigation, removal and remediation of Contamination, including without
limitation: (x) the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 ET SEQ.), the Resource Conservation
and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the Clean Air Act (42
U.S.C. Section 7401 ET SEQ.), the Federal Water Pollution Control Act (33
U.S.C. Section 1251), the Safe Drinking Water Act (42 U.S.C. 300f ET SEQ.),
the Toxic Substances Control Act (15 U.S.C. 2601 ET SEQ.), the Endangered
Species Act (16 U.S.C. 1531 ET SEQ.), the Emergency Planning

D-1

<PAGE>

and Community Right-to-Know Act of 1986 (42 U.S.C: 11001 ET SEQ.), and (y)
applicable state and local statutory and regulatory schemes pertaining to
hazardous materials.

GOVERNMENTAL ENTITY: Means any government or agency, bureau,
board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state
or local, domestic or foreign.

HAZARDOUS MATERIAL: Means any substance:

(i) the presence of which requires investigation or remediation
under any Environmental Law action or policy, administrative request or
civil complaint under the foregoing or under common law; or

(ii) which is controlled, regulated or prohibited under any
Environmental Law as in effect as of the Closing Date, including the
Comprehensive Environmental Response, Compensation and Liability Act (42
U.S.C. Section 9601 ET SEQ.) and the Resource Conservation and Recovery Act
(42 U.S.C. Section 6901 ET SEQ.); or

(iii) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and
as of the Closing Date is regulated by any governmental authority, agency,
department, commission, board, agency or instrumentality of the United
States, or any state or any political subdivision thereof having or
asserting jurisdiction over the Properties; or

(iv) the presence of which on, under or about, a Property poses a
hazard to the health or safety of persons on or about such Property; or

(v) which contains gasoline, diesel fuel or other petroleum
hydrocarbons, polychlorinated biphenyls (PCBs) or asbestos or
asbestos-containing materials or urea formaldehyde foam insulation; or

(vi) radon gas.

INDEMNIFYING PARTY: Means any party required to indemnify any
other party under ARTICLE 3.2 of this EXHIBIT D or under the indemnification
provisions substantially identical to ARTICLE 3.2 hereof in the other
Portfolio Agreements.

KNOWLEDGE: Means, with respect to any representation or warranty
so indicated, the actual knowledge, upon reasonable investigation and inquiry
in good faith, of the signatory to the Contribution Agreement.

KNOWN CONTAMINATION: Means Contamination currently existing on or
affecting the applicable Property as of the Closing, AND which such
Contamination is disclosed in

D-2

<PAGE>

environmental reports received by the Contributor or the Partnerships on or
before the Closing (the "ENVIRONMENTAL REPORTS");

LIENS: Means, with respect to any real and personal property, all
mortgages, pledges, liens, options, charges, security interests,
restrictions, prior assignments, encumbrances, covenants, encroachments,
assessments, rights of others, licenses, easements, liabilities or claims of
any kind or nature whatsoever, direct or indirect, including, without
limitation, interests in or claims to revenues generated by such property.

OP UNITS: Shall have the meaning set forth in the OP Agreement.

PERMITTED LIENS: Means (a) Liens, or deposits made to secure the
release of such Liens, securing taxes, the payment of which is not delinquent
or the payment of which is actively being contested in good faith by
appropriate proceedings diligently pursued;

(b) Zoning laws and ordinances generally applicable to the
districts in which the Properties are located which are not violated by the
existing structures or present uses thereof;

(c) Liens imposed by laws, such as carriers', warehousemen's and
mechanics' liens, and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due
or which are being contested in good faith by appropriate proceedings
diligently pursued;

(d) non-exclusive easements for public utilities, minor
encroachments, rights of access or other non-monetary matters that do not
have a material adverse effect upon, or materially interfere with the use of,
the Properties; and

(e) any exceptions contained in the Title Policies.

PERSON: Means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or governmental entity.

PORTFOLIO AGREEMENTS: Means the agreements, including the
Contribution Agreement, listed on ATTACHMENT "1" hereto, which contemplate
the transfer of partnership and/or limited liability company membership
interests in certain of the Participating Partnerships and LLCs from any
entity directly or indirectly owned by Contributor to the Company and the
Operating Partnership.

PROSPECTUS: Means the Company's Form S-11 Registration Statement.

REIT SHARES: Shall have the meaning set forth in the OP Agreement.

D-3

<PAGE>

ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR

The Contributor represents and warrants to the Operating
Partnership as set forth below in this ARTICLE 2. Notwithstanding any other
provision of the Contribution Agreement or this EXHIBIT D, the Contributor
makes representations, warranties and indemnities only with respect to: (i)
the Properties identified on EXHIBIT A to the Contribution Agreement (the
"Property" or the "Properties"), and (ii) the interests in the Partnerships
to be transferred by the Contributor.

2.1 ORGANIZATION; AUTHORITY. The Contributor (A) if a natural
person, has the legal capacity to enter the Contribution Agreement; if not a
natural person, is duly formed, validly existing and in good standing (to the
extent applicable) under the laws of the jurisdiction of its formation, and
(B) has all requisite power and authority to own, lease or operate its
property and to carry on its business as presently conducted and, to the
extent required under applicable law, is qualified to do business and is in
good standing in each jurisdiction in which the nature of its business or the
character of its property make such qualification necessary.

2.2 DUE AUTHORIZATION. The execution, delivery and performance of
the Contribution Agreement by the Contributor has been duly and validly
authorized by all necessary action of the Contributor. This Contribution
Agreement and each agreement, document and instrument executed and delivered
by or on behalf of the contributor pursuant to this contribution Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of the Contributor, each enforceable against the
Contributor in accordance with its terms, as such enforceability may be
limited by bankruptcy or the application of equitable principles.

2.3 CONSENTS AND APPROVALS. No consent, waiver, approval or
authorization of any third party is required to be obtained by the
Contributor in connection with the execution, delivery and performance of the
Contribution Agreement and the transactions contemplated hereby, except any
of the foregoing that shall have been satisfied prior to the Closing Date.

2.4 OWNERSHIP OF THE PARTNERSHIP INTERESTS. The Contributor is
the sole owner of the Partnership Interest and has good and valid title to
such Partnership Interest, free and clear of all Liens, other than Permitted
Liens.

2.5 PARTNERSHIP INTEREST. The Partnership Interest constitutes
all of the issued and outstanding interests owned by the Contributor in the
Partnerships. The Partnership Interest is validly issued, fully paid and
non-assessable, and was not issued in violation of any preemptive rights.
The Partnership Interest has been issued in compliance with applicable law
and the relevant Partnership Agreements (as then in effect). There are no
rights, subscriptions, warrants, options, conversion rights, preemptive
rights or agreements of any kind outstanding to purchase or to otherwise
acquire any of the interests which comprise the Partnership Interest or any
securities or obligations of any kind convertible into any of the interests
which comprise the Partnership Interest or other equity interests or profit
participation of any kind in the

D-4

<PAGE>

Partnerships. At the Closing, upon receipt of the consideration, the
Contributor will have transferred the Partnership Interest free and clear of
all security interests, mortgages, pledges, liens, encumbrances, claims and
equities to the Operating Partnership.

2.6 NO VIOLATION. None of the execution, delivery or performance
of the Contribution Agreement and the transactions contemplated hereby does
or will, with or without the giving of notice, lapse of time, or both, (i)
violate, conflict with, result in a breach of, or constitute a default under
or give to others any right of termination or cancellation of (A) the
organizational documents, including the charters and bylaws, if any, of the
Contributor, (B) any material agreement, document or instrument to which the
Contributor is a party or by which the Contributor or its Property is bound
or (C) any term or provision of any judgment, order, writ, injunction, or
decree of any governmental or regulatory authority binding on the Contributor
or by which the Contributor or any of its assets or properties are bound or
subject or (ii) result in the creation of any Lien, other than a Permitted
Lien, upon the Property or the Partnership Interest.

2.7 NON-FOREIGN STATUS. The Contributor is not a foreign person,
foreign corporation, foreign partnership, foreign trust or foreign estate (as
defined in the Code), and is, therefore, not subject to the provisions of the
Code relating to the withholding of sales proceeds to foreign persons.

2.8 WITHHOLDING. The Contributor shall execute at Closing such
certificates or affidavits reasonably necessary to document the
inapplicability of any federal or state withhoding provisions, including
those referred to in ARTICLE 2.7 above and similar provisions under
California law. If Contributor fails to provide such certificates or
affidavits, the Operating Partnership may withhold a portion of any payments
otherwise to be made to the Contributor as required by the Code or California
law.

2.9 INVESTMENT PURPOSES. The Contributor acknowledges his, her or
its understanding that the offering and sale of the OP Units to be acquired
pursuant to the Contribution Agreement are intended to be exempt from
registration under the Securities Act of 1933, as amended and the rules and
regulations in effect thereunder (the "ACT"). In furtherance thereof, the
Contributor represents and warrants to the Company as follows:

2.9.1 INVESTMENT. The Contributor is acquiring the OP Units
solely for his, her or its own account for the purpose of investment and not
as a nominee or agent for any other person and not with a view to, or for
offer or sale in connection with, any distribution of any thereof. The
Contributor agrees and acknowledges that he, she or it will not, directly or
indirectly, offer, transfer, sell, assign, pledge, hypothecate or otherwise
dispose of (hereinafter, "TRANSFER") any of the OP Units unless (i) the
Transfer is pursuant to an effective registration statement under the Act and
qualification or other compliance under applicable blue sky or state
securities laws, or (ii) counsel for the Contributor (which counsel shall be
reasonably acceptable to the Operating Partnership) shall have furnished the
Operating Partnership with an opinion, reasonably satisfactory in form and
substance to the Operating Partnership to the effect that no

D-5

<PAGE>

such registration is required because of the availability of an exemption
from registration under the Act and qualification or other compliance under
applicable blue sky or state securities laws.

2.9.2 KNOWLEDGE. The Contributor is knowledgeable,
sophisticated and experienced in business and financial matters; the
Contributor has previously invested in securities similar to the OP Units and
fully understands the limitations on transfer imposed by the Federal
securities laws and as described in the Contribution Agreement. The
Contributor is able to bear the economic risk of holding the OP Units for an
indefinite period and is able to afford the complete loss of his, her or its
investment in the OP Units; the Contributor has received and reviewed all
information and documents about or pertaining to the Company, the Operating
Partnership, the business and prospects of the Company and the Operating
Partnership and the issuance of the OP Units as the Contributor deems
necessary or desirable, and has been given the opportunity to obtain any
additional information or documents and to ask questions and receive answers
about such information and documents, the Company, the Operating Partnership,
the business and prospects of the Company and the Operating Partnership and
the OP Units which the Contributor deems necessary or desirable to evaluate
the merits and risks related to his, her or its investment in the OP Units;
and the Contributor understands and has taken cognizance of all risk factors
related to the purchase of the OP Units.

2.9.3 HOLDING PERIOD. The Contributor acknowledges that he,
she or it has been advised that (i) the OP Units and the common stock of the
Company into which the OP Units may be exchanged in certain circumstances
(the "COMMON STOCK") must be held indefinitely, and the Contributor must
continue to bear the economic risk of the investment in the OP Units (and any
Common Stock that might be exchanged therefor) unless they are subsequently
registered under the Act or an exemption from such registration is available,
(ii) a restrictive legend in the form hereafter set forth shall be placed on
the certificates representing the OP Units (and any Common Stock that might
be exchanged therefor), and (iii) a notation shall be made in the appropriate
records of the Operating Partnership (and the Company) indicating that the OP
Units (and any Common Stock that might be exchanged therefor) are subject to
restrictions on transfer.

2.9.4 ACCREDITED INVESTOR. If the Contributor is an
individual, such individual is an "accredited investor" (as such term is
defined in Rule 501(a) of Regulation D under the Act) and as such:

(i) is a director or executive officer of the Company; or

(ii) has an individual net worth, or joint net worth with his
or her spouse, in excess of $1,000,000; or

(iii) had an individual annual adjusted gross income in
excess of $200,000 in each of the two most recent years and reasonably
expects to have annual adjusted gross income in excess of $200,000 in the
current year; or

D-6

<PAGE>

(iv) had a joint income with his spouse in excess of
$300,000 in each of the two most recent years and reasonably expects to have
an annual adjusted gross income, with his spouse, in excess of $300,000 in
the current year.

If the Contributor is not an individual, it is an "accredited
investor" (as such term is defined in Rule 501(a) of Regulation D under the
Act).

2.9.5 LEGENDING. Each certificate representing the OP Units
(and any Common Stock that might be exchanged therefor) shall bear the
following legend:

THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION, UNLESS THE TRANSFEROR DELIVERS TO THE COMPANY
AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT THE
PROPOSED SALE, TRANSFER OR OTHER DISPOSITION MAY BE EFFECTED WITHOUT
REGISTRATION UNDER THE ACT AND UNDER APPLICABLE STATE SECURITIES OR "BLUE
SKY" LAWS.

In addition, the Common Stock for which the OP Units might be
exchanged shall also bear a legend which generally provides the following:

D-7

<PAGE>

LIMITATIONS MUST IMMEDIATELY NOTIFY THE CORPORATION. IF ANY OF THE
RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE VIOLATED, THE COMMON STOCK
REPRESENTED HEREBY WILL BE AUTOMATICALLY TRANSFERRED TO A TRUSTEE OF A
TRUST FOR THE BENEFIT OF ONE OR MORE CHARITABLE BENEFICIARIES. IN
ADDITION, THE CORPORATION MAY REDEEM SHARES UPON THE TERMS AND CONDITIONS
SPECIFIED BY THE BOARD OF DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF
DIRECTORS DETERMINES THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY
VIOLATE THE RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE
OF CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS
DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL CAPITALIZED TERMS IN THIS
LEGEND HAVE THE MEANINGS DEFINED IN THE CHARTER OF THE CORPORATION, AS THE
SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING THE
RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF
COMMON STOCK ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY
BE DIRECTED TO THE SECRETARY OF THE CORPORATION.

2.10 COMPLIANCE WITH LAWS. In connection with the conduct of the
Properties, to Knowledge, the Partnerships have complied and on the date
hereof do substantially comply in all material respects with all applicable
laws, ordinances, rules and regulations, whether federal, state or local,
foreign, statutory or common, and neither the Partnerships nor, to Knowledge,
any third party have been informed of any material violation of any such
laws, rules or regulations, or that any investigation has been commenced or
is contemplated respecting any such possible violation.

2.11 EMINENT DOMAIN. There is no existing or, to Knowledge,
proposed or threatened condemnation, eminent domain or similar proceeding, or
private purchase in lieu of such a proceeding, which would affect the
Properties in any material respect and of which the Contributor has knowledge.

2.12 LICENSES AND PERMITS. To Knowledge, all material notices,
licenses, permits, certificates and authority required in connection with the
construction, use, occupancy, management, leasing and operation of the
Properties have been obtained, are in full force and effect, are in good
standing and (to the extent required pursuant to the transactions
contemplated hereby) are assignable to the Operating Partnership. Neither
the Partnerships, nor, to Knowledge, any third party has taken any action
that would (or failed to take any action the omission of which would) result
in the revocation of such notices, licenses, permits, certificates and
authority, that would have a material adverse effect, nor has any of them
received any written notice of violation from any Governmental Entity or
written notice of the intention of any entity to revoke any of them, that in
each case has not been cured or otherwise resolved to the satisfaction of
such Governmental Entity.

D-8

<PAGE>

2.13 TAXES. For federal income tax purposes, the Partnerships are,
and at all times during their existence have been, partnerships (rather than
associations or publicly traded partnerships taxable as corporations). The
Partnerships have filed all tax returns required to be filed by them and have
paid all taxes required to be paid by them. The transactions contemplated
hereby will not result in any tax liability to the Partnerships, the Company
or the Operating Partnership. No tax lien or other charge exists or will
exist upon consummation of the transactions contemplated hereby with respect
to any Property except such tax liens for which the tax is not due and has
been reserved for payment by the Partnerships or tax liens or other charges
which individually or in the aggregate are immaterial in amount.

2.14 MECHANICS' LIENS. All material bills and claims for labor
performed and materials furnished to or for the benefit of the Properties
have been paid in full (or otherwise provided for), and there are no material
mechanics' or materialmen's liens (whether or not perfected) affecting the
Properties.

2.15 REAL PROPERTY.

(a) None of the Contributor, the Partnerships, nor, to Knowledge, any
other party to any agreement affecting any portion of the Properties, has
given or received any notice of default with respect to any material term
or condition of any agreement affecting the Properties, including, without
limitation any ground lease which would have a material adverse effect,
and, no event has occurred or, to Knowledge, is threatened, which would
have a material adverse effect and which through the passage of time or the
giving of notice, or both, would constitute a material default thereunder
or would cause the acceleration of any material obligation of any party
thereto or the creation of a Lien upon any asset of the Contributor or the
Partnerships, except for Permitted Liens. For purposes of this ARTICLE
2.15, the term "material agreement" shall be defined with reference to the
Property to which such agreement relates, and shall include, without
limitation, any agreement which is not terminable by the Company upon 90
days prior written notice. To Knowledge, such agreements are valid and
binding and in full force and effect, have not been materially amended,
modified or supplemented since such time as such agreements were made
available to the Company, except for such amendments, modifications and
supplements delivered to the Company, and there are no other material
agreements with any third parties affecting the Properties which will
survive the Closing and be binding on the Company.

(b) All permits which are necessary for the operation of the
Properties upon the consummation of the transactions contemplated hereby in
all material respects (i) shall remain in full force and effect and (ii)
permit the Properties to be operated in compliance with all laws, rules,
codes and regulations.

(c) As presently conducted, the operation of the buildings, fixtures
and other improvements located on the Properties is not in violation in any
material respect of any applicable building code, zoning ordinance or other
law or regulation, except for any

D-9

<PAGE>

such violations which individually or in the aggregate would not have a
material adverse effect on the Operating Partnership.

(d) Except for Known Contamination (i) to Knowledge there is
presently no noncompliance, liability or other Claim (as defined herein) in
connection with Environmental Laws relating to the Properties; (ii) no
notices of any violation or alleged violation of any Environmental Laws
relating to the Properties or their use have been received by any present
owner, or, to Knowledge, by any prior owner, operator or occupant of the
applicable Property, and (iii) there are no writs, injunctions, decrees,
orders or judgments outstanding, or any Claims pending or threatened,
relating to the ownership, use, maintenance or operation of the Properties.
Any instances of noncompliance, notices of violations, and writs,
injunctions, decrees, orders or judgments which may exist or may be
outstanding are of the type that individually or in the aggregate would not
have a material adverse effect on the Operating Partnership.

(e) All material reports of environmental surveys, audits,
investigations and assessments relating to the Properties, including, but
not limited to, the Environmental Reports in the possession or control of
the Contributor or its affiliates have been disclosed to the Operating
Partnership.

(f) Except as has been disclosed in writing to the Operating
Partnership prior to the Closing, to Knowledge and except as would not have
a material adverse effect, all material permits and licenses required under
any Environmental Laws in respect of the operation of the Properties have
been obtained or are in the process of being obtained, and the Properties
are in compliance, in all material respects, with the terms and conditions
of such permits and licenses.

2.16 TRADEMARKS AND TRADENAMES; PROPRIETARY RIGHTS.

(a) There are no actions or other judicial or administrative
proceedings involving any of the Contributor, the Partnerships, or the
Properties pending, or to Knowledge, threatened, that concern any
copyrights, copyright application, trademarks, trademark registrations,
trade names, service marks, service mark registrations, trade names and
trade name registrations or any trade secrets being transferred to the
Operating Partnership hereunder (the "PROPRIETARY RIGHTS"). There are no
patents or patent applications relating to the operations of the Properties
as conducted prior to the Closing.

(b) The Contributor has the right and authority to use each
Proprietary Right necessary in connection with the operation of the
Properties in the manner in which it is currently used, and to convey such
right and authority to the Operating Partnership at the Closing. The
current use of the Proprietary Rights does not, and to Knowledge, such use
did not, conflict with, infringe upon or violate any copyright, trade
secret, trademark or registration of any other person.

D-10

<PAGE>

(c) There are no outstanding or, to Knowledge, threatened disputes or
disagreements with respect to any Proprietary Right or any license,
contract, agreement or other commitment, written or oral, relating to the
same.

2.17 LITIGATION AND CLAIMS.

(a) There are no Claims which could reasonably be anticipated to
result in damages in excess of $50,000 pending or, to Knowledge, threatened
that directly or indirectly affect the Contributor, the Partnerships, the
Properties or the Formation Transactions, nor has any such claim been
pending or, to Knowledge, threatened as of the Closing.

(b) None of the Contributor, the Partnerships or the Properties are
operating under, subject to or in default with respect to any decision,
order, writ, injunction or decree of any court or federal, state or
municipal entity or other Governmental Entity.

2.18 NO BROKERS. Neither the Contributor nor any of its respective
officers, directors or employees has employed or made any agreement with any
broker, finder or similar agent or any person or firm which will result in
the obligation of the Operating Partnership or any of its affiliates to pay
any finder's fee, brokerage fees or commissions or similar payment in
connection with the transactions contemplated by the Contribution Agreement.

2.19 SOLVENCY. The Contributor has been and will be solvent at all
times prior to and immediately following the transfer of the Partnership
Interest to the Operating Partnership.

2.20 NO MISREPRESENTATIONS. No representation, warranty or
statement made, or information provided, by the Contributor in the
Contribution Agreement or in any other document or instrument furnished or to
be furnished by or on behalf of the Contributor pursuant hereto or as
contemplated hereby (i) contains or will contain any untrue statement of a
material fact or (ii) omits or will omit to state a material fact necessary
to make the statements contained herein or therein not misleading. For
purposes of the preceding sentence, materiality shall be determined with
reference to the total portfolio of real properties and other interests to be
transferred pursuant to the Portfolio Agreements.

2.21 TITLE TO ASSETS. Upon consummation of the Formation
Transactions, the Operating Partnership's title to the Properties will be
free and clear of any Liens, encumbrances, debts, charges, liabilities or
obligations except for Permitted Liens.

2.22 PARTNERS/MEMBERS. The Contributor has made available to the
Operating Partnership a true and accurate list of all of the Partners or
members, as applicable, of the Partnerships that own, directly or indirectly,
an interest in any of the Properties, together with their percentage
interests in each Partnership.

D-11

<PAGE>

2.23 CONDITION OF PROPERTY. To Knowledge, and except as set forth
in the structural reports prepared for the Properties and delivered to the
Operating Partnership in connection with the Formation Transactions, there is
no material defect in the condition of any Property, the improvements
thereon, the structural elements thereof and the mechanical systems thereon,
nor any material damage from casualty or other cause, nor any soil condition
of any Property that will not support all of the improvements thereon without
the need for unusual or new subsurface excavations, fill, footings, caissons
or other installations, except for any such defect, damage or condition that
has been corrected or will be corrected in the ordinary course of the
business of the Property as part of its scheduled annual maintenance and
improvement program. To Knowledge, there have been no alterations to the
exteriors of any of the buildings or other improvements on any Property that
would render any surveys provided to the Company in connection with the
Formation Transactions grossly inaccurate or otherwise reflect a material
deficiency in title to such improvements.

ARTICLE 3 - INDEMNIFICATION

3.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDY FOR BREACH.

(a) Subject to ARTICLE 3.6, all representations and warranties
contained in this EXHIBIT D or in any Schedule or certificate delivered
pursuant hereto shall survive the Closing.

(b) Notwithstanding anything to the contrary in the Contribution
Agreement or this EXHIBIT D, no party hereto shall be liable under this
EXHIBIT D or the Contribution Agreement for monetary damages (or otherwise)
for breach of any of its representations and warranties contained in this
EXHIBIT D or the Contribution Agreement, or in any Schedule, certificate or
affidavit delivered by it pursuant thereto, other than pursuant to the
succeeding provisions of this ARTICLE 3.

3.2 GENERAL INDEMNIFICATION.

(a) The Contributor shall indemnify and hold harmless the
Operating Partnership, the Company, and their affiliates and each of their
respective directors, officers, employees, agents, representatives and
affiliates (each of which is an "INDEMNIFIED PARTY") from and against any and
all claims, losses, damages, liabilities and expenses, including, without
limitation, amounts paid in settlement, reasonable attorneys' fees, costs of
investigation and remediation, costs of investigative, judicial or
administrative proceedings or appeals therefrom, and costs of attachment or
similar bonds (collectively, "LOSSES"), asserted against, imposed upon or
incurred by the Indemnified Party in connection with or as a result of any
breach of a representation or warranty of the Contributor contained in the
Contribution Agreement or in any Schedule, certificate or affidavit delivered
by the Contributor pursuant to the Contribution Agreement.

D-12

<PAGE>

(b) The Contributor shall indemnify and hold harmless the
Indemnified Parties from and against any and all Losses, asserted against,
imposed upon or incurred by the Indemnified Parties in connection with or as
a result of:

(i) any liabilities or obligations (other than the liabilities
assumed by the Indemnified Parties under the Contribution Agreement)
incurred, arising from or out of, in connection with or as a result of any
Claims made or Actions brought by or against the Operating Partnership or
any Indemnified Party that arise from or out of, in connection with or as a
result of the operation or ownership of the Properties prior to the Closing
Date, to the extent that such Losses arise from or are related to events,
conditions, actions or omissions occurring prior to the Closing Date,
exclusive of any Losses resulting directly or indirectly from
Contamination;

(ii) all fees and expenses of the Contributor in connection
with the transactions contemplated by the Contribution Agreement;

(iii) any liabilities or obligations incurred, arising from
or out of, in connection with or as a result of the failure of the
Contributor to obtain all consents required to consummate the transactions
contemplated by the Contribution Agreement; or

(iv) any liabilities or obligations of the Contributor or the
Partnerships arising from or out of or in connection with or as a result of
the operation or ownership of any property or asset, other than the
Properties, including properties or assets which may have been owned and
sold by the Contributor or the Partnerships prior to the date hereof.

3.3 PAYMENT OF INDEMNIFICATION. The Contributor may satisfy its
obligations hereunder by the prompt delivery (paid promptly as and when
expenses are incurred) to an Indemnified Party of OP Units, subject to the
limits on ownership and transfer of REIT shares set forth in the Company's
articles of incorporation. Any OP Units delivered to an Indemnified Party
hereunder shall be valued based upon the initial public offering price of the
Company's Common Stock.

D-13

<PAGE>

the Contributor, at its option and expense, to assume the defense of any such
claim by counsel selected by the Contributor and reasonably satisfactory to
the Indemnified Party, and to settle or otherwise dispose of the same;
PROVIDED, HOWEVER, that the Indemnified Party may at all times participate in
such defense at its expense; and PROVIDED FURTHER, HOWEVER, that the
Contributor shall not, in defense of any such claim, except with the prior
written consent of the Indemnified Party in its sole and absolute discretion,
consent to the entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff in question to the Indemnified Party and its affiliates a release
of all liabilities in respect of such claims, or that does not result only in
the payment of money damages. If the Contributor shall fail to undertake
such defense within 30 days after such notice, or within such shorter time as
may be reasonable under the circumstances, then the Indemnified Party shall
have the right to undertake the defense, compromise or settlement of such
liability or claim on behalf of and for the account of the Contributor.

3.5 LIMITATIONS ON AND THRESHOLD FOR INDEMNIFICATION UNDER
ARTICLE 3.2.

(a) The Contributor shall not be liable under ARTICLE 3.2 hereof
unless and until the aggregate amount recoverable from Indemnifying Parties
under the indemnification provisions substantially identical to ARTICLE 3.2
in one or more of the Portfolio Agreements exceeds $200,000; PROVIDED,
HOWEVER, that once the total amount recoverable from Indemnifying Parties
under such provisions exceeds $200,000 in the aggregate, the Contributor's
obligation under ARTICLE 3.2 hereof shall be for the full amount of such
obligation.

(b) Notwithstanding anything contained herein to the contrary, the
Contributor shall not be liable or obligated to make payments under this
ARTICLE 3 with respect to any Property or Partnership Interest to the extent
such payments in the aggregate would exceed the value of the OP Units (based
upon the initial public offering price of the Common Stock) received by the
Contributor at the Closing. Notwithstanding anything contained herein to the
contrary, the Indemnified Parties shall look first to the Contributor's OP
Units for indemnification under this ARTICLE 3 and then to the Contributor's
other assets.

3.6 LIMITATION PERIOD.

(a) Notwithstanding the foregoing, any claim for indemnification
under ARTICLE 3.2 hereof must be asserted in writing by the Indemnified
Party, stating the nature of the Losses and the basis for indemnification
therefor:

(i) within one year after the Closing in the case of a claim
under ARTICLE 3.2 hereof (other than a claim under ARTICLE 3.2(a) based
upon a breach of the representations, and warranties of the Contributor set
forth in ARTICLE 2.13 hereof as specified below; and

D-14

<PAGE>

(ii) prior to the expiration of the applicable statutes of
limitations in the case of a claim under ARTICLE 3.2(a) based upon a breach
of the representations and warranties of the Contributor set forth in
ARTICLE 2.13 hereof.

(b) If so asserted in writing prior to the applicable expiration
date, such claims for indemnification shall survive until resolved by mutual
agreement between the Contributor and the Indemnified Party or by judicial
determination. Any claim for indemnification not so asserted in writing
prior to the applicable expiration date shall not thereafter be asserted and
shall forever be waived.

3.7 RESERVATION OF CONTRIBUTOR RIGHTS.

Notwithstanding anything else in this Contribution Agreement or any
Portfolio Agreement to the contrary, the Contributor reserves unto itself all
rights and remedies (including rights to seek contribution) against any third
party indemnitors, prior property owners or occupants, and contributors to
any Contamination, for which the Partnerships have been indemnified by the
Contributor hereunder. To the extent the Contributor's rights against any
such third party owners, occupants, indemnitors or contributors may be
materially prejudiced by actions or inactions by any owner or occupant of the
Properties after the Closing, the Contributor's indemnity obligation shall be
reduced in accordance with the effect of the actions or inactions which so
prejudiced the Contributor's rights.

D-15

<PAGE>

ATTACHMENT 1 (TO EXHIBIT D)

PORTFOLIO AGREEMENTS

(1) That certain Contribution Agreement by and between Arden Century
Associates, a California general partnership, and Arden Realty Group
Limited Partnership, a Maryland limited partnership, dated as of June 17,
1996.

(2) That certain Contribution Agreement by and between Arden LAOP Two, LLC, a
Nevada limited liability company, and Arden Realty Group Limited
Partnership, a Maryland limited partnership, dated as of June 17, 1996.

(3) That certain Contribution Agreement by and between Arden Sawtelle
Associates, a California general partnership, and Arden Realty Group
Limited Partnership, a Maryland limited partnership, dated as of June 17,
1996.

(4) That certain Contribution Agreement by and between Intercity Buildings
Associates, a California general partnership, and Arden Realty Group
Limited Partnership, a Maryland limited partnership, dated as of June 17,
1996.

(5) That certain Contribution Agreement by and between Montour Realty
Associates, a California general partnership, and Arden Realty Group
Limited Partnership, a Maryland limited partnership, dated as of June 17,
1996.

(6) That certain Contribution Agreement by and between Metropolitan Falls
Partners, a California general partnership, and Arden Realty Group Limited
Partnership, a Maryland limited partnership, dated as of June 17, 1996.

(7) That certain Contribution Agreement by and between Ziman Realty Partners, a
California general partnership, and Arden Realty Group Limited Partnership,
a Maryland limited partnership, dated as of June 17, 1996.

(8) That certain Contribution Agreement by and between Richard S. Ziman and
Arden Realty Group Limited Partnership, a Maryland limited partnership,
dated as of June 17, 1996.

<PAGE>

EXHIBIT 10.18

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

CONTRIBUTION AGREEMENT

by and between

VICTOR J. COLEMAN,
an individual

and

ARDEN REALTY GROUP LIMITED PARTNERSHIP
a Maryland limited partnership

Dated as of June 17, 1996

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

<PAGE>

TABLE OF CONTENTS

PAGE
----
RECITALS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR OP UNITS . . 2

1.1 Contribution Transaction. . . . . . . . . . . . . . . . . . . 2
1.2 Minimum Consideration and Exchange of OP Units. . . . . . . . 2
1.3 Additional Consideration. . . . . . . . . . . . . . . . . . . 2
1.4 Adjusted Consideration. . . . . . . . . . . . . . . . . . . . 3
1.5 Authorization . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6 Contribution of Certain Rights. . . . . . . . . . . . . . . . 3
1.7 Prorations. . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 Treatment as Contribution . . . . . . . . . . . . . . . . . . 4

2. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

2.1 Conditions Precedent. . . . . . . . . . . . . . . . . . . . . 4
2.2 Time and Place. . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Closing Deliveries. . . . . . . . . . . . . . . . . . . . . . 5
2.4 Closing Costs . . . . . . . . . . . . . . . . . . . . . . . . 6

3. REPRESENTATIONS AND WARRANTIES AND INDEMNITIES . . . . . . . . . . 6

3.1 Representations and Warranties of the Operating Partnership . 6
3.2 Representations and Warranties of Contributor . . . . . . . . 7
3.3 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 7

4. COVENANTS OF CONTRIBUTOR . . . . . . . . . . . . . . . . . . . . . 7

5. RELEASES AND WAIVERS . . . . . . . . . . . . . . . . . . . . . . . 8

5.1 General Release of Operating Partnership. . . . . . . . . . . 8
5.2 General Release of Contributor. . . . . . . . . . . . . . . . 9
5.3 Waiver of Section 1542 Protections. . . . . . . . . . . . . . 9
5.4 Waiver of Rights Under Partnership Agreement. . . . . . . . . 9

6. POWER OF ATTORNEY

6.1 Grant of Power of Attorney. . . . . . . . . . . . . . . . . . 9
6.2 Limitation on Liability . . . . . . . . . . . . . . . . . . . 10

7. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . 11

7.1 Further Assurances. . . . . . . . . . . . . . . . . . . . . . 11
7.2 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 11
7.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 11
7.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

<PAGE>

EXHIBIT LIST

SECTION FIRST
EXHIBITS REFERENCED

A Constituent Interests of Contributor's Partnership
Interest. . . . . . . . . . . . . . . . . . . . . . . . . , . Recital D

B Contribution and Assumption Agreement . . . . . . . . . . . . . , . 1.1

C Form of Quitclaim . . . . . . . . . . . . . . . . . . . . . . . . . 2.1

D Representations and Warranties of Contributor. . . . . . . . . . . . 3.2

Attachment 1 . . . . . . . . . . . . . . . List of Portfolio Agreements

<PAGE>

CONTRIBUTION AGREEMENT

THIS CONTRIBUTION AGREEMENT (hereinafter referred to as the
"CONTRIBUTION AGREEMENT") is made and entered into as of June 17, 1996 by and
between Arden Realty Group Limited Partnership, a Maryland limited partnership
(the "OPERATING PARTNERSHIP"), and Victor J. Coleman, an individual (the
"CONTRIBUTOR").

RECITALS

A. The Operating Partnership desires to consolidate the ownership of
a portfolio of office properties (the "PARTICIPATING PROPERTIES") located in
Southern California through a series of transactions (the "FORMATION
TRANSACTIONS") whereby the Operating Partnership will acquire direct interests
in certain of the Participating Properties (the "PROPERTY INTERESTS") and all of
the interests in certain limited partnerships, certain limited liability
companies and certain other entities (collectively the "PARTICIPATING
PARTNERSHIPS AND LLCS") which currently own directly or indirectly the
Participating Properties (the "CONSOLIDATION").

B. The Formation Transactions relate to the proposed initial public
offering (the "PUBLIC OFFERING") of the common stock of Arden Realty Group,
Inc., a Maryland corporation (the "COMPANY"), which will operate as a self-
administered and self-managed real estate investment trust ("REIT") and will be
the sole general partner of the Operating Partnership.

D. The Contributor owns interests in certain of the Participating
Partnerships and LLCs as set forth on EXHIBIT "A" (the "PARTNERSHIPS") which
Partnerships own directly or indirectly interests in certain of the
Participating Properties also as set forth on Exhibit A (the "PROPERTY" or the
"PROPERTIES"). As used herein, "PARTNERSHIP AGREEMENT" means the partnership
agreement or membership agreement, as applicable, under which each such
Partnership was formed.

E. The Contributor desires to, and the Operating Partnership desires
the Contributor to, contribute to the Operating Partnership, all of its right,
title and interest, as a partner (or member) of the Partnerships, including,
without limitation, all of its voting rights and interests in the capital,
profits and losses of the Partnerships or any property distributable therefrom,
constituting all of its interests in the Partnerships (such right, title and
interest are hereinafter collectively referred to as the "PARTNERSHIP
INTEREST"), in exchange for partnership units in the Operating Partnership (the
"OP UNITS"), on the terms and subject to the conditions set forth herein.

<PAGE>

NOW, THEREFORE, for and in consideration of the foregoing premises, and the
mutual undertakings set forth below, the parties hereto agree as follows:

TERMS OF AGREEMENT

1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR OP UNITS

1.1 CONTRIBUTION TRANSACTION

1.2 MINIMUM CONSIDERATION AND EXCHANGE OF OP UNITS.

Subject to ARTICLES 1.3 AND 1.4 below, the Operating Partnership
shall, in exchange for the Partnership Interest, transfer to the Contributor the
number of OP Units having a value, based on one OP Unit being equal in value to
the Public Offering price for one share of the Company's common stock, equal to
the value indicated on Exhibit A as Contributor's "Total Minimum Consideration."
The transfer of the OP Units to the Contributor shall be evidenced by either an
amendment (the "AMENDMENT") to the OP Agreement or by certificates relating to
such units (the "CERTIFICATES") in either case, as shall be acceptable to the
Contributor. The parties shall take such additional actions and execute such
additional documentation as may be required by the Partnership Agreement and the
OP Agreement in order to effect the transactions contemplated hereby.

1.3 ADDITIONAL CONSIDERATION

<PAGE>

Interest and the interests contributed by each of the other OP Participants,
in each case as determined by Richard S. Ziman, in his sole discretion.

1.4 ADJUSTED CONSIDERATION

The Operating Partnership reserves the right not to acquire any
particular interest that constitutes part of the Partnership Interest, if in
good faith the Operating Partnership determines that the ownership of such
interest or the underlying Property would be inappropriate for the Operating
Partnership for any reason whatsoever. Contributor hereby agrees that, in such
event, the Contributor's Total Minimum Consideration may be reduced by an amount
determined by Richard S. Ziman, in his sole discretion, to reflect the reduction
in total value of the Partnership Interest ultimately contributed by the
Contributor.

1.5 AUTHORIZATION

1.6 CONTRIBUTION OF CERTAIN RIGHTS

Effective upon the Closing, the Contributor hereby contributes to the
Operating Partnership all of its rights and interests, if any, including rights
to indemnification in favor of the Contributor, if any, under the agreements
pursuant to which the Contributor or its affiliates initially acquired the
Partnership Interest transferred pursuant to this Contribution Agreement.

1.7 PRORATIONS

At the Closing, or as promptly as practicable following the Closing,
to the extent such matters are not the right or responsibility of all tenants of
a given Property, all revenue and all charges that are customarily prorated in
transactions of this nature, including accrued rent currently due and payable,
overpaid taxes or fees, real and personal property taxes, common area
maintenance charges and other similar periodic charges payable or receivable
with respect to such Property shall be ratably prorated between the partners of
the Partnership which holds such Property prior to the Closing and the Operating
Partnership on and after the Closing, effective as of the Closing. After
providing for such prorations, (i) if any of the Partnerships has a resultant
cash surplus, the value of the Contributor's Partnership Interest shall be
increased in proportion to Contributor's ratable share of such cash surplus and
additional OP Units (based on the initial Public Offering price of the Company's
common stock) shall be issued to the Contributor as a valuation adjustment to
the Contributor's Total Minimum Consideration, and (ii) if any of the
Partnerships has a resultant cash deficit, the value of the Contributor's
Partnership Interest shall be reduced in proportion to Contributor's ratable
share of such cash deficit, and fewer OP Units shall be

<PAGE>

issued to the Contributor as a valuation adjustment to the Contributor's
Total Minimum Consideration, unless such deficit is cured prior to Closing.

1.8 TREATMENT AS CONTRIBUTION

2. CLOSING

2.1 CONDITIONS PRECEDENT

The effectiveness of the Company's registration statement filed with
the Securities and Exchange Commission on Form S-11 (the "REGISTRATION
STATEMENT") is a condition precedent to the obligations of all parties to this
Contribution Agreement to effect the transactions contemplated by this
Contribution Agreement on the Closing Date (as defined below).

The obligations of the Operating Partnership to effect the
transactions contemplated hereby shall be subject to the following additional
conditions:

(a) The representations and warranties of the Contributor contained
in this Contribution Agreement shall have been true and correct in all material
respects on the date such representations and warranties were made, and shall be
true and correct in all material respects on the Closing Date as if made at and
as of such date;

(b) Each of the obligations of the Contributor to be performed by it
shall have been duly performed by it on or before the Closing Date;

(c) Concurrently with the Closing, the Contributor shall have
executed and delivered to the Operating Partnership the documents required to be
delivered pursuant to SECTION 2.3 hereof;

(d) The Contributor shall have obtained all necessary consents or
approvals of governmental authorities or third parties to the consummation of
the transactions contemplated hereby;

(e) The Contributor shall not have breached any of its covenants
contained herein in any material respect;

(f) No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted,
entered, promulgated or enforced by any

<PAGE>

(g) There shall not have occurred between the date hereof and the
Closing Date any material adverse change in any of the Partnerships' businesses;

(h) All existing management agreements with respect to the Properties
shall have been contributed to the Operating Partnership prior to or
simultaneously with the Closing; and

(i) All management functions with respect to the Properties presently
conducted by Arden Realty Group, Inc., a Maryland corporation, shall be assumed
by the Operating Partnership.

The foregoing conditions may be waived by the Operating Partnership in
its sole and absolute discretion.

2.2 TIME AND PLACE

The date, time and place of the transactions contemplated hereunder
shall be the day the Operating Partnership receives the proceeds from the Public
Offering from the underwriter(s), at 10:00 a.m. in the office of Latham &
Watkins, 633 West Fifth Street, Sixth Floor, Los Angeles, California (the
"CLOSING" or "CLOSING DATE"). The transfers described in ARTICLES 1.1 AND 1.2
of this Contribution Agreement, and all closing deliveries, and the consummation
of the Public Offering, shall be deemed concurrent for all purposes.

2.3 CLOSING DELIVERIES

At the Closing, the parties shall make, execute, acknowledge and
deliver, or cause to be made, executed, acknowledged and delivered through the
Attorney-in-Fact (see ARTICLE 6.1 below), the legal documents and other items
(collectively the "CLOSING DOCUMENTS") necessary to carry out the intention of
this Contribution Agreement, which Closing Documents and other items shall
include, without limitation, the following:

(i) A Contribution and Assumption Agreement for each Partnership;

(iii) The Amendment or the Certificates evidencing the transfer of
OP Units to the Contributor;

<PAGE>

(v) The Partnerships' books and records and securities or other
evidences of ownership held by the Contributor; and

2.4 CLOSING COSTS

The Operating Partnership shall pay any documentary transfer taxes,
escrow charges, title charges and recording taxes or fees incurred in connection
with the transactions contemplated hereby.

3. REPRESENTATIONS AND WARRANTIES AND INDEMNITIES

3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING PARTNERSHIP

The Operating Partnership hereby represents and warrants to and
covenants with the Contributor that:

<PAGE>

3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR

3.3 INDEMNIFICATION

The Operating Partnership shall indemnify and hold harmless the
Contributor (the "INDEMNIFIED CONTRIBUTOR PARTY") from and against any and all
claims, losses, damages, liabilities and expenses, including without limitation,
amounts paid in settlement, reasonable attorneys' fees, costs of investigation
and remediation, costs of investigative judicial or administrative proceedings
or appeals therefrom and costs of attachment or similar bonds (collectively,
"LOSSES") asserted against, imposed upon or incurred by the Indemnified
Contributor Party in connection with: (i) any breach of a representation or
warranty of the Operating Partnership contained in this Contribution Agreement;
and (ii) all fees, costs and expenses of the Operating Partnership in connection
with the transactions contemplated by the Contribution Agreement, including
without limitation any and all costs associated with the transfers contemplated
herein.

4. COVENANTS OF CONTRIBUTOR

(a) From the date hereof through the Closing, the Contributor shall
not:

(i) Sell or transfer all or any portion of the Partnership
Interest; or

(ii) Mortgage, pledge or encumber (or permit to become
encumbered) all or any portion of the Partnership Interest.

(b) From the date hereof through the Closing, the Contributor shall
permit each of the Partnerships to conduct its business in the ordinary course,
consistent with past practice, and shall not permit any of the Partnerships to:

(i) Enter into any material transaction not in the ordinary
course of business;

(ii) Sell or transfer any assets of the Partnerships;

(iii) Mortgage, pledge or encumber (or permit to become
encumbered) any assets of the Partnerships, except (x) liens for taxes not
due,

<PAGE>

(y) purchase money security interests and (z) mechanics' liens being
disputed by any of the Partnerships in good faith and by appropriate
proceedings;

(iv) Amend, modify or terminate any material agreements or other
instruments to which any of the Partnerships are a party;

(v) Materially alter the manner of keeping the Partnerships'
books, accounts or records or the accounting practices therein reflected;
or

(vi) Make any distribution to its partners.

5. RELEASES AND WAIVERS

Each of the releases and waivers enumerated in this ARTICLE 5 shall
become effective only upon the Closing of the contribution and exchange of the
Partnership Interest pursuant to ARTICLES 1 AND 2 herein.

5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP

As of the Closing, the Contributor irrevocably waives, releases and
forever discharges the Operating Partnership and the Operating Partnership's
affiliates, partners (including Richard S. Ziman and Victor J. Coleman), agents,
attorneys, successors and assigns of and from, any and all charges, complaints,
claims, liabilities, damages, actions, causes of action, losses and costs of any
nature whatsoever (collectively, "CONTRIBUTOR CLAIMS"), known or unknown,
suspected or unsuspected, arising out of or relating to any of the Partnership
Agreements, this Contribution Agreement or any other matter which exists at the
Closing, except for Contributor Claims arising from the breach of any
representation, warranty, covenant or obligation under this Contribution
Agreement.

5.2 GENERAL RELEASE OF CONTRIBUTOR

As of the Closing, the Operating Partnership irrevocably waives,
releases and forever discharges the Contributor and Contributor's agents,
attorneys, successors and assigns of and from, any and all charges, complaints,
claims, liabilities, damages, actions, causes of action, losses and costs of any
nature whatsoever (collectively, "OPERATING PARTNERSHIP CLAIMS"), known or
unknown, suspected or unsuspected, arising out of or relating to any of the
Partnership Agreements, this Contribution Agreement or any other matter which
exists at the Closing, except for Operating Partnership Claims arising from the
breach of any representation, warranty, covenant or obligation under this
Contribution Agreement.

<PAGE>

5.3 WAIVER OF SECTION 1542 PROTECTIONS

As of the Closing, the Contributor and the Operating Partnership each
expressly waives and relinquishes all rights and benefits afforded by Section
1542 of the California Civil Code and do so understanding and acknowledging the
significance and consequence of such specific waiver of Section 1542 which
provides:

5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT

As of the Closing, the Contributor waives and relinquishes all rights
and benefits otherwise afforded to Contributor under the Partnership Agreements
including, without limitation, any right to consent to or approve of the sale or
contribution by the other partners (or members) of the Partnerships of their
partnership interests to the Company or the Operating Partnership.

6. POWER OF ATTORNEY

6.1 GRANT OF POWER OF ATTORNEY

Contributor does hereby irrevocably appoint the Operating Partnership
(or its designee) and each of them individually and any successor thereof from
time to time (such Operating Partnership or designee or any such successor of
any of them acting in his, her or its capacity as attorney-in-fact pursuant
hereto, the "ATTORNEY-IN FACT") as the true and lawful attorney-in-fact and
agent of Contributor, to act in the name, place and stead of Contributor to
make, execute, acknowledge and deliver all such other contracts, orders,
receipts, notices, requests, instructions, certificates, consents, letters and
other writings (including without limitation the execution of any Closing
Documents or other documents relating to the acquisition by the Operating
Partnership of Contributor's Partnership Interest), to provide information to
the Securities and Exchange Commission and others about the transactions
contemplated hereby and, in general, to do all things and to take all actions
which the Attorney-in-Fact in its sole discretion may consider necessary or
proper in connection with or to carry out the transactions contemplated by this
Contribution Agreement, as fully as could Contributor if personally present and
acting. Further, Contributor hereby grants to Attorney-in-Fact a proxy (the
"PROXY") to vote Contributor's Partnership Interest on any matter related to the
Formation Transactions presented to the partners of any of the Partnerships for
a vote, including, but not limited to, the transfer of interests in any of the
Partnerships by the other partners.

<PAGE>

Each of the Power of Attorney and Proxy and all authority granted
hereby shall be coupled with an interest and therefore shall be irrevocable and
shall not be terminated by any act of Contributor, by operation of law or by the
occurrence of any other event or events, and if any other such act or events
shall occur before the completion of the transactions contemplated by this
Contribution Agreement, the Attorney-in-Fact shall nevertheless be authorized
and directed to complete all such transactions as if such other act or events
had not occurred and regardless of notice thereof. Contributor agrees that, at
the request of Operating Partnership it will promptly execute a separate power
of attorney and proxy on the same terms set forth in this ARTICLE 6, such
execution to be witnessed and notarized. Contributor hereby authorizes the
reliance of third parties on each of the Power of Attorney and Proxy.

Contributor acknowledges that the Operating Partnership has, and any
designee or successor thereof acting as Attorney-in-Fact may have, an economic
interest in the transactions contemplated by this Contribution Agreement.

6.2 LIMITATION ON LIABILITY

It is understood that the Attorney-in-Fact assumes no responsibility
or liability to any person by virtue of the Power of Attorney or Proxy granted
by Contributor hereby. The Attorney-in-Fact makes no representations with
respect to and shall have no responsibility for the Formation Transactions or
the Public Offering, or the acquisition of the Partnership Interest by the
Operating Partnership and shall not be liable for any error or judgement or for
any act done or omitted or for any mistake of fact or law except for its own
gross negligence or bad faith. Contributor agrees to indemnify the Attorney-in-
Fact for and to hold the Attorney-in-Fact harmless against any loss, claim,
damage or liability incurred on its part arising out of or in connection with it
acting as the Attorney-in-Fact under the Power of Attorney or Proxy created by
Contributor hereby, as well as the cost and expense of investigating and
defending against any such loss, claim, damage or liability, except to the
extend such loss, claim, damage or liability is due to the gross negligence or
bad faith of the Attorney-in-Fact. Contributor agrees that the Attorney-in-Fact
may consult with counsel of its own choice (who may be counsel for Operating
Partnership or its successors or affiliates), and it shall have full and
complete authorization and protection for any action taken or suffered by it
hereunder in good faith and in accordance with the opinion of such counsel. It
is understood that the Attorney-in-Fact may, without breaching any express or
implied obligation to Contributor hereunder, release, amend or modify any other
power of attorney or proxy granted by any other person under any related
agreement.

7. MISCELLANEOUS

<PAGE>

7.2 COUNTERPARTS. This Contribution Agreement may be executed in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

7.3 GOVERNING LAW. This Contribution Agreement shall be governed by
the internal laws of the State of California, without regard to the choice of
laws provisions thereof.

7.4 NOTICES. Any notice to be given hereunder by any party to the
other shall be given in writing by personal delivery or by registered or
certified mail, postage prepaid, return receipt requested, and shall be deemed
communicated as of the date of personal delivery (including delivery by
overnight courier). Mailed notices shall be addressed as set forth below, but
any party may change the address set forth below by written notice to other
parties in accordance with this paragraph.

To the Contributor:

Victor J. Coleman
c/o Arden Realty Group, Inc.
9100 Wilshire Boulevard, Suite 700E
Beverly Hills, CA 90212

To the Operating Partnership:

Arden Realty Group Limited Partnership
c/o Arden Realty Group, Inc.
9100 Wilshire Boulevard, Suite 700E
Beverly Hills, CA 90212

<PAGE>

IN WITNESS WHEREOF, the parties have executed this Contribution
Agreement as of the date first written above.

"OPERATING PARTNERSHIP"

ARDEN REALTY GROUP LIMITED PARTNERSHIP,
a Maryland limited partnership

By: ARDEN REALTY GROUP, INC.,
a Maryland Corporation,
general partner

By: /s/ Richard S. Ziman
-------------------------------

Name: Richard S. Ziman
-----------------------------

Title: Chairman & CEO
----------------------------

"CONTRIBUTOR"

VICTOR J. COLEMAN,
an individual

By: /s/ Victor J. Coleman
------------------------------------

<PAGE>

EXHIBIT A
to
CONTRIBUTION AGREEMENT

CONSTITUENT INTERESTS OF CONTRIBUTOR'S PARTNERSHIP INTEREST

Properties Held by the Minimum
Partnerships Partnerships Consideration
- ------------------------------ ----------------------------- -------------
Arden LAOP Three, LLC 16000 Ventura Boulevard; $ 331,510
Bristol Plaza
- ------------------------------ ----------------------------- -------------

1950 Sawtelle Associates, L.P. 1950 Sawtelle Boulevard $ 112,269
- ------------------------------ ----------------------------- -------------

LAOP IV, LLC 5601 Lindero Canyon; $1,573,576
Westwood Terrace;
Calabasas Commerce Center;
The New Wilshire;
70 South Lake;
Skyview Center;
4811 Airport Plaza Drive;
4900/10 Airport Plaza Drive
- ------------------------------ ----------------------------- -------------

LAOP V, LLC 5832 Bolsa Avenue; $ 653,113
400 Corporate Pointe;
9665 Wilshire Boulevard;
Imperial Bank Tower
- ------------------------------ ----------------------------- -------------

Arden Broadway
Associates, LLC 100 West Broadway $2,973,029

Total Minimum
Consideration $5,643,497
-------------
-------------

A-1

<PAGE>

EXHIBIT B
to
CONTRIBUTION AGREEMENT

CONTRIBUTION AND ASSUMPTION AGREEMENT

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which
are hereby acknowledged, the undersigned hereby assigns, transfers, contributes
and conveys to ARDEN REALTY GROUP LIMITED PARTNERSHIP, a Maryland limited
partnership (the "Operating Partnership"), its entire legal and beneficial
right, title and interest in and to _______________________, a
________________________ (the "Partnership"), including, without limitation, all
right, title and interest, if any, of the undersigned in and to the assets of
the Partnership and the right to receive distributions of money, profits and
other assets from the Partnership, presently existing or hereafter at any time
arising or accruing (such right, title and interest are hereinafter collectively
referred to as the "Partnership Interest"), TO HAVE AND TO HOLD the same unto
the Operating Partnership, its successors and assigns, forever.

Upon the execution and delivery hereof, the Operating Partnership assumes
all obligations in respect of the Partnership Interest.

The Partnership owns certain real property as described in Attachment "1"
attached hereto.

Executed: _____ __, 1996

By:
------------------------------------
Victor J. Coleman

B-1

<PAGE>
EXHIBIT C
to
CONTRIBUTION AGREEMENT

Order No.
Escrow No.
Loan No.

WHEN RECORDED MAIL TO:

- --------------------------------------------------------------------------------
MAIL TAX STATEMENTS TO: SPACE ABOVE THIS LINE FOR RECORDER'S USE

DOCUMENTARY TRANSFER TAX $
. . . . . .

Computed on the
. . . . . . consideration or value
of property conveyed;
OR

Computed on the
. . . . . . consideration or value
less liens or encumbrances
remaining at time of sale.

----------------------------------------
Signature of Declarant of Agent
determining tax - Firm Name
- --------------------------------------------------------------------------------

QUITCLAIM DEED

FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,

do(es) hereby REMISE, RELEASE and FOREVER QUITCLAIM to

Arden Realty Group Limited Partnership, a Maryland limited partnership

the real property in the City of ___________, County of ____________, State of

California, described as

Dated __________________ ________________________________

STATE OF CALIFORNIA } ________________________________
} ________________________________
COUNTY OF ________________________} _______________________________

On ____________________ before me,
___________________________________
personally appeared _______________
___________________________________

personally known to me (or
proved to me on the basis of
satisfactory evidence) to be the
person(s) whose names(s) is/are
subscribed to the within
instrument and acknowledged to
me that he/she/they executed
the same in his/her/their
authorized capacity(ies), and
that by his/her/their
signature(s) on the instrument
the person(s) or the entity upon
behalf of which the person(s)
acted, executed the instrument.

WITNESS my hand and official seal.

Signature (This area for official notarial seal)
-----------------------------

C-1

<PAGE>

EXHIBIT D
to
CONTRIBUTION AGREEMENT

REPRESENTATIONS, WARRANTIES AND INDEMNITIES

ARTICLE 1 - ADDITIONAL DEFINED TERMS

For purposes of this EXHIBIT D, the following terms have the meanings
set forth below. Terms which are not defined below shall have the meaning set
forth for those terms as defined in the Contribution Agreement to which this
EXHIBIT D is attached:

CLAIMS: Means claims, disputes, actions, suits, arbitrations,
proceedings or investigations (collectively "Claims") pending or, to Knowledge,
threatened that directly or indirectly affect any of the Contributor, the
Partnerships or the Properties.

CONTAMINATION: Means emissions, discharges, releases or threatened
releases of "Hazardous Materials," substances, pollutants, contaminants or
hazardous or toxic substances, materials or wastes whether solid, liquid or
gaseous in nature, into the air, surface water, ground water or land, or
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of substances, pollutants, contaminants or
hazardous or toxic substances, materials, or wastes, whether solid, liquid or
gaseous in nature.

CONTRIBUTION AGREEMENT: Means the Contribution Agreement to which
this EXHIBIT D is attached.

ENVIRONMENTAL LAW: Means all applicable statutes, regulations, rules,
ordinances, codes, licenses, permits, orders, demands, approvals, authorizations
and similar items of all governmental agencies, departments, commissions,
boards, bureaus or instrumentalities of the United States, states and political
subdivisions thereof and all applicable judicial, administrative and regulatory
decrees, judgments and orders relating to the protection of human health or the
environment as in effect on the Closing Date, including all requirements as of
the Closing Date, including but not limited to those pertaining to reporting,
licensing, permitting, investigation, removal and remediation of Contamination,
including without limitation: (x) the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 ET SEQ.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the Clean Air
Act (42 U.S.C. Section 7401 ET SEQ.), the Federal Water Pollution Control Act
(33 U.S.C. Section 1251), the Safe Drinking Water Act (42 U.S.C. 300f ET SEQ.),
the Toxic Substances Control Act (15 U.S.C. 2601 ET SEQ.), the Endangered
Species Act (16 U.S.C. 1531 ET SEQ.), the Emergency Planning

D-1

<PAGE>

and Community Right-to-Know Act of 1986 (42 U.S.C: 11001 ET SEQ.), and (y)
applicable state and local statutory and regulatory schemes pertaining to
hazardous materials.

GOVERNMENTAL ENTITY: Means any government or agency, bureau, board,
commission, court, department, official, political subdivision, tribunal or
other instrumentality of any government, whether federal, state or local,
domestic or foreign.

HAZARDOUS MATERIAL: Means any substance:

(i) the presence of which requires investigation or remediation under
any Environmental Law action or policy, administrative request or civil
complaint under the foregoing or under common law; or

(iv) the presence of which on, under or about, a Property poses a
hazard to the health or safety of persons on or about such Property; or

(v) which contains gasoline, diesel fuel or other petroleum
hydrocarbons, polychlorinated biphenyls (PCBs) or asbestos or
asbestos-containing materials or urea formaldehyde foam insulation; or

(vi) radon gas.

INDEMNIFYING PARTY: Means any party required to indemnify any other
party under ARTICLE 3.2 of this EXHIBIT D or under the indemnification
provisions substantially identical to ARTICLE 3.2 hereof in the other Portfolio
Agreements.

KNOWLEDGE: Means, with respect to any representation or warranty so
indicated, the actual knowledge, upon reasonable investigation and inquiry in
good faith, of the signatory to the Contribution Agreement.

KNOWN CONTAMINATION: Means Contamination currently existing on or
affecting the applicable Property as of the Closing, AND which such
Contamination is disclosed in

D-2

<PAGE>

environmental reports received by the Contributor or the Partnerships on or
before the Closing (the "ENVIRONMENTAL REPORTS");

LIENS: Means, with respect to any real and personal property, all
mortgages, pledges, liens, options, charges, security interests, restrictions,
prior assignments, encumbrances, covenants, encroachments, assessments, rights
of others, licenses, easements, liabilities or claims of any kind or nature
whatsoever, direct or indirect, including, without limitation, interests in or
claims to revenues generated by such property.

OP UNITS: Shall have the meaning set forth in the OP Agreement.

PERMITTED LIENS: Means (a) Liens, or deposits made to secure the
release of such Liens, securing taxes, the payment of which is not delinquent or
the payment of which is actively being contested in good faith by appropriate
proceedings diligently pursued;

(b) Zoning laws and ordinances generally applicable to the districts
in which the Properties are located which are not violated by the existing
structures or present uses thereof;

(c) Liens imposed by laws, such as carriers', warehousemen's and
mechanics' liens, and other similar liens arising in the ordinary course of
business which secure payment of obligations not more than 60 days past due or
which are being contested in good faith by appropriate proceedings diligently
pursued;

(d) non-exclusive easements for public utilities, minor
encroachments, rights of access or other non-monetary matters that do not have a
material adverse effect upon, or materially interfere with the use of, the
Properties; and

(e) any exceptions contained in the Title Policies.

PERSON: Means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or governmental entity.

PORTFOLIO AGREEMENTS: Means the agreements, including the
Contribution Agreement, listed on ATTACHMENT "1" hereto, which contemplate the
transfer of partnership and/or limited liability company membership interests in
certain of the Participating Partnerships and LLCs from any entity directly or
indirectly owned by Contributor to the Company and the Operating Partnership.

PROSPECTUS: Means the Company's Form S-11 Registration Statement.

REIT SHARES: Shall have the meaning set forth in the OP Agreement.

D-3

<PAGE>

ARTICLE 2 - REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR

The Contributor represents and warrants to the Operating Partnership
as set forth below in this ARTICLE 2. Notwithstanding any other provision of
the Contribution Agreement or this EXHIBIT D, the Contributor makes
representations, warranties and indemnities only with respect to: (i) the
Properties identified on EXHIBIT A to the Contribution Agreement (the "Property"
or the "Properties"), and (ii) the interests in the Partnerships to be
transferred by the Contributor.

2.1 ORGANIZATION; AUTHORITY. The Contributor (A) if a natural
person, has the legal capacity to enter the Contribution Agreement; if not a
natural person, is duly formed, validly existing and in good standing (to the
extent applicable) under the laws of the jurisdiction of its formation, and (B)
has all requisite power and authority to own, lease or operate its property and
to carry on its business as presently conducted and, to the extent required
under applicable law, is qualified to do business and is in good standing in
each jurisdiction in which the nature of its business or the character of its
property make such qualification necessary.

2.2 DUE AUTHORIZATION. The execution, delivery and performance of
the Contribution Agreement by the Contributor has been duly and validly
authorized by all necessary action of the Contributor. This Contribution
Agreement and each agreement, document and instrument executed and delivered by
or on behalf of the contributor pursuant to this contribution Agreement
constitutes, or when executed and delivered will constitute, the legal, valid
and binding obligation of the Contributor, each enforceable against the
Contributor in accordance with its terms, as such enforceability may be limited
by bankruptcy or the application of equitable principles.

2.3 CONSENTS AND APPROVALS. No consent, waiver, approval or
authorization of any third party is required to be obtained by the Contributor
in connection with the execution, delivery and performance of the Contribution
Agreement and the transactions contemplated hereby, except any of the foregoing
that shall have been satisfied prior to the Closing Date.

2.4 OWNERSHIP OF THE PARTNERSHIP INTERESTS. The Contributor is the
sole owner of the Partnership Interest and has good and valid title to such
Partnership Interest, free and clear of all Liens, other than Permitted Liens.

2.5 PARTNERSHIP INTEREST. The Partnership Interest constitutes all
of the issued and outstanding interests owned by the Contributor in the
Partnerships. The Partnership Interest is validly issued, fully paid and
non-assessable, and was not issued in violation of any preemptive rights. The
Partnership Interest has been issued in compliance with applicable law and the
relevant Partnership Agreements (as then in effect). There are no rights,
subscriptions, warrants, options, conversion rights, preemptive rights or
agreements of any kind outstanding to purchase or to otherwise acquire any of
the interests which comprise the Partnership Interest or any securities or
obligations of any kind convertible into any of the interests which comprise the
Partnership Interest or other equity interests or profit participation of any
kind in the

D-4

<PAGE>

2.6 NO VIOLATION. None of the execution, delivery or performance of
the Contribution Agreement and the transactions contemplated hereby does or
will, with or without the giving of notice, lapse of time, or both, (i) violate,
conflict with, result in a breach of, or constitute a default under or give to
others any right of termination or cancellation of (A) the organizational
documents, including the charters and bylaws, if any, of the Contributor, (B)
any material agreement, document or instrument to which the Contributor is a
party or by which the Contributor or its Property is bound or (C) any term or
provision of any judgment, order, writ, injunction, or decree of any
governmental or regulatory authority binding on the Contributor or by which the
Contributor or any of its assets or properties are bound or subject or (ii)
result in the creation of any Lien, other than a Permitted Lien, upon the
Property or the Partnership Interest.

2.8 WITHHOLDING. The Contributor shall execute at Closing such
certificates or affidavits reasonably necessary to document the inapplicability
of any federal or state withhoding provisions, including those referred to in
ARTICLE 2.7 above and similar provisions under California law. If Contributor
fails to provide such certificates or affidavits, the Operating Partnership may
withhold a portion of any payments otherwise to be made to the Contributor as
required by the Code or California law.

2.9.1 INVESTMENT. The Contributor is acquiring the OP Units
solely for his, her or its own account for the purpose of investment and not as
a nominee or agent for any other person and not with a view to, or for offer or
sale in connection with, any distribution of any thereof. The Contributor
agrees and acknowledges that he, she or it will not, directly or indirectly,
offer, transfer, sell, assign, pledge, hypothecate or otherwise dispose of
(hereinafter, "TRANSFER") any of the OP Units unless (i) the Transfer is
pursuant to an effective registration statement under the Act and qualification
or other compliance under applicable blue sky or state securities laws, or (ii)
counsel for the Contributor (which counsel shall be reasonably acceptable to the
Operating Partnership) shall have furnished the Operating Partnership with an
opinion, reasonably satisfactory in form and substance to the Operating
Partnership to the effect that no

D-5

<PAGE>

such registration is required because of the availability of an exemption
from registration under the Act and qualification or other compliance under
applicable blue sky or state securities laws.

2.9.2 KNOWLEDGE. The Contributor is knowledgeable,
sophisticated and experienced in business and financial matters; the Contributor
has previously invested in securities similar to the OP Units and fully
understands the limitations on transfer imposed by the Federal securities laws
and as described in the Contribution Agreement. The Contributor is able to bear
the economic risk of holding the OP Units for an indefinite period and is able
to afford the complete loss of his, her or its investment in the OP Units; the
Contributor has received and reviewed all information and documents about or
pertaining to the Company, the Operating Partnership, the business and prospects
of the Company and the Operating Partnership and the issuance of the OP Units as
the Contributor deems necessary or desirable, and has been given the opportunity
to obtain any additional information or documents and to ask questions and
receive answers about such information and documents, the Company, the Operating
Partnership, the business and prospects of the Company and the Operating
Partnership and the OP Units which the Contributor deems necessary or desirable
to evaluate the merits and risks related to his, her or its investment in the OP
Units; and the Contributor understands and has taken cognizance of all risk
factors related to the purchase of the OP Units.

2.9.3 HOLDING PERIOD. The Contributor acknowledges that he,
she or it has been advised that (i) the OP Units and the common stock of the
Company into which the OP Units may be exchanged in certain circumstances (the
"COMMON STOCK") must be held indefinitely, and the Contributor must continue to
bear the economic risk of the investment in the OP Units (and any Common Stock
that might be exchanged therefor) unless they are subsequently registered under
the Act or an exemption from such registration is available, (ii) a restrictive
legend in the form hereafter set forth shall be placed on the certificates
representing the OP Units (and any Common Stock that might be exchanged
therefor), and (iii) a notation shall be made in the appropriate records of the
Operating Partnership (and the Company) indicating that the OP Units (and any
Common Stock that might be exchanged therefor) are subject to restrictions on
transfer.

2.9.4 ACCREDITED INVESTOR. If the Contributor is an
individual, such individual is an "accredited investor" (as such term is defined
in Rule 501(a) of Regulation D under the Act) and as such:

(i) is a director or executive officer of the Company; or

(ii) has an individual net worth, or joint net worth with his or
her spouse, in excess of $1,000,000; or

(iii) had an individual annual adjusted gross income in
excess of $200,000 in each of the two most recent years and reasonably expects
to have annual adjusted gross income in excess of $200,000 in the current year;
or

D-6

<PAGE>

(iv) had a joint income with his spouse in excess of $300,000 in
each of the two most recent years and reasonably expects to have an annual
adjusted gross income, with his spouse, in excess of $300,000 in the current
year.

If the Contributor is not an individual, it is an "accredited
investor" (as such term is defined in Rule 501(a) of Regulation D under the
Act).

2.9.5 LEGENDING. Each certificate representing the OP Units
(and any Common Stock that might be exchanged therefor) shall bear the following
legend:

In addition, the Common Stock for which the OP Units might be
exchanged shall also bear a legend which generally provides the following:

D-7

<PAGE>

2.10 COMPLIANCE WITH LAWS. In connection with the conduct of the
Properties, to Knowledge, the Partnerships have complied and on the date hereof
do substantially comply in all material respects with all applicable laws,
ordinances, rules and regulations, whether federal, state or local, foreign,
statutory or common, and neither the Partnerships nor, to Knowledge, any third
party have been informed of any material violation of any such laws, rules or
regulations, or that any investigation has been commenced or is contemplated
respecting any such possible violation.

2.11 EMINENT DOMAIN. There is no existing or, to Knowledge, proposed
or threatened condemnation, eminent domain or similar proceeding, or private
purchase in lieu of such a proceeding, which would affect the Properties in any
material respect and of which the Contributor has knowledge.

2.12 LICENSES AND PERMITS. To Knowledge, all material notices,
licenses, permits, certificates and authority required in connection with the
construction, use, occupancy, management, leasing and operation of the
Properties have been obtained, are in full force and effect, are in good
standing and (to the extent required pursuant to the transactions contemplated
hereby) are assignable to the Operating Partnership. Neither the Partnerships,
nor, to Knowledge, any third party has taken any action that would (or failed to
take any action the omission of which would) result in the revocation of such
notices, licenses, permits, certificates and authority, that would have a
material adverse effect, nor has any of them received any written notice of
violation from any Governmental Entity or written notice of the intention of any
entity to revoke any of them, that in each case has not been cured or otherwise
resolved to the satisfaction of such Governmental Entity.

D-8

<PAGE>

2.13 TAXES. For federal income tax purposes, the Partnerships are,
and at all times during their existence have been, partnerships (rather than
associations or publicly traded partnerships taxable as corporations). The
Partnerships have filed all tax returns required to be filed by them and have
paid all taxes required to be paid by them. The transactions contemplated
hereby will not result in any tax liability to the Partnerships, the Company or
the Operating Partnership. No tax lien or other charge exists or will exist
upon consummation of the transactions contemplated hereby with respect to any
Property except such tax liens for which the tax is not due and has been
reserved for payment by the Partnerships or tax liens or other charges which
individually or in the aggregate are immaterial in amount.

2.14 MECHANICS' LIENS. All material bills and claims for labor
performed and materials furnished to or for the benefit of the Properties have
been paid in full (or otherwise provided for), and there are no material
mechanics' or materialmen's liens (whether or not perfected) affecting the
Properties.

2.15 REAL PROPERTY.

D-9

<PAGE>

such violations which individually or in the aggregate would not have a
material adverse effect on the Operating Partnership.

2.16 TRADEMARKS AND TRADENAMES; PROPRIETARY RIGHTS.

D-10

<PAGE>

2.17 LITIGATION AND CLAIMS.

2.18 NO BROKERS. Neither the Contributor nor any of its respective
officers, directors or employees has employed or made any agreement with any
broker, finder or similar agent or any person or firm which will result in the
obligation of the Operating Partnership or any of its affiliates to pay any
finder's fee, brokerage fees or commissions or similar payment in connection
with the transactions contemplated by the Contribution Agreement.

2.19 SOLVENCY. The Contributor has been and will be solvent at all
times prior to and immediately following the transfer of the Partnership
Interest to the Operating Partnership.

2.20 NO MISREPRESENTATIONS. No representation, warranty or statement
made, or information provided, by the Contributor in the Contribution Agreement
or in any other document or instrument furnished or to be furnished by or on
behalf of the Contributor pursuant hereto or as contemplated hereby (i) contains
or will contain any untrue statement of a material fact or (ii) omits or will
omit to state a material fact necessary to make the statements contained herein
or therein not misleading. For purposes of the preceding sentence, materiality
shall be determined with reference to the total portfolio of real properties and
other interests to be transferred pursuant to the Portfolio Agreements.

2.21 TITLE TO ASSETS. Upon consummation of the Formation
Transactions, the Operating Partnership's title to the Properties will be free
and clear of any Liens, encumbrances, debts, charges, liabilities or obligations
except for Permitted Liens.

2.22 PARTNERS/MEMBERS. The Contributor has made available to the
Operating Partnership a true and accurate list of all of the Partners or
members, as applicable, of the Partnerships that own, directly or indirectly, an
interest in any of the Properties, together with their percentage interests in
each Partnership.

D-11

<PAGE>

2.23 CONDITION OF PROPERTY. To Knowledge, and except as set forth in
the structural reports prepared for the Properties and delivered to the
Operating Partnership in connection with the Formation Transactions, there is no
material defect in the condition of any Property, the improvements thereon, the
structural elements thereof and the mechanical systems thereon, nor any material
damage from casualty or other cause, nor any soil condition of any Property that
will not support all of the improvements thereon without the need for unusual or
new subsurface excavations, fill, footings, caissons or other installations,
except for any such defect, damage or condition that has been corrected or will
be corrected in the ordinary course of the business of the Property as part of
its scheduled annual maintenance and improvement program. To Knowledge, there
have been no alterations to the exteriors of any of the buildings or other
improvements on any Property that would render any surveys provided to the
Company in connection with the Formation Transactions grossly inaccurate or
otherwise reflect a material deficiency in title to such improvements.

ARTICLE 3 - INDEMNIFICATION

3.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; REMEDY FOR BREACH.

(a) Subject to ARTICLE 3.6, all representations and warranties
contained in this EXHIBIT D or in any Schedule or certificate delivered pursuant
hereto shall survive the Closing.

(b) Notwithstanding anything to the contrary in the Contribution
Agreement or this EXHIBIT D, no party hereto shall be liable under this EXHIBIT
D or the Contribution Agreement for monetary damages (or otherwise) for breach
of any of its representations and warranties contained in this EXHIBIT D or the
Contribution Agreement, or in any Schedule, certificate or affidavit delivered
by it pursuant thereto, other than pursuant to the succeeding provisions of this
ARTICLE 3.

3.2 GENERAL INDEMNIFICATION.

(a) The Contributor shall indemnify and hold harmless the Operating
Partnership, the Company, and their affiliates and each of their respective
directors, officers, employees, agents, representatives and affiliates (each of
which is an "INDEMNIFIED PARTY") from and against any and all claims, losses,
damages, liabilities and expenses, including, without limitation, amounts paid
in settlement, reasonable attorneys' fees, costs of investigation and
remediation, costs of investigative, judicial or administrative proceedings or
appeals therefrom, and costs of attachment or similar bonds (collectively,
"LOSSES"), asserted against, imposed upon or incurred by the Indemnified Party
in connection with or as a result of any breach of a representation or warranty
of the Contributor contained in the Contribution Agreement or in any Schedule,
certificate or affidavit delivered by the Contributor pursuant to the
Contribution Agreement.

D-12

<PAGE>

(b) The Contributor shall indemnify and hold harmless the Indemnified
Parties from and against any and all Losses, asserted against, imposed upon or
incurred by the Indemnified Parties in connection with or as a result of:

(ii) all fees and expenses of the Contributor in connection with
the transactions contemplated by the Contribution Agreement;

3.3 PAYMENT OF INDEMNIFICATION. The Contributor may satisfy its
obligations hereunder by the prompt delivery (paid promptly as and when expenses
are incurred) to an Indemnified Party of OP Units, subject to the limits on
ownership and transfer of REIT shares set forth in the Company's articles of
incorporation. Any OP Units delivered to an Indemnified Party hereunder shall
be valued based upon the initial public offering price of the Company's Common
Stock.

D-13

<PAGE>

3.5 LIMITATIONS ON AND THRESHOLD FOR INDEMNIFICATION UNDER ARTICLE
3.2.

(a) The Contributor shall not be liable under ARTICLE 3.2 hereof
unless and until the aggregate amount recoverable from Indemnifying Parties
under the indemnification provisions substantially identical to ARTICLE 3.2 in
one or more of the Portfolio Agreements exceeds $200,000; PROVIDED, HOWEVER,
that once the total amount recoverable from Indemnifying Parties under such
provisions exceeds $200,000 in the aggregate, the Contributor's obligation under
ARTICLE 3.2 hereof shall be for the full amount of such obligation.

(b) Notwithstanding anything contained herein to the contrary, the
Contributor shall not be liable or obligated to make payments under this ARTICLE
3 with respect to any Property or Partnership Interest to the extent such
payments in the aggregate would exceed the value of the OP Units (based upon the
initial public offering price of the Common Stock) received by the Contributor
at the Closing. Notwithstanding anything contained herein to the contrary, the
Indemnified Parties shall look first to the Contributor's OP Units for
indemnification under this ARTICLE 3 and then to the Contributor's other assets.

3.6 LIMITATION PERIOD.

(a) Notwithstanding the foregoing, any claim for indemnification
under ARTICLE 3.2 hereof must be asserted in writing by the Indemnified Party,
stating the nature of the Losses and the basis for indemnification therefor:

D-14

<PAGE>

(b) If so asserted in writing prior to the applicable expiration
date, such claims for indemnification shall survive until resolved by mutual
agreement between the Contributor and the Indemnified Party or by judicial
determination. Any claim for indemnification not so asserted in writing prior
to the applicable expiration date shall not thereafter be asserted and shall
forever be waived.

3.7 RESERVATION OF CONTRIBUTOR RIGHTS.

Notwithstanding anything else in this Contribution Agreement or any
Portfolio Agreement to the contrary, the Contributor reserves unto itself all
rights and remedies (including rights to seek contribution) against any third
party indemnitors, prior property owners or occupants, and contributors to any
Contamination, for which the Partnerships have been indemnified by the
Contributor hereunder. To the extent the Contributor's rights against any such
third party owners, occupants, indemnitors or contributors may be materially
prejudiced by actions or inactions by any owner or occupant of the Properties
after the Closing, the Contributor's indemnity obligation shall be reduced in
accordance with the effect of the actions or inactions which so prejudiced the
Contributor's rights.

D-15
<PAGE>

ATTACHMENT 1 (TO EXHIBIT D)

PORTFOLIO AGREEMENTS

(4) That certain Contribution Agreement by and between Coleman Enterprises,
Inc., a California corporation, and Arden Realty Group Limited Partnership,
a Maryland limited partnership, dated as of June 17, 1996.

(5) That certain Contribution Agreement by and between Victor J. Coleman and
Arden Realty Group Limited Partnership, a Maryland limited partnership,
dated as of June 17, 1996.

<PAGE>

[LETTERHEAD]

June 20, 1996

BY FACSIMILE
- ------------

Mr. David Zimmerman, Esq.
Vice President and Associate General Counsel
National Hockey League
1251 Avenue of the Americas
New York, NY 10020

Re: Pledge of Interest in Kings by Roski
------------------------------------

Dear David:

As we discussed by telephone last week, in connection with the
development of a new arena in Los Angeles, Edward P. Roski, Jr. ("Roski")
will pledge and grant a security interest in both his limited partner
interest in The Los Angeles Kings Hockey Club, L.P. ("Club") and his stock in
Majestic L.A. Venture, Inc. ("Majestic L.A."), as security for a $2.5 million
loan to be made by affiliates of Philip F. Anschutz to affiliates of Roski.
Roski is a 48% limited partner of Club and owns 100% of the stock of Majestic
L.A. which is a 1% general partner of Club. Anschutz L.A. Venture, Inc.
("Anschutz L.A."), the beneficiary of the foregoing pledge, is a 49% general
partner and 2% limited partner of Club.

Attached as Exhibit A hereto is a form of consent letter pursuant to
which the NHL would grant its consent to the pledge and grant of security
interest in Roski's interest in Club to Anschutz L.A. A copy of the Security
Agreement pursuant to which the pledge by Roski will be effected is attached
as an exhibit to the form of consent letter.

<PAGE>

Jeffrey Pash
June 20, 1996
Page 2

If you have any questions regarding the proposed transaction or the form
of consent letter attached hereto, please call me at your earliest
convenience.

Very truly yours,

David B. Rogers
of LATHAM & WATKINS

cc: Jeffrey Pash
Edward P. Roski, Jr.
Robert J. Sanderman
G. Kevin Conwick

<PAGE>

EXHIBIT 10.19

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

CONTRIBUTION AGREEMENT

by and between

MICHELE BYER,
an individual

and

ARDEN REALTY GROUP LIMITED PARTNERSHIP
a Maryland limited partnership

Dated as of June 17, 1996

- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------

<PAGE>

TABLE OF CONTENTS

Page
----

RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR OP UNITS. . . . . 2

2. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

3. REPRESENTATIONS AND WARRANTIES AND INDEMNITIES. . . . . . . . . . . . . 6

4. COVENANTS OF CONTRIBUTOR. . . . . . . . . . . . . . . . . . . . . . . . 7

5. RELEASES AND WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . 8

6. POWER OF ATTORNEY

6.1 Grant of Power of Attorney . . . . . . . . . . . . . . . . . . . . 9
6.2 Limitation on Liability. . . . . . . . . . . . . . . . . . . . . . 10

7. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

i
<PAGE>
EXHIBIT LIST

SECTION FIRST
EXHIBITS REFERENCED
-------------

A Constituent Interests of Contributor's Partnership Interest . . . Recital D

B Contribution and Assumption Agreement . . . . . . . . . . . . . . . . 1.1

C Form of Quitclaim . . . . . . . . . . . . . . . . . . . . . . . . . . 1.1

D Representations and Warranties of Contributor . . . . . . . . . . . . . 3.2

E Assignment and Assumption Agreement . . . . . . . . . . . . . . . . . . 1.1

<PAGE>
CONTRIBUTION AGREEMENT

THIS CONTRIBUTION AGREEMENT (hereinafter referred to as the "CONTRIBUTION
AGREEMENT") is made and entered into as of June 17, 1996 by and between Arden
Realty Group Limited Partnership, a Maryland limited partnership (the "OPERATING
PARTNERSHIP"), and Michele Byer, an individual (the "CONTRIBUTOR").

RECITALS

A. The Operating Partnership desires to consolidate the ownership of a
portfolio of office properties (the "PARTICIPATING PROPERTIES") located in
Southern California through a series of transactions (the "FORMATION
TRANSACTIONS") whereby the Operating Partnership will acquire direct interests
in certain of the Participating Properties (the "PROPERTY INTERESTS") and all of
the interests in certain limited partnerships, certain limited liability
companies and certain other entities (collectively the "PARTICIPATING
PARTNERSHIPS AND LLCS") which currently own directly or indirectly the
Participating Properties (the "CONSOLIDATION").

B. The Formation Transactions relate to the proposed initial public
offering (the "PUBLIC OFFERING") of the common stock of Arden Realty Group,
Inc., a Maryland corporation (the "COMPANY"), which will operate as a self-
administered and self-managed real estate investment trust ("REIT") and will be
the sole general partner of the Operating Partnership.

C. The owners of the Property Interests and the partners and members of
the Participating Partnerships and LLCs will either transfer their Property
Interests and interests in the Participating Partnerships and LLCs to the
Company in exchange for cash (the "CASH PARTICIPANTS") or contribute such
interests directly to the Operating Partnership in exchange for an interest in
the Operating Partnership (the "OP PARTICIPANTS").

D. The Contributor owns interests in certain of the Participating
Partnerships and LLCs as set forth on EXHIBIT "A" (the "PARTNERSHIPS") which
Partnerships own directly or indirectly interests in certain of the
Participating Properties also as set forth on Exhibit A (the "PROPERTY" or the
"PROPERTIES"). As used herein, "PARTNERSHIP AGREEMENT" means the partnership
agreement or membership agreement, as applicable, under which each such
Partnership was formed.

E. The Contributor desires to, and the Operating Partnership desires the
Contributor to, contribute to the Operating Partnership, all of its right, title
and interest, as a partner (or member) of the Partnerships, including, without
limitation, all of its voting rights and interests in the capital, profits and
losses of the Partnerships or any property distributable therefrom, constituting
all of its interests in the Partnerships (such right, title and interest are
hereinafter collectively referred to as the "PARTNERSHIP INTEREST") and all of
its right, title and interest in a certain property management agreement as set
forth in ARTICLE 1.1 hereof, in

<PAGE>

exchange for partnership units in the Operating Partnership (the "OP UNITS"),
on the terms and subject to the conditions set forth herein.

NOW, THEREFORE, for and in consideration of the foregoing premises, and
the mutual undertakings set forth below, the parties hereto agree as follows:

TERMS OF AGREEMENT

1. CONTRIBUTION OF PARTNERSHIP INTEREST AND EXCHANGE FOR OP UNITS

1.1 CONTRIBUTION TRANSACTION

At the Closing (as defined in ARTICLE 2.2 herein) and subject to the
terms and conditions contained in this Contribution Agreement, the Contributor
shall transfer to the Operating Partnership, absolutely and unconditionally,
all of its Partnership Interest (as such term is defined in Recital B herein)
and all of its right, title and interest in that certain Property Management
Agreement, dated as of December 14, 1994, by and among 5000 Spring Associates,
LLC, a Nevada limited liability company, Arthur Gilbert as Trustee of the
Arthur Gilbert and Rosalinde Gilbert 1982 Trust, and Contributor, as Owners
and Arden Realty Group, Inc., a California corporation, as Manager (the
"PROPERTY MANAGEMENT AGREEMENT"). The contribution of the Contributor's
Partnership Interest shall be evidenced by a "CONTRIBUTION AND ASSUMPTION
AGREEMENT" for each of the Partnerships in substantially the form of EXHIBIT
"B" attached hereto. The Contributor shall execute and have duly acknowledged
an individual quitclaim deed in the form of EXHIBIT "C" quitclaiming to the
Operating Partnership any direct or indirect ownership interest in and to the
Properties. Furthermore, the contribution of the Property Management Agreement
shall be evidenced by an "ASSIGNMENT AND ASSUMPTION AGREEMENT" in
substantially the form of EXHIBIT "E" attached hereto. The parties shall take
such additional actions and execute such additional documentation as may be
required by the Partnership Agreement and the Agreement of Limited Partnership
of the Operating Partnership (the "OP AGREEMENT") in order to effect the
transactions contemplated hereby.

1.2 MINIMUM CONSIDERATION AND EXCHANGE OF OP UNITS.

Subject to ARTICLES 1.3 AND 1.4 below, the Operating Partnership
shall, in exchange for the Partnership Interest and Contributor's interest in
the Property Management Agreement, transfer to the Contributor the number of
OP Units having a value, based on one OP Unit being equal in value to the
Public Offering price for one share of the Company's common stock, equal to
the value indicated on Exhibit A as Contributor's "Total Minimum
Consideration." The transfer of the OP Units to the Contributor shall be
evidenced by either an amendment (the "AMENDMENT") to the OP Agreement or by
certificates relating to such units (the "CERTIFICATES") in either case, as
shall be acceptable to the Contributor. The parties shall take such
additional actions and execute such additional documentation as may be

<PAGE>

required by the Partnership Agreement and the OP Agreement in order to effect
the transactions contemplated hereby.

1.3 ADDITIONAL CONSIDERATION

1.4 ADJUSTED CONSIDERATION

The Operating Partnership reserves the right not to acquire any
particular interest that constitutes part of the Partnership Interest, if in
good faith the Operating Partnership determines that the ownership of such
interest or the underlying Property would be inappropriate for the Operating
Partnership for any reason whatsoever. Contributor hereby agrees that, in
such event, the Contributor's Total Minimum Consideration may be reduced by an
amount determined by Richard S. Ziman, in his sole discretion, to reflect the
reduction in total value of the Partnership Interest ultimately contributed by
the Contributor.

1.5 AUTHORIZATION

1.6 CONTRIBUTION OF CERTAIN RIGHTS

Effective upon the Closing, the Contributor hereby contributes to the
Operating Partnership all of its rights and interests, if any, including
rights to indemnification in favor of the Contributor, if any, under the
agreements pursuant to which the Contributor or its affiliates initially
acquired the Partnership Interest transferred pursuant to this Contribution
Agreement.

1.7 PRORATIONS

<PAGE>

taxes, common area maintenance charges and other similar periodic charges
payable or receivable with respect to such Property shall be ratably prorated
between the partners of the Partnership which holds such Property prior to the
Closing and the Operating Partnership on and after the Closing, effective as
of the Closing. After providing for such prorations, (i) if the Partnership
has a resultant cash surplus, the value of the Contributor's Partnership
Interest shall be increased in proportion to Contributor's ratable share of
such cash surplus and additional OP Units (based on the initial Public
Offering price of the Company's common stock) shall be issued to the
Contributor as a valuation adjustment to the Contributor's Total Minimum
Consideration, and (ii) if the Partnership has a resultant cash deficit, the
value of the Contributor's Partnership Interest shall be reduced in proportion
to Contributor's ratable share of such cash deficit, and fewer OP Units shall
be issued to the Contributor as a valuation adjustment to the Contributor's
Total Minimum Consideration, unless such deficit is cured prior to Closing.

1.8 TREATMENT AS CONTRIBUTION

2. CLOSING

2.1 CONDITIONS PRECEDENT

The effectiveness of the Company's registration statement filed with
the Securities and Exchange Commission on Form S-11 (the "REGISTRATION
STATEMENT") is a condition precedent to the obligations of all parties to this
Contribution Agreement to effect the transactions contemplated by this
Contribution Agreement on the Closing Date (as defined below).

The obligations of the Operating Partnership to effect the
transactions contemplated hereby shall be subject to the following additional
conditions:

(a) The representations and warranties of the Contributor contained
in this Contribution Agreement shall have been true and correct in all
material respects on the date such representations and warranties were made,
and shall be true and correct in all material respects on the Closing Date as
if made at and as of such date;

(b) Each of the obligations of the Contributor to be performed by it
shall have been duly performed by it on or before the Closing Date;

<PAGE>

(c) Concurrently with the Closing, the Contributor shall have
executed and delivered to the Operating Partnership the documents required to
be delivered pursuant to SECTION 2.3 hereof;

(d) The Contributor shall have obtained all necessary consents or
approvals of governmental authorities or third parties to the consummation of
the transactions contemplated hereby;

(e) The Contributor shall not have breached any of its covenants
contained herein in any material respect;

(f) No order, statute, rule, regulation, executive order,
injunction, stay, decree or restraining order shall have been enacted,
entered, promulgated or enforced by any court of competent jurisdiction or
governmental or regulatory authority or instrumentality that prohibits the
consummation of the transactions contemplated hereby, and no litigation or
governmental proceeding seeking such an order shall be pending or threatened;

(g) There shall not have occurred between the date hereof and the
Closing Date any material adverse change in the Partnerships' businesses;

(h) All existing management agreements with respect to the
Properties shall have been contributed to the Operating Partnership prior to
or simultaneously with the Closing; and

(i) All management functions with respect to the Properties
presently conducted by Arden Realty Group, Inc., a Maryland corporation, shall
be assumed by the Operating Partnership.

The foregoing conditions may be waived by the Operating Partnership
in its sole and absolute discretion.

2.2 TIME AND PLACE

The date, time and place of the transactions contemplated hereunder
shall be the day the Operating Partnership receives the proceeds from the
Public Offering from the underwriter(s), at 10:00 a.m. in the office of Latham
& Watkins, 633 West Fifth Street, Sixth Floor, Los Angeles, California (the
"CLOSING" or "CLOSING DATE"). The transfers described in ARTICLES 1.1 AND 1.2
of this Contribution Agreement, and all closing deliveries, and the
consummation of the Public Offering, shall be deemed concurrent for all
purposes.

2.3 CLOSING DELIVERIES

At the Closing, the parties shall make, execute, acknowledge and
deliver, or cause to be made, executed, acknowledged and delivered through the
Attorney-in-Fact (see

<PAGE>

ARTICLE 6.1 below), the legal documents and other items (collectively the
"CLOSING DOCUMENTS") necessary to carry out the intention of this Contribution
Agreement, which Closing Documents and other items shall include, without
limitation, the following:

(i) A Contribution and Assumption Agreement for each of the
Partnerships;

(ii) An individual quitclaim deed for each Property fully executed
and duly acknowledged from each of the individual constituent partners
and/or members of the Contributor, as required by the Operating
Partnership;

(iii) An Assignment and Assumption Agreement duly executed and
delivered by the Contributor and the Operating Partnership, whereby the
Contributor assigns its rights under the Property Management Agreement to
the Operating Partnership;

(iv) The Amendment or the Certificates evidencing the transfer of OP
Units to the Contributor;

(v) An American Land Title Assurances ("ALTA") policy of title
insurance with appropriate endorsements and levels of reinsurance for the
Property issued as of the Closing Date or endorsements or other assurances
that the existing policy or policies of title insurance are sufficient for
purposes of this Contribution Agreement, which the Contributor shall cause
the tite company to issue to the Operating Partnership in a form acceptable
to the Operating Partnership (the "TITLE POLICIES") including satisfaction
by the Contributor of any and all title company requirements applicable to
it;

(vi) The Partnerships' books and records and securities or other
evidences of ownership held by the Contributor; and

(vii) An affidavit from the Contributor, stating under penalty of
perjury, the Contributor's United States Taxpayer Identification Number
and that the Contributor is not a foreign person pursuant to section
1445(b)(2) of the Code and a comparable affidavit satisfying California
and any other withholding requirements.

2.4 CLOSING COSTS

The Operating Partnership shall pay any documentary transfer taxes,
escrow charges, title charges and recording taxes or fees incurred in
connection with the transactions contemplated hereby.

<PAGE>

3. REPRESENTATIONS AND WARRANTIES AND INDEMNITIES

3.1 REPRESENTATIONS AND WARRANTIES OF THE OPERATING PARTNERSHIP

The Operating Partnership hereby represents and warrants to and
covenants with the Contributor that:

(a) ORGANIZATION; AUTHORITY. The Operating Partnership has been
duly formed and is validly existing with requisite power to enter this
Contribution Agreement and all agreements contemplated hereby. The
persons and entities executing this Contribution Agreement and all
agreements contemplated hereby on behalf of the Operating Partnership have
the power and authority to enter into this Contribution Agreement and such
other contemplated agreements; and

(b) DUE AUTHORIZATION. The execution, delivery and performance
by the Operating Partnership of its obligations under this Contribution
Agreement and all agreements contemplated hereby will not contravene any
provision of applicable law, the OP Agreement, charter, declaration of
trust or other constituent document of the Operating Partnership, or any
agreement or other instrument binding upon the Operating Partnership or
any judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Operating Partnership, and no consent,
approval, authorization or order of or qualification with any
governmental body or agency is required for the performance by the
Operating Partnership of its obligations under this Contribution
Agreement and all other agreements contemplated hereby.

3.2 REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR

3.3 INDEMNIFICATION

The Operating Partnership shall indemnify and hold harmless the
Contributor (the "INDEMNIFIED CONTRIBUTOR PARTY") from and against any and all
claims, losses, damages, liabilities and expenses, including without
limitation, amounts paid in settlement, reasonable attorneys' fees, costs of
investigation and remediation, costs of investigative judicial or
administrative proceedings or appeals therefrom and costs of attachment or
similar bonds (collectively, "LOSSES") asserted against, imposed upon or
incurred by the Indemnified Contributor Party in connection with: (i) any
breach of a representation or warranty of the Operating Partnership contained
in this Contribution Agreement; (ii) any liabilities or obligations incurred,
arising from or out of, in connection with or as a result of

<PAGE>

any claims made or actions brought by or against the Contributor, the
Partnerships, the Properties or an Indemnified Contributor Party, that arise
from or out of, in connection with or as a result of any Contamination (as
defined in Exhibit D hereto) of the Properties regardless of when or how
occurring, except to the extent, and only to the extent, such Losses arise
from or constitute a breach of a representation and warranty of Contributor
under Exhibit D; and (iii) all fees, costs and expenses of the Operating
Partnership in connection with the transactions contemplated by the
Contribution Agreement, including without limitation any and all costs
associated with the transfers contemplated herein.

4. COVENANTS OF CONTRIBUTOR

(a) From the date hereof through the Closing, the Contributor shall
not:

(i) Sell or transfer all or any portion of the Partnership
Interest; or

(ii) Mortgage, pledge or encumber (or permit to become
encumbered) all or any portion of the Partnership Interest.

(b) From the date hereof through the Closing, the Contributor shall
permit each of the Partnerships to conduct its business in the ordinary course,
consistent with past practice, and shall not permit any of the Partnerships to:

(i) Enter into any material transaction not in the ordinary
course of business;

(ii) Sell or transfer any assets of the Partnerships;

(iii) Mortgage, pledge or encumber (or permit to become
encumbered) any assets of the Partnerships, except (x) liens for taxes
not due, (y) purchase money security interests and (z) mechanics' liens
being disputed by the Partnerships in good faith and by appropriate
proceedings;

(iv) Amend, modify or terminate any material agreements or other
instruments to which the Partnerships are a party;

(v) Materially alter the manner of keeping the Partnerships'
books, accounts or records or the accounting practices therein reflected;
or

(vi) Make any distribution to its partners.

<PAGE>

5. RELEASES AND WAIVERS

Each of the releases and waivers enumerated in this ARTICLE 5 shall
become effective only upon the Closing of the contribution and exchange of the
Partnership Interest pursuant to ARTICLES 1 AND 2 herein.

5.1 GENERAL RELEASE OF OPERATING PARTNERSHIP

As of the Closing, the Contributor irrevocably waives, releases and
forever discharges the Operating Partnership and the Operating Partnership's
affiliates, partners (including Richard S. Ziman and Victor J. Coleman),
agents, attorneys, successors and assigns of and from, any and all charges,
complaints, claims, liabilities, damages, actions, causes of action, losses
and costs of any nature whatsoever (collectively, "CONTRIBUTOR CLAIMS"), known
or unknown, suspected or unsuspected, arising out of or relating to any of the
Partnership Agreements, this Contribution Agreement or any other matter which
exists at the Closing, except for Contributor Claims arising from the breach
of any representation, warranty, covenant or obligation under this
Contribution Agreement.

5.2 GENERAL RELEASE OF CONTRIBUTOR

As of the Closing, the Operating Partnership irrevocably waives,
releases and forever discharges the Contributor and Contributor's agents,
attorneys, successors and assigns of and from, any and all charges,
complaints, claims, liabilities, damages, actions, causes of action, losses
and costs of any nature whatsoever (collectively, "OPERATING PARTNERSHIP
CLAIMS"), known or unknown, suspected or unsuspected, arising out of or
relating to any of the Partnership Agreements, this Contribution Agreement or
any other matter which exists at the Closing, except for Operating Partnership
Claims arising from the breach of any representation, warranty, covenant or
obligation under this Contribution Agreement.

5.3 WAIVER OF SECTION 1542 PROTECTIONS

As of the Closing, the Contributor and the Operating Partnership each
expressly waives and relinquishes all rights and benefits afforded by Section
1542 of the California Civil Code and do so understanding and acknowledging
the significance and consequence of such specific waiver of Section 1542 which
provides:

A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing
the release, which if known by him must have materially affected the
settlement with the debtor.

<PAGE>

5.4 WAIVER OF RIGHTS UNDER PARTNERSHIP AGREEMENT

As of the Closing, the Contributor waives and relinquishes all rights
and benefits otherwise afforded to Contributor under the Partnership
Agreements including, without limitation, any right to consent to or approve
of the sale or contribution by the other partners (or members) of the
Partnerships of their partnership interests to the Company or the Operating
Partnership.

6. POWER OF ATTORNEY

6.1 GRANT OF POWER OF ATTORNEY

Contributor does hereby irrevocably appoint the Operating Partnership
(or its designee) and each of them individually and any successor thereof from
time to time (such Operating Partnership or designee or any such successor of
any of them acting in his, her or its capacity as attorney-in-fact pursuant
hereto, the "ATTORNEY-IN FACT") as the true and lawful attorney-in-fact and
agent of Contributor, to act in the name, place and stead of Contributor to
make, execute, acknowledge and deliver all such other contracts, orders,
receipts, notices, requests, instructions, certificates, consents, letters and
other writings (including without limitation the execution of any Closing
Documents or other documents relating to the acquisition by the Operating
Partnership of Contributor's Partnership Interest), to provide information to
the Securities and Exchange Commission and others about the transactions
contemplated hereby and, in general, to do all things and to take all actions
which the Attorney-in-Fact in its sole discretion may consider necessary or
proper in connection with or to carry out the transactions contemplated by
this Contribution Agreement, as fully as could Contributor if personally
present and acting. Further, Contributor hereby grants to Attorney-in-Fact a
proxy (the "PROXY") to vote Contributor's Partnership Interest on any matter
related to the Formation Transactions presented to the partners of any of the
Partnerships for a vote, including, but not limited to, the transfer of
interests in the Partnership by the other partners.

Each of the Power of Attorney and Proxy and all authority granted
hereby shall be coupled with an interest and therefore shall be irrevocable
and shall not be terminated by any act of Contributor, by operation of law or
by the occurrence of any other event or events, and if any other such act or
events shall occur before the completion of the transactions contemplated by
this Contribution Agreement, the Attorney-in-Fact shall nevertheless be
authorized and directed to complete all such transactions as if such other act
or events had not occurred and regardless of notice thereof. Contributor
agrees that, at the request of Operating Partnership it will promptly execute
a separate power of attorney and proxy on the same terms set forth in this
ARTICLE 6, such execution to be witnessed and notarized. Contributor hereby
authorizes the reliance of third parties on each of the Power of Attorney and
Proxy.

<PAGE>

Contributor acknowledges that the Operating Partnership has, and any
designee or successor thereof acting as Attorney-in-Fact may have, an economic
interest in the transactions contemplated by this Contribution Agreement.

6.2 LIMITATION ON LIABILITY

It is understood that the Attorney-in-Fact assumes no responsibility
or liability to any person by virtue of the Power of Attorney or Proxy granted
by Contributor hereby. The Attorney-in-Fact makes no representations with
respect to and shall have no responsibility for the Formation Transactions or
the Public Offering, or the acquisition of the Partnership Interest by the
Operating Partnership and shall not be liable for any error or judgement or
for any act done or omitted or for any mistake of fact or law except for its
own gross negligence or bad faith. Contributor agrees to indemnify the
Attorney-in-Fact for and to hold the Attorney-in-Fact harmless against any
loss, claim, damage or liability incurred on its part arising out of or in
connection with it acting as the Attorney-in-Fact under the Power of Attorney
or Proxy created by Contributor hereby, as well as the cost and expense of
investigating and defending against any such loss, claim, damage or liability,
except to the extend such loss, claim, damage or liability is due to the gross
negligence or bad faith of the Attorney-in-Fact. Contributor agrees that the
Attorney-in-Fact may consult with counsel of its own choice (who may be
counsel for Operating Partnership or its successors or affiliates), and it
shall have full and complete authorization and protection for any action taken
or suffered by it hereunder in good faith and in accordance with the opinion
of such counsel. It is understood that the Attorney-in-Fact may, without
breaching any express or implied obligation to Contributor hereunder, release,
amend or modify any other power of attorney or proxy granted by any other
person under any related agreement.

7. MISCELLANEOUS

7.3 GOVERNING LAW. This Contribution Agreement shall be governed by
the internal laws of the State of California, without regard to the choice of
laws provisions thereof.

<PAGE>

addressed as set forth below, but any party may change the address set forth
below by written notice to other parties in accordance with this paragraph.

To the Contributor:

Michele Byer
c/o Arden Realty Group, Inc.
9100 Wilshire Boulevard, Suite 700E
Beverly Hills, CA 90212

To the Operating Partnership:

Arden Realty Group Limited Partnership
c/o Arden Realty Group, Inc.
9100 Wilshire Boulevard, Suite 700E
Beverly Hills, CA 90212

IN WITNESS WHEREOF, the parties have executed this Contribution Agreement
as of the date first written above.

"OPERATING PARTNERSHIP"

ARDEN REALTY GROUP LIMITED PARTNERSHIP,
a Maryland limited partnership

By: ARDEN REALTY GROUP, INC.,
a Maryland Corporation,
general partner

By:
------------------------------

"CONTRIBUTOR"

MICHELE BYER,
an individual

By:
-------------------------------------

<PAGE>

EXHIBIT A
to
CONTRIBUTION AGREEMENT

CONSTITUENT INTERESTS OF CONTRIBUTOR'S PARTNERSHIP INTEREST

Partnerships Property Held by the Minimum
and Management Agreement Partnerships Consideration
- ----------------------------- ---------------------------- --------------
<S> <C> <C>
1950 Sawtelle Associates, L.P. 1950 Sawtelle Boulevard $ 56,134
- ----------------------------- ---------------------------- -------------
5000 Spring Associates, LLC 5000 East Spring Street $ 33,917
- ----------------------------- ---------------------------- -------------
Arden LAOP Two, LLC Anaheim City Center; $ 2,408
425 West Broadway
- ----------------------------- ---------------------------- -------------
Arden LAOP Three, LLC 16000 Ventura Boulevard; $ 12,621
Bristol Plaza
- ----------------------------- ---------------------------- -------------
LAOP IV, LLC 5601 Lindero Canyon; $276,066
Westwood Terrace;
Calabasas Commerce Center;
The New Wilshire;
70 South Lake;
Skyview Center;
4811 Airport Plaza Drive;
4900/10 Airport Plaza Drive
- ----------------------------- ---------------------------- -------------
LAOP V, LLC 5832 Bolsa Avenue; $ 85,936
400 Corporate Pointe;
9665 Wilshire Boulevard;
Imperial Bank Tower
Arden Broadway
Associates, LLC 100 West Broadway $347,139
- ----------------------------- ---------------------------- -------------
Management Agreement for 5000 $ 34,376
East Spring Street
- ----------------------------- ---------------------------- -------------
Total Minimum
Consideration $848,597
-------------
-------------
</TABLE>

A-1

<PAGE>

EXHIBIT B
to
CONTRIBUTION AGREEMENT

CONTRIBUTION AND ASSUMPTION AGREEMENT

FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of
which are hereby acknowledged, the undersigned hereby assigns, transfers,
contributes and conveys to ARDEN REALTY GROUP LIMITED PARTNERSHIP, a Maryland
limited partnership (the "Operating Partnership"), its entire legal and
beneficial right, title and interest in and to 5000 Spring Associates, LLC, a
Nevada limited liability company (the "Partnership"), including, without
limitation, all right, title and interest, if any, of the undersigned in and
to the assets of the Partnership and the right to receive distributions of
money, profits and other assets from the Partnership, presently existing or
hereafter at any time arising or accruing (such right, title and interest are
hereinafter collectively referred to as the "Partnership Interest"), TO HAVE
AND TO HOLD the same unto the Operating Partnership, its successors and
assigns, forever.

Upon the execution and delivery hereof, the Operating Partnership
assumes all obligations in respect of the Partnership Interest.

The Partnership owns certain real property as described in Attachment
"1" attached hereto.

Executed: _____ __, 1996

By: /s/ Michele Byer
----------------------
Michele Byer

B-1

<PAGE>

EXHIBIT C
to
CONTRIBUTION AGREEMENT

Order No.
Escrow No.
Loan No.

WHEN RECORDED MAIL TO:

- --------------------------------------------------------------------------------
MAIL TAX STATEMENTS TO: SPACE ABOVE THIS LINE FOR RECORDER'S USE

DOCUMENTARY TRANSFER TAX $ ...........

..... Computed on the consideration or
value of property conveyed; OR

..... Computed on the consideration or
value less liens or encumbrances
remaining at time of sale.

---------------------------------------
Signature of Declarant of Agent
determining tax - Firm Name

- --------------------------------------------------------------------------------
QUITCLAIM DEED

FOR A VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,

do(es) hereby REMISE, RELEASE and FOREVER QUITCLAIM to

Arden Realty Group Limited Partnership, a Maryland limited partnership

the real property in the City of ____________, County of ____________, State of
California, described as

Dated ______________________ _____________________________
STATE OF CALIFORNIA } _____________________________
} _____________________________
COUNTY OF ________________ } _____________________________

On ______________ before me,
___________________________,
personally appeared ________
____________________________

personally known to me (or proved to
me on the basis of satisfactory evidence)
to be the person(s) whose names(s) is/are
subscribed to the within instrument and
acknowledged to me that he/she/they
executed the same in his/her/their
authorized capacity(ies), and that by
his/her/their signature(s) on the
instrument the person(s) or the entity
upon behalf of which the person(s) acted,
executed the instrument.

WITNESS my hand and official seal.

Signature ________________________ (This area for official notarial seal)

C-1

<PAGE>

EXHIBIT D
TO
CONTRIBUTION AGREEMENT

REPRESENTATIONS, WARRANTIES AND INDEMNITIES

ARTICLE 1- ADDITIONAL DEFINED TERMS