ARDEN REALTY INC, S-11, 1997-06-26

ARDEN REALTY INC
S-11, 1997-06-26
OPERATORS OF NONRESIDENTIAL BUILDINGS

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

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 STEVEN A. MUSELES
650 Town Center Drive Hogan & Hartson L.L.P.
Suite 2000 Columbia Square
Costa Mesa, California 555 Thirteenth Street, N.W.
92626 Washington, D.C. 20004-1109
(714) 540-1235 (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>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per
share 11,500,000 $26.0625 $299,718,750 $90,824
</TABLE>

(1) Includes 1,500,000 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.

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

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.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 be 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>
Subject to Completion, dated June 26, 1997

PROSPECTUS

10,000,000 SHARES

[LOGO]
ARDEN REALTY, INC.
COMMON STOCK
----------------

Arden Realty, Inc., a Maryland corporation (the "Company"), is a
self-administered and self-managed real estate investment trust ("REIT") engaged
in owning, acquiring, managing, leasing and renovating office properties in
Southern California. The Company currently owns 45 office properties (the
"Properties") containing approximately 7.4 million rentable square feet, all of
which are located in Southern California. As of June 15, 1997, the Company had
executed eight contracts and entered one letter of intent to acquire nine
additional office properties containing approximately 1.2 million rentable
square feet (collectively, the "Pending Acquisitions") for a Total Acquisition
Cost (as defined below) of approximately $161.4 million.

All of the shares of the Company's common stock (the "Common Stock") offered
hereby are being sold by the Company. 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."

The Common Stock is listed on the New York Stock Exchange ("NYSE") under the
symbol "ARI." On June 24, 1997, the last reported sales price of the Common
Stock on the NYSE was $26.0625 per share.
---------------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK, INCLUDING:

- - The possibility that the Company may not be able to refinance outstanding
debt upon maturity, that indebtedness might be refinanced on less favorable
terms, and that interest rates might increase on variable rate indebtedness;
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;

- - The possibility that one or more of the Pending Acquisitions will not close;

- - The lack of operating history of the Properties under the management of the
Company;

- - 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, 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>
Underwriting
Discounts
Price to and Proceeds to
Public Commissions(1) Company(2)
Per Share......................................... $ $ $
<S> <C> <C> <C>
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 $ payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
1,500,000 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 , 1997.
---------------------------

LEHMAN BROTHERS

ALEX. BROWN & SONS
INCORPORATED

A.G. EDWARDS & SONS, INC.

MORGAN STANLEY DEAN WITTER

SMITH BARNEY INC.

<TABLE>
<S> <C> <C>
EVEREN SECURITIES, INC. RAYMOND JAMES & ASSOCIATES, INC.
</TABLE>

, 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON STOCK PRIOR TO PRICING
OF THE OFFERING FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK,
THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING THE PRICING OF THE OFFERING TO
COVER A SYNDICATE SHORT POSITION IN THE COMMON STOCK OR FOR THE PURPOSE OF
MAINTAINING THE PRICE OF THE COMMON STOCK, AND THE IMPOSITION OF PENALTY BIDS.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PROSPECTUS SUMMARY............................ 1
The Company................................. 1
Risk Factors................................ 2
Recent Developments......................... 4
Acquired Properties....................... 4
Pending Acquisitions...................... 5
Credit Facilities......................... 5
Mortgage Financing........................ 6
Business and Growth Strategies.............. 6
The Properties.............................. 7
The Offering................................ 10
Distributions............................... 10
Tax Status of the Company................... 11
Summary Selected Financial Data............. 11

RISK FACTORS.................................. 15
Real Estate Financing Risks................. 15
No Limitation on Debt....................... 16
Real Estate Investment Risks................ 16
Concentration of Properties in Southern
California................................ 18
Risk that Pending Acquisitions Will Not
Close..................................... 18
Conflicts of Interests in the Formation
Transactions and the Business of the
Company................................... 18
Risks Associated with Rapid Growth, the
Recent Acquisition of Many of the New
Properties and the Lack of Operating
History................................... 19
Changes in Policies Without Stockholder
Approval.................................. 19
Risk of Acquisition, Renovation and
Development Activities.................... 20
Potential Adverse Tax Consequences of
Failure to Qualify as a REIT.............. 20
Other Tax Liabilities....................... 21
Insurance................................... 21
Dependence on Key Personnel................. 22
Limits on Changes in Control................ 22
Possible Environmental Liabilities.......... 23
Possible Adverse Effect on Common Stock
Price of Shares Available for Future
Sale...................................... 24
Possible Adverse Effect on Holders of Common
Stock of an Issuance of Preferred Stock... 24
Influence of Executive Officers, Directors
and Principal Stockholders................ 25

<CAPTION>
PAGE
-----
<S> <C>
Possible Adverse Effect of Market Interest
Rates on Price of Common Stock............ 25

THE COMPANY................................... 26
General..................................... 26
The Operating Partnership................... 27

BUSINESS AND GROWTH STRATEGIES................ 28
Business Strategies......................... 28
Growth Strategies........................... 29

USE OF PROCEEDS............................... 31

PRICE RANGE OF COMMON STOCK AND DISTRIBUTION
HISTORY..................................... 31

CAPITALIZATION................................ 33

SELECTED FINANCIAL INFORMATION................ 34

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.................................. 38
Overview.................................... 38
Results of Operations....................... 38
Pro Forma Operating Results................. 46
Liquidity and Capital Resources............. 47
Cash Flows.................................. 48
Inflation................................... 49

SOUTHERN CALIFORNIA ECONOMY AND OFFICE
MARKETS..................................... 50
Southern California Economy................. 50

PROPERTIES.................................... 55
General..................................... 55
Properties and Pending Acquisitions......... 56
Tenant Information.......................... 59
Lease Distributions......................... 60
Lease Expirations--Portfolio Total.......... 60
Lease Expirations--Property by Property..... 61
Tenant Retention and Expansions............. 73
Historical Lease Renewals................... 73
Historical Tenant Improvements and Leasing
Commissions............................... 74
Historical Capital Expenditures............. 75
Historical Occupancy........................ 75

OFFICE SUBMARKETS AND PROPERTY INFORMATION.... 76
</TABLE>

i
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Location of Properties and Pending
Acquisitions.............................. 77
Los Angeles County Office Market............ 77
Orange County Office Market................. 86
Ventura County Office Market................ 88
Kern County Office Market................... 89
Competition................................. 90
Insurance................................... 90
Environmental Regulations................... 91
Potential Eminent Domain Proceedings........ 92
Legal Proceedings........................... 92
Employees................................... 92

MANAGEMENT.................................... 93
Directors and Executive Officers............ 93
Board of Directors.......................... 95
Committees of the Board of Directors........ 96
Compensation of Directors................... 96
Executive Compensation...................... 96
Compensation Committee Interlocks and
Insider Participation..................... 98
Employment Agreements....................... 98
Stock Incentive Plan........................ 99
401(k) Plan................................. 99
Limitation of Liability and
Indemnification........................... 100

FORMATION TRANSACTIONS........................ 101
Benefits of the Formation Transactions and
the IPO to Affiliates of the Company...... 102

POLICIES WITH RESPECT TO CERTAIN ACTIVITIES... 103
Investment Policies......................... 103
Dispositions................................ 104
Financing Policies.......................... 104
Conflict of Interest Policies............... 105
Policies with Respect to Other Activities... 106

CERTAIN TRANSACTIONS.......................... 106
Formation Transactions...................... 106
Partnership Agreement; Redemption/ Exchange
Rights.................................... 106
Registration Rights......................... 106
Acquisition of Property from Former
Director.................................. 106
Acceleration of Options Granted to Former
Officer................................... 107

PARTNERSHIP AGREEMENT......................... 107
Management.................................. 107
Transferability of Interests................ 107
<CAPTION>
PAGE
-----
<S> <C>
Capital Contributions....................... 108
Redemption/Exchange Rights.................. 108
Issuance of Additional OP Units, Common
Stock or Convertible Securities........... 109
Tax Matters................................. 109
Operations.................................. 109
Duties and Conflicts........................ 109
Certain Voting Rights of Limited Partners... 109
Term........................................ 110
Indemnification............................. 110

PRINCIPAL AND MANAGEMENT STOCKHOLDERS......... 111

CAPITAL STOCK................................. 112
General..................................... 112
Common Stock................................ 112
Preferred Stock............................. 112
Power to Issue Additional Shares of Common
Stock and Preferred Stock................. 113
Transfer Agent and Registrar................ 113
Restrictions on Transfer.................... 113

CERTAIN PROVISIONS OF MARYLAND LAW AND THE
COMPANY'S CHARTER AND BYLAWS................ 115
Board of Directors--Number, Classification,
Vacancies................................. 116
Removal of Directors........................ 116
Business Combinations....................... 116
Control Share Acquisitions.................. 117
Amendment to the Charter.................... 117
Dissolution of the Company.................. 118
Advance Notice of Director Nominations and
New Business.............................. 118
Anti-takeover Effect of Certain Provisions
of Maryland Law and of the Charter and
Bylaws.................................... 118
Rights to Purchase Securities and Other
Property.................................. 118

SHARES AVAILABLE FOR FUTURE SALE.............. 118
General..................................... 118
Registration Rights......................... 119

FEDERAL INCOME TAX CONSIDERATIONS............. 119
Taxation of the Company..................... 120
Failure to Qualify.......................... 125
Taxation of Taxable U.S. Stockholders
Generally................................. 125
</TABLE>

ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Backup Withholding.......................... 126
Taxation of Tax-Exempt Stockholders......... 127
Taxation of Non-U.S. Stockholders........... 127
Tax Aspects of the Operating Partnership.... 130
Other Tax Considerations.................... 133

ERISA CONSIDERATIONS.......................... 133
Employment Benefit Plans, Tax-Qualified
Pension, Profit Sharing or Stock Bonus
Plans and IRAs............................ 133
<CAPTION>
PAGE
-----
<S> <C>
Status of the Company and the Operating
Partnership under ERISA................... 134

UNDERWRITING.................................. 136

EXPERTS....................................... 137

LEGAL MATTERS................................. 138

ADDITIONAL INFORMATION........................ 138

GLOSSARY...................................... 139
</TABLE>

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 UNDERWRITERS' OVERALLOTMENT OPTION IS NOT EXERCISED, (II) THE
OFFERING PRICE FOR THE COMMON STOCK OFFERED HEREBY IS $26.0625 AND (III) NONE OF
THE LIMITED PARTNERSHIP INTERESTS ("OP UNITS") OF ARDEN REALTY LIMITED
PARTNERSHIP, A MARYLAND LIMITED PARTNERSHIP (THE "OPERATING PARTNERSHIP"),
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, THE OPERATING PARTNERSHIP AND THEIR SUBSIDIARIES, COLLECTIVELY. ALL
REFERENCES IN THIS PROSPECTUS TO "NAMIZ" REFER TO NAMIZ, INC., A CALIFORNIA
CORPORATION FORMERLY KNOWN AS ARDEN REALTY GROUP, INC. AND THE COMPANY'S
IMMEDIATE PREDECESSOR. ALL REFERENCES IN THIS PROSPECTUS TO THE ACTIVITIES OF
THE COMPANY PRIOR TO OCTOBER 9, 1996 REFER TO THE ACTIVITIES OF THE "ARDEN
PREDECESSORS" WHICH INCLUDE NAMIZ AND CERTAIN OF ITS AFFILIATED ENTITIES THAT
WERE ENGAGED IN THE REAL ESTATE BUSINESS IN SOUTHERN CALIFORNIA PRIOR TO THE
COMPANY'S FORMATION AND THE CONSUMMATION OF ITS INITIAL PUBLIC OFFERING. SEE
"GLOSSARY" FOR THE DEFINITIONS OF CERTAIN TERMS USED IN THIS PROSPECTUS.

THE COMPANY

The Company is a self-administered and self-managed real estate investment
trust ("REIT") engaged in owning, acquiring, managing, leasing and renovating
commercial office properties in Southern California. The Company currently owns
a portfolio of 45 office properties (the "Properties") containing approximately
7.4 million rentable square feet. All of the Properties are located in Southern
California, with 38 in suburban Los Angeles County, three in Orange County, one
in Ventura County, two in Kern County and one in San Diego County.

Since its initial public offering in October 1996 (the "IPO"), the Company
has acquired 21 additional office properties (collectively, the "Acquired
Properties"), increasing its portfolio of office properties from the initial 24
Properties (collectively, the "Initial Properties") to 45 Properties. The
Acquired Properties contain approximately 3.4 million rentable square feet and
were purchased for a Total Acquisition Cost of approximately $366.5 million.

As of June 15, 1997, the Company had executed eight contracts and entered
into one letter of intent to acquire nine additional office properties
(collectively, the "Pending Acquisitions") containing approximately 1.2 million
rentable square feet for a Total Acquisition Cost of approximately $161.4
million. As of May 1, 1997, the Pending Acquisitions were approximately 77.1%
leased.

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 below those required to make new
construction economically feasible. The Company's portfolio is comprised of
suburban office properties which have high quality finishes, are situated in
desirable locations, 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. Of the Company's 45 Properties, 36 have
been built since 1980 and 17 have been substantially renovated within the last
five years.

As of May 1, 1997, the Company's portfolio of 45 Properties (which includes
the 24 Initial Properties and the 21 Acquired Properties) was approximately
85.8% leased. The 24 Initial Properties were approximately 91.9% leased as of
May 1, 1997 as compared to 88.9% leased as of August 1, 1996.

The Company also believes, based upon its evaluation of market conditions,
that certain economic fundamentals are present in Southern California which
enhance the Company's ability to achieve its business objectives by providing an
attractive environment for owning, acquiring and operating suburban

1
<PAGE>
office properties. Specifically, the Company believes that the limited
construction of new office properties in the Southern California region since
1992 coupled with an improving Southern California economy will continue to
result in increased demand for office space and positive net absorption in the
Southern California region, particularly in the selected submarkets where most
of the Properties are located.

The Company operates from its Beverly Hills, California headquarters and is
a fully-integrated real estate company with approximately 86 full-time employees
and in-house expertise in acquisitions, finance, asset management, leasing and
construction. The Company's founders, Richard S. Ziman and Victor J. Coleman,
along with the other six senior officers of the Company, have an average of more
than 14 years of experience in the real estate industry. See
"Management--Directors and Executive Officers." Upon completion of this offering
(the "Offering"), management will own in the aggregate 6.38% of the outstanding
shares of Common Stock and OP Units.

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 Company may not be able to refinance outstanding
indebtedness upon maturity (including the $175 million Mortgage Financing
(as defined below) and the $300 million Credit Facility (as defined below)
which mature on June 10, 2004 and June 1, 2000, 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 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 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;

- the possibility that one or more of the Pending Acquisitions will not
close and that the Company may be unable to apply proceeds from the
Offering toward other suitable acquisitions, which may adversely affect
its ability to increase distributable cash flow per share;

- 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, the risks that 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;

- conflicts of interest involving Messrs. Ziman and Coleman in business
decisions regarding the Company, including conflicts associated with any
prepayment of debt secured by the Initial

2
<PAGE>
Properties that may arise due to the more adverse tax consequences of such
prepayment to Messrs. Ziman and Coleman as holders of OP Units;

- 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, 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 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;

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

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

3
<PAGE>
RECENT DEVELOPMENTS

ACQUIRED PROPERTIES

Since the closing of the IPO on October 9, 1996 through June 15, 1997, the
Company has acquired 21 additional suburban office properties in Southern
California containing approximately 3.4 million rentable square feet for a Total
Acquisition Cost of approximately $366.5 million. The following table sets forth
certain data regarding the Acquired Properties:

<TABLE>
<CAPTION>
PERCENT TOTAL
APPROXIMATE LEASED AT PERCENT ACQUISITION
NET RENTABLE ACQUISITION LEASED AT COST(1) MONTH
PROPERTY NAME LOCATION SQUARE FEET DATE MAY 1, 1997 (MILLIONS) ACQUIRED
- -------------------------------------------- -------------- ------------ ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
10351 Santa Monica.......................... Los Angeles 96,251 99% 98% $ 11.1 October 1996

2730 Wilshire............................... Santa Monica 55,080(2) 93% 98% 7.9(2) November 1996

Burbank Executive Plaza..................... Burbank 60,395 84% 74% 5.5 November 1996

California Federal Building................. Burbank 82,467 98% 97% 7.5 November 1996

Grand Avenue Plaza.......................... El Segundo 84,500 0%(3) 62%(3) 4.9 November 1996

Center Promenade............................ Ventura 174,837 83% 74% 11.7 December 1996

Los Angeles Corporate Center................ Monterey Park 389,293 77% 85% 42.0 December 1996

5200 West Century........................... Los Angeles 310,910 29%(4) 30%(4) 13.7 December 1996

Sumitomo Bank Building...................... Sherman Oaks 110,641 92% 92% 12.9 December 1996

10350 Santa Monica.......................... Los Angeles 42,292 88% 93% 4.3 December 1996

6800 Owensmouth............................. Canoga Park 80,014 83% 85% 7.5 March 1997

535 Brand................................... Glendale 109,187 41%(4) 51%(4) 15.1 March 1997

Whittier Financial Center................... Whittier 135,415 88% 85% 14.4 March 1997

California Twin Centre...................... Bakersfield 155,189 86% 89% 19.6 March 1997

Clarendon Crest............................. Woodland Hills 43,063 85% 85% 5.2 April 1997

10780 Santa Monica.......................... Los Angeles 92,486 78% 84% 10.6 April 1997

Noble Professional Center................... Sherman Oaks 51,828 81% 81% 6.7 April 1997

South Bay Centre............................ Gardena 202,830 86% 86% 19.1 April 1997

8383 Wilshire............................... Beverly Hills 417,463 77% 77% 59.1 May 1997

Parkway Center.............................. Bakersfield 61,333 99% 99% 7.5 May 1997

Centerpointe La Palma....................... La Palma 597,550 88% 88% 80.2 June 1997
-- --
------------ -----------

Total/Weighted Average.................. 3,353,024(2) 76% 79% $366.5(2)
------------ -----------
------------ -----------
</TABLE>

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

(1) "Total Acquisition Cost" includes all purchase costs, closing costs and
anticipated capital expenditures for, and carrying costs during,
renovations.

(2) Excludes the square feet and purchase price associated with the 100%
occupied, 12,740 square foot, 16-unit apartment complex at this property
which the Company also owns.

(3) Renovations were recently completed at Grand Avenue Plaza.

(4) 5200 West Century and 535 Brand are currently being renovated.

4
<PAGE>
PENDING ACQUISITIONS

As of June 15, 1997, the Company had executed eight contracts and entered
one letter of intent to acquire nine additional office properties containing
approximately 1.2 million rentable square feet for a Total Acquisition Cost of
approximately $161.4 million. The Company intends to use a portion of the net
proceeds from the Offering to complete the Pending Acquisitions within 60 days
after the closing of the Offering; however, purchase of the Pending Acquisitions
is subject to the Company's completion of due diligence and the satisfaction of
other customary conditions to closing, and there can be no assurance that any of
the Pending Acquisitions will be completed. See "Risk Factors--Risk that Pending
Acquisitions Will Not Close." The following table sets forth certain data
regarding the Pending Acquisitions:

<TABLE>
<CAPTION>
TOTAL
APPROXIMATE PERCENT ACQUISITION
NET RENTABLE LEASED AT COST(1)
PROPERTY NAME LOCATION SQUARE FEET MAY 1, 1997 (MILLIONS)
- ---------------------------------------------------------- ------------- ------------ --------------- -------------
<S> <C> <C> <C> <C>
1100 Glendon.............................................. Los Angeles 282,013 50%(2) $ 49.9
Carlsberg Corporate Center................................ Santa Monica 103,506 87% 11.8
299 Euclid................................................ Pasadena 73,400 0% 8.1
Harbor Corporate Center................................... Gardena 63,925 77% 4.5
Pacific Gateway II........................................ Torrance 223,731 92% 25.2
Mariner Court............................................. Torrance 105,436 87% 11.8
Crown Cabot............................................... Laguna Niguel 172,900 93% 28.3
1821 Dyer................................................. Irvine 115,061 100% 7.7
1000 Town Center.......................................... Oxnard 107,653 100% 14.1
------------ --- ------
Total/Weighted Average................................ 1,247,625 77% $ 161.4
------------ ------
------------ ------
</TABLE>

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

(1) "Total Acquisition Cost" includes all purchase costs, anticipated closing
costs and anticipated capital expenditures for, and carrying costs during,
renovations.

(2) Renovations are currently scheduled for 1100 Glendon.

CREDIT FACILITIES

On June 11, 1997, the Company amended its then existing credit facility with
a $300 million unsecured line of credit (the "Credit Facility") from a group of
banks led by Wells Fargo (the "Lenders"). The interest rate of the Credit
Facility ranges between LIBOR plus 1.2% and LIBOR plus 1.45% depending on the
leverage ratio of the Company. Once the Company achieves a long-term, unsecured,
investment grade debt rating, the interest rate may be lowered to between LIBOR
plus 0.9% and LIBOR plus 1.15% depending on such debt rating. As of June 24,
1997, approximately $14.0 million was available under the Credit Facility. Upon
consummation of the Offering and the Pending Acquisitions, the Company expects
to have $170 million available under the Credit Facility. The Credit Facility
has been and 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.

Pursuant to a separate agreement, Wells Fargo has advanced $26 million to
the Company which is secured by two Properties. This advance accrues interest at
the Wells Fargo Prime Rate and is scheduled to mature on July 10, 1997. Upon
receipt of the Lenders' consent to add the two Properties which currently secure
this advance to the Credit Facility's unencumbered pool of properties, the
Company will draw down $26 million from the Credit Facility to repay the
advance.

The Company also has an unsecured line of credit with a total commitment of
$10,000,000 from City National Bank (the "CNB Credit Facility"). On June 15,
1997, the aggregate outstanding balance was $10,000,000. The CNB Credit Facility
accrues interest at the City National Bank Prime Rate less 0.875% and is
scheduled to mature on August 1, 1998. The CNB Credit Facility has and will be
used, among other things, to provide funds for tenant improvements and capital
expenditures and provide for working capital and other corporate purposes.

5
<PAGE>
MORTGAGE FINANCING

On June 11, 1997, the Company refinanced its existing $175 million mortgage
financing with a new $175 million mortgage financing (the "Mortgage Financing")
from an affiliate of Lehman Brothers. The Mortgage Financing is non-recourse and
secured by fully cross-collateralized and cross-defaulted first mortgage liens
on 18 of the Properties (collectively, the "Mortgage Financing Properties"), all
of which are held by a special purpose subsidiary of the Company. The Mortgage
Financing bears interest at a fixed rate of 7.52%, is anticipated to be repaid
in seven years and requires monthly payments of interest only with all principal
due in a balloon payment at maturity.

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 by capitalizing on external
and internal growth opportunities. The Company's primary business strategies are
to actively manage its portfolio and to 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. When market conditions permit, the Company may also
develop new properties in submarkets where it has local market expertise.

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 such properties' cash flow and
value through active management and aggressive leasing.

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 and
existing rental rates at levels below those required to make new construction
economically feasible. The Company also believes, based upon its evaluation of
market conditions, that certain economic fundamentals are present in Southern
California which enhance its ability to achieve its business objectives by
providing an attractive environment for owning, acquiring and operating suburban
office properties. Specifically, the Company believes that the limited
construction of new office properties in the Southern California region since
1992 coupled with an improving Southern California 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.

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; (iv) its access to capital as a public
company; (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, however, currently intends to focus primarily on
acquisitions rather than development given its belief that opportunities to
acquire office properties at less than replacement cost continue to exist within
selected submarkets in Southern California.

6
<PAGE>
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

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 May 1, 1997, the Properties were 85.8% leased to over 1,200 tenants.
In addition, no single tenant accounted for more than approximately 2.1% of the
aggregate Annualized Base Rent (defined as the monthly contractual base rent
under existing leases as of May 1, 1997 multiplied by 12) of the Properties and
only ten tenants individually represented more than 1.0% of such aggregate
Annualized Base Rent.

As of June 15, 1997, the Company had executed eight contracts and entered
into one letter of intent to acquire the nine Pending Acquisitions. Upon closing
of the Pending Acquisitions the Company will own a total of 54 office properties
consisting of approximately 8.6 million rentable square feet; although there can
be no assurance that any of the Pending Acquisitions will be completed. See
"Risk Factors--Risk that Pending Acquisitions Will Not Close." As of May 1,
1997, the Pending Acquisitions were approximately 77.1% leased.

7
<PAGE>
The following table sets forth certain information regarding the Properties
and the Pending Acquisitions as of May 1, 1997:
<TABLE>
<CAPTION>
YEAR(S)
BUILT/ NO. OF
PROPERTY NAME SUBMARKET LOCATION RENOVATED BLDGS
- ----------------------------------- ---------------------------------- ------------------ ------------- -----------
<S> <C> <C> <C> <C>
INITIAL PROPERTIES
LOS ANGELES COUNTY
LOS ANGELES WEST
9665 Wilshire Beverly Hills/Century City Beverly Hills 1972/92-93 1
Beverly Atrium Beverly Hills/Century City Beverly Hills 1989 1
Century Park Center Beverly Hills/Century City Los Angeles 1972/94 1
Westwood Terrace Westwood/West Los Angeles Los Angeles 1988 1
1950 Sawtelle Westwood/West Los Angeles Los Angeles 1988/95 1
400 Corporate Pointe Marina Area/Culver City/LAX Culver City 1987 1
Bristol Plaza Marina Area/Culver City/LAX Culver City 1982 1
Skyview Center Marina Area/Culver City/LAX Los Angeles 1981,87/95 2
The New Wilshire Park Mile/West Hollywood Los Angeles 1986 1
LOS ANGELES NORTH
5601 Lindero Canyon Simi/Conejo Valley Westlake 1989 1
Calabasas Commerce Center Simi/Conejo Valley Calabasas 1990 4
Woodland Hills Financial Center West San Fernando Valley Woodland Hills 1972/95 2
16000 Ventura Central San Fernando Valley Encino 1980/96 1
425 Broadway East San Fernando Glendale 1984 1
Valley/Tri-Cities
303 Glenoaks East San Fernando Burbank 1983/96 1
Valley/Tri-Cities
70 South Lake East San Fernando Pasadena 1982/94 1
Valley/Tri-Cities
LOS ANGELES SOUTH
4811 Airport Plaza Long Beach Long Beach 1987/95 1
4900/10 Airport Plaza Long Beach Long Beach 1987/95 1
5000 Spring Long Beach Long Beach 1989/95 1
100 West Broadway Long Beach Long Beach 1987/96 1
12501 East Imperial Highway Norwalk/Cerritos Norwalk 1978/94 1
ORANGE COUNTY
5832 Bolsa West County Huntington Beach 1985 1
Anaheim City Centre Tri-Freeway Area Anaheim 1986/91 1
SAN DIEGO COUNTY
Imperial Bank Tower Central City San Diego 1982/96 1
--
Subtotal/Weighted Average--Initial Properties 29
--

ACQUIRED PROPERTIES
LOS ANGELES COUNTY
LOS ANGELES WEST
10350 Santa Monica Beverly Hills/Century City Los Angeles 1979 1
10351 Santa Monica Beverly Hills/Century City Los Angeles 1984 1
8383 Wilshire Beverly Hills/Century City Beverly Hills 1971/93 1
2730 Wilshire(1) Westwood/West Los Angeles Santa Monica 1985 1
10780 Santa Monica Westwood/West Los Angeles Los Angeles 1984 1
5200 West Century Marina Area/Culver City/LAX Los Angeles 1982 1

<CAPTION>
PERCENTAGE
OF TOTAL
APPROXIMATE PORTFOLIO PERCENT
NET RENTABLE NET RENTABLE LEASED AS OF
PROPERTY NAME SQUARE FEET SQUARE FEET MAY 1, 1997
- ----------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
INITIAL PROPERTIES
LOS ANGELES COUNTY
LOS ANGELES WEST
9665 Wilshire 158,684 1.8% 99.6%
Beverly Atrium 61,314 0.7% 85.0%
Century Park Center 243,404 2.8% 89.4%
Westwood Terrace 135,943 1.6% 95.0%
1950 Sawtelle 103,772 1.2% 88.3%
400 Corporate Pointe 164,598 1.9% 100.0%
Bristol Plaza 84,014 1.0% 88.1%
Skyview Center 391,675 4.5% 88.9%
The New Wilshire 202,704 2.4% 86.9%
LOS ANGELES NORTH
5601 Lindero Canyon 105,830 1.2% 100.0%
Calabasas Commerce Center 123,121 1.4% 97.7%
Woodland Hills Financial Center 224,955 2.6% 89.7%
16000 Ventura 174,841 2.0% 88.1%
425 Broadway 71,589 0.8% 97.6%

303 Glenoaks 175,449 2.0% 97.7%

70 South Lake 100,133 1.2% 91.9%

LOS ANGELES SOUTH
4811 Airport Plaza 121,610 1.4% 100.0%
4900/10 Airport Plaza 150,403 1.8% 100.0%
5000 Spring 163,358 1.9% 93.5%
100 West Broadway 191,727 2.2% 94.5%
12501 East Imperial Highway 122,175 1.4% 96.1%
ORANGE COUNTY
5832 Bolsa 49,355 0.6% 100.0%
Anaheim City Centre 175,391 2.0% 94.7%
SAN DIEGO COUNTY
Imperial Bank Tower 540,413 6.3% 82.1%

------------- ------------- -------------
Subtotal/Weighted Average--In 4,036,458 46.7% 91.9%

------------- ------------- -------------
ACQUIRED PROPERTIES
LOS ANGELES COUNTY
LOS ANGELES WEST
10350 Santa Monica 42,292 0.5% 93.1%
10351 Santa Monica 96,251 1.1% 97.8%
8383 Wilshire 417,463 4.8% 76.8%
2730 Wilshire(1) 55,080 0.6% 97.5%
10780 Santa Monica 92,486 1.1% 84.1%
5200 West Century 310,910 3.6% 30.1%
</TABLE>

8
<PAGE>
<TABLE>
<CAPTION>
YEAR(S)
BUILT/ NO. OF
PROPERTY NAME SUBMARKET LOCATION RENOVATED BLDGS
- ----------------------------------- ---------------------------------- ------------------ ------------- -----------
<S> <C> <C> <C> <C>
LOS ANGELES NORTH
6800 Owensmouth West San Fernando Valley Canoga Park 1986 1
Clarendon Crest West San Fernando Valley Woodland Hills 1990 1
Sumitomo Bank Building Central San Fernando Valley Sherman Oaks 1970/90-91 1
Noble Professional Center Central San Fernando Valley Sherman Oaks 1985/93 1
Burbank Executive Plaza East San Fernando Burbank 1983 1
Valley/Tri-Cities
California Federal Building East San Fernando Burbank 1978 1
Valley/Tri-Cities
535 Brand East San Fernando Glendale 1973/92 1
Valley/Tri-Cities
LOS ANGELES SOUTH
Grand Avenue Plaza El Segundo El Segundo 1979,80 2
South Bay Centre Torrance Gardena 1984 1
LOS ANGELES CENTRAL
Los Angeles Corporate Center San Gabriel Valley Monterey Park 1984,86 4
Whittier Financial Center San Gabriel Valley Whittier 1967,82 2
ORANGE COUNTY
Centerpointe La Palma North County La Palma 1986,88,90 12
VENTURA COUNTY
Center Promenade West County Ventura 1982 7
KERN COUNTY
Parkway Center Bakersfield Bakersfield 1992,95 2
California Twin Centre Bakersfield Bakersfield 1983 1
--
Subtotal/Weighted Average--Acquired Properties 44
--

PENDING ACQUISITIONS
LOS ANGELES COUNTY
LOS ANGELES WEST
1100 Glendon Westwood/West Los Angeles Los Angeles 1965 1
Carlsberg Corporate Center Westwood/West Los Angeles Santa Monica 1979 1
LOS ANGELES NORTH
299 Euclid East San Fernando Pasadena 1983 1
Valley/Tri-Cities
LOS ANGELES SOUTH
Harbor Corporate Center Torrance Gardena 1985 1
Pacific Gateway II Torrance Torrance 1982/90 1
Mariner Court Torrance Torrance 1989 1
ORANGE COUNTY
Crown Cabot South County Laguna Niguel 1989 1
1821 Dyer Greater Airport Area Irvine 1980/88 1
VENTURA COUNTY
1000 Town Center West County Oxnard 1989 1
--
Subtotal/Weighted Average--Pending Acquisitions 9
--

Total/Weighted Average--All Properties and Pending Acquisitions 82
--
--

<CAPTION>
PERCENTAGE
OF TOTAL
APPROXIMATE PORTFOLIO PERCENT
NET RENTABLE NET RENTABLE LEASED AS OF
PROPERTY NAME SQUARE FEET SQUARE FEET MAY 1, 1997
- ----------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
LOS ANGELES NORTH
6800 Owensmouth 80,014 0.9% 84.9%
Clarendon Crest 43,063 0.5% 84.7%
Sumitomo Bank Building 110,641 1.3% 92.2%
Noble Professional Center 51,828 0.6% 80.5%
Burbank Executive Plaza 60,395 0.7% 73.8%

California Federal Building 82,467 1.0% 97.0%

535 Brand 109,187 1.3% 51.0%

LOS ANGELES SOUTH
Grand Avenue Plaza 84,500 1.0% 61.5%
South Bay Centre 202,830 2.4% 85.8%
LOS ANGELES CENTRAL
Los Angeles Corporate Center 389,293 4.5% 84.9%
Whittier Financial Center 135,415 1.6% 85.2%
ORANGE COUNTY
Centerpointe La Palma 597,550 6.9% 88.2%
VENTURA COUNTY
Center Promenade 174,837 2.0% 73.7%
KERN COUNTY
Parkway Center 61,333 0.7% 99.5%
California Twin Centre 155,189 1.8% 88.5%

------------- ------------- -------------
Subtotal/Weighted Average--Ac 3,353,024 38.9% 78.6%

------------- ------------- -------------
PENDING ACQUISITIONS
LOS ANGELES COUNTY
LOS ANGELES WEST
1100 Glendon 282,013 3.3% 49.7%
Carlsberg Corporate Center 103,506 1.2% 87.3%
LOS ANGELES NORTH
299 Euclid 73,400 0.8% 0.0%

LOS ANGELES SOUTH
Harbor Corporate Center 63,925 0.7% 77.4%
Pacific Gateway II 223,731 2.6% 92.4%
Mariner Court 105,436 1.2% 86.7%
ORANGE COUNTY
Crown Cabot 172,900 2.0% 93.3%
1821 Dyer 115,061 1.3% 100.0%
VENTURA COUNTY
1000 Town Center 107,653 1.3% 100.0%

------------- ------------- -------------
Subtotal/Weighted Average--Pe 1,247,625 14.4% 77.1%

------------- ------------- -------------
Total/Weighted Average--All P 8,637,107 100.0% 84.6%

------------- -------------
------------- -------------
</TABLE>

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

(1) Above amounts for 2730 Wilshire exclude the 100%-occupied, 12,740 square
foot, 16-unit apartment complex which is also owned by the Company.

9
<PAGE>
THE OFFERING

All of the shares of Common Stock offered hereby are being sold by the
Company.

<TABLE>
<S> <C>
Common Stock Offered by the Company.... 10,000,000 shares

Common Stock Outstanding After the
Offering(1).......................... 31,692,833 shares

Use of Proceeds........................ Purchase of the Pending Acquisitions, repayment of
a portion of the Credit Facility, tenant
improvements and capital expenditures, and working
capital. 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"
</TABLE>

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

(1) Includes shares of Common Stock to be issued in the Offering, 5,000 shares
issued in 1996 to employees of the Company as a stock bonus and 13,333
shares issued upon the exercise of options granted under the Company's Stock
Incentive Plan. See "Management--Executive Compensation." Does not include
(i) 2,971,756 shares of Common Stock that may be issued upon the exchange of
OP Units which are issued and outstanding, (ii) 1,500,000 shares of Common
Stock subject to the Underwriters' overallotment option and (iii) 890,000
shares of Common Stock subject to options granted under the Company's Stock
Incentive Plan. If all OP Units were exchanged for Common Stock, there would
be 34,664,589 shares of Common Stock outstanding after the Offering.

DISTRIBUTIONS

The Company currently pays regular quarterly distributions to its
stockholders. The first distribution, for the period from the closing of the IPO
through December 31, 1996, was $.36 per share, which is equivalent to a
quarterly distribution of $.40 per share and an annual distribution of $1.60 per
share. On March 31, 1997, the Company declared a distribution of $.40 per share
for the first quarter of 1997 payable on May 15, 1997 to stockholders of record
on April 30, 1997. Future distributions by the Company will be at the discretion
of the Board of Directors and will depend on the actual cash available for
distribution, its financial condition, capital requirements, the annual
distribution requirements under the REIT provisions of the Code (see "Federal
Income Tax Considerations--Taxation of the Company"), economic conditions and
such other factors as the Board of Directors deems relevant. See "Risk
Factors--Changes in Policies Without Stockholder Approval." Distributions by the
Company to the extent of its current and accumulated earnings and profits for
federal income tax purposes generally will be taxable to stockholders as
ordinary income. Distributions in excess of current and accumulated earnings and
profits will be treated as a non-taxable reduction of the stockholder's basis in
its shares of Common Stock to the extent thereof, and thereafter as taxable
gain. Distributions that are treated as a reduction of the stockholder's basis
in its shares of Common Stock will have the effect of deferring taxation until
the sale of the stockholder's shares. The Company has determined that, for
federal income tax purposes, approximately $.28 (or approximately 78%) of the
$.36 per share distribution paid for the partial fourth quarter of 1996
represented ordinary dividend income to stockholders. The Company believes that,
in the future, the portion of the distribution representing ordinary dividend
income will be higher and no assurances can be given regarding what percent of
future dividends will constitute return of capital for federal income tax
purposes.

10
<PAGE>
TAX STATUS OF THE COMPANY

The following table sets forth (i) selected consolidated historical
financial data for the Company as of and for the three months ended March 31,
1997, as of December 31, 1996 and for the period October 9, 1996 (the date of
the Company's commencement of operations as a public REIT) to December 31, 1996,
(ii) selected combined historical financial data for the Arden Predecessors as
of December 31, 1995, for the period January 1, 1996 to October 8, 1996, for the
three months ended March 31, 1996, and for each of the four years in the period
ended December 31, 1995, and (iii) selected pro forma financial data for the
Company as of and for the three months ended March 31, 1997 and for the year
ended December 31, 1996.

The selected consolidated historical operating and balance sheet data of the
Company as of December 31, 1996 and for the period from October 9, 1996 (the
date of the Company's commencement of operations as a public REIT) to December
31, 1996 and the selected combined historical operating and balance sheet data
of the Arden Predecessors as of December 31, 1995 and for the period January 1,
1996 to October 8, 1996 and for each of the two years in the period ended
December 31, 1995 have been derived from the respective historical consolidated
and combined financial statements audited by Ernst & Young LLP, whose reports
with respect thereto are included elsewhere in this Prospectus. The following
data should be read in conjunction with (i) the pro forma financial statements
and notes thereto of the Company; (ii) the historical consolidated and combined
financial statements and notes thereto for the Company and the Arden
Predecessors; and (iii) "Management's Discussion and Analysis of Financial
Condition and Results of Operations," each included elsewhere in this
Prospectus.

The selected pro forma financial operating information for the three months
ended March 31, 1997 and the year ended December 31, 1996 is presented as if the
IPO, the Formation Transactions, the closings of the Mortgage Financing and the
Credit Facility, the acquisition of the Properties acquired in 1996 prior to the
consummation of the IPO, 303 Glenoaks and 12501 East Imperial Highway, the
Properties acquired in 1996 subsequent to the IPO, the Properties acquired in
1997, the completion of the Offering, and the acquisition of the Pending
Acquisitions had occurred at January 1, 1996 for the statements of operations.
The selected pro forma balance sheet data as of March 31, 1997 is presented as
if the completion of the Offering, the closings of the Mortgage Financing and
the Credit Facility, the acquisition of the properties acquired subsequent to
March 31, 1997 and the acquisition of the Pending Acquisitions had occurred on
March 31, 1997. The selected pro forma information is based upon certain
assumptions that are included in the notes to the pro forma financial statements
included elsewhere in this Prospectus. The selected pro forma financial
information is not necessarily indicative of what the financial position and
results of operations of the Company would have been as of the dates and for the
periods indicated, nor does it purport to represent or project the financial
position and results of operations for future periods.

11
<PAGE>

<TABLE>
<CAPTION>
ARDEN
COMPANY PREDECESSORS COMPANY
------------------------ ------------- -------------------------- ARDEN PREDECESSORS HISTORICAL
---------------------------------
THREE MONTHS THREE MONTHS YEAR ENDED OCT. 9, 1996 JAN. 1,
ENDED ENDED DEC. 31, TO 1996 YEARS ENDED
MAR. 31, 1997 MAR. 31, 1996 1996 DEC. 31, 1996 TO DECEMBER 31,
------------------------ ------------- ----------- ------------- OCT. 8, --------------------
PRO FORMA HISTORICAL HISTORICAL PRO FORMA HISTORICAL 1996 1995 1994
----------- ----------- ------------- ----------- ------------- ----------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
REVENUE:
Rental................. $ 33,444 $ 21,892 $ 8,607 $ 132,211 $ 17,041 $ 32,287 $ 8,832 $ 5,157
Tenant
reimbursements....... 1,367 958 638 5,643 803 2,031 403 217
Parking, net of
expenses............. 1,941 1,490 879 8,663 1,215 3,692 751 382
Other.................. 723 630 695 3,354 513 2,455 1,707 796
----------- ----------- ------------- ----------- ------------- ----------- --------- ---------
Total revenue........ 37,475 24,970 10,819 149,871 19,572 40,465 11,693 6,552
----------- ----------- ------------- ----------- ------------- ----------- --------- ---------
EXPENSES:
Property expenses...... 12,189 7,894 3,615 55,780 6,005 14,224 3,340 2,191
General and
administrative....... 1,000 918 364 4,000 753 1,758 1,377 689
Interest............... 5,359 3,024 6,662 21,436 1,280 24,521 5,537 1,673
Depreciation and
amortization......... 5,520 3,562 1,582 21,721 3,108 5,264 1,898 1,143
----------- ----------- ------------- ----------- ------------- ----------- --------- ---------
Total expenses....... 24,068 15,398 12,223 102,937 11,146 45,767 12,152 5,696
----------- ----------- ------------- ----------- ------------- ----------- --------- ---------
Equity in net (loss)
income of noncombined
entities............... -- -- (84) -- -- (336) (116) 201
----------- ----------- ------------- ----------- ------------- ----------- --------- ---------
Income (loss) before
minority interests and
extraordinary items.... 13,407 9,572 (1,488) 46,934 8,426 (5,638) (575) 1,057
Minority interests' share
of loss (income) of
Arden Predecessors..... -- -- 187 -- -- 721 (1) 1
Minority interests in
Operating
Partnership............ (1,140) (1,134) -- (3,989) (993) -- -- --
----------- ----------- ------------- ----------- ------------- ----------- --------- ---------
Income (loss) before
extraordinary items.... 12,267 8,438 (1,301) 42,945 7,433 (4,917) (576) 1,058
Extraordinary (loss) gain
on early extinguishment
of debt, net of
minority interests'
share.................. -- -- -- -- (13,105) 1,877 -- --
----------- ----------- ------------- ----------- ------------- ----------- --------- ---------
Net income (loss)........ $ 12,267 $ 8,438 $ (1,301) $ 42,945 $ (5,672) $ (3,040) $ (576) $ 1,058
----------- ----------- ------------- ----------- ------------- ----------- --------- ---------
----------- ----------- ------------- ----------- ------------- ----------- --------- ---------
Weighted average number
of shares
outstanding............ 31,921 21,921 31,680 21,680
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
Net income (loss) per
common share:
Income before
extraordinary item... $ 0.38 $ 0.38 $ 1.36 $ 0.34
Extraordinary
item--loss on early
extinguishment of
debt................. -- -- -- (0.60)
----------- ----------- ----------- -------------
Net income (loss) per
common share........... $ 0.38 $ 0.38 $ 1.36 $ (0.26)
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
Cash dividends declared
per common share....... $ -- $ 0.40 $ -- $ 0.36
----------- ----------- ----------- -------------
----------- ----------- ----------- -------------
Supplemental net income
(loss) per share
reflecting the pro
forma effects solely of
the Offering and
repayment of debt(1)... $ 0.36 $ (0.21)
----------- -------------
----------- -------------
Pro forma net income per
share reflecting the
pro forma effects of
the Offering and solely
the purchase of the
Pending
Acquisitions(2)........ $ 0.39 $ 0.01
----------- -----------
----------- -----------
</TABLE>

12
<PAGE>

<TABLE>
<CAPTION>
COMPANY ARDEN
--------------------------------------- PREDECESSORS
HISTORICAL
MARCH 31, 1997 -------------
------------------------ DECEMBER 31, DECEMBER 31,
PRO FORMA HISTORICAL 1996 1995
----------- ----------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Commercial office properties--net of accumulated
depreciation............................................... $ 908,716 $ 580,636 $ 529,568 $ 160,874
Total assets................................................. 933,468 599,338 551,256 182,379
Mortgage loans payable and unsecured lines of credit......... 285,286 197,800 155,000 168,451
Total liabilities............................................ 307,164 219,678 173,612 174,163
Minority interests........................................... 47,563 47,563 45,667 100
Total Stockholders' equity/Owners' equity.................... 578,741 332,097 331,977 8,116
</TABLE>
<TABLE>
<CAPTION>
ARDEN
COMPANY PREDECESSORS COMPANY
------------------------ -------------- ----------------------------
THREE MONTHS THREE MONTHS YEAR OCT. 9, 1996
ENDED ENDED ENDED TO
MAR. 31, 1997 MAR. 31, 1996 DEC. 31, 1996 DEC. 31, 1996
------------------------ -------------- ------------- -------------
PRO FORMA HISTORICAL HISTORICAL PRO FORMA HISTORICAL
----------- ----------- -------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Funds from Operations(3):
Income (loss) before minority interests and
extraordinary items............................... $ 13,407 $ 9,572 $ (1,488) $ 46,934 $ 8,426
Depreciation and amortization....................... 5,520 3,562 1,582 21,721 3,108
----------- ----------- -------------- ------------- -------------
Funds from Operations............................... 18,927 13,134 94 68,655 11,534
Company's share percentage............................ 91.5% 88.2% -- 91.5% 88.2%
Company's share of Funds from Operations.............. $ 17,318 $ 11,584 $ 94 $ 62,819 $ 10,173
----------- ----------- -------------- ------------- -------------
----------- ----------- -------------- ------------- -------------
Weighted average number of shares outstanding (in
thousands).......................................... 31,921 21,921 N/A 31,680 21,680
Cash flows from operating activities.................. -- 12,645 2,031 -- 8,665
Cash flows from investing activities.................. -- (53,677) (95,157) -- (164,763)
Cash flows from financing activities.................. -- 34,222 93,421 -- 163,730
Number of Properties owned at period end.............. 54 38 21 54 34
Gross rentable square feet of Properties owned at end
of period (in thousands)............................ 8,637 5,923 3,547 8,637 5,443
Leased percentage for Properties owned at end of
period.............................................. -- 85% 88% -- 85%

ARDEN PREDECESSORS HISTORICAL
------------------------------------
YEARS ENDED
JAN. 1, 1996 DECEMBER 31,
TO ----------------------
OCT. 8, 1996 1995 1994
------------ ---------- ----------

<S> <C> <C> <C>
OTHER DATA:
Funds from Operations(3):
Income (loss) before minority interests and
extraordinary items............................... $ (5,638) $ (575) $ 1,057
Depreciation and amortization....................... 5,264 1,898 1,143
------------ ---------- ----------
Funds from Operations............................... (374) 1,323 2,200
Company's share percentage............................ -- -- --
Company's share of Funds from Operations.............. $ (374) $ 1,323 $ 2,200
------------ ---------- ----------
------------ ---------- ----------
Weighted average number of shares outstanding (in
thousands).......................................... N/A N/A N/A
Cash flows from operating activities.................. 5,221 2,830 834
Cash flows from investing activities.................. (119,083) (123,358) (17,921)
Cash flows from financing activities.................. 122,074 120,707 16,845
Number of Properties owned at period end.............. 22 17 8
Gross rentable square feet of Properties owned at end
of period (in thousands)............................ 3,739 2,634 1,130
Leased percentage for Properties owned at end of
period.............................................. 88% 88% 82%
</TABLE>

- ----------------------------------
(1) The following table sets forth the pro forma effects solely of the Offering
and repayment of debt (in thousands, except per share data):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, 1997
---------------
<S> <C> <C>
Historical net income (loss).................................................................................... $ 8,438
Pro forma decrease in interest expense associated with the repayment of debt outstanding at beginning of
period......................................................................................................... 1,042
---------------
Net income (loss) adjusted for repayment of debt................................................................ $ 9,480
---------------
---------------
Common Stock outstanding on a historical basis.................................................................. 21,921
Common Stock issued in the Offering for repayment of debt....................................................... 4,108
---------------
Common Stock outstanding--pro forma............................................................................. $ 26,029
---------------
---------------
Net income (loss) per share reflecting the pro forma effect of the repayment of debt............................ $ 0.36
---------------
---------------

<CAPTION>
OCTOBER 9, 1996

DECEMBER 31, 1996

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

<S> <C>
Historical net income (loss).................................................................................... $ (5,672)

Pro forma decrease in interest expense associated with the repayment of debt outstanding at beginning of
period......................................................................................................... 160

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

Net income (loss) adjusted for repayment of debt................................................................ $ (5,512)

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

Common Stock outstanding on a historical basis.................................................................. 21,680

Common Stock issued in the Offering for repayment of debt....................................................... 4,108

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

Common Stock outstanding--pro forma............................................................................. $ 25,788

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

Net income (loss) per share reflecting the pro forma effect of the repayment of debt............................ $ (0.21)

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

</TABLE>

13
<PAGE>
(2) The following table sets forth the pro forma effects of the Offering and
solely the purchase of the Pending Acquisitions (in thousands, except per
share data):
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, 1997
---------------
<S> <C> <C>
Historical net income (loss).................................................................................... $ 8,438
Arden Predecessors combined net loss............................................................................ --
Pro forma net income of the Pending Acquisitions................................................................ 2,225
---------------
Pro forma net income of the Company and Pending Acquisitions.................................................... $ 10,663
---------------
---------------
Common Stock outstanding on a historical basis.................................................................. 21,921
Common Stock issued in the Offering to purchase the Pending Acquisitions........................................ 5,574
---------------
Common Stock outstanding-pro forma.............................................................................. $ 27,495
---------------
---------------
Net income per share reflecting the pro forma effects of the Offering and purchase of the Pending
Acquisitions................................................................................................... $ 0.39
---------------
---------------

YEAR ENDED

DECEMBER 31, 1996

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

<S> <C>
Historical net income (loss).................................................................................... $ (5,672)

Arden Predecessors combined net loss............................................................................ (3,040)

Pro forma net income of the Pending Acquisitions................................................................ 9,051

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

Pro forma net income of the Company and Pending Acquisitions.................................................... $ 339

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

Common Stock outstanding on a historical basis.................................................................. 21,680

Common Stock issued in the Offering to purchase the Pending Acquisitions........................................ 5,574

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

Common Stock outstanding-pro forma.............................................................................. $ 27,254

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

Net income per share reflecting the pro forma effects of the Offering and purchase of the Pending
Acquisitions................................................................................................... $ 0.01

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

</TABLE>

(3) 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 believes Funds from Operations
is helpful to investors as a measure of the performance of an equity REIT
because, along with cash flows from operating activities, financing
activities and investing activities it provides investors with an
understanding of the ability of the Company to incur and service debt and
make capital expenditures. 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.
Further, Funds from Operations does not represent amounts available for
management's discretionary use because of needed capital replacement or
expansion, debt service obligations, or other commitments and uncertainties.
See the notes to the Company's historical financial statements. Funds from
Operations should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of the Company's
financial performance or to cash flows 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.

14
<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 SHARES OF COMMON STOCK IN THE OFFERING.

REAL ESTATE FINANCING RISKS

INABILITY TO REPAY OR REFINANCE INDEBTEDNESS AT MATURITY. 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 current indebtedness. Upon the closings of the Offering and
the Pending Acquisitions, the Company expects to have outstanding indebtedness
of approximately $285.3 million, of which $175 million will be secured by 18 of
the Properties and is anticipated to be repaid by June 10, 2004, and
approximately $110.3 million of which will be unsecured and will mature on due
June 1, 2000. If the Company's indebtedness cannot be refinanced at maturity,
extended or paid with proceeds of other capital transactions, such as the
issuance of new equity capital, the Company expects that its cash flow will not
be sufficient in all years to pay distributions at expected levels and to repay
all maturing debt. Furthermore, if prevailing interest rates or other factors at
the time of refinancing result in higher interest rates, the interest expense
relating to such refinanced indebtedness would increase, adversely affecting the
Company's cash flow and the amounts available for distributions to its
stockholders.

RISK OF FAILURE TO COVER DEBT SERVICE OF CURRENT COLLATERALIZED DEBT UNDER
THE MORTGAGE FINANCING. The Company, through a special purpose entity, has
outstanding the Mortgage Financing in the principal amount of $175 million. The
payment and other obligations under the Mortgage Financing are secured by fully
cross-collateralized and cross-defaulted first mortgage liens on the 18 Mortgage
Financing Properties and $4 million in cash collateral. The Mortgage Financing
requires monthly payments of interest only, with all principal anticipated to be
repaid on the seventh anniversary of the Mortgage Financing. If the Mortgage
Financing is not repaid or refinanced within seven years, the interest rate
increases by at least 2% and all excess cash flow from the Mortgage Financing
Properties must be used to pay down principal. If the Company is unable to meet
its obligations under the Mortgage Financing, the Mortgage Financing Properties
securing such debt could be foreclosed on, which would have a material adverse
effect on the Company and its ability to make expected distributions. Similarly,
any future indebtedness of the Company secured by any of the Properties will be
subject to this risk of foreclosure. See "Policies With Respect to Certain
Transactions--Financing Policies."

POTENTIAL EFFECT OF RISING INTEREST RATES ON COMPANY'S VARIABLE RATE
DEBT. The Company currently has an outstanding balance of $211 million under
its $300 million Credit Facility which bears 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, which could adversely affect the Company's cash flow and the
amounts available for distributions to its stockholders. The Company, however,
entered into interest rate floor and cap transactions with a notional amount of
$155 million (collectively, the "Swap Agreement") to limit its exposure to
rising interest rates. Although the Swap Agreement enables the Company to
convert floating rate liabilities to fixed rate liabilities, it exposes the
Company to the risk that the counterparty to the Swap Agreement may not perform,
which could cause the Company to lose the benefits of the Swap Agreement. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and Note 5 to the Notes to the
Financial Statements of Arden Realty, Inc. and the Arden Predecessors.

15
<PAGE>
NO LIMITATION ON DEBT

Upon completion of the Offering, the Company's debt to total market
capitalization ratio will be approximately 24.0% (20.8% if the Underwriters'
overallotment option is exercised in full). While 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, the organizational documents of the
Company contain no 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 may 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 manage and maintain the Properties and secure adequate insurance; and
the potential increase in 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 is and 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 9.7% and
48.9% of the leased space in the Properties will expire through the end of 1997
and 2000, respectively. If the Company is unable to promptly relet or renew
leases for all or a substantial portion of this space, or 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

16
<PAGE>
properties held for fewer than four years, which may affect the Company's
ability to sell properties without adversely affecting returns to stockholders.

IMPACT OF COMPETITION ON OCCUPANCY LEVELS AND RENTS CHARGED. Numerous
office properties compete with the Properties and the Pending Acquisitions 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
and Pending Acquisitions (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 and the Pending Acquisitions 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 and the Pending Acquisitions
are currently in substantial compliance with all such regulatory requirements
and that any noncompliance would not have a material adverse effect on the
Company. 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 and the Pending Acquisitions
are substantially in compliance with these requirements, the Company may incur
additional costs to comply 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. The Company currently does not
have any plans to invest in joint ventures or partnerships with affiliates or
promoters of the Company. Nonetheless, 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

17
<PAGE>
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 any such partnerships or joint ventures with which it may become
involved 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 38
of the 45 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.

RISK THAT PENDING ACQUISITIONS WILL NOT CLOSE

The Company has executed eight contracts and entered into one letter of
intent with respect to the acquisition of the nine Pending Acquisitions within
60 days after the Offering. While the Company has commenced its due diligence
with respect to the Pending Acquisitions, the acquisition contracts are subject
to customary closing conditions and no assurances can be made that the Company
will complete any of the Pending Acquisitions. In the event any of the Pending
Acquisitions are not acquired, there can be no assurance that the Company will
apply any remaining net proceeds from the Offering towards other acquisitions
that meet the Company's acquisition criteria. If the Company is unable to close
the acquisition of a significant number of the Pending Acquisitions or to locate
additional available acquisitions after the Offering, the Company's ability to
increase distributable cash flow per share could be adversely affected.

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

FAILURE TO ENFORCE TERMS OF FORMATION AGREEMENTS. As partners and members
in the Arden Predecessors (which owned certain of the Initial Properties
acquired by the Company in the Formation Transactions), owners of Namiz, and
recipients of cash and OP Units in the Formation Transactions, certain members
of the Company's management, including Messrs. Ziman and Coleman, 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 Initial
Properties and the Namiz 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 Namiz 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 IPO price of the Common Stock), 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.

18
<PAGE>
TAX CONSEQUENCES UPON ANY PREPAYMENT OF MORTGAGE FINANCING. Certain Limited
Partners of the Operating Partnership, including Messrs. Ziman and Coleman, may
incur adverse tax consequences upon the repayment of mortgage indebtedness
relating to certain of the Mortgage Financing Properties which are different
from the tax consequences to the Company and its stockholders. Consequently,
such Limited Partners may have different objectives regarding the appropriate
timing of any such repayment. While the Company has 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 and Coleman, as executive officers and
directors of the Company, 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 of the Operating
Partnership which may result from a sale of Century Park Center, for a period of
seven years following the IPO, 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 and Coleman hold certain real
estate interests which were not contributed to the Company as part of the
Formation Transactions although none of such real estate interests relate to
office properties.

RISKS ASSOCIATED WITH RAPID GROWTH, THE RECENT ACQUISITION OF MANY OF THE NEW
PROPERTIES AND THE LACK OF OPERATING HISTORY

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.

All of the Acquired Properties had relatively short or no operating history
under management by the Company prior to their acquisition by the Company, and
none of the Pending Acquisitions are currently managed by the Company. The
Company has had limited control over the operation of the Acquired Properties
and the Pending Acquisitions, and such 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 these
properties may decline under the Company's management.

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
Activities."

19
<PAGE>
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.

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 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.

POTENTIAL ADVERSE TAX CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT

The Company has operated and intends to continue 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 the Company is and will continue to be
organized and has operated and will continue to operate in such a manner, no
assurance can be given that the Company is now or will continue to be organized
or operated 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

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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, however, is not aware of any pending
legislation that would adversely affect the Company's ability to operate as a
REIT. Latham & Watkins, counsel to the Company, will render an opinion to the
effect that, commencing with its taxable year ended December 31, 1996, the
Company has been organized and has operated in conformity with the requirements
for qualification and taxation as a REIT, and that the Company's proposed method
of operation will enable it to continue to meet the requirements for
qualification and taxation 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. The opinion of Latham & Watkins is not binding on the IRS or any
court. Moreover, the Company's qualification and taxation as a REIT depend on
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 will not be reviewed by tax
counsel to the Company.

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."

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."

INSURANCE

The Operating Partnership carries comprehensive liability, fire, extended
coverage and rental loss insurance which currently covers all of the Properties,
and will be expanded to cover each of the Pending Acquisitions which is
acquired, 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 which
also will be expanded to cover each of the Pending Acquisitions which is
acquired. 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 the sole 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, and the Pending Acquisitions will be,
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

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renovated buildings, including office buildings, the current and strictest
construction standards having been adopted in 1984. Of the 54 Properties and
Pending Acquisitions, 24 have been built since January 1, 1985 and the Company
believes that all of the Properties and Pending Acquisitions 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, however, 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 and Ms. Laing. The loss of their services
could have a material adverse effect on the operations of the Company. Each of
Messrs. Ziman and Coleman and Ms. Laing have entered 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 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.

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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 July 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."

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. Except for one Pending
Acquisition, 1100 Glendon, which is currently undergoing abatement activities,
the Company is not aware of any friable ACM at any of the Properties or Pending
Acquisitions.

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In the past few years, independent environmental consultants have conducted
or updated Phase I Environmental Assessments and other environmental
investigations as appropriate ("Environmental Site Assessments") at the
Properties and Pending Acquisitions. These Environmental Site Assessments have
included, among other things, a visual inspection of the Properties and Pending
Acquisitions and the surrounding area and a review of relevant state, federal
and historical documents. Soil and groundwater sampling were performed where
warranted and remediation, if necessary, has or is being conducted.

The Company's Environmental Site Assessments of the Properties and the
Pending Acquisitions identified 10351 Santa Monica, Burbank Executive Plaza,
California Federal Building, South Bay Centre, 8383 Wilshire, Carlsberg
Corporate Center, and Pacific Gateway II as being located in areas of known or
suspected contamination. The Environmental Site Assessments have not, however,
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
Environmental Site 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 and Pending Acquisitions will
not be affected by tenants, by the condition of land or operations in the
vicinity of the Properties and Pending Acquisitions (such as the presence of
underground storage tanks), or by third parties unrelated to the Company.

The Company believes that the Properties and the Pending Acquisitions 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 or the
Pending Acquisitions, other than as noted above.

POSSIBLE ADVERSE 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 Transactions, the Company
placed 2,889,071 OP Units, in addition to Common Stock sold by the Company in
the IPO. See "Formation Transactions." Messrs. Ziman and Coleman have agreed to
certain restrictions on the dispositions of the shares of Common Stock issued
upon exchange of OP Units which, pursuant to the Partnership Agreement, may
occur beginning on October 9, 1997 (the first anniversary of the closing of the
IPO). 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 certain OP Unit holders or
available exemptions from registration. In addition, 1,500,000 shares of Common
Stock have been 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 890,000 shares of Common Stock have
been granted and stock bonus awards for a total of 5,000 shares have been
granted to certain executive officers, employees and directors. 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.

POSSIBLE ADVERSE 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

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<PAGE>
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."

INFLUENCE OF EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS

The directors and executive officers of the Company as a group beneficially
own approximately 76.18% of the OP Units issued in the Formation Transactions
which, commencing on October 9, 1997 (the first anniversary of the closing of
the IPO), 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
9.27% of the total issued and outstanding shares of Common Stock. Mr. Ziman
currently serves as Chairman and Chief Executive Officer and serves, along with
Mr. Coleman, who currently serves as President and Chief Operating Officer, on
the Board of Directors of the Company. Accordingly, such persons 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 in the Formation Transactions who received OP
Units to act together on any matter, such 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 and Management Stockholders."

POSSIBLE ADVERSE 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 is the annual distribution rate on the shares of Common Stock.
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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<PAGE>
THE COMPANY

GENERAL

Since its initial public offering in October 1996 (the "IPO"), the Company
has acquired 21 additional office properties (collectively, the "Acquired
Properties"), increasing its portfolio of office properties from the 24 Initial
Properties to 45 Properties. The Acquired Properties contain approximately 3.4
million rentable square feet and were purchased for a Total Acquisition Cost of
approximately $366.5 million.

As of May 1, 1997, the Company's portfolio of 45 Properties (which includes
the 24 Initial Properties and the 21 Acquired Properties) was approximately
85.8% leased. The 24 Initial Properties were 91.9% leased as of May 1, 1997 as
compared to 88.9% leased as of August 1, 1996.

As of June 15, 1997, the Company had executed eight contracts and entered
one letter of intent to acquire the nine Pending Acquisitions comprising
approximately 1.2 million rentable square feet for a Total Acquisition Cost of
approximately $161.4 million. As of May 1, 1997, the Pending Acquisitions were
approximately 77.1% leased.

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 below those required to make new
construction economically feasible. The Company's portfolio is comprised
primarily of suburban office properties which have high quality finishes, are
situated in desirable locations, 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. Of the Company's 45
Properties, 36 have been built since 1980 and 17 have been substantially
renovated within the last five years.

The Company also believes, based upon its evaluation of market conditions,
that certain economic fundamentals are present in Southern California which
enhance its ability to achieve its business objectives by providing an
attractive environment for owning, acquiring and operating suburban office
properties. Specifically, the Company believes that the limited construction of
new office properties in the Southern California region since 1992 coupled with
an improving Southern California economy will continue to result in increased
demand for office space and positive net absorption in the Southern California
region, particularly in the selected submarkets where most of the Properties are
located.

The Company operates from its Beverly Hills, California headquarters and is
a fully-integrated real estate company with approximately 86 full-time employees
and in-house expertise in acquisitions, finance, asset management, leasing and
construction. The Company's founders, Richard S. Ziman and Victor J. Coleman,
along with the other six senior officers of the Company, have an average of more
than 14 years of experience in all aspects of the real estate industry. See
"Management--Directors and Executive Officers."

The Company seeks to grow by continuing to acquire office properties that
are located in submarkets with growth potential, are underperforming or need
renovation and which offer 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

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<PAGE>
other spaces within the Company's portfolio). The Company's commitment to tenant
satisfaction and retention is evidenced by its retention rate of approximately
76% (based on square feet renewed) from 1993 through May 1, 1997 and
management's on-going relationships with multi-site tenants.

Upon completion of the Offering, the founders and executive officers of the
Company will beneficially own approximately 6.52% 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 Stock Incentive
Plan.

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.

THE OPERATING PARTNERSHIP

Since the closing of the IPO, substantially all of the Company's assets have
been held directly or indirectly by, and its operations conducted through, the
Operating Partnership. The Company's interest in the Operating Partnership
entitles 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 currently is approximately 88% and will be 91% upon completion
of the Offering. Certain individuals and entities own the remaining OP Units,
including Messrs. Ziman and Coleman and Namiz, together with two entities which
were issued OP Units in connection with the Company's acquisition of certain
Properties previously owned by such entities. One such entity, CalTwin
Investors, L.L.C., a Delaware limited liability company ("CalTwin"), was issued
26,880 OP Units as partial consideration for its transfer of California Twin
Centre to the Operating Partnership in March 1997. The OP Units held by CalTwin
have a special redemption right which provides CalTwin the option to tender all
or part of its OP Units to the Operating Partnership on January 2, 1998 for a
cash redemption based on the value of such OP Units at the time of their
issuance. Any OP Units held by CalTwin afer January 2, 1998 may be tendered to
the Operating Partnership for a cash redemption based on the then current value
of the Common Stock. In lieu of such cash redemption, the Company may elect to
exchange OP Units tendered by CalTwin after January 2, 1998 for shares of Common
Stock of the Company (on a one-for-one basis), subject to certain limitations.
All other holders of OP Units are entitled to cause the Operating Partnership to
redeem its OP Units for cash beginning on October 9, 1997, the anniversary of
the consummation of the IPO. The Company may similarly elect to 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
generally has 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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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 by capitalizing 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; and (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.

BUSINESS STRATEGIES

The Company's primary business strategies are to actively manage its
portfolio and to 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. When market conditions permit, the Company may also develop new
properties in submarkets where it has local market expertise.

Based on its own historical activities and its knowledge of the local
marketplace, the Company believes that the Southern California region offers
opportunities for well-capitalized, experienced owners of real estate with
extensive local market expertise to take advantage of opportunities to acquire
additional office properties at attractive prices and develop office properties,
when feasible, at attractive returns. Through six 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 concentration of many of the Properties within
certain office submarkets and the Company's relationships with a broad array of
tenants and brokers enable the Company to pursue aggressive leasing strategies,
to effectively monitor the office space requirements of existing and potential
tenants, and to offer tenants a variety of space alternatives across its
portfolio. In an effort to realize cost savings and exercise more control over
the lease negotiations the Company has recently implemented in-house leasing
programs for 17 Properties in selected submarkets in which it has a substantial
market presence. The Company continues, however, to employ third-party broker
listings in the submarkets in which it has a less significant market presence.

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, management
and leasing activities are coordinated to enhance responsiveness to market
opportunities and tenant needs. The acquisition, leasing and renovation teams
work closely with the Company's senior management from the 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.

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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
geographic focus of the portfolio, the ownership of multiple Properties within
certain submarkets and the maintenance of a centralized accounting system for
cost control at each of the Properties.

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 renovation, 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.

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 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; (iv) its access to capital as a public company,
including the Company's $300 million Credit Facility ($170 million of which will
be available following the Offering and assuming completion of the Pending
Acquisitions); (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 may also seek to take advantage of management's development
expertise to develop office space when market conditions support office building
development. The Company, however, currently intends to focus primarily on
acquisitions rather than development given its belief that opportunities to
acquire office properties at less than replacement cost continue to exist within
selected submarkets in Southern California.

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 its 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

29
<PAGE>
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 76% (based on
square feet renewed) from inception through May 1, 1997. See "Properties--Tenant
Retention and Expansions." The Company also seeks to improve occupancies by
aggressively marketing available space within its portfolio. As of May 1, 1997,
approximately 1,046,000 rentable square feet were unleased within the Company's
portfolio.

(ii) 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
result over time in increasing market rents. The Company believes it will 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.

(iii) COST CONTROL MANAGEMENT AND SYSTEMS: The Company seeks to lower
operating expenses through 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.

(iv) 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 parking
operations, building and other services and tenant improvements purchased on a
portfolio-wide basis will facilitate further economies of scale.

(v) 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 13 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.

30
<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 $246.6 million (approximately $283.7
million if the Underwriters' overallotment option is exercised in full). The
Company intends to use approximately $137.5 million of the net proceeds from the
Offering to fund the purchase of the Pending Acquisitions, and approximately
$109.2 million to repay a portion of the outstanding balance on the Credit
Facility with the balance to be retained by the Company for working capital. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-- Liquidity and Capital Resources."

If the Underwriters' overallotment option to purchase 1,500,000 shares of
Common Stock is exercised in full, the Company expects to use the additional net
proceeds (which will be approximately $37.1 million) to pay down indebtedness
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 continuing to qualify for
taxation as a REIT.

PRICE RANGE OF COMMON STOCK AND DISTRIBUTION HISTORY

The Common Stock began trading on the NYSE on October 4, 1996 under the
symbol "ARI." On June 24, 1997, the last reported sales price per share of
Common Stock on the NYSE was $26.0625, and there were approximately 114 holders
of record of the Common Stock. The table below sets forth the quarterly high and
low closing sales price per share of Common Stock reported on the NYSE and the
distributions paid by the Company with respect to each such period.

<TABLE>
<CAPTION>
QUARTER ENDED HIGH LOW DISTRIBUTIONS
- ----------------------------------------------------------- --------- --------- -------------
<S> <C> <C> <C>
December 31, 1996 (from October 9, 1996)................... $ 27.625 $ 22.00 $ .36(1)
March 31, 1997............................................. $ 29.50 $ 26.25 $ .40(2)
June 30, 1997 (through June 24, 1997)...................... $ 27.375 $ 23.75 $ --(3)
</TABLE>

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

(1) The Company paid a distribution of $.36 per share of Common Stock on January
15, 1997, to stockholders of record on December 31, 1996, for the period
from October 9, 1996 (the closing of the IPO) through December 31, 1996,
which is approximately equivalent to a quarterly distribution of $.40 and an
annual distribution of $1.60 per share of Common Stock.

(2) On March 31, 1997, the Company declared a distribution of $.40 per share of
Common Stock for the first quarter of 1997 payable on May 15, 1997 to
stockholders of record on April 30, 1997.

(3) The Company expects to declare a distribution for the second quarter of 1997
on June 30, 1997 payable on July 31, 1997 to stockholders of record on July
15, 1997. PURCHASERS OF COMMON STOCK IN THIS OFFERING WILL NOT RECEIVE THIS
DISTRIBUTION IN RESPECT OF THE SHARES OF COMMON STOCK OFFERED HEREBY.

Distributions by the Company to the extent of its current and accumulated
earnings and profits for federal income tax purposes, other than capital gain
dividends, will be taxable to stockholders as ordinary dividend income. Capital
gain dividends generally will be treated as long-term capital gain.
Distributions in excess of earnings and profits generally will be treated as a
non-taxable reduction of the stockholder's basis in the Common Stock to the
extent thereof, and thereafter as capital gain. Distributions treated as a non-
taxable reduction in basis will generally have the effect of deferring taxation
until the sale of a stockholder's Common Stock. The Company has determined that
for federal income tax purposes, approximately $.28 per share (or approximately
78%) of the $.36 per share distribution paid for the partial fourth quarter of
1996 represented ordinary dividend income to stockholders. The Company believes
that, in the future, the portion of the distribution representing ordinary
dividend income will be higher. No assurances can be given regarding what
percent of future dividends will constitute return of capital for federal income
tax purposes. In order to avoid corporate income taxation of the earnings that
it distributes, the Company must make annual distributions to stockholders of at
least 95% of its REIT taxable income (determined by

31
<PAGE>
excluding any net capital gain), which the Company anticipates will be less than
its share of cash available for distribution. 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. In such a case,
the Company may find it necessary to arrange for short-term (or possibly
long-term) borrowings or to raise funds through the issuance of preferred shares
or additional shares of Common Stock.

Future distributions by the Company will be at the discretion of the Board
of Directors and will depend on the actual Funds from Operations of the Company,
its financial condition, capital requirements, the annual distribution
requirements under the REIT provisions of the Code (see "Federal Income Tax
Considerations--Taxation of the Company"), economic conditions and such other
factors as the Board of Directors deems relevant. See "Risk Factors--Changes in
Policies Without Stockholder Approval."

32
<PAGE>
CAPITALIZATION

The following table sets forth the capitalization of the Company as of March
31, 1997 on a historical and pro forma basis to give effect to (i) all Property
acquisitions completed between December 31, 1996 and June 15, 1997 and the
current borrowings under the Credit Facility incurred in connection therewith
and (ii) completion of the Offering, the application of the assumed net proceeds
therefrom and the completion of the Pending Acquisitions. See "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 the discussion under "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------
CONSOLIDATED PRO FORMA
HISTORICAL AS ADJUSTED
------------ -----------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Mortgage Loans....................................................................... $ 137,800 $ 175,000
Lines of Credit...................................................................... 60,000(1) 110,286
Minority interests in Operating Partnership............................................ 47,563 47,563
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; 21,692,833 issued and
outstanding on a historical basis; and 31,692,833(2) issued and outstanding on a
pro forma basis.................................................................... 217 317
Additional Paid-in Capital........................................................... 331,880 578,424
------------ -----------
Total Stockholders' equity......................................................... 332,097 578,741
------------ -----------
Total Capitalization............................................................. $ 577,460 911,590
------------ -----------
------------ -----------
</TABLE>

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

(1) The balance on the Lines of Credit as of June 24, 1997 was $220.5 million.

(2) Includes 10,000,000 shares of Common Stock to be issued in the Offering,
21,674,500 shares issued in the IPO, 5,000 shares issued in 1996 to
employees of the Company as a stock bonus and 13,333 shares issued upon the
exercise of options granted under the Company's Stock Incentive Plan. See
"Management--Executive Compensation." Does not include 2,971,756 shares of
Common Stock that may be issued upon the exchange of OP Units which are
issued and outstanding, 1,500,000 shares of Common Stock subject to the
Underwriters' overallotment option or 890,000 shares of Common Stock subject
to options granted under the Company's Stock Incentive Plan.

33
<PAGE>
SELECTED FINANCIAL INFORMATION

34
<PAGE>
<TABLE>
<CAPTION>
ARDEN
PREDECESSORS ARDEN PREDECESSORS
----------- COMPANY ---------------------------------
COMPANY ------------------------
------------------------ THREE OCT. 9, HISTORICAL
MONTHS 1996 ---------------------------------
THREE MONTHS ENDED YEAR ENDED TO JAN. 1,
ENDED MAR. 31, DEC. 31, DEC. 31, 1996 YEARS ENDED
MAR. 31, 1997 1996 1996 1996 TO DECEMBER 31,
------------------------ ----------- ----------- ----------- OCT. 8, --------------------
PRO FORMA HISTORICAL HISTORICAL PRO FORMA HISTORICAL 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
REVENUE:
Rental................. $ 33,444 $ 21,892 $ 8,607 $ 132,211 $ 17,041 $ 32,287 $ 8,832 $ 5,157
Tenant
reimbursements....... 1,367 958 638 5,643 803 2,031 403 217
Parking, net of
expenses............. 1,941 1,490 879 8,663 1,215 3,692 751 382
Other.................. 723 630 695 3,354 513 2,455 1,707 796
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
Total revenue........ 37,475 24,970 10,819 149,871 19,572 40,465 11,693 6,552
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
EXPENSES:
Property expenses...... 12,189 7,894 3,615 55,780 6,005 14,224 3,340 2,191
General and
administrative....... 1,000 918 364 4,000 753 1,758 1,377 689
Interest............... 5,359 3,024 6,662 21,436 1,280 24,521 5,537 1,673
Depreciation and
amortization......... 5,520 3,562 1,582 21,721 3,108 5,264 1,898 1,143
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
Total expenses....... 24,068 15,398 12,223 102,937 11,146 45,767 12,152 5,696
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
Equity in net (loss)
income of noncombined
entities............... -- -- (84) -- -- (336) (116) 201
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
Income (loss) before
minority interests and
extraordinary items.... 13,407 9,572 (1,488) 46,934 8,426 (5,638) (575) 1,057
Minority interests' share
of loss (income) of
Arden Predecessors..... -- -- 187 -- -- 721 (1) 1
Minority interests in
Operating
Partnership............ (1,140) (1,134) -- (3,989) (993) -- -- --
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
Income (loss) before
extraordinary items.... 12,267 8,438 (1,301) 42,945 7,433 (4,917) (576) 1,058
Extraordinary (loss) gain
on early extinguishment
of debt, net of
minority interests'
share.................. -- -- -- -- (13,105) 1,877 -- --
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
Net income (loss)........ $ 12,267 $ 8,438 $ (1,301) $ 42,945 $ (5,672) $ (3,040) $ (576) $ 1,058
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
Weighted average number
of shares
outstanding............ 31,921 21,921 31,680 21,680
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income (loss) per
common share:
Income before
extraordinary item... $ 0.38 $ 0.38 $ 1.36 $ 0.34
Extraordinary
item--loss on early
extinguishment of
debt................. -- -- -- (0.60)
----------- ----------- ----------- -----------
Net income (loss) per
common share........... $ 0.38 $ 0.38 $ 1.36 $ (0.26)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Cash dividends declared
per common share....... $ -- $ 0.40 $ -- $ 0.36
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Supplemental net income
(loss) per share
reflecting the pro
forma effects solely of
the Offering and
repayment of debt(1)... $ 0.36 $ (0.21)
----------- -----------
----------- -----------
Pro forma net income per
share reflecting the
pro forma effects of
the Offering and solely
the purchase of the
Pending
Acquisitions(2)........ $ 0.39 $ 0.01
----------- -----------
----------- -----------

<CAPTION>
1993 1992
--------- ---------
<S> <C> <C>
OPERATING DATA:
REVENUE:
Rental................. $ 3,034 $
Tenant
reimbursements....... 35
Parking, net of
expenses............. 279
Other.................. 314 324
--------- ---------
Total revenue........ 3,662 324
--------- ---------
EXPENSES:
Property expenses...... 1,480 --
General and
administrative....... 386 471
Interest............... 646 9
Depreciation and
amortization......... 499 2
--------- ---------
Total expenses....... 3,011 482
--------- ---------
Equity in net (loss)
income of noncombined
entities............... 4 --
--------- ---------
Income (loss) before
minority interests and
extraordinary items.... 655 (158)
Minority interests' share
of loss (income) of
Arden Predecessors..... -- --
Minority interests in
Operating
Partnership............ -- --
--------- ---------
Income (loss) before
extraordinary items.... 655 (158)
Extraordinary (loss) gain
on early extinguishment
of debt, net of
minority interests'
share.................. -- --
--------- ---------
Net income (loss)........ $ 655 $ (158)
--------- ---------
--------- ---------
Weighted average number
of shares
outstanding............
Net income (loss) per
common share:
Income before
extraordinary item...
Extraordinary
item--loss on early
extinguishment of
debt.................
Net income (loss) per
common share...........
Cash dividends declared
per common share.......
Supplemental net income
(loss) per share
reflecting the pro
forma effects solely of
the Offering and
repayment of debt(1)...
Pro forma net income per
share reflecting the
pro forma effects of
the Offering and solely
the purchase of the
Pending
Acquisitions(2)........
</TABLE>

35
<PAGE>
<TABLE>
<CAPTION>
COMPANY ARDEN PREDECESSORS
--------------------------------------- --------------------
MARCH 31, 1997 DECEMBER 31,
------------------------ DECEMBER 31, --------------------
PRO FORMA HISTORICAL 1996 1995 1994
----------- ----------- ------------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Commercial office properties--net of accumulated depreciation...... $ 908,716 $ 580,636 $ 529,568 $ 160,874 $ 34,977
Total assets....................................................... 933,468 599,338 551,256 182,379 46,090
Mortgage loans payable and unsecured lines of credit............... 285,286 197,800 155,000 168,451 32,944
Total liabilities.................................................. 307,164 219,678 173,612 174,163 34,148
Minority interests................................................. 47,563 47,563 45,667 100 99
Total Stockholders' equity/Owners' equity.......................... 578,741 332,097 331,977 8,116 11,843

1993 1992
--------- ---------

<S> <C> <C>
BALANCE SHEET DATA:
Commercial office properties--net of accumulated depreciation...... $ 25,404 $ --
Total assets....................................................... 27,911 134
Mortgage loans payable and unsecured lines of credit............... 24,356 250
Total liabilities.................................................. 25,190 287
Minority interests................................................. -- --
Total Stockholders' equity/Owners' equity.......................... 2,721 (153)
</TABLE>
<TABLE>
<CAPTION>
ARDEN
PREDECESSORS ARDEN PREDECESSORS
----------- COMPANY ---------------------------------
COMPANY ------------------------
------------------------ THREE OCT. 9, HISTORICAL
MONTHS 1996 ---------------------------------
THREE MONTHS ENDED YEAR ENDED TO JAN. 1,
ENDED MAR. 31, DEC. 31, DEC. 31, 1996 YEARS ENDED DECEMBER
MAR. 31, 1997 1996 1996 1996 TO 31,
------------------------ ----------- ----------- ----------- OCT. 8, --------------------
PRO FORMA HISTORICAL HISTORICAL PRO FORMA HISTORICAL 1996 1995 1994
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Funds from
Operations(3):
Income (loss) before
minority interests
and extraordinary
items............. $ 13,407 $ 9,572 $ (1,488) $ 46,934 $ 8,426 $ (5,638) $ (575) $ 1,057
Depreciation and
amortization...... 5,520 3,562 1,582 21,721 3,108 5,264 1,898 1,143
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
Funds from
Operations........ 18,927 13,134 94 68,655 11,534 (374) 1,323 2,200
Company's share
percentage.......... 91.5% 88.2% -- 91.5% 88.2% -- -- --
Company's share of
Funds from
Operations.......... 17,318 11,584 94 62,819 10,173 (374) 1,323 2,200
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
----------- ----------- ----------- ----------- ----------- ----------- --------- ---------
Weighted average
number of shares
Outstanding (in
thousands).......... 31,921 21,921 N/A 31,680 21,680 N/A N/A N/A
Cash flows from
operating
activities.......... -- 12,645 2,031 -- 8,665 5,221 2,830 834
Cash flows from
investing
activities.......... -- (53,677) (95,157) -- (164,763) (119,083) (123,358) (17,921)
Cash flows from
financing
activities.......... -- 34,222 93,421 -- 163,730 122,074 120,707 16,845
Number of Properties
owned at period
end................. 54 38 21 54 34 22 17 8
Gross rentable square
feet of Properties
owned at end of
period (in
thousands).......... 8,637 5,923 3,547 8,637 5,443 3,739 2,634 1,130
Leased percentage for
Properties owned at
end of period....... -- 85% 88% -- 85% 88% 88% 82%

1993 1992
--------- ---------

<S> <C> <C>
OTHER DATA:
Funds from
Operations(3):
Income (loss) before
minority interests
and extraordinary
items............. $ 655 $ (158)
Depreciation and
amortization...... 499 2
--------- ---------
Funds from
Operations........ 1,154 (156)
Company's share
percentage.......... -- --
Company's share of
Funds from
Operations.......... 1,154 (156)
--------- ---------
--------- ---------
Weighted average
number of shares
Outstanding (in
thousands).......... N/A N/A
Cash flows from
operating
activities.......... 1,186 (258)
Cash flows from
investing
activities.......... (25,965) --
Cash flows from
financing
activities.......... 25,632 250
Number of Properties
owned at period
end................. 3 --
Gross rentable square
feet of Properties
owned at end of
period (in
thousands).......... 530 --
Leased percentage for
Properties owned at
end of period....... 84% --
</TABLE>

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

(1) The following table sets forth the pro forma effects solely of the Offering
and repayment of debt (in thousands, except per share data):

<TABLE>
<CAPTION>
THREE MONTHS OCTOBER 9, 1996
ENDED TO
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
Historical net income (loss).................................................................. $ 8,438 $ (5,672)
Pro forma decrease in interest expense associated with the repayment of debt outstanding at
beginning of period.......................................................................... 1,042 160
-------------- -----------------
Net income (loss) adjusted for repayment of debt outstanding at beginning of period........... $ 9,480 $ (5,512)
-------------- -----------------
-------------- -----------------
Common Stock outstanding on a historical basis................................................ 21,921 21,680
Common Stock issued in the Offering for repayment of debt..................................... 4,108 4,108
-------------- -----------------
Common Stock outstanding--pro forma........................................................... $ 26,029 $ 25,788
-------------- -----------------
-------------- -----------------
Net income (loss) per share reflecting the pro forma effect of the repayment of debt.......... $ 0.36 $ (0.21)
-------------- -----------------
-------------- -----------------
</TABLE>

36
<PAGE>
(2) The following table sets forth the pro forma effects of the Offering and
purchase of the Pending Acquisitions (in thousands, except per share data):

<TABLE>
<CAPTION>
THREE MONTHS OCTOBER 9, 1996
ENDED TO
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
Historical net income (loss).................................................................. $ 8,438 $ (5,672)
Arden Predecessors combined net loss.......................................................... -- (3,040)
Pro forma net income of the Pending Acquisitions.............................................. 2,225 9,051
-------------- -----------------
Pro forma net income of the Company and Pending Acquisitions.................................. $ 10,663 $ 339
-------------- -----------------
-------------- -----------------
Common Stock outstanding on a historical basis................................................ 21,921 21,680
Common Stock issued in the Offering to purchase the Pending Acquisitions...................... 5,574 5,574
-------------- -----------------
Common Stock outstanding-pro forma............................................................ $ 27,495 $ 27,254
-------------- -----------------
-------------- -----------------
Net income per share reflecting the pro forma effects of the Offering and purchase of the
Pending Acquisitions......................................................................... $ 0.39 $ 0.01
-------------- -----------------
-------------- -----------------
</TABLE>

(3) 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 believes Funds from Operations is helpful to
investors as a measure of the performance of an equity REIT because, along
with cash flows from operating activities, financing activities and
investing activities it provides investors with an understanding of the
ability of the Company to incur and service debt and make capital
expenditures. 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. Further,
Funds from Operations does not represent amounts available for management's
discretionary use because of needed capital replacement or expansion, debt
service obligations, or other commitments and uncertainties. See the notes
to the Company's historical financial statements. Funds from Operations
should not be considered as an alternative to net income (determined in
accordance with GAAP) as an indication of the Company's financial
performance or to cash flows 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.

37
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

The following discussion should be read in conjunction with the Selected
Financial Information and the historical consolidated financial statements of
the Company and the combined financial statements of the Arden Predecessors and
related notes thereto included elsewhere in this Prospectus. Where appropriate,
the following discussion includes analysis of the effects of the Formation
Transactions and the IPO, the Mortgage Financing, the Offering and the purchase
of the Properties acquired in 1996 prior to the consummation of the IPO, 303
Glenoaks and 12501 East Imperial Highway, the Properties acquired in 1996
subsequent to the IPO, the Properties acquired in 1997, and the Pending
Acquisitions. These effects are reflected in the pro forma condensed
consolidated financial statements located elsewhere in this Prospectus.

Income is derived primarily from rental revenue (including tenant
reimbursements) and parking revenue from commercial office properties. The
Company has acquired its current portfolio over the last four years, with
approximately 7.4% of the Properties (as a percentage of pro forma rental
revenue for the three months ended March 31, 1997) acquired in calendar year
1993, approximately 7.0% of the Properties acquired in 1994, approximately 17.2%
acquired in 1995, approximately 33.5% acquired in 1996 and approximately 34.9%
acquired during the three months ended March 31, 1997. As a result of the
Company's and the Arden Predecessors' aggressive acquisition program, the
financial data shows significant increases in total revenue from year to year,
largely attributable to the acquisitions made during each 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, management does not believe
the 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 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 THREE MONTHS ENDED MARCH 31, 1997 TO THREE MONTHS ENDED MARCH
31, 1996. During the first three months of 1997, the Company purchased four
Properties resulting in an increase in real estate investments of approximately
$51.5 million.

The Company's management believes that in order for a meaningful analysis of
the financial statements to be made, certain transactions which occurred in 1996
should be considered in a manner which makes each accounting period comparable.
Accordingly, the revenue and expenses for the noncombined entities for the three
months ended March 31, 1996 have been included as though they were combined,
with intercompany management fees relating to the noncombined entities of
$203,000 eliminated in 1996, in the following discussion. The following section
discusses the results of operations, as adjusted and in thousands.

38
<PAGE>
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
REVENUE:
Revenue from rental operations:
Rental.............................................................. $ 21,892 $ 12,471
Tenant reimbursements............................................... 958 758
Parking, net of expense............................................. 1,490 1,142
Other rental operations............................................. 576 345
--------- ---------
24,916 14,716
Other income.......................................................... 54 212
--------- ---------
Total revenue..................................................... $ 24,970 $ 14,928
--------- ---------
--------- ---------
EXPENSES:
Repairs and maintenance............................................... $ 2,841 $ 1,440
Utilities............................................................. 2,423 1,137
Real estate taxes..................................................... 1,378 957
Insurance............................................................. 384 872
Ground rent........................................................... 51 47
Marketing and other................................................... 817 732
--------- ---------
Total property expenses............................................. 7,894 5,185
General and administrative............................................ 918 364
Interest.............................................................. 3,024 8,832
Depreciation and amortization......................................... 3,562 2,396
--------- ---------
Total expenses.................................................... $ 15,398 $ 16,777
--------- ---------
--------- ---------
</TABLE>

Rental revenue increased by $9.4 million or 76% for the three months ended
March 31, 1997 compared to the three months ended March 31, 1996. The increase
in rental revenue resulted primarily from a full three months of rental revenue
from Properties acquired during 1996. Rental revenue from the Properties
acquired in 1996 increased to $11.2 million for the three months ended March 31,
1997, representing a full three months of rental revenue, from $2.2 million in
the prior period. Rental revenue associated with Properties acquired in the
first three months of 1997 added an additional $123,000 to rental revenue for
the three months ended March 31, 1997.

Tenant reimbursements increased by $200,000 or 26% for the three months
ended March 31, 1997, compared to the three months ended March 31, 1996. The
increase in tenant reimbursements resulted principally from a full three months
of tenant reimbursements from properties acquired during 1996 offset in part by
a reset in the base year for leases that were renewed or retained for those
Properties that were owned for the entire three months ended March 31, 1997 and
March 31, 1996. Tenant reimbursements associated with the properties acquired in
1996 added an additional $301,000 to revenue during the three months ended March
31, 1997 offset in part by a decrease of $101,000 in tenant reimbursements
associated with the Properties owned for the entire three months ended March 31,
1995 and March 31, 1996. Parking, net of expense, increased by $348,000 or 30%
for the three months ended March 31, 1997 compared to the three months ended
March 31, 1996. The increase resulted principally from a full three months of
parking, net of expense, from Properties acquired during 1996. Parking revenue,
net of expense, associated with the Properties acquired in 1996 increased to
approximately $374,000 for the three months ended March 31, 1997 from
approximately $77,000 for the three months ended March 31, 1996.

39
<PAGE>
Other rental operations, consisting primarily of tenant charges, such as
after hours utility and HVAC charges, increased by $231,000 or 67.0% for the
three months ended March 31, 1997 compared to the prior year, primarily due to
$229,000 of other rental operations from properties acquired in 1996.

Other income decreased by $158,000 due to the decrease in management fees
from third party owned properties.

The following is a comparison of certain expenses for the three months ended
March 31, 1997 and March 31, 1996:

<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
-------------------- DOLLAR PERCENT
1997 1996 CHANGE CHANGE
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
CERTAIN EXPENSES:
Repairs and maintenance.............................. $ 2,841 $ 1,440 $ 1,401 97%
Utilities............................................ 2,423 1,137 1,286 113%
Real estate taxes.................................... 1,378 957 421 44%
Insurance............................................ 384 872 (488) (56%)
Ground rent.......................................... 51 47 4 9%
Marketing and other.................................. 817 732 85 12%
--------- --------- --------- ---
Total certain expenses............................. $ 7,894 $ 5,185 $ 2,709 52.2%
--------- --------- --------- ---
--------- --------- --------- ---
</TABLE>

Total certain expenses increased to $7.9 million, or 35% of rental revenue
and tenant reimbursements, from $5.2 million or 39% of rental revenue and tenant
reimbursements for the three months ended March 31, 1997 and 1996, respectively.
The increase in total certain expenses was partially offset by a decrease in
insurance due to a more favorable insurance policy. The increase in total
certain expenses is primarily attributable to the Properties acquired during
1996. The increase in total certain expenses from the three months ended March
31, 1996 to the three months ended March 31, 1997 resulting from the Properties
acquired during 1996 was approximately $2.7 million.

General and administrative expenses increased by $554,000 or 152% for the
three months ended March 31, 1997 compared to the three months ended March 31,
1996. The increase resulted principally from the increase in portfolio size and
the increase in management and administration costs associated with the
Company's infrastructure relative to that of the Arden Predecessors.

Depreciation and amortization increased by $1.2 million or 49% primarily due
to 1996 acquisitions.

40
<PAGE>
The following is a comparison of property operating data for the 17
Properties that were owned for the entire three months ended March 31, 1997 and
March 31, 1996 (in thousands):

<TABLE>
<CAPTION>
MARCH 31,
--------------------
1997 1996
--------- ---------
<S> <C> <C>
REVENUE:
Rental................................................................ $ 10,561 $ 10,242
Tenant reimbursements................................................. 516 617
Parking............................................................... 1,116 1,064
Other................................................................. 298 170
--------- ---------
Total revenues.................................................... $ 12,491 $ 12,093
--------- ---------
--------- ---------
EXPENSES:
Property operating, taxes, insurance, and ground rent................. $ 4,122 $ 4,064
--------- ---------
--------- ---------
</TABLE>

Rental revenues increased slightly during the first three months of 1997
compared to 1996 primarily due to an increase in occupancy. Tenant
reimbursements decreased by $101,000 during the same period, primarily resulting
from a reset in the base year for leases that were renewed or retenanted. For
the three months ended March 31, 1997, parking income increased by $52,000 over
the same period in 1996. Other income increased by $128,000 in 1997 compared to
1996 due to increases in miscellaneous tenant charges such as after hour utility
and HVAC charges. Property operating expenses, taxes, and ground rent increased
slightly in 1997 compared to the prior year primarily due to an increase in
occupancy. This was partially offset by a decrease in insurance due to a more
favorable insurance policy.

COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31,
1995. During 1996 the Company and the Arden Predecessors purchased 16
properties resulting in an increase in real estate investments of approximately
$266 million.

The Company's management believes that in order for a meaningful analysis of
the financial statements to be made, certain transactions which occurred in 1996
should be considered in a manner which makes each accounting period comparable.
Accordingly, the revenue and expenses for the noncombined entities for the year
ended December 31, 1995 and the period from January 1, 1996 to October 8, 1996
have been included as though they were combined, with intercompany management
fees relating to the noncombined entities of $704,000 and $831,000 eliminated in
1996 and 1995, respectively, in the following discussion. The following section
discusses the results of operations, as adjusted and in thousands.

41
<PAGE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
REVENUE:
Revenue from rental operations:
Rental.................................................................................. $ 62,156 $ 24,442
Tenant reimbursements................................................................... 3,076 822
Parking, net of expense................................................................. 5,753 1,665
Other rental operations................................................................. 1,867 1,027
--------- ---------
72,852 27,956
Other income.............................................................................. 754 626
--------- ---------
Total revenue....................................................................... $ 73,606 $ 28,582
--------- ---------
--------- ---------
EXPENSES:
Repairs and maintenance................................................................... $ 6,446 $ 3,235
Utilities................................................................................. 7,054 3,076
Real estate taxes......................................................................... 3,741 1,590
Insurance................................................................................. 3,049 626
Ground rent............................................................................... 994 152
Marketing and other....................................................................... 4,292 1,588
--------- ---------
Total property expenses................................................................. 25,576 10,267
General and administrative................................................................ 2,512 1,404
Interest.................................................................................. 33,157 13,780
Depreciation and amortization............................................................. 11,078 4,346
--------- ---------
Total expenses...................................................................... $ 72,323 $ 29,797
--------- ---------
--------- ---------
</TABLE>

Rental revenue increased by $37.7 million or 154% for the year ended
December 31, 1996 compared to the year ended December 31, 1995. The increase in
rental revenue resulted principally from a full year of rental revenue from
Properties acquired during 1995, six of which were acquired after June 30, 1995,
and rental revenue from Properties acquired during 1996. Rental revenue from the
Properties acquired in 1995 increased to $23.2 million for the year ended
December 31, 1996, representing a full year of rental revenue, from $5.4 million
in the prior period. Rental revenue associated with Properties acquired in 1996
added an additional $19.7 million to rental revenue for the year ended December
31, 1996.

Tenant reimbursements increased by $2.3 million or 274% for the year ended
December 31, 1996, compared to the year ended December 31, 1995. The increase in
tenant reimbursements resulted principally from a full year of tenant
reimbursements from Properties acquired during 1995 and tenant reimbursements
from Properties acquired during 1996. Tenant reimbursements from Properties
acquired in 1995 added an additional $1.1 million for the year ended December
31, 1996, representing a full year of tenant reimbursements. Tenant
reimbursements associated with the Properties, net of expenses, acquired in 1996
added an additional $1.3 million to revenue during the year ended December 31,
1996.

Other rental operations, consisting primarily of miscellaneous tenant
charges such as after hours utility and HVAC charges, increased by $840,000 or
82% for the year ended December 31, 1996 compared to the prior year. The
increase in other rental operations resulted principally from a full year of
other rental operations from Properties acquired in 1995 and other rental
operations from the Properties acquired during 1996.

42
<PAGE>
Other income consisting primarily of management fees from third party owned
Properties increased $128,000 or 20% for the year ended December 31, 1996
compared to the prior year.

Parking, net of expense, increased by $4.1 million or 246% for the year
ended December 31, 1996 compared to the year ended December 31, 1995. The
increase resulted principally from a full year of parking, net of expense, from
Properties acquired during 1995 and parking, net of expense, from Properties
acquired during 1996. Parking, net of expense, from the Properties acquired in
1995 increased to $3.4 million for the year ended December 31, 1996,
representing a full year of parking, net of expense, from $586,000 in the prior
year. Parking, net of expense, associated with the Properties acquired in 1996
added an additional $1.2 million to parking, net of expense, during the year
ended December 31, 1996.

The following is a comparison of certain expenses for the years ended
December 31, 1996 and December 31, 1995:

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------- DOLLAR PERCENT
1996 1995 CHANGE CHANGE
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
CERTAIN EXPENSES:
Repairs and maintenance............................................... $ 6,446 $ 3,235 $ 3,211 99%
Utilities............................................................. 7,054 3,076 3,978 129%
Real estate taxes..................................................... 3,741 1,590 2,151 135%
Insurance............................................................. 3,049 626 2,423 387%
Ground rent........................................................... 994 152 842 554%
Marketing and other................................................... 4,292 1,588 2,704 170%
--------- --------- --------- ---
Total certain expenses.............................................. $ 25,576 $ 10,267 $ 15,309 149%
--------- --------- --------- ---
--------- --------- --------- ---
</TABLE>

For the years ended December 31, 1996 and 1995, total certain expenses were
$25.6 million, or 39% of rental revenue and tenant reimbursements, and $10.3
million or 41% of rental revenue and tenant reimbursements, respectively. The
increase in total certain expenses is primarily attributable to the Properties
acquired during 1995 and 1996 and the expenses associated with the absorption of
vacant rentable space. The increase in total certain expenses from the year
ended December 31, 1995 to the year ended December 31, 1996 resulting from the
Properties acquired during 1996 was approximately $8.1 million. In addition,
total certain expenses increased by $7.4 million as a result of a full year of
operations for the properties acquired in 1995, and an increase in occupancy at
the Properties owned at both December 31, 1996 and 1995.

General and administrative expenses increased by $1.1 million or 79% for the
year ended December 31, 1996 compared to the year ended December 31, 1995.
However, general and administrative expenses during 1996 fell to 3.0% of total
revenue compared to 5.0% of total revenue during 1995, due to the economies of
scale associated with adding additional Properties.

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, 1996 was approximately $33.2 million,
including interest payable upon the retirement of certain mortgage loans.
Interest expense increased by approximately $19.4 million or 141% for the year
ended December 31, 1996 compared to the year ended December 31, 1995, primarily
as a result of the increase in mortgage loans payable to fund the acquisitions
that occurred during 1995 and 1996. The interest expense associated with the
mortgage loans originated during 1996 prior to the IPO was approximately $9.1
million. In addition, the year ended December 31, 1996 included a full year of
interest expense for Properties acquired during calendar year 1995, which
increased interest expense by approximately $10.4 million.

43
<PAGE>
Depreciation and amortization increased by $6.7 million or 155% primarily
due to 1995 and 1996 acquisitions.

The following is a comparison of property operating data for the eight
Properties that were owned for the entire twelve months ended December 31, 1996
and December 31, 1995 (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
REVENUE:
Rental.................................................................................... $ 19,264 $ 18,893
Tenant reimbursements..................................................................... 553 662
Parking................................................................................... 1,102 1,081
Other..................................................................................... 524 863
--------- ---------
Total revenues.......................................................................... $ 21,443 $ 21,499
--------- ---------
--------- ---------
EXPENSES:
Property operating, taxes, insurance, and ground rent..................................... $ 7,493 $ 7,548
--------- ---------
--------- ---------
</TABLE>

Rental revenues increased slightly during 1996 compared to 1995 primarily
due to an increase in occupancy. Tenant reimbursements decreased by $109,000
during 1996 compared to 1995, primarily resulting from a reset in the base year
for leases that were renewed or retenanted. For the twelve months ended December
31, 1996, parking income increased by $21,000 over the same period in 1995.
Other income decreased by $339,000 in 1996 compared to 1995 due to non-recurring
lease buyout income earned in 1995. Property operating expenses, taxes,
insurance, and ground rent decreased slightly in 1996 compared to the prior year
primarily due to the economies of scale that the Company achieved by owning a
larger portfolio of Properties.

In connection with the IPO, the Company repaid all of the Arden
Predecessors' mortgage debt. These repayments resulted in (i) an extraordinary
gain to the Arden Predecessors of $1,877,000 relating to a partial forgiveness
of debt by one lender, and (ii) an extraordinary loss to the Company of
$14,857,000 ($13,105,000, net of minority interest) relating to additional
interest and unamortized loan fees.

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 commercial office properties 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 Property acquired in 1994 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 Properties acquired in 1995 added an additional
approximate $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 1995 as well as the addition of one new
third-party property management agreement during 1995. Tenant reimbursements
from the Property acquired in 1994 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

44
<PAGE>
reimbursements associated with the Properties acquired in 1995 added an
additional $150,000 to tenant reimbursements during the year ended December 31,
1995.

Parking, net of expense, 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, net of expense, from the
Property acquired during 1994 and partial year parking, net of expense, from
Properties acquired during 1995. Parking, net of expense, associated with the
Properties acquired in 1995 added an additional $319,000 to parking, net of
expense, during the year ended December 31, 1995.

At December 31, 1994 the Arden Predecessors held non-controlling 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 expenses of the Arden Predecessors
for the years ended December 31, 1995 and December 31, 1994 (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------- DOLLAR PERCENT
1995 1994 CHANGE CHANGE
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
CERTAIN EXPENSES:
Repairs and maintenance.................................................. $ 1,027 $ 901 $ 126 14%
Utilities................................................................ 953 581 372 64%
Real estate taxes........................................................ 502 272 230 85%
Insurance................................................................ 279 50 229 458%
Ground rent.............................................................. 19 -- 19 --
Marketing and other...................................................... 560 387 173 45%
--------- --------- --------- ---
Total certain expenses................................................. $ 3,340 $ 2,191 $ 1,149 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 Property acquired in 1994, the partial year
of operations for the Properties acquired in 1995, 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
$44,000 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.

45
<PAGE>
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 acquisition.

As a result of the foregoing, the Arden Predecessors had a net loss of
$576,000 for the year ended December 31, 1995 compared to net income of $1.1
million for the year ended December 31, 1994.

The following is a comparison of the property operating data for the
Properties that were owned for the entire year ended December 31, 1995 and
December 31, 1994 (in thousands):

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

PRO FORMA OPERATING RESULTS

THREE MONTHS ENDED MARCH 31, 1997. On a pro forma basis, consolidated
income (before deduction of minority interests) would have been $13.4 million
for the three months ended March 31, 1997 or $12.3 million consolidated net
income of the Company (after deduction of minority interests), comparing
positively to the historical net income of $8.4 million for the three months
ended March 31, 1997. This positive comparison results from a substantial
increase in total revenue, due to the benefit of a pro forma full three months
of revenue from the properties acquired (and to be acquired) in 1997.

Pro forma total revenue is $37.5 million representing a $12.5 million
increase over historical 1997 resulting primarily from an increase of $11.6
million in rental revenue associated with properties acquired (and to be
acquired) in 1997. Pro forma revenue from tenant reimbursements and parking is
$3.3 million, representing a $860,000 increase over historical results.

The historical 1997 interest expense of 3.0 million increased to $5.4
million on a pro forma basis. Correspondingly, interest expense as a percentage
of total revenue increased from 12% of total revenue in historical 1997 to 14%
of total revenue on a pro forma basis.

YEAR ENDED DECEMBER 31, 1996. On a pro forma basis, consolidated income
(before deduction of minority interests) would have been $46.9 million for the
year ended December 31, 1996, or $42.9 million consolidated net income of the
Company (after deduction of minority interests), comparing positively to the
historical net loss of $5.7 million for the year ended December 31, 1996. This
positive comparison

46
<PAGE>
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 1996 and pro forma revenue from
the properties acquired (and to be acquired) in 1997.

Pro forma total revenue is $149.9 million representing a $75.6 million
increase over the combination of the total revenue of $54.7 million of the Arden
Predecessors and the noncombined entities of the Arden Predecessors for the
period from January 1, 1996 to October 8, 1996 and the total revenue of $19.6
million of the Company for the period from October 9, 1996 to December 31, 1996,
resulting primarily from an increase of $46.9 million in rental revenue
associated with properties acquired (and to be acquired) in 1997, combined with
a full year of rental revenue from the properties acquired in 1996 totaling
$23.1 million. Revenue from tenant reimbursements and parking also increased on
a pro forma basis over historical 1996 primarily due to $3.6 million of such
revenue generated at the properties acquired (or to be acquired) in 1997.

LIQUIDITY AND CAPITAL RESOURCES

MORTGAGE FINANCING. On June 11, 1997, the Company refinanced, through a
special purpose subsidiary, its existing $175 million mortgage financing with
the new $175 million Mortgage Financing from an affiliate of Lehman Brothers.
The Mortgage Financing is non-recourse and secured by fully cross-collateralized
and cross-defaulted first mortgage liens on the 18 Mortgage Financing Properties
and has a fifteen year term. The Mortgage Financing bears interest at a fixed
rate of 7.52%, is anticipated to be repaid in seven years and requires monthly
payments of interest only with all principal due in a balloon payment at
maturity. If the Mortgage Financing is not repaid or refinanced within seven
years, the interest rate increases by at least 2% and all excess cash flow from
the Mortgage Financing Properties must be used to pay down principal. The
Mortgage Financing documentation requires the Company to comply with certain
customary financial covenants, ongoing operational restrictions, and certain
cash management procedures. In addition, the Mortgage Financing prohibits
prepayment for approximately three years from its origination.

CREDIT FACILITIES. On June 11, 1997, the Company amended its then existing
credit facility with a $300 million unsecured line of credit (the "Credit
Facility") from a group of banks led by Wells Fargo (the "Lenders"). The
interest rate of the Credit Facility ranges between LIBOR plus 1.2% and LIBOR
plus 1.45% depending on the leverage ratio of the Company. Once the Company
achieves a long-term, unsecured, investment grade debt rating, the interest rate
may be lowered to between LIBOR plus 0.9% to LIBOR plus 1.15% depending on such
debt rating. Under certain circumstances, the Company has the option to convert
the interest rate from LIBOR to the prime rate plus 0.5%. As of June 24, 1997,
approximately $14.0 million was available under the Credit Facility. Upon
consummation of the Offering and the Pending Acquisitions, the Company expects
to have $170 million available under the Credit Facility. The Credit Facility
has been and 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 outstanding
principal balance is due on June 1, 2000.

The Credit Facility is subject to customary conditions to borrowing,
contains representations and warranties and defaults customary in REIT
financings, and contains 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 documentation) and requirements to maintain a
pool of unencumbered properties which meet certain defined characteristics and
are approved by the Lenders. The Credit Facility also contains restrictions on,
among other things, indebtedness, investments, distributions, liens and mergers.

47
<PAGE>
secure this advance to the Credit Facility's unencumbered pool of properties,
the Company will draw down $26 million from the Credit Facility to repay the
advance.

The Company also has an unsecured line of credit with a total commitment of
$10,000,000 from City National Bank (the "CNB Credit Facility"). On March 31,
1997 the aggregate outstanding balance was $10,000,000. The CNB Credit Facility
accrues interest at the City National Bank Prime Rate less 0.875%, and is
scheduled to mature on August 1, 1998. The CNB Credit Facility has and will be
used, among other things, to provide funds for tenant improvements and capital
expenditures and provide for working capital and other corporate purposes.

SWAP AGREEMENT. Effective January 2, 1997, the Company entered into
interest rate floor and cap transactions with a notional amount of $155 million
(collectively, the "Swap Agreement"), to convert floating rate liabilities to
fixed rate liabilities. The Swap Agreement enables the Company to fix the LIBOR
portion of its floating rate liabilities at 6.6% through March 2004.

ANALYSIS OF LIQUIDITY AND CAPITAL RESOURCES. The total market
capitalization of the Company at March 31, 1997 was approximately $869.9
million, based upon the market price of the issued and outstanding shares of
Common Stock and OP Units at March 31, 1997 (assuming all OP Units were
exchanged for shares of Common Stock) and the outstanding debt of approximately
$197.8 million at March --]31, 1997. As a result, the Company's debt to total
market capitalization ratio at March 31, 1997 was approximately 22.7%. The
undisbursed portion of the Credit Facility combined with this low-leveraged
capital structure should enhance the Company's ability to take advantage of
acquisition opportunities as well as provide, if necessary, working capital for
tenant leasehold improvements and leasing commissions associated with new
leasing activity.

Amounts accumulated for 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.

The Company expects to continue meeting its short-term liquidity
requirements generally through its working capital and net cash provided by
operating activities. The Company believes that its net cash provided by
operating activities will continue to be sufficient to allow the Company to make
any distributions necessary to enable the Company to continue 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 the remaining funds available under the Credit Facility to fund
acquisitions, development activities and capital improvements on an interim
basis.

CASH FLOWS

COMPARISON OF THREE MONTHS ENDED MARCH 31, 1997 TO THREE MONTHS ENDED MARCH
31, 1996. Net cash provided by operating activities increased by $10.6 million
from $2 million to $12.6 million primarily due to an increase in rental revenue.
Net cash used in investing activities decreased by $41.5 million from $95.2
million to $53.7 million mainly due to a decrease in the amount of real estate
assets purchased during the first three months of 1997 compared to the first
three months of 1996. Net cash provided by financing activities decreased by
$59.2 million from $93.4 million to $34.2 million due primarily to a decrease in
proceeds received from mortgage loans.

48
<PAGE>
COMPARISON OF YEAR ENDED DECEMBER 31, 1996 TO YEAR ENDED DECEMBER 31,
1995. In October 1996 the Company completed the IPO of 18,847,500 shares of its
Common Stock at $20 per share. In addition, the underwriters exercised their
overallotment option and accordingly, the Company issued an additional 2,827,000
shares of Common Stock. Net proceeds to the Company, after underwriting
discounts and other offering costs, were approximately $397 million. In
conjunction with the Formation Transactions, certain investors contributing
interests in properties and or property partnerships received OP Units. An OP
Unit and a share of the Common Stock have essentially the same economic
characteristics in as much as they effectively share equally in the net income
or loss of the Operating Partnership. Holders of OP Units issued in connection
with the Formation Transactions will have the opportunity beginning on the first
anniversary of the consummation of the IPO (October 9, 1997) to have their OP
Units redeemed for cash equal to the fair market value thereof at the time of
redemption or, at the election of the Company, exchanged for shares of Common
Stock on a one-for-one basis. Each time an OP Unit is redeemed, the Company's
percentage interest in the Operating Partnership will be proportionately
increased.

The Company used the proceeds from the IPO (i) to repay certain mortgage
indebtedness on the Initial Properties in the amount of approximately $370
million (including payment of additional interest and other related expenses);
(ii) to acquire certain real estate properties for approximately $33 million;
and (iii) to pay approximately $26.8 million in exchange for partnership assets.

During the period October 9, 1996 to December 31, 1996, the Company
purchased an additional nine office properties. These acquisitions were
partially financed with the Company's mortgage financing and credit facility
which were in place at that time. The outstanding balances of such mortgage
financing and credit facility at December 31, 1996 were $104 and $51 million,
respectively. In connection with the purchase of one of the Properties the
Company issued 55,805 OP Units as partial consideration in the transaction.

COMPARISON OF YEAR ENDED DECEMBER 31, 1995 TO YEAR ENDED DECEMBER 31,
1994. Net cash provided by operating activities increased by $2.0 million from
$800,000 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
primarily 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.

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.

49
<PAGE>
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 office space in Southern California has stabilized
and is unlikely to increase significantly over the short term in large part
because in many submarkets it is still not economically feasible to develop new
office space based on rental rates currently attainable in Southern California
office markets. 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 office space relative to the level of
supply has led to higher occupancy rates and a trend toward higher rental rates
which are supportable in the office markets where the Company's Properties and
Pending Acquisitions are located. Finally, patterns of residential relocation to
suburban areas due in part to the public perception of greater personal security
and the availability of greater recreational and residential amenities, 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
continued strengthening of the Southern California economy. Given the quality
and location of its Properties and Pending Acquisitions, the Company believes it
is competitively positioned to capitalize on these economic trends and the
resulting increasing demand for suburban office space.

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 five counties in which the Company's Properties are located include Los
Angeles, Orange, Ventura, Kern and San Diego counties which collectively
comprise approximately 50% of the statewide population and employment base in
California. Data from the U.S. Bureau of Labor Statistics indicate 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 1996 ECONOMIC REPORT OF THE
GOVERNOR OF CALIFORNIA (the "1996 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.
Since 1993, the five-county Los Angeles area economy (comprising Los Angeles,
Orange, Ventura, Riverside and San Bernardino counties) has grown at an annual
rate of over 3.9%, and, according to the Economic Development Corporation of Los
Angeles (the "LAEDC") is forecast to grow at a 6.3% rate during 1997 (as
compared to 3.5% for the United States as a whole).

50
<PAGE>
GDP FOR FIVE-COUNTY LOS ANGELES AREA

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
GDP ($ BILLIONS)
<S> <C>
1990 372.6
1991 376.4
1992 389.0
1993 296.2
1994 405.0
1995 421.5
1996 445.2
1997e 473.4
</TABLE>

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

SOURCE: CALIFORNIA DEPARTMENT OF FINANCE, LAEDC

Unemployment in the Company's markets has also shown positive trends since
the recession. According to the U.S. Bureau of Labor Statistics, in March 1997
unemployment in Los Angeles County was 7.1% (not seasonally adjusted), its
lowest level since January 1991 and down 3.7% from its recessionary high of
10.8% (not seasonally adjusted) in July 1992. Similar trends of decreasing
unemployment have also been experienced in Orange, Ventura, Kern, and San Diego
counties, all of which experienced post-recession annual lows in unemployment in
1996.

LOS ANGELES COUNTY UNEMPLOYMENT RATE

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
UNEMPLOYMENT RATE
<S> <C>
1990 5.9%
1991 8.2%
1992 9.8%
1993 9.8%
1994 9.4%
1995 7.9%
1996 8.2%
1997e 7.4%
</TABLE>

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

SOURCE: BUREAU OF LABOR STATISTICS, LAEDC

The LAEDC has forecast a total increase in non-farm employment for the
period from 1996 to 2005 of 19.9% and 19.5% for Los Angeles County and Orange
County, respectively, representing an average annual growth rate of 2.0% for
each. Overall, the five-county Los Angeles region is expected to experience
similar growth with an 18.6% increase in employment over the same period.

51
<PAGE>
A driving factor in the forecast employment growth within the counties in
which the Company operates is strong population growth, which is expected to
outpace the population growth in the United States for the period from 1995 to
2000, as shown below:

<TABLE>
<CAPTION>
POPULATION
POPULATION GROWTH
GROWTH 1995-2000
AREA 1990-1995 (PROJECTED)
- --------------------------------------------------------------------- -------------- -------------
<S> <C> <C>
Los Angeles County................................................... 3.1% 5.8%
Orange County........................................................ 6.4% 11.1%
Ventura County....................................................... 5.5% 6.0%
Kern County.......................................................... 13.5% 17.9%
San Diego County..................................................... 5.8% 12.2%
California........................................................... 6.2% 9.1%
United States........................................................ 5.6% 5.1%
</TABLE>

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

SOURCE: U.S. BUREAU OF THE CENSUS, BUREAU OF ECONOMIC ANALYSIS (U.S. DEPARTMENT
OF COMMERCE), STATE OF CALIFORNIA DEPARTMENT OF FINANCE.

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, Ventura County and Orange
County), in which 42 of the Company's 45 Properties are located, is projected to
be the number one market in the United States for primary office employment
growth from 1996 to 2006, and San Diego is ranked 17th.

TOP 20 MARKETS FOR PRIMARY OFFICE
EMPLOYMENT GROWTH (1996-2006)

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

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

SOURCE: COGNETICS, INC.

A significant factor affecting primary office employment growth in the
Metropolitan Los Angeles area is a trend within the local economy to become more
services oriented. From 1990 to 1996, the service sector in Los Angeles county
has expanded from approximately 28% of total non-farm employment to
approximately 33%, and is projected by the LAEDC to continue to expand to
approximately 38% by 2005. Data from the California Employment Development
Department show that Los Angeles County created over 85,000 new jobs in 1996,
62% of which were in the service sector. This constituted a 2.3% annual growth
rate versus 2.0% for the U.S. as a whole.

52
<PAGE>
LOS ANGELES COUNTY SERVICES EMPLOYMENT
AS PERCENTAGE OF TOTAL NON-FARM EMPLOYMENT

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
% OF TOTAL NON-FARM EMPLOYMENT
<S> <C>
1988 27.3%
1989 27.9%
1990 28.5%
1991 29.8%
1992 29.7%
1993 30.7%
1994 31.2%
1995 31.9%
1996 32.6%
1997e 33.3%
1998e 33.8%
2000e 34.9%
2005e 37.6%
</TABLE>

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

SOURCE: CALIFORNIA EMPLOYMENT DEVELOPMENT DEPARTMENT, LAEDC

In addition to becoming a more diversified economy with a stronger emphasis
on the services sector, according to the LAEDC, 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 1996 ECONOMIC REPORT,
Los Angeles County is also the nation's leading manufacturing center. The
five-county Los Angeles area is home to 26 Fortune 500 companies, and Los
Angeles County itself 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 Primary Metropolitan Statistical Area
("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 U.S. Department of Commerce, international trade passing through the Los
Angeles Customs District has increased from approximately $90.0 billion in 1988
to approximately $167.6 billion in 1996, representing over 12.0% of the total
trading volume in the United States. In the ten-year period ending 1994, the
total trading volume in the region grew at an average annual rate of
approximately 11.4%, as compared to the rate of 8.0% nationally during the same
period.

53
<PAGE>
INTERNATIONAL TRADE THROUGH LOS ANGELES CUSTOMS DISTRICT

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
TOTAL TRADING VOLUME
($BILLION)
<S> <C>
1988 $ 90.0
1989 101.4
1990 106.6
1991 112.7
1992 121.8
1993 128.5
1994 145.9
1995 164.2
1996 167.6
1997e 173.5
1998e 179.1
</TABLE>

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

SOURCE: U.S. DEPARTMENT OF COMMERCE, LAEDC

SOUTHERN CALIFORNIA OFFICE MARKETS

In the past four years the underlying fundamentals of supply and demand in
the suburban Los Angeles County and Orange County office markets have improved.
The peak in available supply occurred near the midpoint of the recession in
1991. Since that time, the local economies have been recovering and the
relationship between supply and demand has resulted in declining direct vacancy
rates in these markets. According to Cushman & Wakefield, as of December 31,
1996, the direct vacancy rate for the suburban Los Angeles County office market
and the Orange County office market was 14.8% and 15.3%, respectively, as
compared to 19.2% and 19.5% 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>
Los Angeles County (suburban) Orange County
1991 19.2% 19.5%
1992 18.9% 19.1%
1993 18.4% 17.1%
1994 17.3% 17.2%
1995 17.0% 15.5%
1996 14.8% 15.3%
</TABLE>

54
<PAGE>
PROPERTIES

GENERAL

The Company's Properties consist of 45 office properties containing
approximately 7.4 million rentable square feet, including acquisitions made
since the IPO of the 21 Acquired Properties containing approximately 3.4 million
rentable square feet. The Properties consist primarily of suburban office
properties and individually range from approximately 42,000 to 598,000 rentable
square feet. All of the Properties are located in Southern California, with 38
located in suburban Los Angeles County, three in Orange County, one in Ventura
County, two in Kern County and one in San Diego County. The Company believes
that the Properties have desirable locations with established business
communities and are well-maintained. Of the Company's 45 Properties, 36 have
been built since 1980 and 17 have been substantially renovated within the last
five years. The average age of the buildings is approximately 13 years. The
Properties offer an array of 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 May
1, 1997, the Properties were 85.8% leased to over 1,200 tenants, including 91.9%
and 78.6%, respectively, for the Initial Properties and the Acquired Properties.
As of May 1, 1997, no one tenant represented more than approximately 2.1% of the
aggregate Annualized Base Rent (defined as the monthly contractual base rent
under existing leases as of May 1, 1997, multiplied by 12) of the Properties and
only ten tenants individually represented more than 1.0% of such aggregate
Annualized Base Rent.

As of June 15, 1997, the Company had executed eight contracts and entered
one letter of intent to acquire the nine Pending Acquisitions within 60 days
after the Offering. Upon closing of the Pending Acquisitions the Company will
own a total of 54 office properties consisting of approximately 8.6 million
rentable square feet; although there can be no assurance that any of the Pending
Acquisitions will be completed. See "Risk Factors--Risk that Pending
Acquisitions Will Not Close." As of May 1, 1997, the Pending Acquisitions were
approximately 77.1% leased.

The Properties and Pending Acquisitions 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 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 lease, 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 on site monthly employee and visitor parking.

Although the leases at the Properties and the Pending Acquisitions primarily
consist of gross leases (which represented approximately 90% of the total
portfolio leased square footage as of May 1, 1997), they also include 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

55
<PAGE>
managers communicate frequently 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 AND PENDING ACQUISITIONS

The following table sets forth certain information regarding each of the
Properties and Pending Acquisitions as of May 1, 1997:

56
<PAGE>
<TABLE>
<CAPTION>
YEAR(S)
BUILT/
PROPERTY NAME SUBMARKET LOCATION RENOVATED
- ----------------------------------------------- ------------------------------------- ------------------- -----------
<S> <C> <C> <C>
INITIAL PROPERTIES
LOS ANGELES COUNTY
LOS ANGELES WEST
9665 Wilshire................................ Beverly Hills/Century City Beverly Hills 1972/92-93
Beverly Atrium............................... Beverly Hills/Century City Beverly Hills 1989
Century Park Center.......................... Beverly Hills/Century City Los Angeles 1972/94
Westwood Terrace............................. Westwood/West Los Angeles Los Angeles 1988
1950 Sawtelle................................ Westwood/West Los Angeles Los Angeles 1988/95
400 Corporate Pointe......................... Marina Area/Culver City/LAX Culver City 1987
Bristol Plaza................................ Marina Area/Culver City/LAX Culver City 1982
Skyview Center............................... Marina Area/Culver City/LAX Los Angeles 1981,87/95
The New Wilshire............................. Park Mile/West Hollywood Los Angeles 1986
LOS ANGELES NORTH
5601 Lindero Canyon.......................... Simi/Conejo Valley Westlake 1989
Calabasas Commerce Center.................... Simi/Conejo Valley Calabasas 1990
Woodland Hills Financial Center.............. West San Fernando Valley Woodland Hills 1972/95
16000 Ventura................................ Central San Fernando Valley Encino 1980/96
425 West Broadway............................ East San Fernando Valley/Tri-Cities Glendale 1984
303 Glenoaks................................. East San Fernando Valley/Tri-Cities Burbank 1983/96
70 South Lake................................ East San Fernando Valley/Tri-Cities Pasadena 1982/94
LOS ANGELES SOUTH
4811 Airport Plaza(5)........................ Long Beach Long Beach 1987/95
4900/10 Airport Plaza(5)..................... Long Beach Long Beach 1987/95
5000 Spring(5)............................... Long Beach Long Beach 1989/95
100 West Broadway............................ Long Beach Long Beach 1987/96
12501 East Imperial Highway.................. Norwalk/Cerritos Norwalk 1978/94
ORANGE COUNTY
5832 Bolsa................................... West County Huntington Beach 1985
Anaheim City Centre(5)....................... Tri-Freeway Area Anaheim 1986/91
SAN DIEGO COUNTY
Imperial Bank Tower(5)....................... Central City San Diego 1982/96
Subtotal/Weighted Average--Initial Properties ......................................................................
ACQUIRED PROPERTIES
LOS ANGELES COUNTY
LOS ANGELES WEST
10350 Santa Monica........................... Beverly Hills/Century City Los Angeles 1979
10351 Santa Monica........................... Beverly Hills/Century City Los Angeles 1984
8383 Wilshire................................ Beverly Hills/Century City Beverly Hills 1971/93
2730 Wilshire(6)............................. Westwood/West Los Angeles Santa Monica 1985
10780 Santa Monica........................... Westwood/West Los Angeles Los Angeles 1984
5200 West Century............................ Marina Area/Culver City/LAX Los Angeles 1982
LOS ANGELES NORTH
6800 Owensmouth.............................. West San Fernando Valley Canoga Park 1986
Clarendon Crest.............................. West San Fernando Valley Woodland Hills 1990
Sumitomo Bank Building....................... Central San Fernando Valley Sherman Oaks 1970/90-91
Noble Professional Center.................... Central San Fernando Valley Sherman Oaks 1985/93
Burbank Executive Plaza...................... East San Fernando Valley/Tri-Cities Burbank 1983
California Federal Building.................. East San Fernando Valley/Tri-Cities Burbank 1978
535 Brand.................................... East San Fernando Valley/Tri-Cities Glendale 1973/92
LOS ANGELES SOUTH
Grand Avenue Plaza........................... El Segundo El Segundo 1979,80
South Bay Centre............................. Torrance Gardena 1984
LOS ANGELES CENTRAL
Los Angeles Corporate Center................. San Gabriel Valley Monterey Park 1984,86
Whittier Financial Center.................... San Gabriel Valley Whittier 1967,82
ORANGE COUNTY
Centerpointe La Palma........................ North County La Palma 1986,88,90
VENTURA COUNTY
Center Promenade............................. West County Ventura 1982
KERN COUNTY....................................
Parkway Center Bakersfield Bakersfield 1992,95
California Twin Centre....................... Bakersfield Bakersfield 1983
Subtotal/Weighted Average--Acquired Properties .....................................................................

<CAPTION>
PERCENTAGE OF
TOTAL ANNUALIZED
APPROXIMATE PORTFOLIO PERCENT BASE
NUMBER OF NET RENTABLE NET RENTABLE LEASED AS OF RENT(1)
PROPERTY NAME BUILDINGS SQUARE FEET SQUARE FEET MAY 1, 1997 ($000S)
- ----------------------------------------------- ------------- ------------ -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
INITIAL PROPERTIES
LOS ANGELES COUNTY
LOS ANGELES WEST
9665 Wilshire................................ 1 158,684 1.8% 99.6% 4,912
Beverly Atrium............................... 1 61,314 0.7% 85.0% 1,274
Century Park Center.......................... 1 243,404 2.8% 89.4% 4,456
Westwood Terrace............................. 1 135,943 1.6% 95.0% 3,109
1950 Sawtelle................................ 1 103,772 1.2% 88.3% 1,797
400 Corporate Pointe......................... 1 164,598 1.9% 100.0% 3,181
Bristol Plaza................................ 1 84,014 1.0% 88.1% 1,234
Skyview Center............................... 2 391,675 4.5% 88.9% 5,811
The New Wilshire............................. 1 202,704 2.4% 86.9% 3,319
LOS ANGELES NORTH
5601 Lindero Canyon.......................... 1 105,830 1.2% 100.0% 1,180
Calabasas Commerce Center.................... 4 123,121 1.4% 97.7% 1,743
Woodland Hills Financial Center.............. 2 224,955 2.6% 89.7% 4,468
16000 Ventura................................ 1 174,841 2.0% 88.1% 3,014
425 West Broadway............................ 1 71,589 0.8% 97.6% 1,354
303 Glenoaks................................. 1 175,449 2.0% 97.7% 3,548
70 South Lake................................ 1 100,133 1.2% 91.9% 1,919
LOS ANGELES SOUTH
4811 Airport Plaza(5)........................ 1 121,610 1.4% 100.0% 1,051
4900/10 Airport Plaza(5)..................... 1 150,403 1.8% 100.0% 1,173
5000 Spring(5)............................... 1 163,358 1.9% 93.5% 2,944
100 West Broadway............................ 1 191,727 2.2% 94.5% 3,775
12501 East Imperial Highway.................. 1 122,175 1.4% 96.1% 2,010
ORANGE COUNTY
5832 Bolsa................................... 1 49,355 0.6% 100.0% 659
Anaheim City Centre(5)....................... 1 175,391 2.0% 94.7% 2,632
SAN DIEGO COUNTY
Imperial Bank Tower(5)....................... 1 540,413 6.3% 82.1% 7,376
--
------------ ----- ----- -----------
Subtotal/Weighted Average--Initial Properti 29 4,036,458 46.7% 91.9% 67,939
--
------------ ----- ----- -----------
ACQUIRED PROPERTIES
LOS ANGELES COUNTY
LOS ANGELES WEST
10350 Santa Monica........................... 1 42,292 0.5% 93.1% 686
10351 Santa Monica........................... 1 96,251 1.1% 97.8% 1,607
8383 Wilshire................................ 1 417,463 4.8% 76.8% 6,761
2730 Wilshire(6)............................. 1 55,080 0.6% 97.5% 1,074
10780 Santa Monica........................... 1 92,486 1.1% 84.1% 1,419
5200 West Century............................ 1 310,910 3.6% 30.1% 927
LOS ANGELES NORTH
6800 Owensmouth.............................. 1 80,014 0.9% 84.9% 1,240
Clarendon Crest.............................. 1 43,063 0.5% 84.7% 677
Sumitomo Bank Building....................... 1 110,641 1.3% 92.2% 1,990
Noble Professional Center.................... 1 51,828 0.6% 80.5% 837
Burbank Executive Plaza...................... 1 60,395 0.7% 73.8% 560
California Federal Building.................. 1 82,467 1.0% 97.0% 1,591
535 Brand.................................... 1 109,187 1.3% 51.0% 639
LOS ANGELES SOUTH
Grand Avenue Plaza........................... 2 84,500 1.0% 61.5% --
South Bay Centre............................. 1 202,830 2.4% 85.8% 3,012
LOS ANGELES CENTRAL
Los Angeles Corporate Center................. 4 389,293 4.5% 84.9% 6,741
Whittier Financial Center.................... 2 135,415 1.6% 85.2% 2,059
ORANGE COUNTY
Centerpointe La Palma........................ 12 597,550 6.9% 88.2% 8,519
VENTURA COUNTY
Center Promenade............................. 7 174,837 2.0% 73.7% 1,868
KERN COUNTY....................................
Parkway Center 2 61,333 0.7% 99.5% 1,046
California Twin Centre....................... 1 155,189 1.8% 88.5% 3,263
--
------------ ----- ----- -----------
Subtotal/Weighted Average--Acquired Propert 44 3,353,024 38.9% 78.6% 46,516
--
------------ ----- ----- -----------

<CAPTION>
ANNUALIZED
PERCENTAGE OF ANNUALIZED NET BASE RENT C&W PEER
PORTFOLIO EFFECTIVE RENT PER LEASED GROUP RENT
ANNUALIZED NUMBER OF PER LEASED SQUARE PER SQUARE
PROPERTY NAME BASE RENT LEASES SQUARE FOOT(2) FOOT(3) FOOT(4)
- ----------------------------------------------- ------------- ----------- --------------- ----------- -----------
INITIAL PROPERTIES
LOS ANGELES COUNTY
LOS ANGELES WEST
9665 Wilshire................................ 3.7% 26 $ 29.79 $ 31.09 $ 30.47
Beverly Atrium............................... 1.0% 9 22.42 24.46 30.47
Century Park Center.......................... 3.4% 81 17.98 20.47 23.92
Westwood Terrace............................. 2.4% 26 23.97 24.08 28.93
1950 Sawtelle................................ 1.4% 30 18.46 19.60 21.58
400 Corporate Pointe......................... 2.4% 19 20.80 19.33 18.02
Bristol Plaza................................ 0.9% 20 17.81 16.68 18.00
Skyview Center............................... 4.4% 46 15.97 16.68 18.65
The New Wilshire............................. 2.5% 35 19.36 18.84 21.87
LOS ANGELES NORTH
5601 Lindero Canyon.......................... 0.9% 2 10.69 11.15 20.75
Calabasas Commerce Center.................... 1.3% 11 16.16 14.48 19.41
Woodland Hills Financial Center.............. 3.4% 64 20.39 22.15 21.48
16000 Ventura................................ 2.3% 46 18.29 19.57 22.61
425 West Broadway............................ 1.0% 14 17.88 19.39 22.54
303 Glenoaks................................. 2.7% 24 20.51 20.70 22.35
70 South Lake................................ 1.5% 15 19.36 20.86 25.75
LOS ANGELES SOUTH
4811 Airport Plaza(5)........................ 0.8% 1 9.30 8.64 25.60
4900/10 Airport Plaza(5)..................... 0.9% 1 8.40 7.80 25.60
5000 Spring(5)............................... 2.2% 26 16.81 19.27 25.60
100 West Broadway............................ 2.9% 30 23.66 20.84 19.58
12501 East Imperial Highway.................. 1.5% 5 17.06 17.12 18.54
ORANGE COUNTY
5832 Bolsa................................... 0.5% 1 13.40 13.35 17.82
Anaheim City Centre(5)....................... 2.0% 14 15.48 15.85 19.14
SAN DIEGO COUNTY
Imperial Bank Tower(5)....................... 5.6% 52 17.35 16.62 20.65

----- ----- ------ ----------- -----------
Subtotal/Weighted Average--Initial Properti 51.6% 598 $ 18.07 $ 18.32 $ 22.04(7)

----- ----- ------ ----------- -----------
ACQUIRED PROPERTIES
LOS ANGELES COUNTY
LOS ANGELES WEST
10350 Santa Monica........................... 0.5% 16 $ 17.29 $ 17.44 $ 21.86
10351 Santa Monica........................... 1.2% 17 17.28 17.07 21.83
8383 Wilshire................................ 5.1% 125 21.67 21.09 23.74
2730 Wilshire(6)............................. 0.8% 29 20.68 20.00 24.00
10780 Santa Monica........................... 1.1% 29 19.14 18.23 21.96
5200 West Century............................ 0.7% 20 11.98 9.90 13.55
LOS ANGELES NORTH
6800 Owensmouth.............................. 0.9% 21 18.29 18.25 19.31
Clarendon Crest.............................. 0.5% 8 18.65 18.56 18.47
Sumitomo Bank Building....................... 1.5% 51 19.99 19.50 22.88
Noble Professional Center.................... 0.6% 13 21.51 20.05 22.13
Burbank Executive Plaza...................... 0.4% 10 19.68 12.57 22.49
California Federal Building.................. 1.2% 9 19.77 19.89 22.49
535 Brand.................................... 0.5% 15 11.44 11.47 25.28
LOS ANGELES SOUTH
Grand Avenue Plaza........................... -- 2 12.80 -- 16.40
South Bay Centre............................. 2.3% 33 17.87 17.30 17.89
LOS ANGELES CENTRAL
Los Angeles Corporate Center................. 5.1% 37 21.43 20.40 18.09
Whittier Financial Center.................... 1.6% 42 19.98 17.84 13.08
ORANGE COUNTY
Centerpointe La Palma........................ 6.5% 66 16.80 16.16 19.37
VENTURA COUNTY
Center Promenade............................. 1.4% 47 14.37 14.50 16.39
KERN COUNTY....................................
Parkway Center 0.8% 10 17.33 17.14 17.41
California Twin Centre....................... 2.5% 8 24.21 23.75 17.32

----- ----- ------ ----------- -----------
Subtotal/Weighted Average--Acquired Propert 35.2% 608 $ 18.67 $ 17.66 $ 19.24(7)

----- ----- ------ ----------- -----------
</TABLE>

57
<PAGE>
<TABLE>
<CAPTION>
YEAR(S)
BUILT/
PROPERTY NAME SUBMARKET LOCATION RENOVATED
- ----------------------------------------------- ------------------------------------- ------------------- -----------
<S> <C> <C> <C>
PENDING ACQUISITIONS
LOS ANGELES COUNTY
LOS ANGELES WEST
1100 Glendon................................. Westwood/West Los Angeles Los Angeles 1965
Carlsberg Corporate Center................... Westwood/West Los Angeles Santa Monica 1979
LOS ANGELES NORTH
299 Euclid................................... East San Fernando Valley/Tri-Cities Pasadena 1983
LOS ANGELES SOUTH
Harbor Corporate Center...................... Torrance Gardena 1985
Pacific Gateway II........................... Torrance Torrance 1982/90
Mariner Court................................ Torrance Torrance 1989
ORANGE COUNTY
Crown Cabot.................................. South County Laguna Niguel 1989
1821 Dyer.................................... Greater Airport Area Irvine 1980/88
VENTURA COUNTY
1000 Town Center............................. West County Oxnard 1989
Subtotal/Weighted Average--Pending Acquisitions ....................................................................
Total/Weighted Average--All Properties and Pending Acquisitions ....................................................

<CAPTION>
PERCENTAGE OF
TOTAL ANNUALIZED
APPROXIMATE PORTFOLIO PERCENT BASE
NUMBER NET RENTABLE NET RENTABLE LEASED AS OF RENT(1)
PROPERTY NAME OF BUILDINGS SQUARE FEET SQUARE FEET MAY 1, 1997 ($000S)
- ----------------------------------------------- ------------- ------------ -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
PENDING ACQUISITIONS
LOS ANGELES COUNTY
LOS ANGELES WEST
1100 Glendon................................. 1 282,013 3.3% 49.7% 3,345
Carlsberg Corporate Center................... 1 103,506 1.2% 87.3% 1,838
LOS ANGELES NORTH
299 Euclid................................... 1 73,400 0.8% 0.0% --
LOS ANGELES SOUTH
Harbor Corporate Center...................... 1 63,925 0.7% 77.4% 716
Pacific Gateway II........................... 1 223,731 2.6% 92.4% 3,971
Mariner Court................................ 1 105,436 1.2% 86.7% 1,522
ORANGE COUNTY
Crown Cabot.................................. 1 172,900 2.0% 93.3% 3,342
1821 Dyer.................................... 1 115,061 1.3% 100.0% 635
VENTURA COUNTY
1000 Town Center............................. 1 107,653 1.3% 100.0% 2,056
--
------------ ----- ----- -----------
Subtotal/Weighted Average--Pending Acquisit 9 1,247,625 14.4% 77.1% 17,425
--
------------ ----- ----- -----------
Total/Weighted Average--All Properties and 82 8,637,107 100.0% 84.6% 131,880
--
--
------------ ----- ----- -----------
------------ ----- ----- -----------

----- ----- ------ ----------- -----------
Subtotal/Weighted Average--Pending Acquisit 13.2% 294 18.35 18.11 20.96(7)

----- ----- ------ ----------- -----------
Total/Weighted Average--All Properties and 100.0% 1,500 $ 18.32 $ 18.05 $ 20.80(7)

----- ----- ------ ----------- -----------
----- ----- ------ ----------- -----------
</TABLE>

- ----------------------------------
(1) Annualized base rent is calculated as monthly contractual base rent under
existing leases as of May 1, 1997, multiplied by 12.

(2) Annualized Net Effective Rent is calculated for each lease in effect at May
1, 1997. 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. For leases at the
Acquired Properties not acquired as of May 1, 1997 and the Pending
Acquisitions, Annualized Net Effective Rent is calculated by assuming the
Properties were acquired on May 1, 1997 and by dividing the remaining lease
payments under the lease by the number of months remaining under the lease
and multiplying the result by 12. The foregoing amounts were in all cases
adjusted for tenant improvements and leasing commissions, if any, paid or
payable by the Company.

(3) Amounts in this column that may be exceeded by the counterpart amounts under
the column headed Annualized Net Effective Rent Per Leased Square Foot do so
primarily because the amounts in this column do not reflect future scheduled
rent increases.

(4) Represents the mid-point of the range of the weighted average annual asking
rents (for full-service gross leases only; any net leases have been adjusted
to full-service gross leases by adding estimated recoverable expenses for
similar properties) for the respective C&W Peer Group properties as of
approximately May 1, 1997. 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.

(5) The land underlying these Properties and/or their parking structures is
leased by the Company pursuant to long term ground leases (see Note 3 of the
Notes to Financial Statements of Arden Realty, Inc. and the Arden
Predecessors).

(6) Above amounts for 2730 Wilshire exclude the 100%-occupied, 12,740-square
foot, 16-unit apartment complex which is also owned by the Company.

(7) The C&W Peer Group Rent per square foot weighted average subtotals and total
have been calculated by weighing each property by its approximate net
rentable square feet relative to the respective subtotal or total
approximate net rentable square feet.

58
<PAGE>
TENANT INFORMATION

The Properties and Pending Acquisitions are leased to 1,500 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 the Annualized Base
Rent as of May 1, 1997 derived from the 20 largest tenants at the Properties and
Pending Acqusitions:

<TABLE>
<CAPTION>
PERCENTAGE OF
WEIGHTED PERCENTAGE OF AGGREGATE
AVERAGE AGGREGATE AGGREGATE ANNUALIZED PORTFOLIO
NUMBER OF REMAINING LEASE RENTABLE LEASED SQUARE BASE RENT ANNUALIZED
TENANT LEASES TERM IN MONTHS SQUARE FEET FEET ($000S) BASE RENT
- --------------------------------------- ------------- --------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Chevron USA, Inc....................... 1 52 103,887 1.42% $ 2,755 2.09%
State Compensation Insurance Fund...... 1 10 113,513 1.55% 2,622 1.99%
McDonnell Douglas Corporation.......... 1 102 272,013 3.72% 2,224 1.69%
Atlantic Richfield Company(1).......... 2 112 117,479 1.61% 1,971 1.49%
Southern Pacific Transportation
Company.............................. 1 23 83,017 1.14% 1,943 1.47%
GTE(2)................................. 2 29 113,124 1.55% 1,752 1.33%
Pepperdine University.................. 1 68 92,343 1.26% 1,741 1.32%
Logicon, Inc........................... 1 62 74,174 1.02% 1,575 1.19%
Merrill Lynch, Pierce, Fenner & Smith,
Inc.(3).............................. 2 39 51,748 0.71% 1,441 1.09%
Maritz, Inc.(4)........................ 2 34 57,306 0.78% 1,210 0.93%
Earth Technology
Corporation(5)....................... 2 71 44,122 0.60% 1,138 0.86%
City National Bank(6).................. 3 109 42,219 0.58% 1,073 0.81%
Latham & Watkins....................... 1 82 56,814 0.78% 1,047 0.79%
Ralphs Grocery Company................. 1 8 46,416 0.64% 1,003 0.76%
DIC Entertainment, L.P................. 1 67 50,472 0.69% 993 0.75%
State of California(7)................. 7 39 55,151 0.75% 960 0.73%
Grey Advertising, Inc.(8).............. 2 100 51,148 0.70% 934 0.71%
The Hearst Corporation................. 1 36 25,731 0.35% 932 0.71%
Smith Barney, Inc.(9).................. 3 83 33,528 0.47% 873 0.66%
Tenet HealthCare Corporation........... 1 45 24,069 0.33% 871 0.66%
--
--- ----------- ----- ----------- -----
Total/Weighted Average(10)............. 36 63 1,508,274 20.65% $ 29,058 22.03%
--
--
--- ----------- ----- ----------- -----
--- ----------- ----- ----------- -----
</TABLE>

- ------------------------
(1) Atlantic Richfield Company leases 81,972 and 35,507 rentable square feet
with 108 and 120 months remaining, respectively.

(2) GTE leases 63,769 and 49,355 rentable square feet with 24 and 36 months
remaining, respectively.

(3) Merrill Lynch, Pierce, Fenner & Smith leases 19,293 and 32,455 rentable
square feet with 8 and 58 months remaining, respectively.

(4) Maritz leases 5,389 and 51,425 rentable square feet with 6 and 37 months
remaining, respectively.

(5) Earth Technology leases 6,628 and 37,494 rentable square feet with 17 and
81 months remaining, respectively.

(6) City National Bank leases 2,340, 16,496 and 23,383 rentable square feet
with 51, 108 and 116 months remaining, respectively.

(7) The State of California leases 1,261, 10,120, 3,219, 22,145, 10,083, 3,173,
and 5,150 rentable square feet with 1, 23, 25, 27, 56, 60, and 90 months
remaining, respectively.

(8) Grey Advertising leases 3,496 and 47,652 rentable square feet with 1 and
107 months remaining, respectively.

(9) Smith Barney leases 15,321, 8,792, and 9,415 rentable square feet with 65,
92, and 104 months remaining, respectively.

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

59
<PAGE>
LEASE DISTRIBUTIONS

The following table sets forth information relating to the distribution of
the leases for the Properties and Pending Acquisitions, based on rentable square
feet under lease, as of May 1, 1997:

<TABLE>
<CAPTION>
SQUARE PERCENTAGE OF ANNUALIZED PERCENTAGE
FOOTAGE AGGREGATE BASE RENT OF AVERAGE BASE OF AGGREGATE
NUMBER OF PORTFOLIO EXPIRING RENT PER PORTFOLIO
SQUARE FEET OF LEASES PERCENT OF EXPIRING LEASED SQUARE LEASES SQUARE FOOT OF ANNUALIZED
UNDER LEASE EXPIRING ALL LEASES LEASES FEET ($000S) EXPIRING LEASES BASE RENT
- ----------------------- ----------- ----------- ---------- ------------- ------------ --------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
2,500 or less.......... 849 56.60% 1,049,293 14.36% $ 20,657 $ 19.69 14.56%
2,501-5,000............ 310 20.67% 1,075,163 14.72% 20,681 19.24 14.58%
5,001-7,500............ 117 7.80% 722,784 9.89% 14,612 20.22 10.30%
7,501-10,000........... 69 4.60% 591,510 8.10% 11,549 19.52 8.14%
10,001-20,000.......... 98 6.53% 1,361,487 18.64% 27,432 20.15 19.34%
20,001-40,000.......... 32 2.13% 845,908 11.58% 17,917 21.18 12.63%
40,001 and over........ 25 1.67% 1,659,214 22.71% 29,031 17.50 20.45%
----- ----------- ---------- ------ ------------ ------ ------
Total.............. 1,500 100.00% 7,305,359 100.00% $ 141,879 $ 19.42 100.00%
----- ----------- ---------- ------ ------------ ------ ------
----- ----------- ---------- ------ ------------ ------ ------
</TABLE>

LEASE EXPIRATIONS--PORTFOLIO TOTAL

The following table sets forth a summary schedule of the total lease
expirations for the Properties and Pending Acquisitions for leases in place as
of May 1, 1997, assuming that none of the tenants exercise renewal options or
termination rights, if any, at or prior to the scheduled expirations:

<TABLE>
<CAPTION>
PERCENTAGE ANNUALIZED PERCENTAGE
SQUARE OF AGGREGATE BASE RENT OF AVERAGE BASE OF AGGREGATE
NUMBER FOOTAGE OF PORTFOLIO EXPIRING RENT PER PORTFOLIO
YEAR OF LEASE OF LEASES EXPIRING LEASED LEASES SQUARE FOOT OF ANNUALIZED
EXPIRATION EXPIRING LEASES SQUARE FEET (000S)(2) EXPIRING LEASES BASE RENT
- ----------------------------- ----------- ---------- ------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1997(1)...................... 338 906,020 12.40% $ 16,759 $ 18.50 11.81%
1998......................... 303 1,018,576 13.94% 20,407 20.03 14.38%
1999......................... 245 970,434 13.28% 18,640 19.21 13.14%
2000......................... 212 860,416 11.78% 17,858 20.75 12.59%
2001......................... 178 1,039,900 14.23% 21,023 20.22 14.82%
2002......................... 103 963,995 13.20% 18,491 19.18 13.03%
2003......................... 30 291,935 4.00% 5,404 18.51 3.81%
2004......................... 39 369,766 5.06% 7,465 20.19 5.26%
2005......................... 29 506,504 6.93% 7,097 14.01 5.00%
2006......................... 9 200,333 2.74% 4,925 24.58 3.47%
2008......................... 6 112,943 1.55% 2,409 21.33 1.70%
2010......................... 3 28,238 0.39% 765 27.09 0.54%
2013......................... 5 36,299 0.50% 636 17.52 0.45%
----- ---------- ------ ------------ ------ ------
Total.................... 1,500 7,305,359 100.00% $ 141,879 $ 19.42 100.00%
----- ---------- ------ ------------ ------ ------
----- ---------- ------ ------------ ------ ------
</TABLE>

- ------------------------
(1) All month-to-month leases are assumed to expire during 1997.

(2) Base rent is as of the date of lease expiration, including all fixed
contractual base rent increases; increases tied to indices such as the CPI
are not included.

60
<PAGE>
LEASE EXPIRATIONS--PROPERTY BY PROPERTY

The following table sets forth detailed lease expiration information for
each of the Properties and Pending Acquisitions for leases in place as of May 1,
1997, assuming that none of the tenants exercise renewal options or termination
rights, if any, at or prior to the scheduled expirations along with the C&W Peer
Group Rent per square foot for each of the Properties and Pending Acquisitions.
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1997(1) 1998 1999 2000 2001 2002
- ------------------------------------------------------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INITIAL PROPERTIES
9665 WILSHIRE
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 30.47
Base Rent per Sq. Foot of Expiring Leases................... $ 37.59 $ 27.51 $ 25.39 $ 32.18 $ 32.91
Square Footage of Expiring Leases........................... 20,734 8,362 19,296 37,165 54,501
Percentage of Total Leased Sq. Ft........................... 13.12% 5.29% 12.21% 23.52% 34.49%
Percentage of Total Annualized Base Rent.................... 15.90% 4.69% 10.00% 24.41% 36.61%
Number of Leases Expiring................................... 6 2 2 7 6

BEVERLY ATRIUM
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 30.47
Base Rent per Sq. Foot of Expiring Leases................... $ 23.59 $ 30.30 $ 27.74 $ 21.60
Square Footage of Expiring Leases........................... 11,128 4,158 6,261 18,489
Percentage of Total Leased Sq. Ft........................... 21.36% 7.98% 12.02% 35.48%
Percentage of Total Annualized Base Rent.................... 20.22% 9.70% 13.38% 30.76%
Number of Leases Expiring................................... 2 2 2 1

CENTURY PARK CENTER
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 23.92
Base Rent per Sq. Foot of Expiring Leases................... $ 20.19 $ 19.17 $ 19.16 $ 17.43 $ 36.62 $ 19.24
Square Footage of Expiring Leases........................... 29,215 32,728 26,114 39,397 30,843 36,335
Percentage of Total Leased Sq. Ft........................... 13.42% 15.03% 12.00% 18.10% 14.17% 16.69%
Percentage of Total Annualized Base Rent.................... 12.31% 13.10% 10.44% 14.33% 23.58% 14.59%
Number of Leases Expiring................................... 21 17 13 15 6 4

WESTWOOD TERRACE
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 28.93
Base Rent per Sq. Foot of Expiring Leases................... $ 21.43 $ 16.51 $ 20.31 $ 28.93 $ 21.17 $ 22.80
Square Footage of Expiring Leases........................... 19,867 7,527 25,877 62,175 5,128 8,524
Percentage of Total Leased Sq. Ft........................... 15.39% 5.83% 20.04% 48.16% 3.97% 6.60%
Percentage of Total Annualized Base Rent.................... 13.40% 3.91% 16.54% 56.62% 3.42% 6.12%
Number of Leases Expiring................................... 6 2 6 9 2 1

1950 SAWTELLE
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 21.58
Base Rent per Sq. Foot of Expiring Leases................... $ 20.53 $ 19.79 $ 18.50 $ 19.88 $ 18.37
Square Footage of Expiring Leases........................... 22,944 40,032 4,763 8,231 14,219
Percentage of Total Leased Sq. Ft........................... 25.03% 43.67% 5.20% 8.98% 15.51%
Percentage of Total Annualized Base Rent.................... 25.97% 43.69% 4.86% 9.02% 14.41%
Number of Leases Expiring................................... 7 9 3 5 5

<CAPTION>
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006+ TOTAL
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INITIAL PROPERTIES
9665 WILSHIRE
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 22.89 $ 31.01
Square Footage of Expiring Leases........................... 17,945 158,003
Percentage of Total Leased Sq. Ft........................... 11.36% 100%
Percentage of Total Annualized Base Rent.................... 8.38% 100%
Number of Leases Expiring................................... 3 26
BEVERLY ATRIUM
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 28.58 $ 27.46 $ 24.92
Square Footage of Expiring Leases........................... 4,668 7,404 52,108
Percentage of Total Leased Sq. Ft........................... 8.96% 14.21 100%
Percentage of Total Annualized Base Rent.................... 10.28% 15.66% 100%
Number of Leases Expiring................................... 1 1 9
CENTURY PARK CENTER
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 21.64 $ 24.83 $ 25.20 $ 22.01
Square Footage of Expiring Leases........................... 5,008 14,849 3,207 217,696
Percentage of Total Leased Sq. Ft........................... 2.30% 6.82% 1.47% 100%
Percentage of Total Annualized Base Rent.................... 2.26% 7.70% 1.69% 100%
Number of Leases Expiring................................... 2 2 1 81
WESTWOOD TERRACE
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 24.61
Square Footage of Expiring Leases........................... 129,098
Percentage of Total Leased Sq. Ft........................... 100%
Percentage of Total Annualized Base Rent.................... 100%
Number of Leases Expiring................................... 26
1950 SAWTELLE
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 25.20 $ 19.79
Square Footage of Expiring Leases........................... 1,476 91,665
Percentage of Total Leased Sq. Ft........................... 1.61% 100%
Percentage of Total Annualized Base Rent.................... 2.05% 100%
Number of Leases Expiring................................... 1 30
</TABLE>

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

(1) Represents lease expirations data from May 1, 1997 to December 31, 1997.

(2)"C&W Peer Group Rent" represents, for each of the Properties and Pending
Acquisitions, the mid-point of the range of the weighted average annual
asking rents (for full service gross leases only) for such property's C&W
Peer Group as of approximately May 1, 1997. Any net leases for properties in
the applicable C&W Peer Group have been adjusted to full-service gross leases
by adding estimated recoverable expenses for similar properties. Asking rents
may differ significantly from actual rents.

61
<PAGE>
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1997(1) 1998 1999 2000 2001 2002
- ------------------------------------------------------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>

400 CORPORATE POINTE
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 18.02
Base Rent per Sq. Foot of Expiring Leases................... $ 15.80 $ 29.42 $ 19.03 $ 15.44 $ 22.62
Square Footage of Expiring Leases........................... 9,969 22,347 6,087 14,106 92,195
Percentage of Total Leased Sq. Ft........................... 6.06% 13.58% 3.70% 8.57% 56.01%
Percentage of Total Annualized Base Rent.................... 4.40% 18.38% 3.24% 6.09% 58.33%
Number of Leases Expiring................................... 4 2 3 2 6

BRISTOL PLAZA
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 18.00
Base Rent per Sq. Foot of Expiring Leases................... $ 23.51 $ 20.56 $ 16.22 $ 15.97
Square Footage of Expiring Leases........................... 3,889 23,912 13,976 13,505
Percentage of Total Leased Sq. Ft........................... 5.26% 32.32% 18.89% 18.25%
Percentage of Total Annualized Base Rent.................... 6.68% 35.91% 16.56% 15.75%
Number of Leases Expiring................................... 3 6 4 6

SKYVIEW CENTER
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 18.65
Base Rent per Sq. Foot of Expiring Leases................... $ 16.58 $ 16.61 $ 14.80 $ 13.47 $ 15.06 $ 22.87
Square Footage of Expiring Leases........................... 21,009 17,548 15,316 18,487 24,316 102,623
Percentage of Total Leased Sq. Ft........................... 6.03% 5.04% 4.40% 5.31% 6.98% 29.46%
Percentage of Total Annualized Base Rent.................... 5.52% 4.62% 3.59% 3.94% 5.80% 37.17%
Number of Leases Expiring................................... 8 8 8 5 4 4

THE NEW WILSHIRE
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 21.87
Base Rent per Sq. Foot of Expiring Leases................... $ 15.60 $ 26.80 $ 18.01 $ 22.62 $ 20.04
Square Footage of Expiring Leases........................... 21,892 29,796 6,652 44,879 6,990
Percentage of Total Leased Sq. Ft........................... 12.43% 16.91% 3.78% 25.47% 3.97%
Percentage of Total Annualized Base Rent.................... 8.83% 20.65% 3.10% 26.26% 3.62%
Number of Leases Expiring................................... 9 8 3 9 2

5601 LINDERO CANYON
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 20.75
Base Rent per Sq. Foot of Expiring Leases................... $ 12.18
Square Footage of Expiring Leases........................... 105,830
Percentage of Total Leased Sq. Ft........................... 100.00%
Percentage of Total Annualized Base Rent.................... 100.00%
Number of Leases Expiring................................... 2

<CAPTION>
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006+ TOTAL
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
400 CORPORATE POINTE
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 17.18 $ 21.73
Square Footage of Expiring Leases........................... 19,894 164,598
Percentage of Total Leased Sq. Ft........................... 12.09% 100%
Percentage of Total Annualized Base Rent.................... 9.56% 100%
Number of Leases Expiring................................... 2 19
BRISTOL PLAZA
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 18.36 $ 18.50
Square Footage of Expiring Leases........................... 18,711 73,993
Percentage of Total Leased Sq. Ft........................... 25.29% 100%
Percentage of Total Annualized Base Rent.................... 25.09% 100%
Number of Leases Expiring................................... 1 20
SKYVIEW CENTER
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 17.10 $ 15.13 $ 14.64 $ 22.30 $ 18.13
Square Footage of Expiring Leases........................... 32,521 44,459 45,687 26,334 348,300
Percentage of Total Leased Sq. Ft........................... 9.34% 12.76% 13.12% 7.56% 100%
Percentage of Total Annualized Base Rent.................... 8.81% 10.65% 10.59% 9.30% 100%
Number of Leases Expiring................................... 2 3 2 2 46
THE NEW WILSHIRE
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 20.40 $ 22.37 $ 21.94
Square Footage of Expiring Leases........................... 12,513 53,447 176,169
Percentage of Total Leased Sq. Ft........................... 7.10% 30.34% 100%
Percentage of Total Annualized Base Rent.................... 6.60% 30.93% 100%
Number of Leases Expiring................................... 2 2 35
5601 LINDERO CANYON
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 12.18
Square Footage of Expiring Leases........................... 105,830
Percentage of Total Leased Sq. Ft........................... 100%
Percentage of Total Annualized Base Rent.................... 100%
Number of Leases Expiring................................... 2
</TABLE>

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

(1) Represents lease expirations data from May 1, 1997 to December 31, 1997.

62
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<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1997(1) 1998 1999 2000 2001 2002
- ------------------------------------------------------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>

CALABASAS COMMERCE CENTER
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 19.41
Base Rent per Sq. Foot of Expiring Leases................... $ 14.52 $ 25.08 $ 17.89 $ 18.00 $ 19.20 $ 17.00
Square Footage of Expiring Leases........................... 59,477 4,413 17,194 3,157 10,841 15,984
Percentage of Total Leased Sq. Ft........................... 49.44% 3.67% 14.29% 2.62% 9.01% 13.29%
Percentage of Total Annualized Base Rent.................... 42.91% 5.50% 15.28% 2.82% 10.34% 13.50%
Number of Leases Expiring................................... 2 1 2 1 1 3

WOODLAND HILLS FINANCIAL CENTER
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 21.48
Base Rent per Sq. Foot of Expiring Leases................... $ 19.39 $ 24.04 $ 21.02 $ 27.10 $ 21.12 $ 22.10
Square Footage of Expiring Leases........................... 9,777 41,203 32,637 39,096 34,791 5,662
Percentage of Total Leased Sq. Ft........................... 4.85% 20.43% 16.18% 19.38% 17.25% 2.81%
Percentage of Total Annualized Base Rent.................... 4.03% 21.07% 14.60% 22.55% 15.64% 2.66%
Number of Leases Expiring................................... 10 15 13 12 6 2

16000 VENTURA
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 22.61
Base Rent per Sq. Foot of Expiring Leases................... $ 22.67 $ 19.98 $ 17.80 $ 19.23 $ 20.38 $ 20.26
Square Footage of Expiring Leases........................... 43,519 29,613 44,352 7,987 24,523 3,993
Percentage of Total Leased Sq. Ft........................... 28.26% 19.23% 28.80% 5.19% 15.93% 2.59%
Percentage of Total Annualized Base Rent.................... 31.80% 19.08% 25.45% 4.95% 16.12% 2.61%
Number of Leases Expiring................................... 14 8 10 4 8 2

425 BROADWAY
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 22.54
Base Rent per Sq. Foot of Expiring Leases................... $ 18.53 $ 19.51 $ 19.43 $ 21.00 $ 19.20
Square Footage of Expiring Leases........................... 5,749 25,901 29,540 4,308 4,344
Percentage of Total Leased Sq. Ft........................... 8.23% 37.09% 42.30% 6.17% 6.22%
Percentage of Total Annualized Base Rent.................... 7.84% 37.17% 42.21% 6.65% 6.13%
Number of Leases Expiring................................... 2 6 4 1 1

303 GLENOAKS
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 22.35
Base Rent per Sq. Foot of Expiring Leases................... $ 23.00 $ 22.92 $ 21.16 $ 20.00 $ 22.19 $ 20.95
Square Footage of Expiring Leases........................... 3,300 8,570 26,990 31,831 36,748 51,820
Percentage of Total Leased Sq. Ft........................... 1.92% 5.00% 15.74% 18.57% 21.43% 30.23%
Percentage of Total Annualized Base Rent.................... 2.09% 5.41% 15.73% 17.53% 22.46% 29.90%
Number of Leases Expiring................................... 2 3 4 6 5 2

<CAPTION>
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006+ TOTAL
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
CALABASAS COMMERCE CENTER
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 21.00 $ 16.73
Square Footage of Expiring Leases........................... 9,243 120,309
Percentage of Total Leased Sq. Ft........................... 7.68% 100%
Percentage of Total Annualized Base Rent.................... 9.64% 100%
Number of Leases Expiring................................... 1 11
WOODLAND HILLS FINANCIAL CENTER
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 26.35 $ 16.27 $ 74.85 $ 20.28 $ 23.30
Square Footage of Expiring Leases........................... 22,047 7,019 489 8,983 201,704
Percentage of Total Leased Sq. Ft........................... 10.93% 3.48% 0.24% 4.45% 100%
Percentage of Total Annualized Base Rent.................... 12.36% 2.43% 0.78% 3.88% 100%
Number of Leases Expiring................................... 2 2 1 1 64
16000 VENTURA
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 20.14
Square Footage of Expiring Leases........................... 153,987
Percentage of Total Leased Sq. Ft........................... 100%
Percentage of Total Annualized Base Rent.................... 100%
Number of Leases Expiring................................... 46
425 BROADWAY
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 19.47
Square Footage of Expiring Leases........................... 69,842
Percentage of Total Leased Sq. Ft........................... 100%
Percentage of Total Annualized Base Rent.................... 100%
Number of Leases Expiring................................... 14
303 GLENOAKS
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 19.20 $ 20.64 $ 21.18
Square Footage of Expiring Leases........................... 1,039 11,142 171,440
Percentage of Total Leased Sq. Ft........................... 0.61% 6.50% 100%
Percentage of Total Annualized Base Rent.................... 0.55% 6.33% 100%
Number of Leases Expiring................................... 1 1 24
</TABLE>

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

(1) Represents lease expirations data from May 1, 1997 to December 31, 1997.

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

70 SOUTH LAKE
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 25.75
Base Rent per Sq. Foot of Expiring Leases................... $ 18.00 $ 23.07 $ 19.04 $ 22.95
Square Footage of Expiring Leases........................... 8,394 33,272 34,825 6,075
Percentage of Total Leased Sq. Ft........................... 9.13% 36.17% 37.86% 6.60%
Percentage of Total Annualized Base Rent.................... 7.74% 39.31% 33.95% 7.14%
Number of Leases Expiring................................... 1 6 5 2

4811 AIRPORT PLAZA
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 25.60
Base Rent per Sq. Foot of Expiring Leases...................
Square Footage of Expiring Leases...........................
Percentage of Total Leased Sq. Ft...........................
Percentage of Total Annualized Base Rent....................
Number of Leases Expiring...................................

4900/10 AIRPORT PLAZA
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 25.60
Base Rent per Sq. Foot of Expiring Leases...................
Square Footage of Expiring Leases...........................
Percentage of Total Leased Sq. Ft...........................
Percentage of Total Annualized Base Rent....................
Number of Leases Expiring...................................

5000 SPRING
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 25.60
Base Rent per Sq. Foot of Expiring Leases................... $ 21.20 $ 19.08 $ 20.85 $ 19.21 $ 18.39 $ 21.84
Square Footage of Expiring Leases........................... 9,346 4,418 27,939 36,035 52,217 6,654
Percentage of Total Leased Sq. Ft........................... 6.12% 2.89% 18.29% 23.59% 34.19% 4.36%
Percentage of Total Annualized Base Rent.................... 6.56% 2.79% 19.28% 22.92% 31.80% 4.81%
Number of Leases Expiring................................... 3 3 5 5 7 1

100 WEST BROADWAY
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 19.58
Base Rent per Sq. Foot of Expiring Leases................... $ 29.04 $ 17.50 $ 20.72 $ 16.60 $ 16.30 $ 19.47
Square Footage of Expiring Leases........................... 8,010 17,837 8,220 4,806 22,868 51,414
Percentage of Total Leased Sq. Ft........................... 4.42% 9.85% 4.54% 2.65% 12.63% 28.39%
Percentage of Total Annualized Base Rent.................... 5.55% 7.45% 4.06% 1.90% 8.89% 23.88%
Number of Leases Expiring................................... 3 6 5 2 4 5

<CAPTION>
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006+ TOTAL
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
70 SOUTH LAKE
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 24.60 $ 21.23
Square Footage of Expiring Leases........................... 9,415 91,981
Percentage of Total Leased Sq. Ft........................... 10.24% 100%
Percentage of Total Annualized Base Rent.................... 11.86% 100%
Number of Leases Expiring................................... 1 15
4811 AIRPORT PLAZA
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 9.96 $ 9.96
Square Footage of Expiring Leases........................... 121,610 121,610
Percentage of Total Leased Sq. Ft........................... 100.00% 100%
Percentage of Total Annualized Base Rent.................... 100.00% 100%
Number of Leases Expiring................................... 1 1
4900/10 AIRPORT PLAZA
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 9.00 $ 9.00
Square Footage of Expiring Leases........................... 150,403 150,403
Percentage of Total Leased Sq. Ft........................... 100.00% 100%
Percentage of Total Annualized Base Rent.................... 100.00% 100%
Number of Leases Expiring................................... 1 1
5000 SPRING
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 21.60 $ 25.32 $ 19.78
Square Footage of Expiring Leases........................... 13,588 2,532 152,729
Percentage of Total Leased Sq. Ft........................... 8.90% 1.66% 100%
Percentage of Total Annualized Base Rent.................... 9.72% 2.12% 100%
Number of Leases Expiring................................... 1 1 26
100 WEST BROADWAY
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 22.74 $ 36.60 $ 21.00 $ 17.38 $ 23.14
Square Footage of Expiring Leases........................... 20,385 37,494 3,352 6,730 181,116
Percentage of Total Leased Sq. Ft........................... 11.26% 20.70% 1.85% 3.72% 100%
Percentage of Total Annualized Base Rent.................... 11.06% 32.74% 1.68% 2.79% 100%
Number of Leases Expiring................................... 2 1 1 1 30
</TABLE>

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

(1) Represents lease expirations data from May 1, 1997 to December 31, 1997.

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

12501 EAST IMPERIAL HIGHWAY
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 18.54
Base Rent per Sq. Foot of Expiring Leases................... $ 17.80 $ 17.14 $ 16.28 $ 16.92
Square Footage of Expiring Leases........................... 27,913 63,769 23,702 1,972
Percentage of Total Leased Sq. Ft........................... 23.78% 54.34% 20.20% 1.68%
Percentage of Total Annualized Base Rent.................... 24.73% 54.40% 19.20% 1.66%
Number of Leases Expiring................................... 1 1 2 1

5832 BOLSA
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 17.82
Base Rent per Sq. Foot of Expiring Leases................... $ 14.59
Square Footage of Expiring Leases........................... 49,355
Percentage of Total Leased Sq. Ft........................... 100.00%
Percentage of Total Annualized Base Rent.................... 100.00%
Number of Leases Expiring................................... 1

ANAHEIM CITY CENTRE
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 19.14
Base Rent per Sq. Foot of Expiring Leases................... $ 16.80 $ 12.96 $ 17.19 $ 17.46 $ 19.60
Square Footage of Expiring Leases........................... 4,732 56,397 48,768 13,780 32,373
Percentage of Total Leased Sq. Ft........................... 2.85% 33.96% 29.37% 8.30% 19.49%
Percentage of Total Annualized Base Rent.................... 2.73% 25.08% 28.77% 8.26% 21.78%
Number of Leases Expiring................................... 2 2 4 3 2

IMPERIAL BANK TOWER
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 20.65
Base Rent per Sq. Foot of Expiring Leases................... $ 16.01 $ 17.78 $ 16.28 $ 24.57 $ 15.87 $ 18.64
Square Footage of Expiring Leases........................... 19,161 28,457 20,369 40,764 38,764 94,343
Percentage of Total Leased Sq. Ft........................... 4.32% 6.41% 4.59% 9.19% 8.73% 21.26%
Percentage of Total Annualized Base Rent.................... 3.56% 5.87% 3.85% 11.63% 7.14% 20.42%
Number of Leases Expiring................................... 9 5 4 5 5 9

INITIAL PROPERTIES SUBTOTAL
C&W Peer Group Rent per Sq. Ft.(2)(3)....................... $ 22.04
Base Rent per Sq. Foot of Expiring Leases................... $ 19.97 $ 20.05 $ 19.23 $ 21.77 $ 20.45 $ 20.42
Square Footage of Expiring Leases........................... 312,590 446,496 468,637 458,143 388,038 689,702
Percentage of Total Leased Sq. Ft........................... 8.43% 12.04% 12.63% 12.35% 10.46% 18.59%
Percentage of Total Annualized Base Rent.................... 8.53% 12.23% 12.31% 13.63% 10.84% 19.25%
Number of Leases Expiring................................... 111 107 99 96 70 53

<CAPTION>
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006+ TOTAL
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
12501 EAST IMPERIAL HIGHWAY
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 17.12
Square Footage of Expiring Leases........................... 117,356
Percentage of Total Leased Sq. Ft........................... 100%
Percentage of Total Annualized Base Rent.................... 100%
Number of Leases Expiring................................... 5
5832 BOLSA
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 14.59
Square Footage of Expiring Leases........................... 49,355
Percentage of Total Leased Sq. Ft........................... 100%
Percentage of Total Annualized Base Rent.................... 100%
Number of Leases Expiring................................... 1
ANAHEIM CITY CENTRE
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 38.92 $ 17.54
Square Footage of Expiring Leases........................... 10,009 166,059
Percentage of Total Leased Sq. Ft........................... 6.03% 100%
Percentage of Total Annualized Base Rent.................... 13.37% 100%
Number of Leases Expiring................................... 1 14
IMPERIAL BANK TOWER
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 19.52 $ 18.18 $ 20.01 $ 30.12 $ 19.41
Square Footage of Expiring Leases........................... 36,967 79,227 64,225 21,508 443,785
Percentage of Total Leased Sq. Ft........................... 8.33% 17.85% 14.47% 4.85% 100%
Percentage of Total Annualized Base Rent.................... 8.37% 16.72% 14.92% 7.52% 100%
Number of Leases Expiring................................... 4 4 5 2 52
INITIAL PROPERTIES SUBTOTAL
C&W Peer Group Rent per Sq. Ft.(2)(3).......................
Base Rent per Sq. Foot of Expiring Leases................... $ 21.14 $ 21.84 $ 13.41 $ 24.72 $ 19.73
Square Footage of Expiring Leases........................... 135,184 206,040 469,891 134,415 3,709,136
Percentage of Total Leased Sq. Ft........................... 3.64% 5.55% 12.67% 3.62% 100%
Percentage of Total Annualized Base Rent.................... 3.90% 6.15% 8.61% 4.55% 100%
Number of Leases Expiring................................... 14 18 20 10 598
</TABLE>

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

(1) Represents lease expirations data from May 1, 1997 to December 31, 1997.

(3)The C&W Peer Group Rent per square foot weighted average subtotals and total
have been calculated by weighing each property by its approximate net
rentable square feet relative to the respective subtotal or total approximate
net rentable square feet.

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

ACQUIRED PROPERTIES
10350 SANTA MONICA
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 21.86
Base Rent per Sq. Foot of Expiring Leases................... $ 18.59 $ 18.71 $ 17.15 $ 17.07 $ 19.20 $ 17.76
Square Footage of Expiring Leases........................... 6,085 12,169 3,776 10,765 1,899 4,661
Percentage of Total Leased Sq. Ft........................... 15.46% 30.92% 9.59% 27.35% 4.83% 11.84%
Percentage of Total Annualized Base Rent.................... 15.96% 32.14% 9.14% 25.93% 5.15% 11.68%
Number of Leases Expiring................................... 3 6 2 2 1 2

10351 SANTA MONICA
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 21.83
Base Rent per Sq. Foot of Expiring Leases................... $ 18.17 $ 18.11 $ 16.82 $ 17.95 $ 21.00 $ 16.08
Square Footage of Expiring Leases........................... 23,396 3,759 15,432 3,261 16,088 11,977
Percentage of Total Leased Sq. Ft........................... 24.84% 3.99% 16.39% 3.46% 17.08% 12.72%
Percentage of Total Annualized Base Rent.................... 25.28% 4.05% 15.43% 3.48% 20.08% 11.45%
Number of Leases Expiring................................... 6 1 3 2 1 1

8383 WILSHIRE
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 23.74
Base Rent per Sq. Foot of Expiring Leases................... $ 22.45 $ 22.46 $ 19.84 $ 20.25 $ 18.26 $ 18.83
Square Footage of Expiring Leases........................... 62,551 40,742 29,228 37,865 52,570 44,278
Percentage of Total Leased Sq. Ft........................... 19.51% 12.71% 9.12% 11.81% 16.40% 13.81%
Percentage of Total Annualized Base Rent.................... 21.03% 13.71% 8.69% 11.48% 14.38% 12.49%
Number of Leases Expiring................................... 36 24 16 18 15 6

2730 WILSHIRE
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 24.00
Base Rent per Sq. Foot of Expiring Leases................... $ 14.07 $ 20.41 $ 19.92 $ 21.95 $ 20.75 $ 21.21
Square Footage of Expiring Leases........................... 4,276 4,195 3,595 7,705 19,676 3,673
Percentage of Total Leased Sq. Ft........................... 7.96% 7.81% 6.69% 14.34% 36.63% 6.84%
Percentage of Total Annualized Base Rent.................... 5.40% 7.68% 6.43% 15.17% 36.62% 6.99%
Number of Leases Expiring................................... 3 4 2 5 7 3

10780 SANTA MONICA
C&W Peer Group Rent per Sq. Ft.(2).......................... $ 21.96
Base Rent per Sq. Foot of Expiring Leases................... $ 18.83 $ 20.26 $ 18.14 $ 21.01 $ 17.84 $ 20.04
Square Footage of Expiring Leases........................... 23,216 17,725 10,396 7,090 14,045 5,348
Percentage of Total Leased Sq.Ft............................ 29.83% 22.78% 13.36% 9.11% 18.05% 6.87%
Percentage of Total Annualized Base Rent.................... 29.31% 24.08% 12.64% 9.98% 16.79% 7.18%
Number of Leases Expiring................................... 11 8 4 2 3 1

<CAPTION>
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006+ TOTAL
- ------------------------------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
ACQUIRED PROPERTIES
10350 SANTA MONICA
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 18.01
Square Footage of Expiring Leases........................... 39,355
Percentage of Total Leased Sq. Ft........................... 100%
Percentage of Total Annualized Base Rent.................... 100%
Number of Leases Expiring................................... 16
10351 SANTA MONICA
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 14.43 $ 21.00 $ 17.86
Square Footage of Expiring Leases........................... 12,980 7,286 94,179
Percentage of Total Leased Sq. Ft........................... 13.78% 7.74% 100%
Percentage of Total Annualized Base Rent.................... 11.14% 9.10% 100%
Number of Leases Expiring................................... 2 1 17
8383 WILSHIRE
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 24.60 $ 24.36 $ 25.80 $ 10.66 $ 20.82
Square Footage of Expiring Leases........................... 10,845 23,266 11,740 7,505 320,590
Percentage of Total Leased Sq. Ft........................... 3.38% 7.26% 3.66% 2.34% 100%
Percentage of Total Annualized Base Rent.................... 4.00% 8.49% 4.54% 1.20% 100%
Number of Leases Expiring................................... 1 7 1 1 125
2730 WILSHIRE
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 22.80 $ 22.81 $ 22.91 $ 20.75
Square Footage of Expiring Leases........................... 2,254 6,165 2,176 53,715
Percentage of Total Leased Sq. Ft........................... 4.20% 11.48% 4.05% 100%
Percentage of Total Annualized Base Rent.................... 4.61% 12.62% 4.47% 100%
Number of Leases Expiring................................... 1 2 2 29
10780 SANTA MONICA
C&W Peer Group Rent per Sq. Ft.(2)..........................
Base Rent per Sq. Foot of Expiring Leases................... $ 19.17
Square Footage of Expiring Leases........................... 77,820
Percentage of Total Leased Sq.Ft............................ 100%
Percentage of Total Annualized Base Rent.................... 100%
Number of Leases Expiring................................... 29
</TABLE>

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

(1) Represents lease expirations data from May 1, 1997 to December 31, 1997.

66
<PAGE>
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1997(1) 1998 1999 2000 2001
- -------------------------------------------------------------------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
5200 WEST CENTURY
C&W Peer Group Rent per Sq. Ft.(2).................................. $ 13.55
Base Rent per Sq. Foot of Expiring Leases........................... $ 10.20 $ 9.29 $ 12.50
Square Footage of Expiring Leases................................... 12,682 10,311 11,332
Percentage of Total Leased Sq. Ft................................... 13.54% 11.01% 12.10%
Percentage of Total Annualized Base Rent............................ 10.79% 7.99% 11.82%
Number of Leases Expiring........................................... 6 4 3

6800 OWENSMOUTH
C&W Peer Group Rent per Sq. Ft.(2).................................. $ 19.31
Base Rent per Sq. Foot of Expiring Leases........................... $ 18.90 $ 18.96 $ 21.86 $ 15.71 $ 15.96
Square Footage of Expiring Leases................................... 9,361 1,181 19,500 8,548 2,993
Percentage of Total Leased Sq. Ft................................... 13.78% 1.74% 28.70% 12.58% 4.40%
Percentage of Total Annualized Base Rent............................ 14.19% 1.80% 33.91% 10.78% 3.83%
Number of Leases Expiring........................................... 4 1 6 5 1

CLARENDON CREST
C&W Peer Group Rent per Sq. Ft.(2).................................. $ 18.47
Base Rent per Sq. Foot of Expiring Leases........................... 19.80 $ 19.20 $ 18.00
Square Footage of Expiring Leases................................... 5,560 3,015 25,027
Percentage of Total Leased Sq. Ft................................... 15.24% 8.27% 68.62%
Percentage of Total Annualized Base Rent............................ 16.09% 8.46% 65.85%
Number of Leases Expiring........................................... 1 1 4

SUMITOMO BANK BUILDING
C&W Peer Group Rent per Sq. Ft.(2).................................. $ 22.88
Base Rent per Sq. Foot of Expiring Leases........................... 22.74 $ 20.75 $ 24.36 $ 13.48 $ 21.75
Square Footage of Expiring Leases................................... 16,384 28,384 22,312 20,995 12,678
Percentage of Total Leased Sq. Ft................................... 16.06% 27.82% 21.87% 20.58% 12.43%
Percentage of Total Annualized Base Rent............................ 17.82% 28.16% 25.99% 13.53% 13.18%
Number of Leases Expiring........................................... 10 19 10 6 5

NOBLE PROFESSIONAL CENTER
C&W Peer Group Rent per Sq. Ft.(2).................................. $ 22.13
Base Rent per Sq. Foot of Expiring Leases........................... 21.00 $ 26.89 $ 19.53 $ 21.71 $ 20.35
Square Footage of Expiring Leases................................... 1,721 7,424 9,565 11,759 8,280
Percentage of Total Leased Sq. Ft................................... 4.12% 17.79% 22.91% 28.17% 19.84%
Percentage of Total Annualized Base Rent............................ 3.98% 22.00% 20.59% 28.13% 18.57%
Number of Leases Expiring........................................... 1 1 4 2 4

<CAPTION>
YEAR OF LEASE EXPIRATION 2002 2003 2004 2005 2006+
- -------------------------------------------------------------------- --------- --------- --------- --------- -----------
<S> <C>
5200 WEST CENTURY
C&W Peer Group Rent per Sq. Ft.(2)..................................
Base Rent per Sq. Foot of Expiring Leases........................... $ 14.34 $ 12.86 $ 15.43
Square Footage of Expiring Leases................................... 15,745 25,655 17,913
Percentage of Total Leased Sq. Ft................................... 16.81% 27.40% 19.13%
Percentage of Total Annualized Base Rent............................ 18.83% 27.52% 23.06%
Number of Leases Expiring........................................... 5 1 1
6800 OWENSMOUTH
C&W Peer Group Rent per Sq. Ft.(2)..................................
Base Rent per Sq. Foot of Expiring Leases........................... $ 18.00 $ 18.00 $ 15.00 $ 15.60
Square Footage of Expiring Leases................................... 5,716 8,518 5,150 6,985
Percentage of Total Leased Sq. Ft................................... 8.41% 12.54% 7.58% 10.28%
Percentage of Total Annualized Base Rent............................ 8.25% 12.30% 6.20% 8.74%
Number of Leases Expiring........................................... 1 1 1 1
CLARENDON CREST
C&W Peer Group Rent per Sq. Ft.(2)..................................
Base Rent per Sq. Foot of Expiring Leases........................... $ 18.60 $ 29.74
Square Footage of Expiring Leases................................... 1,771 1,100
Percentage of Total Leased Sq. Ft................................... 4.86% 3.02%
Percentage of Total Annualized Base Rent............................ 4.81% 4.78%
Number of Leases Expiring........................................... 1 1
SUMITOMO BANK BUILDING
C&W Peer Group Rent per Sq. Ft.(2)..................................
Base Rent per Sq. Foot of Expiring Leases........................... $ 21.84
Square Footage of Expiring Leases................................... 1,265
Percentage of Total Leased Sq. Ft................................... 1.24%
Percentage of Total Annualized Base Rent............................ 1.32%
Number of Leases Expiring........................................... 1
NOBLE PROFESSIONAL CENTER
C&W Peer Group Rent per Sq. Ft.(2)..................................
Base Rent per Sq. Foot of Expiring Leases........................... $ 20.40
Square Footage of Expiring Leases................................... 2,993
Percentage of Total Leased Sq. Ft................................... 7.17%
Percentage of Total Annualized Base Rent............................ 6.73%
Number of Leases Expiring........................................... 1

<CAPTION>
YEAR OF LEASE EXPIRATION TOTAL
- -------------------------------------------------------------------- ---------
5200 WEST CENTURY
C&W Peer Group Rent per Sq. Ft.(2)..................................
Base Rent per Sq. Foot of Expiring Leases........................... $ 12.81
Square Footage of Expiring Leases................................... 93,638
Percentage of Total Leased Sq. Ft................................... 100%
Percentage of Total Annualized Base Rent............................ 100%
Number of Leases Expiring........................................... 20
6800 OWENSMOUTH
C&W Peer Group Rent per Sq. Ft.(2)..................................
Base Rent per Sq. Foot of Expiring Leases........................... $ 18.35
Square Footage of Expiring Leases................................... 67,952
Percentage of Total Leased Sq. Ft................................... 100%
Percentage of Total Annualized Base Rent............................ 100%
Number of Leases Expiring........................................... 21
CLARENDON CREST
C&W Peer Group Rent per Sq. Ft.(2)..................................
Base Rent per Sq. Foot of Expiring Leases........................... $ 18.76
Square Footage of Expiring Leases................................... 36,473
Percentage of Total Leased Sq. Ft................................... 100%
Percentage of Total Annualized Base Rent............................ 100%
Number of Leases Expiring........................................... 8
SUMITOMO BANK BUILDING
C&W Peer Group Rent per Sq. Ft.(2)..................................
Base Rent per Sq. Foot of Expiring Leases........................... $ 20.50
Square Footage of Expiring Leases................................... 102,018
Percentage of Total Leased Sq. Ft................................... 100%
Percentage of Total Annualized Base Rent............................ 100%
Number of Leases Expiring........................................... 51
NOBLE PROFESSIONAL CENTER
C&W Peer Group Rent per Sq. Ft.(2)..................................
Base Rent per Sq. Foot of Expiring Leases........................... $ 21.74
Square Footage of Expiring Leases................................... 41,742
Percentage of Total Leased Sq. Ft................................... 100%
Percentage of Total Annualized Base Rent............................ 100%
Number of Leases Expiring........................................... 13
</TABLE>

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

(1) Represents lease expirations data from May 1, 1997 to December 31, 1997.

67
<PAGE>
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1997(1) 1998 1999 2000 2001 2002
- ----------------------------------------------------------- ----------- --------- --------- --------- --------- ---------

<S> <C> <C> <C> <C> <C> <C>
BURBANK EXECUTIVE PLAZA
C&W Peer Group Rent per Sq. Ft.(2)......................... $ 22.49
Base Rent per Square Foot of Expiring Leases............... 18.47 $ 18.74 $ 21.60
Square Footage of Expiring Leases.......................... 6,737 13,110 2,545
Percentage of Total Leased Square Footage.................. 15.11% 29.41% 5.71%
Percentage Total Annualized Base Rent...................... 12.87% 25.41% 5.68%
Number of Leases Expiring.................................. 3 3 1

CALIFORNIA FEDERAL BUILDING
C&W Peer Group Rent per Sq. Ft.(2)......................... $ 22.49
Base Rent per Square Foot of Expiring Leases............... 19.44 $ 20.57 $ 23.48
Square Footage of Expiring Leases.......................... 16,024 28,609 22,549
Percentage of Total Leased Square Footage.................. 20.03% 35.76% 28.19%
Percentage Totoal Annualized Base Rent..................... 18.57% 35.08% 31.56%
Number of Leases Expiring.................................. 3 2 3

535 BRAND
C&W Peer Group Rent per Sq. Ft.(2)......................... $ 25.28
Base Rent per Sq. Foot of Expiring Leases.................. 17.73 $ 18.81 $ 19.20 $ 15.00
Square Footage of Expiring Leases.......................... 17,505 4,202 1,665 400
Percentage of Total Leased Sq. Ft.......................... 31.42% 7.54% 2.99% 0.72%
Percentage of Total Annualized Base Rent................... 48.66% 12.39% 5.01% 0.94%
Number of Leases Expiring.................................. 9 3 1 1

GRAND AVENUE PLAZA
C&W Peer Group Rent per Sq. Ft.(2)......................... $ 16.40
Base Rent per Sq. Foot of Expiring Leases.................. $ 16.20
Square Footage of Expiring Leases.......................... 11,527
Percentage of Total Leased Sq. Ft.......................... 22.18%
Percentage of Total Annualized Base Rent................... 23.39%
Number of Leases Expiring.................................. 1

SOUTH BAY CENTRE
C&W Peer Group Rent per Sq. Ft.(2)......................... $ 17.89
Base Rent per Sq. Foot of Expiring Leases.................. $ 18.06 $ 19.34 $ 17.60 $ 20.87 $ 15.67 $ 19.62
Square Footage of Expiring Leases.......................... 18,466 11,010 17,988 56,405 10,823 2,369
Percentage of Total Leased Sq. Ft.......................... 10.61% 6.32% 10.33% 32.40% 6.22% 1.36%
Percentage of Total Annualized Base Rent................... 10.53% 6.72% 9.99% 37.18% 5.36% 1.47%
Number of Leases Expiring.................................. 9 6 5 4 3 2

<CAPTION>
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006+ TOTAL
- ----------------------------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BURBANK EXECUTIVE PLAZA
C&W Peer Group Rent per Sq. Ft.(2).........................
Base Rent per Square Foot of Expiring Leases............... $ 22.80 $ 24.67 $ 21.69
Square Footage of Expiring Leases.......................... 2,947 19,242 44,581
Percentage of Total Leased Square Footage.................. 6.61% 43.16% 100%
Percentage Total Annualized Base Rent...................... 6.95% 49.09% 100%
Number of Leases Expiring.................................. 1 2 10
CALIFORNIA FEDERAL BUILDING
C&W Peer Group Rent per Sq. Ft.(2).........................
Base Rent per Square Foot of Expiring Leases............... $ 19.36 $ 20.97
Square Footage of Expiring Leases.......................... 12,816 79,998
Percentage of Total Leased Square Footage.................. 16.02% 100%
Percentage Totoal Annualized Base Rent..................... 14.79% 100%
Number of Leases Expiring.................................. 1 9
535 BRAND
C&W Peer Group Rent per Sq. Ft.(2).........................
Base Rent per Sq. Foot of Expiring Leases.................. $ 6.59 $ 11.45
Square Footage of Expiring Leases.......................... 31,947 55,719
Percentage of Total Leased Sq. Ft.......................... 57.34% 100%
Percentage of Total Annualized Base Rent................... 33.00% 100%
Number of Leases Expiring.................................. 1 15
GRAND AVENUE PLAZA
C&W Peer Group Rent per Sq. Ft.(2).........................
Base Rent per Sq. Foot of Expiring Leases.................. $ 15.12 $ 15.36
Square Footage of Expiring Leases.......................... 40,449 51,976
Percentage of Total Leased Sq. Ft.......................... 77.82% 100%
Percentage of Total Annualized Base Rent................... 76.61% 100%
Number of Leases Expiring.................................. 1 2
SOUTH BAY CENTRE
C&W Peer Group Rent per Sq. Ft.(2).........................
Base Rent per Sq. Foot of Expiring Leases.................. $ 16.18 $ 15.49 $ 18.19
Square Footage of Expiring Leases.......................... 39,364 17,667 174,092
Percentage of Total Leased Sq. Ft.......................... 22.61% 10.15% 100%
Percentage of Total Annualized Base Rent................... 20.11% 8.64% 100%
Number of Leases Expiring.................................. 3 1 33
</TABLE>

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

(1) Represents lease expirations data from May 1, 1997 to December 31, 1997.

68
<PAGE>
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1997(1) 1998 1999 2000 2001 2002
- --------------------------------------------------------- ----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
LOS ANGELES CORPORATE CENTER
C&W Peer Group Rent per Sq. Ft.(2)....................... $ 18.09
Base Rent per Sq. Foot of Expiring Leases................ $ 20.20 $ 22.82 $ 23.15 $ 20.99 $ 16.78 $ 18.01
Square Footage of Expiring Leases........................ 13,618 126,314 94,306 16,923 49,505 29,718
Percentage of Total Leased Sq. Ft........................ 4.12% 38.23% 28.54% 5.12% 14.98% 8.99%
Percentage of Total Annualized Base Rent................. 3.90% 40.81% 30.92% 5.03% 11.76% 7.58%
Number of Leases Expiring................................ 4 15 4 8 4 2

WHITTIER FINANCIAL CENTER
C&W Peer Group Rent per Sq. Ft.(2)....................... $ 13.08
Base Rent per Sq. Foot of Expiring Leases................ $ 19.21 $ 18.27 $ 19.39 $ 21.44 $ 18.37 $ 17.84
Square Footage of Expiring Leases........................ 17,836 12,162 3,906 17,206 10,917 1,589
Percentage of Total Leased Sq. Ft........................ 15.46% 10.54% 3.39% 14.91% 9.46% 1.38%
Percentage of Total Annualized Base Rent................. 14.13% 9.16% 3.12% 15.21% 8.27% 1.17%
Number of Leases Expiring................................ 11 6 3 7 4 2

CENTERPOINTE LA PALMA
C&W Peer Group Rent per Sq. Ft.(2)....................... $ 19.37
Base Rent per Sq. Foot of Expiring Leases................ $ 18.07 $ 18.64 $ 15.65 $ 15.94 $ 19.96 $ 10.14
Square Footage of Expiring Leases........................ 28,829 104,972 87,919 44,333 33,364 75,184
Percentage of Total Leased Sq. Ft........................ 5.47% 19.91% 16.68% 8.41% 6.33% 14.26%
Percentage of Total Annualized Base Rent................. 5.39% 20.25% 14.24% 7.31% 6.89% 7.89%
Number of Leases Expiring................................ 9 11 20 10 6 5

CENTER PROMENADE
C&W Peer Group Rent per Sq. Ft.(2)....................... $ 16.39
Base Rent per Sq. Foot of Expiring Leases................ $ 17.10 $ 12.72 $ 14.86 $ 14.42 $ 15.56 $ 17.70
Square Footage of Expiring Leases........................ 10,816 16,040 37,862 23,824 19,676 18,544
Percentage of Total Leased Sq. Ft........................ 8.40% 12.45% 29.39% 18.49% 15.27% 14.40%
Percentage of Total Annualized Base Rent................. 9.40% 10.37% 28.60% 17.46% 15.56% 16.69%
Number of Leases Expiring................................ 7 9 8 12 6 4

PARKWAY CENTER
C&W Peer Group Rent per Sq. Ft.(2)....................... $ 17.41
Base Rent per Sq. Foot of Expiring Leases................ $ 17.40 $ 17.40 $ 16.80 $ 16.80 $ 14.35
Square Footage of Expiring Leases........................ 1,469 8,962 13,520 20,611 10,350
Percentage of Total Leased Sq. Ft........................ 2.41% 14.69% 22.15% 33.77% 16.96%
Percentage of Total Annualized Base Rent................. 2.40% 14.63% 21.31% 32.48% 13.93%
Number of Leases Expiring................................ 1 1 1 1 4

<CAPTION>
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006+ TOTAL
- --------------------------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
LOS ANGELES CORPORATE CENTER
C&W Peer Group Rent per Sq. Ft.(2).......................
Base Rent per Sq. Foot of Expiring Leases................ $ 21.37
Square Footage of Expiring Leases........................ 330,384
Percentage of Total Leased Sq. Ft........................ 100%
Percentage of Total Annualized Base Rent................. 100%
Number of Leases Expiring................................ 37
WHITTIER FINANCIAL CENTER
C&W Peer Group Rent per Sq. Ft.(2).......................
Base Rent per Sq. Foot of Expiring Leases................ $ 23.56 $ 23.55 $ 18.21 $ 19.07 $ 21.02
Square Footage of Expiring Leases........................ 22,428 22,712 3,137 3,489 115,382
Percentage of Total Leased Sq. Ft........................ 19.44% 19.68% 2.72% 3.02% 100%
Percentage of Total Annualized Base Rent................. 21.79% 22.06% 2.36% 2.74% 100%
Number of Leases Expiring................................ 4 2 1 2 42
CENTERPOINTE LA PALMA
C&W Peer Group Rent per Sq. Ft.(2).......................
Base Rent per Sq. Foot of Expiring Leases................ $ 9.36 $ 25.51 $ 18.33
Square Footage of Expiring Leases........................ 13,396 139,160 527,157
Percentage of Total Leased Sq. Ft........................ 2.54% 26.41% 100%
Percentage of Total Annualized Base Rent................. 1.30% 36.74% 100%
Number of Leases Expiring................................ 1 4 66
CENTER PROMENADE
C&W Peer Group Rent per Sq. Ft.(2).......................
Base Rent per Sq. Foot of Expiring Leases................ $ 18.44 $ 15.27
Square Footage of Expiring Leases........................ 2,060 128,822
Percentage of Total Leased Sq. Ft........................ 1.60% 100%
Percentage of Total Annualized Base Rent................. 1.93% 100%
Number of Leases Expiring................................ 1 47
PARKWAY CENTER
C&W Peer Group Rent per Sq. Ft.(2).......................
Base Rent per Sq. Foot of Expiring Leases................ $ 27.90 $ 24.18 $ 17.47
Square Footage of Expiring Leases........................ 3,984 2,129 61,025
Percentage of Total Leased Sq. Ft........................ 6.53% 3.49% 100%
Percentage of Total Annualized Base Rent................. 10.43% 4.83% 100%
Number of Leases Expiring................................ 1 1 10
</TABLE>

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

(1) Represents lease expirations data from May 1, 1997 to December 31, 1997.

69
<PAGE>
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1997(1) 1998 1999 2000 2001 2002 2003
- ------------------------------------------------ ----------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
CALIFORNIA TWIN CENTRE
C&W Peer Group Rent per Sq. Ft.(2).............. $ 17.32
Base Rent per Sq. Foot of Expiring Leases....... $ 18.96 $ 18.84 $ 17.11 $ 26.00 $ 16.20
Square Footage of Expiring Leases............... 6,617 4,409 5,048 109,023 3,691
Percentage of Total Leased Sq. Ft............... 4.82% 3.21% 3.67% 79.36% 2.69%
Percentage of Total Annualized Base Rent........ 3.75% 2.48% 2.58% 84.74% 1.79%
Number of Leases Expiring....................... 1 1 1 3 1

ACQUIRED PROPERTIES SUBTOTAL
C&W Peer Group Rent per Sq. Ft.(2)(3)........... $ 19.24
Base Rent per Sq. Foot of Expiring Leases....... $ 19.20 $ 20.18 $ 19.10 $ 18.46 $ 20.52 $ 15.34 $ 15.78
Square Footage of Expiring Leases............... 303,149 416,976 408,836 286,912 432,669 250,399 144,995
Percentage of Total Leased Sq. Ft............... 11.51% 15.83% 15.52% 10.89% 16.43% 9.51% 5.50%
Percentage of Total Annualized Base Rent........ 11.51% 16.64% 15.44% 10.47% 17.56% 7.59% 4.52%
Number of Leases Expiring....................... 138 121 95 86 73 43 13

PENDING ACQUISITIONS
1100 GLENDON
C&W Peer Group Rent per Sq. Ft.(2).............. $ 25.63
Base Rent per Sq. Foot of Expiring Leases....... $ 24.28 $ 24.66 $ 27.64 $ 28.46 $ 23.72 $ 45.60 $ 20.70
Square Footage of Expiring Leases............... 69,309 32,793 8,347 3,432 19,181 665 923
Percentage of Total Leased Sq. Ft............... 49.49% 23.42% 5.96% 2.45% 13.70% 0.47% 0.66%
Percentage of Total Annualized Base Rent........ 50.16% 24.11% 6.88% 2.91% 13.56% 0.90% 0.57%
Number of Leases Expiring....................... 65 34 17 6 10 1 1

CARLSBERG CORPORATE CENTER
C&W Peer Group Rent per Sq. Ft.(2).............. $ 22.03
Base Rent per Sq. Foot of Expiring Leases....... $ 20.57 $ 20.18 $ 21.15 $ 21.13 $ 19.88 $ 21.96
Square Footage of Expiring Leases............... 15,423 16,959 26,919 3,107 25,069 2,902
Percentage of Total Leased Sq. Ft............... 17.06% 18.76% 29.78% 3.44% 27.74% 3.21%
Percentage of Total Annualized Base Rent........ 17.09% 18.43% 30.67% 3.54% 26.84% 3.43%
Number of Leases Expiring....................... 12 7 11 2 5 1

299 EUCLID
C&W Peer Group Rent per Sq. Ft.(2).............. $ 19.44
Base Rent per Sq. Foot of Expiring Leases.......
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.......................

<CAPTION>
YEAR OF LEASE EXPIRATION 2004 2005 2006+ TOTAL
- ------------------------------------------------ --------- --------- --------- ----------
<S> <C> <C> <C> <C>
CALIFORNIA TWIN CENTRE
C&W Peer Group Rent per Sq. Ft.(2)..............
Base Rent per Sq. Foot of Expiring Leases....... $ 18.12 $ 24.35
Square Footage of Expiring Leases............... 8,597 137,385
Percentage of Total Leased Sq. Ft............... 6.26% 100%
Percentage of Total Annualized Base Rent........ 4.66% 100%
Number of Leases Expiring....................... 1 8
ACQUIRED PROPERTIES SUBTOTAL
C&W Peer Group Rent per Sq. Ft.(2)(3)...........
Base Rent per Sq. Foot of Expiring Leases....... $ 17.98 $ 21.69 $ 23.50 $ 19.20
Square Footage of Expiring Leases............... 157,548 36,613 195,906 2,634,003
Percentage of Total Leased Sq. Ft............... 5.98% 1.39% 7.44% 100%
Percentage of Total Annualized Base Rent........ 5.60% 1.57% 9.10% 100%
Number of Leases Expiring....................... 19 9 11 608
PENDING ACQUISITIONS
1100 GLENDON
C&W Peer Group Rent per Sq. Ft.(2)..............
Base Rent per Sq. Foot of Expiring Leases....... $ 5.56 $ 23.95
Square Footage of Expiring Leases............... 5,400 140,050
Percentage of Total Leased Sq. Ft............... 3.86% 100%
Percentage of Total Annualized Base Rent........ 0.89% 100%
Number of Leases Expiring....................... 1 135
CARLSBERG CORPORATE CENTER
C&W Peer Group Rent per Sq. Ft.(2)..............
Base Rent per Sq. Foot of Expiring Leases....... $ 20.54
Square Footage of Expiring Leases............... 90,379
Percentage of Total Leased Sq. Ft............... 100%
Percentage of Total Annualized Base Rent........ 100%
Number of Leases Expiring....................... 38
299 EUCLID
C&W Peer Group Rent per Sq. Ft.(2)..............
Base Rent per Sq. Foot of Expiring Leases.......
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.......................
</TABLE>

- ----------------------------------
(1) Represents lease expirations data from May 1, 1997 to December 31, 1997.
(2)"C&W Peer Group Rent" represents, for each of the Properties and Pending
Acquisitions, the mid-point of the range of the weighted average annual
asking rents (for full service gross leases only) for such property's C&W
Peer Group as of approximately May 1, 1997. Any net leases for properties in
the applicable C&W Peer Group have been adjusted to full-service gross leases
by adding estimated recoverable expenses for similar properties. Asking rents
may differ significantly from actual rents.
(3)The C&W Peer Group Rent per square foot weighted average subtotals and total
have been calculated by weighting each property by its approximate net
rentable square feet relative to the respective subtotal or total approximate
net rentable square feet.

70
<PAGE>
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1997(1) 1998 1999 2000 2001 2002
- ---------------------------------------------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
HARBOR CORPORATE CENTER
C&W Peer Group Rent per Sq. Ft.(2)........................ $ 15.44
Base Rent per Sq. Foot of Expiring Leases................. $ 16.10 $ 14.92 $ 13.84 $ 16.01 $ 12.60
Square Footage of Expiring Leases......................... 8,571 14,022 7,334 7,265 12,308
Percentage of Total Annualized Base Rent.................. 17.32% 28.33% 14.82% 14.68% 24.86%
Percentage of Total Annualized Base Rent.................. 19.16% 29.06% 14.09% 16.16% 21.54%
Number of Leases Expiring................................. 4 6 3 1 3

PACIFIC GATEWAY II
C&W Peer Group Rent per Sq. Ft.(2)........................ $ 20.11
Base Rent per Sq. Foot of Expiring Leases................. $ 21.46 $ 20.21 $ 18.83 $ 20.01 $ 21.97 $ 21.00
Square Footage of Expiring Leases......................... 48,969 11,612 6,280 34,324 54,333 2,309
Percentage of Total Leased Sq. Ft......................... 23.68% 5.62% 3.04% 16.60% 26.28% 1.12%
Percentage of Total Annualized Base Rent.................. 24.66% 5.51% 2.78% 16.12% 28.01% 1.14%
Number of Leases Expiring................................. 3 7 3 7 7 1

MARINER COURT
C&W Peer Group Rent per Sq. Ft.(2)........................ $ 20.34
Base Rent per Sq. Foot of Expiring Leases................. $ 16.50 $ 15.63 $ 15.91 $ 19.94 $ 15.31 $ 23.72
Square Footage of Expiring Leases......................... 982 36,214 17,960 14,098 10,276 11,898
Percentage of Total Leased Sq. Ft......................... 1.07% 39.61% 19.64% 15.42% 11.24% 13.01%
Percentage of Total Annualized Base Rent.................. 1.02% 35.63% 17.99% 17.69% 9.91% 17.76%
Number of Leases Expiring................................. 1 13 7 4 3 1

CROWN CABOT
C&W Peer Group Rent per Sq. Ft.(2)........................ $ 21.14
Base Rent per Sq. Foot of Expiring Leases................. $ 26.75 $ 20.50 $ 20.67 $ 20.95 $ 20.08 $ 23.18
Square Footage of Expiring Leases......................... 31,966 40,292 20,587 18,123 44,291 6,120
Percentage of Total Leased Sq. Ft......................... 19.81% 24.97% 12.76% 11.23% 27.45% 3.79%
Percentage of Total Annualized Base Rent.................. 24.31% 23.48% 12.10% 10.79% 25.29% 4.03%
Number of Leases Expiring................................. 3 7 8 6 5 3

1821 DYER
C&W Peer Group Rent per Sq. Ft.(2)........................ $ 15.59
Base Rent per Sq. Foot of Expiring Leases................. $ 5.52
Square Footage of Expiring Leases......................... 115,061
Percentage of Total Leased Sq. Ft......................... 100%
Percentage of Total Annualized Base Rent.................. 100%
Number of Leases Expiring................................. 1

<CAPTION>
YEAR OF LEASE EXPIRATION 2003 2004 2005 2006+ TOTAL
- ---------------------------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
HARBOR CORPORATE CENTER
C&W Peer Group Rent per Sq. Ft.(2)........................
Base Rent per Sq. Foot of Expiring Leases................. $ 14.55
Square Footage of Expiring Leases......................... 49,500
Percentage of Total Annualized Base Rent.................. 100%
Percentage of Total Annualized Base Rent.................. 100%
Number of Leases Expiring................................. 17
PACIFIC GATEWAY II
C&W Peer Group Rent per Sq. Ft.(2)........................
Base Rent per Sq. Foot of Expiring Leases................. $ 22.44 $ 21.60 $ 18.48 $ 20.61
Square Footage of Expiring Leases......................... 3,443 3,402 42,092 206,764
Percentage of Total Leased Sq. Ft......................... 1.67% 1.65% 20.36% 100%
Percentage of Total Annualized Base Rent.................. 1.81% 1.72% 18.25% 100%
Number of Leases Expiring................................. 1 1 1 31
MARINER COURT
C&W Peer Group Rent per Sq. Ft.(2)........................
Base Rent per Sq. Foot of Expiring Leases................. $ 17.38
Square Footage of Expiring Leases......................... 91,428
Percentage of Total Leased Sq. Ft......................... 100%
Percentage of Total Annualized Base Rent.................. 100%
Number of Leases Expiring................................. 29
CROWN CABOT
C&W Peer Group Rent per Sq. Ft.(2)........................
Base Rent per Sq. Foot of Expiring Leases................. $ 21.80
Square Footage of Expiring Leases......................... 161,379
Percentage of Total Leased Sq. Ft......................... 100%
Percentage of Total Annualized Base Rent.................. 100%
Number of Leases Expiring................................. 32
1821 DYER
C&W Peer Group Rent per Sq. Ft.(2)........................
Base Rent per Sq. Foot of Expiring Leases................. $ 5.52
Square Footage of Expiring Leases......................... 115,061
Percentage of Total Leased Sq. Ft......................... 100%
Percentage of Total Annualized Base Rent.................. 100%
Number of Leases Expiring................................. 1
</TABLE>

71
<PAGE>
<TABLE>
<CAPTION>
YEAR OF LEASE EXPIRATION 1997(1) 1998 1999 2000 2001 2002 2003
- ------------------------------------------- --------- ---------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1000 TOWN CENTER
C&W Peer Group Rent per Sq. Ft.(2)......... $ 19.90
Base Rent per Sq. Foot of Expiring Leases.. $ 16.20 $ 16.52 $ 27.38 $ 15.97 $ 21.96
Square Footage of Expiring Leases.......... 3,212 5,534 35,012 53,735 7,390
Percentage of Total Leased Sq. Ft.......... 2.98% 5.14% 32.52% 49.91% 6.86%
Percentage of Total Annualized Base Rent... 2.39% 4.19% 43.96% 39.35% 7.44%
Number of Leases Expiring.................. 1 2 4 2 1

PENDING ACQUISITIONS SUBTOTAL
C&W Peer Group Rent per Sq. Ft.(2)(3)...... $ 20.96
Base Rent per Sq. Foot of Expiring Leases.. $ 16.17 $ 19.59 $ 19.61 $ 22.42 $ 19.19 $ 23.71 $ 22.00
Square Footage of Expiring Leases.......... 290,281 155,104 92,961 115,361 219,193 23,894 11,756
Percentage of Total Leased Sq. Ft.......... 30.17% 16.12% 9.66% 11.99% 22.78% 2.48% 1.22%
Percentage of Total Annualized Base Rent... 25.92% 16.78% 10.06% 14.27% 23.22% 3.13% 1.43%
Number of Leases Expiring.................. 89 75 51 30 35 7 3

PORTFOLIO TOTAL
C&W Peer Group Rent per Sq. Ft.(2)(3)...... 20.80
Base Rent per Sq. Foot of Expiring Leases.. $ 18.50 $ 20.03 $ 19.21 $ 20.75 $ 20.22 $ 19.18 $ 18.51
Square Footage of Expiring Leases.......... 906,020 1,018,576 970,434 860,416 1,039,900 963,995 291,935
Percentage of Total Leased Sq. Ft.......... 12.40% 13.94% 13.28% 11.78% 14.24% 13.20% 4.00%
Percentage of Total Annualized Base Rent... 11.81% 14.38% 13.14% 12.59% 14.82% 13.03% 3.81%
Number of Leases Expiring.................. 338 303 245 212 178 103 30

<CAPTION>
YEAR OF LEASE EXPIRATION 2004 2005 2006+ TOTAL
- ------------------------------------------- --------- --------- --------- ----------
<S> <C> <C> <C> <C>
1000 TOWN CENTER
C&W Peer Group Rent per Sq. Ft.(2).........
Base Rent per Sq. Foot of Expiring Leases.. $ 21.02 $ 20.26
Square Footage of Expiring Leases.......... 2,776 107,659
Percentage of Total Leased Sq. Ft.......... 2.58% 100%
Percentage of Total Annualized Base Rent... 2.68% 100%
Number of Leases Expiring.................. 1 11
PENDING ACQUISITIONS SUBTOTAL
C&W Peer Group Rent per Sq. Ft.(2)(3)......
Base Rent per Sq. Foot of Expiring Leases.. $ 21.34 $ 17.01 $ 18.83
Square Footage of Expiring Leases.......... 6,178 47,492 962,220
Percentage of Total Leased Sq. Ft.......... 0.64% 4.94% 100%
Percentage of Total Annualized Base Rent... 0.73% 4.46% 100%
Number of Leases Expiring.................. 2 2 294
PORTFOLIO TOTAL
C&W Peer Group Rent per Sq. Ft.(2)(3)......
Base Rent per Sq. Foot of Expiring Leases.. $ 20.19 $ 14.01 $ 23.12 $ 19.42
Square Footage of Expiring Leases.......... 369,766 506,504 377,813 7,305,359
Percentage of Total Leased Sq. Ft.......... 5.06% 6.93% 5.17% 100%
Percentage of Total Annualized Base Rent... 5.26% 5.00% 6.16% 100%
Number of Leases Expiring.................. 39 29 23 1,500
</TABLE>

72
<PAGE>
TENANT RETENTION AND EXPANSIONS

The Company believes that its relationship with tenants contributes
significantly 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
responsiveness to individual tenant's 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 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.

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/
JANUARY 1 TO WEIGHTED
1993 1994 1995 1996 MAY 1, 1997 AVERAGE
--------- --------- --------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Number of leases expired during calendar year... 3 28 33 61 49 174
Number of lease renewals........................ 3 20 21 48 35 127
Percentage of leases renewed.................... 100% 71% 64% 79% 71% 73%
Aggregate rentable square footage of expiring
leases........................................ 2,870 112,539 99,577 189,615 154,385 558,986
Aggregate rentable square footage of lease
renewals...................................... 2,870 92,057 75,213 140,507 113,786 424,433
Percentage of expiring rentable square footage
renewed....................................... 100% 82% 76% 74% 74% 76%
</TABLE>

73
<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 (84%), while leases signed relating to shell
space comprised 16%. 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 MAY 1 WEIGHTED
1993 1994 1995 1996 1997 AVERAGE
--------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
RENEWALS
Number of leases.......................... 3 20 20(1) 48 35 126
Square feet of renewals................... 2,870 92,057 57,181(1) 140,507 113,786 406,401
TI per square foot........................ $ 3.58 $ 2.23 $ 4.67(1) $ 5.28 $ 5.39 $ 4.52
LC per square foot........................ 0.09 3.44 1.11(1) 2.42 3.00 2.61
--------- ---------- ---------- ---------- ------------ ------------
Total TI and LC per square foot....... $ 3.67 $ 5.67 $ 5.78(1) $ 7.70 $ 8.39 $ 7.13
--------- ---------- ---------- ---------- ------------ ------------
--------- ---------- ---------- ---------- ------------ ------------
RE-TENANTED SPACE(2)
Number of leases.......................... 7 13 47 61 71 199
Square feet of re-tenanted space.......... 9,910 22,265 108,430 143,657 267,788 552,050
TI per square foot........................ $ 2.22 $ 9.04 $ 9.82 $ 8.52 $ 10.33 $ 9.56
LC per square foot........................ 0.31 2.72 3.05 3.51 4.25 3.69
--------- ---------- ---------- ---------- ------------ ------------
Total TI and LC per square foot....... $ 2.53 $ 11.76 $ 12.87 $ 12.03 $ 14.58 $ 13.25
--------- ---------- ---------- ---------- ------------ ------------
--------- ---------- ---------- ---------- ------------ ------------
SHELL SPACE(3)
Number of leases.......................... 5 8 10 17 0 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 77 126 106 365
Square feet............................... 30,169 130,452 219,487 384,472 381,574 1,146,154
TI per square foot........................ $ 19.06 $ 7.60 $ 12.52 $ 10.64 $ 8.86 $ 10.28
LC per square foot........................ 2.22 3.78 2.98 3.80 3.88 3.63
--------- ---------- ---------- ---------- ------------ ------------
Total TI and LC per square foot....... $ 21.28 $ 11.38 $ 15.50 $ 14.44 $ 12.74 $ 13.91
--------- ---------- ---------- ---------- ------------ ------------
--------- ---------- ---------- ---------- ------------ ------------
</TABLE>

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

(1) 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.

(2) Does not include shell space build-out for 187,703 square feet.

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

74
<PAGE>
HISTORICAL CAPITAL EXPENDITURES

The following table sets forth information relating to the recurring
historical capital expenditures of the Company's Properties:

<TABLE>
<CAPTION>
1993 1994 1995 1996
---------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Number of Properties(1).................................... 3 8 10 16
Number of square feet...................................... 529,673 1,129,855 1,408,468 2,634,057
Capital expenditures incurred ($000s)...................... $ 9.5 $ 51.6 $ 200.8 $ 673.3
Weighted average capital expenditures per square foot(2)... $ 0.02 $ 0.06 $ 0.15 $ 0.26
Four year weighted average per square foot................. $ 0.17
</TABLE>

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

(1) Represents the actual number of Properties and square feet for which
recurring 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 historical weighted average occupancy rates,
based on square feet leased, of the Company's Properties 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%
December 31, 1996......................................... 5,443,124 85%
</TABLE>

75
<PAGE>
OFFICE SUBMARKETS AND PROPERTY INFORMATION

The Company owns and operates 45 Properties comprising approximately 7.4
million rentable square feet located in suburban Los Angeles County, Orange
County, Ventura County, Kern County and San Diego County. The following map
shows the relative geographic location of these counties.

MAP OF LOS ANGELES COUNTY, ORANGE COUNTY, VENTURA COUNTY,
KERN COUNTY AND SAN DIEGO COUNTY

76
<PAGE>
LOCATION OF PROPERTIES AND PENDING ACQUISITIONS

The Company's Properties and the Pending Acquisitions consist of
approximately 8.6 million rentable square feet and are located in the following
office market sectors and submarkets within suburban Los Angeles County, Orange
County, Ventura County, Kern County and San Diego County:

OFFICE MARKET SECTORS AND SUBMARKETS
AS OF MAY 1, 1997
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
APPROXIMATE PORTFOLIO ADJUSTED
NUMBER OF NUMBER OF NET RENTABLE RENTABLE BASE RENT
PROPERTIES BUILDINGS SQUARE FEET SQUARE FEET ($000S)
--------------- --------------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
LOS ANGELES COUNTY
LOS ANGELES WEST
Beverly Hills/Century City................ 6 6 1,019,408 11.8% $ 19,696
Westwood/West Los Angeles................. 6 6 772,800 8.9% 12,581
Marina Area/Culver City................... 4 5 951,197 11.0% 11,153
Park Mile/West Hollywood.................. 1 1 202,704 2.3% 3,319
LOS ANGELES NORTH
Simi/Conejo Valley........................ 2 5 228,951 2.7% 2,923
West Valley............................... 3 4 348,032 4.0% 6,385
Central Valley............................ 3 3 337,310 3.9% 5,841
East Valley/Tri-Cities.................... 7 7 672,620 7.8% 9,612
LOS ANGELES SOUTH
El Segundo................................ 1 2 84,500 1.0% 0
Torrance.................................. 4 4 595,922 6.9% 9,221
Long Beach................................ 5 5 749,273 8.7% 10,952
LOS ANGELES CENTRAL
San Gabriel Valley........................ 2 6 524,708 6.1% 8,800
ORANGE COUNTY
South County.............................. 1 1 172,900 2.0% 3,342
Greater Airport Area...................... 1 1 115,061 1.3% 635
West County............................... 1 1 49,355 0.6% 659
Tri-Freeway Area.......................... 1 1 175,391 2.0% 2,632
North County.............................. 1 12 597,550 6.9% 8,519
VENTURA COUNTY
West County............................... 2 8 282,490 3.3% 3,924
KERN COUNTY
Bakersfield............................... 2 3 216,522 2.5% 4,309
SAN DIEGO COUNTY
Central City.............................. 1 1 540,413 6.3% 7,377
-- --
------------ ----- ----------
Total................................. 54 82 8,637,107 100.0% $ 131,880
-- --
-- --
------------ ----- ----------
------------ ----- ----------

PERCENTAGE
OF PORTFOLIO
ANNUALIZED
BASE RENT
-------------
<S> <C>
LOS ANGELES COUNTY
LOS ANGELES WEST
Beverly Hills/Century City................ 14.9%
Westwood/West Los Angeles................. 9.5%
Marina Area/Culver City................... 8.5%
Park Mile/West Hollywood.................. 2.5%
LOS ANGELES NORTH
Simi/Conejo Valley........................ 2.2%
West Valley............................... 4.8%
Central Valley............................ 4.4%
East Valley/Tri-Cities.................... 7.3%
LOS ANGELES SOUTH
El Segundo................................ 0.0%
Torrance.................................. 7.0%
Long Beach................................ 8.3%
LOS ANGELES CENTRAL
San Gabriel Valley........................ 6.7%
ORANGE COUNTY
South County.............................. 2.5%
Greater Airport Area...................... 0.5%
West County............................... 0.5%
Tri-Freeway Area.......................... 2.0%
North County.............................. 6.5%
VENTURA COUNTY
West County............................... 3.0%
KERN COUNTY
Bakersfield............................... 3.3%
SAN DIEGO COUNTY
Central City.............................. 5.6%

-----
Total................................. 100.0%

-----
-----
</TABLE>

LOS ANGELES COUNTY OFFICE MARKET

According to Cushman & Wakefield, the Los Angeles County office market
(including suburban Los Angeles County and downtown Los Angeles), contained
office space inventory of approximately 170 million square feet and had a direct
vacancy rate of 17.5% as of March 31, 1997, reflecting a 1.2% improvement since
year end 1995. Cushman & Wakefield divides Los Angeles County into four office

77
<PAGE>
market sectors, namely, Los Angeles West, Los Angeles North, Los Angeles South,
and Los Angeles Central, with each of these sectors composed of a number of
submarkets as illustrated on the map below.

MAP OF THE FOUR OFFICE MARKET SECTORS
WITHIN LOS ANGELES COUNTY

The table below sets forth salient statistics on each of the four office
market sectors within the Los Angeles county office market.

LOS ANGELES COUNTY
OFFICE MARKET STATISTICS AS OF MARCH 31, 1997

<TABLE>
<CAPTION>
DIRECT NET WTD. AVG.
NO. OF DIRECT VACANCY ABSORPTION ASKING
OFFICE MARKET SECTOR INVENTORY BLDGS. AVAILABILITY(1) RATE YTD 1997 RENTAL RATE
- --------------------------------------- ------------- --------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Los Angeles West....................... 50,252,599 368 7,687,323 15.3% 258,506 $ 21.31
Los Angeles North...................... 41,003,114 489 5,763,525 14.1% (53,108) $ 20.37
Los Angeles South...................... 26,727,075 233 4,796,301 17.9% 51,968 $ 17.51
Los Angeles Central.................... 52,184,928 251 11,450,055 21.9% (43,574) $ 17.25
------------- --------- ------------- --- ----------- -----------
Total.............................. 170,167,716 1,341 29,697,204 17.5% 213,792 $ 18.95
------------- --------- ------------- --- ----------- -----------
------------- --------- ------------- --- ----------- -----------
</TABLE>

- ------------------------
Source: Cushman & Wakefield

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

LOS ANGELES WEST OFFICE MARKET SECTOR

The Los Angeles West office market sector encompasses 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 submarkets. According to Cushman & Wakefield, the Los Angeles West
office market sector contains approximately 50.3 million square feet of office
space or roughly 30% of the total inventory in Los Angeles County. As of March
31, 1997, the Los Angeles West office market sector had a direct vacancy rate of
15.3% and a weighted average asking rental rate of $21.31 per square foot.

MAP OF THE OFFICE SUBMARKETS IN THE
LOS ANGELES WEST OFFICE MARKET SECTOR

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 of $30.00,
$25.44, and $24.00 per square foot, respectively, as of March 31, 1997. 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.

Nine of the Initial Properties, six of the Acquired Properties, and two of
the Pending Acquisitions are located in the Los Angeles West market sector and
collectively contain approximately 2,946,109 net rentable square feet which
represents approximately 34.1% of the total rentable square footage of the
Properties and Pending Acquisitions. 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

78
<PAGE>
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.

DESCRIPTION OF ACQUIRED PROPERTIES LOCATED IN THE LOS ANGELES WEST OFFICE MARKET
SECTOR:

10350 SANTA MONICA. 10350 Santa Monica is a three-story, garden-style
office building containing approximately 42,292 rentable square feet. Developed
in 1979, the property has a steel frame striped with horizontal bands of solar
reflective glass and features a central open-air atrium. A four-level
subterranean garage provides 98 parking spaces. The building is located in the
Century City submarket, within walking distance of the Century City Shopping
Center and Marketplace and a number of other retail establishments and
restaurants. At the date of acquisition, the property was 88.0% leased. As of
May 1, 1997, the property was 93.1% leased at an average base rental rate of
$17.44 per square foot.

10351 SANTA MONICA. 10351 Santa Monica consists of a 96,251-square foot,
four-story office building over a four-level, 274 space subterranean parking
garage. The building's steel frame is clad in red brick veneer and aluminum
frame sliders. The building was completed in 1984 and is located in the Century
City submarket, within walking distance of the Century Plaza Hotel, the Century
City Shopping Center and Marketplace, and numerous other retail, restaurant, and
entertainment amenities. The property was 97.8% leased as of May 1, 1997, at an
average base rental rate of $17.07 per square foot.

8383 WILSHIRE. 8383 Wilshire is a 10-story, 417,463 square foot office
building in the Beverly Hills submarket. The property was developed in 1971 and
renovated in 1993. The building is a concrete structure with a reinforced
concrete and tempered glass exterior and has a 20-foot high lobby with a rotunda
ceiling. A three-level, subterranean garage and a surface lot provide 1,125
parking spaces. 8383 Wilshire is the largest office building in Beverly Hills
and tenants of the building include a full-service post office, three banks,
several restaurants, a travel agency and a print shop. The Company believes that
8383 Wilshire has a unique position in its market because current planning and
zoning restrictions limit the size of any new construction to three stories. As
of May 1, 1997, the property was 76.8% leased, which the Company believes is
significantly below market occupancy levels, and had an average base rental rate
of $21.09 per square foot.

2730 WILSHIRE. 2730 Wilshire is a six-story office building in the Santa
Monica submarket, which the Company believes is one of the most desirable
submarkets in the Los Angeles West office market sector. Developed in 1985 of
steel frame construction and covered with an aluminum and glass curtain wall
system, the property contains approximately 55,080 rentable square feet. The
three-level, subterranean garage provides approximately 199 parking spaces. The
property is located just five blocks from the Santa Monica (10) Freeway, which
together with nearby Interstate 405, provides access to all areas of greater Los
Angeles. As of May 1, 1997, the property was 97.5% leased, with base rents
averaging $20.00 per square foot.

10780 SANTA MONICA. Located in the Westwood submarket, 10780 Santa Monica
is a four-story office building containing approximately 92,486 rentable square
feet. The property was completed in 1984 and is of steel-frame construction with
precast concrete bands and aluminum-framed strip glazing. A four-level
subterranean garage provides 249 parking spaces. Interstate 405 is just West of
the property, and a variety of retail, restaurant, and entertainment amenities,
including the Century City Shopping Center and Marketplace, are accessible by
way of Santa Monica Boulevard. At the date of acquisition, the property was
78.1% leased. As of May 1, 1997, the property was 84.1% leased, with an average
base rental rate of $18.23 per square foot.

5200 WEST CENTURY. 5200 West Century is a 10-story office complex
consisting of two connected towers situated in the LAX submarket. The property
was developed in 1982 and contains approximately 310,910 rentable square feet.
The building's steel frame is clad in reflective monolithic glass, and a
landscaped courtyard and covered walkway connect the office towers to a
seven-level parking structure

79
<PAGE>
with 940 spaces. The property benefits from immediate access to both the
Interstate 405 and the 105 Freeway and from its proximity to the Los Angeles
International Airport. The Company acquired the property for $11.4 million and
intends to invest approximately $2.3 million over the next two years in capital
improvements including refinishing the exterior panels and refurbishing the
lobby. As of May 1, 1997, the property was 30.1% leased and had an average base
rental rate of $9.90.

DESCRIPTION OF PENDING ACQUISITIONS LOCATED IN THE LOS ANGELES WEST OFFICE
MARKET SECTOR:

1100 GLENDON. 1100 Glendon is a 22-story office building located in the
Westwood submarket. Completed in 1965, the property consists of 15 office floors
totaling 282,013 rentable square feet with six above-grade and two subterranean
parking levels providing 606 spaces. The building is constructed of steel and
concrete with precast concrete marble aggregate panels and tinted glass and
aluminum windows and is located near Interstate 405 and Interstate 10 with easy
access to other West Los Angeles markets,

80
<PAGE>
downtown Los Angeles, the San Fernando Valley and the Los Angeles International
Airport. In addition, the property is adjacent to the Westwood Village retail
area and the University of California at Los Angeles campus. The Company has
entered a letter of intent to purchase the property for $29.5 million and the
Company intends to invest approximately $21.9 million over the next two years
for renovations, including exterior refinishing, lobby renovation, common area
remodeling and upgrading of the building's operating systems and parking
facilities.

CARLSBERG CORPORATE CENTER. Carlsberg Corporate Center is a three-story
office building located in the Santa Monica submarket. The property was
completed in 1979 and contains approximately 103,506 rentable square feet with
346 surface parking spaces. The building has a steel frame with aluminum and
glass curtain walls. The property is located south of the Interstate 10 Freeway
in the southeastern portion of the City of Santa Monica. As of May 1, 1997, the
property was 87.3% leased, with an average base rental rate of $20.34 per square
foot, which the Company believes is below market rental rates.

LOS ANGELES NORTH OFFICE MARKET SECTOR

The Los Angeles North office market sector, as defined by Cushman &
Wakefield, spans four market areas located in the San Fernando, Santa Clarita,
and Conejo valleys and portions of southeastern Ventura County. The four primary
submarkets in this sector (Simi/Conejo Valley, West San Fernando Valley, Central
San Fernando Valley, and East San Fernando Valley/Tri-Cities) account for
approximately 41.0 million square feet of office space, representing
approximately 24.1% of Los Angeles County's total inventory. As of March 31,
1997, the Los Angeles North office market sector had a direct vacancy rate of
14.1%, with annual asking rental rates averaging $20.37 per square foot.

MAP OF THE OFFICE SUBMARKETS IN THE
LOS ANGELES NORTH OFFICE MARKET SECTOR

Seven of the Initial Properties, seven of the Acquired Properties, and one
of the Pending Acquisitions are located in the Los Angeles North office market
sector and collectively contain approximately 586,913 rentable square feet which
represents approximately 18.4% of the total rentable square footage of the
Properties and Pending Acquisitions. The Properties and Pending Acquisitions are
located in the office submarkets of Westlake Village, Calabasas, Woodland Hills,
Encino, Glendale, Burbank City Center, Pasadena, Canoga Park/Chatsworth, and
Sherman Oaks.

DESCRIPTION OF ACQUIRED PROPERTIES LOCATED IN THE LOS ANGELES NORTH OFFICE
MARKET SECTOR:

6800 OWENSMOUTH. 6800 Owensmouth is a four-story suburban office building
containing approximately 80,014 rentable square feet. Developed in 1986, the
property has a steel frame with stucco veneer and horizontal bands of solar
tempered glass and a total of 275 parking spaces. The building is conveniently
located adjacent to the Warner Center master-planned office park and within
walking distance of the Topanga Plaza Shopping Center. The property was 84.9%
leased as of May 1, 1997, and had an average base rental rate of $18.25 per
square foot.

CLARENDON CREST. Clarendon Crest is a three-story office building in the
Woodland Hills submarket. The property was completed in 1990 and contains
approximately 43,063 rentable square feet. The building's steel frame is clad in
stucco with solar glass set in aluminum frames. A subterranean garage provides
138 parking spaces. The property offers excellent visibility from and access to
the 101 Freeway and is conveniently located near the Warner Center post office
and numerous other amenities. As of May 1, 1997, the property was 84.7% leased
at an average base rental rate of $18.56 per square foot.

SUMITOMO BANK BUILDING. Sumitomo Bank Building, located in the Sherman Oaks
submarket, is a 12-story office tower containing approximately 110,641 rentable
square feet. The building was constructed in 1970 and was the runner-up for the
1991 BOMA Los Angeles award for the Best Renovated office

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building based on its 1990-1991 renovation. The building consists of a concrete
structure clad in anodized aluminum, solar bronze glass, and mirrored spandrels.
A three-level concrete parking structure provides approximately 312 spaces.
Located on Ventura Boulevard near Interstates 405 and 101, the property also
benefits from an extensive amenity base, with the Sherman Oaks Galleria within
walking distance and a number of other retail establishments and restaurants
nearby. As of May 1, 1997, the property was 92.2% leased at an average base
rental rate of $19.50 per square foot.

NOBLE PROFESSIONAL CENTER. Situated in the Sherman Oaks submarket, Noble
Professional Center is a four-story office building containing approximately
51,828 rentable square feet. The building, which was completed in 1985 and
renovated in 1993, has a steel frame and red brick exterior with glass set in
bronze aluminum frames. The lobby is finished with oak paneling and brass
accents. Parking is provided by 32 surface spaces and a 140-space subterranean
garage. The property is located on Ventura Boulevard and benefits from immediate
access to both Interstate 405 and Interstate 101. The Sherman Oaks Galleria and
a number of other retail establishments offer amenities nearby. As of May 1,
1997, the property was 80.5% leased and had an average base rental rate of
$20.05 per square foot.

BURBANK EXECUTIVE PLAZA. Burbank Executive Plaza is a six-story office
building located in the Burbank submarket. Completed in 1983, the property
consists of approximately 60,395 rentable square feet and has a steel-frame
structure clad in an exposed aggregate finish with tinted horizontal glass
ribbons. A five-level parking structure, shared with the California Federal
Building, provides a total of 372 spaces. Burbank Executive Plaza is one of
seven properties that the Company owns in the Tri-Cities area, allowing the
Company to realize significant economies of scale with respect to operations and
management. As of May 1, 1997, the property was 73.8% leased and had an average
base rental rate of approximately $12.57 per square foot.

CALIFORNIA FEDERAL BUILDING. Located in the Burbank submarket, the
California Federal Building is a six-story office building consisting of
approximately 82,467 rentable square feet. Completed in 1978, the property has a
steel-frame structure and an exterior of tinted bronze and spandrel glass panels
in bronze anodized aluminum. As of May 1, 1997, the property was 97.0% leased
and had an average base rental rate of approximately $19.89 per square foot.

535 BRAND. Situated in the Glendale submarket, 535 Brand is an 11-story
office tower containing approximately 109,187 rentable square feet. The property
was completed in 1973 and provides a total of 188 parking spaces. The Company
acquired the property for $10.2 million, and intends to invest an additional
approximately $4.9 million over the next two years in capital expenditures to
renovate the property including exterior refinishing, lobby and entry
renovation, common area remodeling, and upgrading of the building's operating
systems and parking structure. The building is located in the heart of
Glendale's office district, one of the premier submarkets in Los Angeles County.
The C&W Peer Group vacancy rate for this building is 6.9% while the property's
occupancy is only 51.0%.

DESCRIPTION OF PENDING ACQUISITION LOCATED IN THE LOS ANGELES NORTH OFFICE
MARKET SECTOR:

299 EUCLID. 299 Euclid is a five-story office building located in the
Pasadena submarket. The property was completed in 1983 and contains
approximately 73,400 rentable square feet. The building has a steel frame clad
in solar reflective glass and red brick. A two-level subterranean garage
provides 293 parking spaces. Located one block south of Interstate 210, the
property enjoys excellent freeway access. The property, previously occupied by a
single-tenant user, was 100% vacant as of May 1, 1997. The Company believes the
property contains the largest block of contiguous office space for comparable
buildings in the Pasadena office submarket.

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LOS ANGELES SOUTH OFFICE MARKET SECTOR

The Los Angeles South office market sector, the smallest of Los Angeles
County's four office market sectors, consists of three submarkets, namely, El
Segundo, Torrance, and Long Beach. These three submarkets, located primarily in
the South Bay, are comprised of nine constituent office concentrations that
total approximately 26.7 million square feet or 15.7% of Los Angeles County's
total inventory of office space. As of March 31, 1997, the Los Angeles South
office market sector had a direct vacancy rate of 17.9% and an average rental
rate of $17.51 per square foot.

MAP OF THE OFFICE SUBMARKETS IN THE
LOS ANGELES SOUTH OFFICE MARKET SECTOR

Five of the Initial Properties, two of the Acquired Properties, and three of
the Pending Acquisitions are located in the Los Angeles South office market
sector and collectively contain approximately 1,429,695

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rentable square feet, which represents approximately 19% of the total rentable
square footage of the Properties and Pending Acquisitions. The Properties and
Pending Acquisitions within the Los Angeles South office market sector are
located in the Long Beach Airport/I-405 Freeway Corridor, Downtown Long Beach,
Cerritos/Norwalk, El Segundo, 190th Street Corridor, and Central Torrance
submarkets.

DESCRIPTION OF ACQUIRED PROPERTIES LOCATED IN THE LOS ANGELES SOUTH OFFICE
MARKET SECTOR:

GRAND AVENUE PLAZA. Grand Avenue Plaza is an office complex consisting of
two three-story office buildings, each containing approximately 42,250 rentable
square feet. The property is located in the El Segundo submarket and was
developed between 1979 and 1980. The buildings have steel frames and stucco
exterior finishes and provide a total of 303 surface parking spaces. The Company
purchased the vacant buildings in November 1996 for $3.5 million, and has
completed a $1.4 million renovation program. Since the completion of the
renovation program, through May 1, 1997, the Company has leased approximately
61.5% of the property. The property is just south of the Los Angeles
International Airport and enjoys excellent access to both the Interstate 405 and
the 105 Freeway.

SOUTH BAY CENTRE. Located in the 190th Street Corridor of the Torrance
submarket, South Bay Centre is a five-story office complex consisting of two
interconnected towers totaling 202,820 rentable square feet. The building was
constructed in 1984 and has a steel-frame structure with concrete panels and
dark tinted glass. Surface parking provides approximately 800 spaces. Situated
just west of Interstate 405, the property benefits from superior freeway access
and visibility. As of May 1, 1997, the property was 85.8% leased and had an
average base rental rate of $17.30 per square foot.

DESCRIPTION OF PENDING ACQUISITIONS LOCATED IN THE LOS ANGELES SOUTH OFFICE
MARKET SECTOR:

HARBOR CORPORATE CENTER. Harbor Corporate Center is a two-story office
building situated in the 190th Street Corridor of the Torrance submarket. The
property was completed in 1985 and contains approximately 63,925 rentable square
feet and 251 surface parking spaces. Located just southwest of the Interstate
405 and 110 Freeway interchange, the property benefits from exceptional freeway
access and visibility. As of May 1, 1997, the property was 77.4% leased and had
an average base rental rate per square foot of $14.47.

PACIFIC GATEWAY II. Pacific Gateway II is a 10-story office tower
containing 223,731 rentable square feet and 710 surface parking spaces. Located
in the heart of the 190th Street Corridor of the Torrance submarket, the
property benefits from excellent access to and visibility from the Interstate
405 and the 110 Freeway. Completed in 1982, the building underwent an extensive
renovation in 1990, with a majority of the space rebuilt from essentially shell
condition. As a result of this renovation coupled with its freeway access and
visibility, quality construction, interior finishes, and a state-of-the-art
building system, Pacific Gateway II is considered one of the premier office
towers in the 190th Street Corridor submarket. The Company believes that it can
benefit from operational economies of scale at this property due to its
concentration of ownership in the Torrance submarket, where it will own four
properties comprising 595,922 square feet, assuming completion of the Pending
Acquisitions.

MARINER COURT. Mariner Court is a three-story office building situated in
the Torrance submarket. Completed in 1989 of steel frame construction with a
brick veneer and stucco exterior, the property contains approximately 105,436
rentable square feet and 362 surface parking spaces. As of May 1, 1997, the
property was 86.7% leased with base rental rates averaging $16.65 per square
foot.

LOS ANGELES CENTRAL OFFICE MARKET SECTOR

The Los Angeles Central office market sector, the largest of Los Angeles
County's four office market sectors, consists of three submarkets, namely,
Downtown Los Angeles, Mid-Wilshire, and the San Gabriel

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Valley. According to Cushman & Wakefield, the Los Angeles Central market sector
contains approximately 52.2 million square feet of office space or roughly 31%
of the total inventory in Los Angeles County. As of March 31, 1997, the Los
Angeles Central office market sector had a direct vacancy rate of 21.9% and a
weighted average asking rental rate of $17.25 per square foot.

MAP OF THE OFFICE SUBMARKETS IN THE
LOS ANGELES CENTRAL OFFICE MARKET SECTOR

Two of the Acquired Properties are located in the Los Angeles Central office
market sector, in the Alhambra/Monterey Park and Whittier/City of Commerce
submarkets and collectively contain approximately 524,708 rentable square feet
which represents approximately 6.7% of the total rentable square footage of the
Properties and Pending Acquisitions.

DESCRIPTION OF ACQUIRED PROPERTIES LOCATED IN THE LOS ANGELES CENTRAL OFFICE
MARKET SECTOR:

LOS ANGELES CORPORATE CENTER. Located in the Alhambra/Monterey Park
submarket, Los Angeles Corporate Center is a suburban office complex containing
approximately 389,293 rentable square feet. Generally regarded as one of the
premier office parks in its submarket, the property won the 1996 BOMA Award for
Suburban Office Parks in Greater Los Angeles in recognition of its superior
design and well-landscaped master-planned setting. The property enjoys excellent
access to Interstate 10 and the Pomona and Long Beach Freeways. A 4.5 acre pad
on the northern portion of the property is zoned for office use. As of May 1,
1997, the property was 84.9% leased and had an average base rental rate per
square foot of $14.47.

WHITTIER FINANCIAL CENTER. Located at 15111 and 15141 Whittier Boulevard in
the Whittier/City of Commerce submarket, Whittier Financial Center consists of
one four-story and one five-story office building. The Company believes the
property is the premier office building in its submarket based in part on its
location near various amenities, including several restaurants, the Whitwood
Mall, the Whittier Quad Shopping Center and the Whittier Hospital Medical
Center. The property also benefits from easy access to the I-5, I-605, 60, 91
and 57 freeways. As of May 1, 1997, the property was 85.2% leased and had an
average base rental rate per square foot of $17.84.

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ORANGE COUNTY OFFICE MARKET

The Orange County office market contains several distinct office submarkets,
namely, West County, Tri-Freeway Area, Central County, Greater Airport Area,
South County, and North County, each of which is composed of numerous office
concentrations as highlighted in the table below. According to Cushman &
Wakefield, the Orange County office market has approximately 52.3 million square
feet of inventory among 691 office buildings. As of March 31, 1997, the
countywide direct vacancy rate was 13.6%, with annual asking rents averaging
$17.76 per square foot.

MAP OF THE ORANGE COUNTY OFFICE MARKET

Two of the Initial Properties, one of the Acquired Properties, and two of
the Pending Acquisitions are located in the Orange County office market in the
Huntington Beach, Anaheim Stadium Area, La Palma/ Buena Park, Laguna
Niguel/Laguna Beach, and Irvine office submarkets and collectively contain
approximately 1,110,257 rentable square feet which represents approximately
12.9% of the total rentable square footage of the Properties and Pending
Acquisitions.

DESCRIPTION OF THE ACQUIRED PROPERTY LOCATED IN THE ORANGE COUNTY OFFICE MARKET:

CENTERPOINTE LA PALMA. Completed in three phases between 1986 and 1990,
Centerpointe La Palma is a 12-building suburban mixed-use development
encompassing approximately 563,974 rentable square feet of office space and
33,576 square feet of retail space. The property is located in the City of La
Palma near the Los Angeles/Orange County border and is part of a well-landscaped
commercial master plan bounded by the Interstate 5, Interstate 605, and 91
Freeway. The property benefits from excellent freeway proximity and visibility,
which provide tenants with superior access to destinations in both Orange and
Los Angeles counties. Of the ten office buildings at the property, the largest
three account for approximately 314,723 rentable square feet and have steel
frames with aluminum curtain walls and solar reflective glass. Ranging from four
to seven stories, these three primary office buildings have dramatic two-story
lobbies with nine-foot glass entry doors and marble or tile floors with carpet
inlays. The other seven office buildings are constructed of concrete tilt-up
panels with aluminum windows and solar reflective glass. The two retail
buildings of the property have exteriors of cement stucco and aluminum
storefronts. The property also includes an approximately one acre development
parcel, which the Company believes can support an additional 60,000 square foot
office building when market conditions favor the development of additional
space. As of May 1, 1997, the property was 88.2% leased with base rental rates
averaging $16.16 per square foot. Atlantic Richfield, the property's largest
tenant, occupies 117,479 square feet under leases ending in 2006 and 2007. Other
major tenants include Kaiser Foundation Health Plan, A.D.P., Honeywell, City
National Bank, Xerox and Northern Telecom.

DESCRIPTION OF PENDING ACQUISITIONS LOCATED IN THE ORANGE COUNTY OFFICE MARKET:

CROWN CABOT. Crown Cabot is a six-story office building located in the
Laguna Niguel/Mission Viejo submarket. The property was developed in 1989 and
contains approximately 172,900 rentable square feet. The building's steel frame
is covered in solar reflective glass. The two-story high lobby is finished in
German marble and polished chrome accents. A 3.5-level parking structure and
surface lot provide a total of 641 spaces. Situated on a terraced hillside
overlooking Interstate 5, the property provides excellent freeway visibility and
access. At May 1, 1997, the property was 93.3% leased at an average base rental
rate of $20.71 per square foot. Major tenants include Ralston Purina, Maxtor
International, Motorola, and Quaker Oats.

1821 DYER. 1821 Dyer is a two-story office building located in the Irvine
submarket. Completed in 1980, the property was renovated in 1988 and contains
approximately 115,061 rentable square feet and 330 surface parking spaces. The
building is of concrete tilt-up construction with stucco finishes and a glass
curtain wall. The property is located approximately 100 yards east of the 55
Freeway in the northern

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portion of the master-planned Irvine Business complex. Matria Healthcare
currently occupies 100% of the net leasable area and will vacate the building
upon the expiration of its lease term on December 31, 1997. The Company believes
that the building, with some of the largest vacant blocks of space in its
submarket, will appeal particularly to high-tech tenants that occupy much of the
office space in the Greater Airport Area submarket.

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VENTURA COUNTY OFFICE MARKET

According to Cushman & Wakefield, the Ventura County office market is
divided into two submarkets, namely, Simi/Conejo Valley and West County. The
Simi/Conejo Valley submarket is considered part of the Los Angeles North market
sector and has been included in such. The West County submarket, which includes
the areas of Ventura, Oxnard/Port Hueneme, and Camarillo, contains approximately
2.9 million square feet of office space. As of March 31, 1997, the West County
submarket had a direct vacancy rate of 20.3%

MAP OF THE VENTURA COUNTY OFFICE MARKET

One of the Acquired Properties and one of the Pending Acquisitions are
located in the Ventura County office market and collectively contain
approximately 282,490 rentable square feet which represent approximately 3.3% of
the total rentable square footage of the Properties and Pending Acquisitions.
The Properties are located in the office submarkets of Ventura and Oxnard/Port
Hueneme.

DESCRIPTION OF THE ACQUIRED PROPERTY LOCATED IN THE VENTURA COUNTY OFFICE
MARKET:

CENTER PROMENADE. Center Promenade is a low-rise office park completed in
1982 on approximately 11.2 well-landscaped acres in the heart of the City of
Ventura. The property's seven buildings vary from one to three stories, have
reflective glass and brick exteriors and contain a total of 174,837 rentable
square feet. Surface parking provides 719 spaces. The property enjoys convenient
access to both the US 101 and State 126 freeways and benefits from its proximity
to the Ventura County Government Center and to a number of restaurants and
retail establishments. Center Promenade was 73.7% leased as of May 1, 1997, with
base rental rates averaging approximately $14.50 per square foot. Major tenants
include the County of Ventura which occupies 11,454 rentable square feet and the
State of California which occupies 13,293 rentable square feet.

DESCRIPTION OF THE PENDING ACQUISITION LOCATED IN THE VENTURA COUNTY OFFICE
MARKET:

1000 TOWN CENTER. 1000 Town Center is a six-story office building located
in the Oxnard/Port Hueneme submarket. The property was developed in 1989 and
contains approximately 107,653 rentable square feet and 431 surface parking
spaces. The building has a steel frame and an exterior consisting of limestone
panels and a glass curtain wall. The property is located in the City of Oxnard
just north of Highway 101. As of May 1, 1997, the property was 100% leased and
had an average base rental rate of $19.10 per square foot.

KERN COUNTY OFFICE MARKET

The Kern County office market, which consists primarily of the City of
Bakersfield, contains approximately 6.2 million square feet of inventory among
267 office buildings. According to Cushman & Wakefield, Kern County had a direct
vacancy rate of 14.3% and a weighted average rental rate of $14.09 per square
foot as of March 31, 1997.

MAP OF THE KERN COUNTY OFFICE MARKET

Two of the Acquired Properties are located in the Kern County office market
and collectively contain approximately 216,522 rentable square feet which
represent approximately 2.5% of the total rentable square footage of the
Properties and Pending Acquisitions. Both of these Properties are located in
Bakersfield.

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DESCRIPTION OF ACQUIRED PROPERTIES LOCATED IN THE KERN COUNTY OFFICE MARKET:

PARKWAY CENTER. Parkway Center consists of a three-story and a single-story
office building located at 4200 and 4260 Truxton Avenue. 4200 Truxton contains
approximately 46,154 rentable square feet and was constructed in 1992 of steel
and concrete with solar reflective glass. Built in 1995, 4260 Truxton is a
concrete tilt-up structure containing approximately 15,179 rentable square feet.
Visible from Highway 99, the project provides easy access to all areas of
Bakersfield, including Central Bakersfield and the Stockdale Business District.
Major tenants include Bakersfield Cellular Telephone Co., which occupies 20,611
square feet, and IBM, which occupies 8,962 square feet. As of May 31, 1997, the
property was 99.5% leased and had an average base rental rate of $17.14 per
square foot.

CALIFORNIA TWIN CENTRE. California Twin Centre is a 4-story office complex
containing approximately 155,189 rentable square feet of office space and 649
surface parking spaces. Built in 1983 in the heart of Bakersfield's business
district, the building has a steel-frame structure with dryvit insulated panels
and a curtain wall of reflective glass. The property is located near the 99
Freeway and the Bakersfield/Kern County Airport. Chevron occupies over 75% of
the building. As of May 1, 1997, the property was 88.5% leased and had an
average base rental rate of $23.75 per square foot.

COMPETITION

The Company may be competing for acquisition opportunities 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 and Pending Acquisitions are located could have a
material adverse effect on both the Company's ability to lease space at the
Properties and Pending Acquisitions and on the rents charged at the Properties
and Pending Acquisitions. 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 that currently covers all of the Properties,
and will be expanded to cover each of the Pending Acquisitions which is
acquired, 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 which
also will be expanded to cover each of the Pending Acquisitions which is
acquired. 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 the sole 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, and the Pending Acquisitions will be,
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 54 Properties and Pending Acquisitions, 24 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,

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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, 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 and Pending Acquisitions, the Company may be
potentially liable for such costs. Except for one Pending Acquisition, 1100
Glendon, which is currently undergoing abatement activities, the Company is not
aware of any friable ACM at any of the Properties or Pending Acquisitions.

In the past few years, independent environmental consultants have conducted
or updated Phase I Assessments and other environmental investigations as
appropriate (the "Environmental Site Assessments") at the Properties and Pending
Acquisitions. These Environmental Site Assessments have included, among other
things, a visual inspection of the Properties and Pending Acquisitions and the
surrounding area and a review of relevant state, federal and historical
documents. Soil and groundwater sampling were performed where warranted and
remediation, if necessary, has or is being conducted.

The Company's Environmental Site Assessments of the Properties and Pending
Acquisitions have identified 10351 Santa Monica, Burbank Executive Plaza,
California Federal Building, South Bay Centre, 8383 Wilshire, Carlsberg
Corporate Center and Pacific Gateway II as being located in areas of known or
suspected contamination. The Environmental Site Assessments 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 Environmental Site
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 and Pending Acquisitions will not be
affected by tenants, by the condition of land or operations in the

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vicinity of the Properties and Pending Acquisitions (such as the presence of
underground storage tanks), or by third parties unrelated to the Company.

The Company believes that the Properties and Pending Acquisitions 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 and Pending
Acquisitions, other than as noted above.

POTENTIAL EMINENT DOMAIN PROCEEDINGS

On January 15, 1997, the City of Calabasas passed a resolution of necessity
stating its intention to exercise the power of eminent domain to acquire the
Company's property at 26135 Mureau Road, Calabasas, California. The property is
a two-story office building containing approximately 18,371 rentable square feet
and is part of the Company's four-building project (containing approximately
123,121 rentable square feet). The City of Calabasas currently occupies
approximately 9,243 rentable square feet in the subject building.

Through eminent domain proceedings, the City of Calabasas has the power to
acquire private property for public use but is required to pay the owner just
compensation which is commonly defined as the fair market value of the property.
The City of Calabasas has six months after passing the resolution of necessity
(which will expire on July 15, 1997) to serve the Company with a formal eminent
domain lawsuit. Should the City of Calabasas serve the action on the Company,
the Company will defend the action and seek to obtain the highest value for the
property based on its fair market value.

LEGAL PROCEEDINGS

The Company is not presently subject to any material litigation nor, to the
Company's knowledge, is any litigation threatened against the Company, other
than routine litigation arising in the ordinary course of business, some of
which is expected to be covered by liability insurance and all of which
collectively is not expected to have a material adverse effect on the
consolidated financial statements of the Company.

EMPLOYEES

As of May 1, 1997, the Company had 86 full-time employees.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain current information with respect to
the directors 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 54 Chairman of the Board and Chief Executive Officer 1999

Victor J. Coleman 36 President, Chief Operating Officer and Director 1999

Diana M. Laing 42 Chief Financial Officer and Secretary

Andrew J. Sobel 38 Executive Vice President and Director of Leasing

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

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

Daniel S. Bothe 31 Vice President-Finance

Robert C. Peddicord 36 Vice President-Leasing

Carl D. Covitz 58 Director 1997

Larry S. Flax 55 Director 1997

Kenneth B. Roath 61 Director 1997

Steven C. Good 55 Director 1998
</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 is a founder of the Company and has served as
the Chairman of the Board and Chief Executive Officer since its inception. He
has been involved in the real estate industry for over 25 years. In 1990, Mr.
Ziman formed Namiz and served as its Chairman of the Board and Chief Executive
Officer from its inception until the formation of the Company. 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 is a founder of the Company and has served
as its President and Chief Operating Officer and as a Director of the Company
since its inception. He was the President, Chief Operating Officer and
co-founder of Namiz from 1990 to 1996. 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 has served as Chief Financial Officer of the
Company since August 1996 and as Secretary of the Company since February 1997.
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

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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.

ANDREW J. SOBEL. Mr. Sobel has served as Executive Vice President and
Director of Leasing of the Company since its formation. He served as Director of
Leasing for Namiz from 1992 to 1996. 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).

BRIGITTA B. TROY. Ms. Troy has served as Senior Vice President and Director
of Acquisitions of the Company since its formation. She served as Director of
Acquisitions for Namiz from 1993 to 1996 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.

HERBERT L. PORTER. Mr. Porter has served as Senior Vice President and
Director of Construction and Capital Improvements of the Company since its
formation. He served as Director of Construction and Capital Improvements for
Namiz from 1993 to 1996. 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.

DANIEL S. BOTHE. Mr. Bothe has served as Vice President-Finance of the
Company since December 1996. From 1993 to 1996, Mr. Bothe was a management
consultant with the E&Y Kenneth Leventhal Real Estate Group of Ernst & Young
LLP. From 1988 to 1991, Mr. Bothe served as a member of the audit staff of KPMG
Peat Marwick specializing in real estate. Mr. Bothe is a Certified Public
Accountant in the State of California and a member of the American Institute of
CPAs. Mr. Bothe received his Bachelor of Science in Accounting from San Diego
State University and his Master of Business Administration from the University
of Southern California.

ROBERT C. PEDDICORD. Mr. Peddicord has served as Vice President-Leasing of
the Company since December 1996. From 1987 to 1996, Mr. Peddicord was a Managing
Director in the West Los Angeles office of Julien J. Studley, representing
landlords and tenants in the leasing of office space. From 1984 to 1986, Mr.
Peddicord served as a branch Vice President for Great Western Financial
Corporation. Mr. Peddicord received his Bachelor's Degree in Economics from the
University of California at Los Angeles.

CARL D. COVITZ. Mr. Covitz has served as a member of the Board of Directors
of the Company since its inception as a public company in October 1996. 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

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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.

LARRY S. FLAX. Mr. Flax has served as a member of the Board of Directors of
the Company since December 1996. Mr. Flax is Co-Founder and Co-Chairman of the
Board of California Pizza Kitchen. Prior to becoming a restaurateur in 1985, Mr.
Flax served in Los Angeles as Assistant U.S. Attorney from 1968 to 1972, Chief
of Civil Rights from 1970 to 1971 and Assistant Chief of the Criminal Division
for the United States Department of Justice from 1971 to 1972. Mr. Flax attended
the University of Washington as an undergraduate and received his Juris Doctor
Degree from the University of Southern California Law School in 1967.

KENNETH B. ROATH. Mr. Roath has served as a member of the Board of
Directors of the Company since its inception as a public company in October
1996. Mr. Roath is currently Chairman, President and Chief Executive Officer of
Health Care Property Investors, Inc., a leader in the health care REIT industry.
Mr. Roath is past Chairman of the National Association of Real Estate Investment
Trusts ("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.

STEVEN C. GOOD. Mr. Good has served as a member of the Board of Directors
of the Company since its inception as a public company in October 1996. Mr. Good
is the senior partner in the firm of Good Swartz & Berns, an accountancy
corporation founded in 1993 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.

BOARD OF DIRECTORS

The business and affairs of the Company are managed under the direction of
the Board of Directors, which currently has six members, four of whom 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 July 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.

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<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors of the Company has established an Audit Committee, an
Executive Committee, a Compensation Committee, and an Acquisitions Committee.

AUDIT COMMITTEE. The Audit Committee consists of three non-employee
directors including Mr. Good, its Chairman, and Messrs. Covitz and Flax. The
Audit Committee makes recommendations concerning the engagement of independent
public accountants, reviews with the independent public accountants the scope
and results of the audit engagement, approves professional services provided by
the independent public accountants, reviews the independence of the independent
public accountants, considers the range of audit and non-audit fees and reviews
the adequacy of the Company's internal accounting controls.

EXECUTIVE COMMITTEE. The Executive Committee consists of Mr. Ziman, its
Chairman, and Mr. Coleman. Subject to the Company's conflict of interest
policies, the Executive Committee has authority to 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).

COMPENSATION COMMITTEE. The Compensation Committee consists of three
non-employee directors including Mr. Roath, its Chairman, and Messrs. Covitz and
Good. The function of the Compensation Committee is to (i) establish, review,
modify, and adopt compensation plans and arrangements for the Company, (ii)
review, determine and establish the compensation (including bonuses) of the
officers of the Company, and (iii) grant bonuses and other compensation to such
officers of the Company.

ACQUISITIONS COMMITTEE. The Acquisitions Committee consists of Mr. Ziman,
its Chairman, and Messrs. Coleman and Covitz. The Acquisitions Committee has the
authority to approve the acquisition of real property with purchase prices up to
$20,000,000. Any acquisitions greater in amount require approval of the full
Board of Directors.

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

COMPENSATION OF DIRECTORS

Each of the Company's non-employee directors receives annual compensation of
$18,000 for his services. In addition, each non-employee director receives
$1,000 for each Board of Directors meeting attended. Each non-employee director
attending any committee meeting receives an additional $1,000 for each committee
meeting attended, unless the committee meeting is held on the day of a meeting
of the Board of Directors. Each non-employee director is also reimbursed for
reasonable expenses incurred to attend director and committee meetings. Officers
of the Company who are directors are not paid any directors' fees. In addition,
under the Company's Stock Incentive Plan, each non-employee director was
automatically granted, upon his initial election to the Board of Directors,
options to purchase 10,000 shares of Common Stock at the then current market
price which vest during such director's continued service, in equal installments
over four years.

EXECUTIVE COMPENSATION

Prior to the inception of the Company as a public company on October 9,
1996, the Company did not pay any compensation to its officers. Accordingly, the
following table for informational purposes only, sets forth the estimated annual
base salary rates and the actual other compensation paid to the Company's

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Chief Executive Officer and each of the Company's four other most highly
compensated executive officers (the "Named Executive Officers").

SUMMARY COMPENSATION

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------------- LONG-TERM COMPENSATION
1997 BASE -----------------------------
SALARY 1996 OTHER ANNUAL OPTIONS GRANTED STOCK
NAME TITLE RATE($) BONUS($) COMPENSATION($) IN 1996(#) BONUS(#)
- -------------------- --------------------------- ------------- ----------- ----------------- --------------- ------------

<S> <C> <C> <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 and
Secretary 195,000 -- -- 50,000 --

Andrew J. Sobel Executive Vice President
and Director of Leasing 150,000 7,700 -- 40,000 3,750(1)

Herbert L. Porter Senior Vice President and
Director of Construction
and Capital Improvements 130,000 5,100 -- 30,000 1,250(1)
</TABLE>

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

(1) Represents the number of shares for a one-time Common Stock bonus granted in
1996.

The following table shows certain information relating to stock options
granted to the Named Executive Officers during the fiscal year ended December
31, 1996.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1) POTENTIAL REALIZABLE
---------------------------------------------------- VALUE AT
NUMBER OF PERCENT OF ASSUMED ANNUAL RATES OF
SECURITIES TOTAL OPTIONS SHARE PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION ---------------------------
NAME GRANTED(#) FISCAL YEAR SHARE DATE 5% 10%
- --------------------------------- ----------- ------------- ----------- ----------- ------------ -------------

<S> <C> <C> <C> <C> <C> <C>
Richard S. Ziman................. 400,000 43.0% $ 20.00 10/04/06 $ 5,023,000 $ 12,748,000

Victor J. Coleman................ 250,000 26.9% 20.00 10/04/06 3,145,000 7,967,500

Diana M. Laing................... 50,000 5.4% 20.00 10/04/06 629,000 1,593,500

Andrew J. Sobel.................. 40,000 4.3% 20.00 10/04/06 503,200 1,274,800

Herbert L. Porter................ 30,000 3.2% 20.00 10/04/06 377,400 956,100
</TABLE>

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

(1) All options granted in 1996 become exercisable in three equal installments
beginning on the first anniversary of the date of grant and have a term of
ten years subject to earlier termination in certain events related to
termination of employment. The option exercise price is equal to fair market
value of the Common Stock on the date of grant (I.E., the IPO price).

(2) Assumed annual rates of stock price appreciation for illustrative purposes
only. Actual stock prices will vary from time to time based upon market
factors and the Company's financial performance. No assurances can be given
that these appreciation rates will be achieved.

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The following table sets forth certain information concerning exercised and
unexercised stock options held by the Named Executive Officers at December 31,
1996.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS OPTIONS AT
SHARES AT DECEMBER 31, 1996 DECEMBER 31, 1996
ACQUIRED ON VALUE -------------------------- ----------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE(1)
- ---------------------------- ----------- ------------ ----------- ------------- ----------- ---------------

<S> <C> <C> <C> <C> <C> <C>
Richard S. Ziman............ -- -- -- 400,000 -- $ 3,050,000

Victor J. Coleman........... -- -- -- 250,000 -- 1,906,250

Diana M. Laing.............. -- -- -- 50,000 -- 381,250

Andrew J. Sobel............. -- -- -- 40,000 -- 305,000

Herbert L. Porter........... -- -- -- 30,000 -- 228,750
</TABLE>

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

(1) Based on closing price of $27 5/8 per share of Common Stock on December 31,
1996, as reported by the New York Stock Exchange.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 1996, there were no Compensation Committee interlocks and no officers
or employees of the Company participated on the Compensation Committee.

EMPLOYMENT AGREEMENTS

Each of Messrs. Ziman and Coleman have entered into an employment agreement
with the Company. The employment agreements of Messrs. Ziman and Coleman have an
initial term of three years and are 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.

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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 36-month
period. The Severance Amount for 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 is
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

The Company has adopted the Stock Incentive Plan for the purpose of
attracting and retaining executive officers, directors and employees.

The Stock Incentive Plan is qualified under Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Stock Incentive Plan
is administered by the Compensation Committee and provides 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 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

The Company established the Arden Realty 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 permits eligible employees of the Company to defer up to 20%
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. Employees are generally

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eligible to participate in the 401(k) Plan after six months of service. The
Company currently makes matching contributions to the 401(k) Plan equal to 50%
of each participating employee's contribution up to 10% of the employee's
salary. Employees vest 25% in the Company's contributions for each full year of
service and vest 100% after four full years of service.

The 401(k) Plan qualifies 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.

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 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

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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."

FORMATION TRANSACTIONS

The Company was formed to continue and expand the real estate business of
Namiz and the Arden Predecessors. Concurrently with the consummation of the IPO
on October 9, 1996, the Company and the Operating Partnership engaged in the
transactions described below (the "Formation Transactions"), which were designed
to (i) enable the Company to raise the necessary capital to acquire the 24
Initial Properties and repay certain mortgage debt relating thereto, (ii)
provide a vehicle for future acquisition, (iii) enable the Company to qualify as
a REIT commencing with the short taxable year ended December 31, 1996, (iv)
facilitate potential securitized mortgage financings and (v) preserve certain
tax advantages for certain Arden Predecessors.

The Formation Transactions included the following:

- The Company sold to the public 18,847,500 shares of Common Stock and
issued an additional 2,827,000 shares of Common Stock pursuant to the
Underwriters' exercise of their over-allotment option.

- Pursuant to separate option agreements (the "Option Agreements"), the
Company acquired for cash from certain participants in the Formation
Transactions (the "Cash Participants") the interests owned by such Cash
Participants in certain of the Arden Predecessors and in certain of the
Initial Properties. The Company paid approximately $26.8 million from the
net proceeds of the IPO for such interests, which represented 31.7% of the
ownership interests in the Initial Properties acquired by the Company
simultaneously with the IPO.

- The Company contributed (i) the interests in the Arden Predecessors and in
the Initial Properties acquired pursuant to the Option Agreements and (ii)
the net proceeds from the IPO (after payment of the cash consideration to
the Cash Participants as described above) to the Operating Partnership in
exchange for an 88.2% general partner interest in the Operating
Partnership, representing the sole general partnership interest.

- Pursuant to separate contribution agreements (the "Contribution
Agreements"), the following additional contributions were made by certain
other participants in the Formation Transactions (the "Unit Participants")
to the Operating Partnership in exchange for OP Units: (i) the remaining
interests in the Arden Predecessors and in certain of the Initial
Properties (I.E., all interests not acquired by the Company pursuant to
the Option Agreements) and (ii) certain assets, including management
contracts relating to certain of the Properties and the contract rights to
purchase two properties (303 Glenoaks and 12501 East Imperial Highway).
The Unit Participants making such contributions (a total of seven entities
and individuals including Namiz, Richard Ziman and Victor Coleman),
received an aggregate of 2,889,071 OP Units, with a value of approximately
$57.8 million based on the IPO price of the Common Stock.

- The Company, through the Operating Partnership, borrowed $57 million
aggregate principal amount under a one year loan which was non-recourse to
the Company and the Operating

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Partnership and at the closing of the IPO was secured by
cross-collateralized and cross-defaulted first mortgage liens on nine of
the Initial Properties.

- Approximately $33 million of the net proceeds of the IPO were used by the
Operating Partnership to purchase two properties, 303 Glenoaks and 12501
East Imperial Highway.

- The Company used a portion of the proceeds of the IPO and the mortgage
financing in place at that time to repay approximately $370 million of
mortgage debt secured by the Initial Properties and indebtedness
outstanding under lines of credit assumed by the Operating Partnership in
the Formation Transactions.

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

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

RECEIPT OF OP UNITS. In exchange for their respective ownership interests
in the Arden Predecessors and the assets of Namiz, Messrs. Ziman and Coleman
became beneficial owners of a total of 2,210,876 OP Units, with a total value of
$44.2 million based on the IPO price of the Common Stock, compared to a book
value of such interests and assets contributed to the Operating Partnership of
approximately $2,000. The Company believes that the book values of these
interests and assets contributed to the Operating Partnership (which reflect the
depreciated historical cost of such interests and assets) was less than the fair
market values of such interests and assets. Any time after October 9, 1997 (the
first anniversary of the closing of the IPO), holders of OP Units issued in the
Formation Transactions, including the above-mentioned affiliates of the Company,
may, in accordance with the Partnership Agreement, exchange all or a portion of
such OP Units for cash or, at the election of the Company, shares of Common
Stock on a one-for-one basis. The Company currently expects that it will not
elect to pay cash for OP Units in connection with any such exchange request, but
instead will exchange shares of Common Stock for such OP Units. The OP Units may
provide the Unit Participants with increased liquidity and, until disposition of
certain assets contributed to the Company, with the continued deferral of the
taxable gain associated with those assets.

INCREASE IN NET TANGIBLE INVESTMENT. The Unit Participants realized 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.

REPAYMENT OF DEBT. Approximately $398 million of indebtedness secured by
the Initial Properties and indebtedness outstanding under lines of credit
assumed by the Operating Partnership was repaid in the Formation Transactions.

SPECIAL ALLOCATIONS OF INTEREST DEDUCTION. Pursuant to the Partnership
Agreement, certain Unit Participants, including Messrs. Ziman and Coleman
received special allocations of interest deduction of approximately $13.3
million in the aggregate relating to the repayment of mortgage debt on certain
of the Initial Properties.

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

ZIMAN'S PROPORTIONAL PURCHASE RIGHTS. So long as he is Chief Executive
Officer, Mr. Ziman has certain proportional purchase rights which 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 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

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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.

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, (ii) changes in
certain policies with respect to conflicts of interest must be consistent with
legal requirements, and (iii) the Company cannot take any action intended to
terminate its qualification as a REIT without the approval of the holders of
two-thirds of the outstanding Common Stock.

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 "Properties" and
"Business and Growth Strategies."

The Company expects to pursue its investment objectives primarily through
the direct ownership by the Operating Partnership and its affiliates 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.
The Company will not 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").

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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 IPO.

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 Pending Acquisitions, the debt to total market
capitalization ratio of the Company will be approximately 24.0% (20.8% 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 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

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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 or the counting of 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 IPO and its related Formation Transactions and the issuance
of OP Units in connection with the acquisition of two of the Acquired Properties
subsequent to the IPO (see "The Company--The Operating Partnership"), the
Company has not issued Common Stock, OP Units or any other securities in
exchange for property or for 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 Initial Properties and in
Namiz by the Operating Partnership are described in "Formation Transactions."

PARTNERSHIP AGREEMENT; REDEMPTION/EXCHANGE RIGHTS

The Company has entered into the Partnership Agreement with the Unit
Participants. 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 Activities--Conflict of Interest Policies" and "Partnership
Agreement--Redemption/Exchange Rights."

REGISTRATION RIGHTS

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

ACQUISITION OF PROPERTY FROM FORMER DIRECTOR

In March 1997 when Mr. Arthur Gilbert was still a director of the Company, a
majority of disinterested directors of the Board of Directors approved and the
Company acquired Mr. Gilbert's interest in 535 Brand (one of the Acquired
Properties) for a purchase price of $10.2 million.

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ACCELERATION OF OPTIONS GRANTED TO FORMER OFFICER

On February 14, 1997, Ms. Michele Byer resigned as Chief Accounting Officer
of the Company. In connection with Ms. Byer's resignation, the Compensation
Committee of the Company's Board of Directors approved the accelerated vesting
of one third of the 40,000 stock options Ms. Byer was granted in 1996.
Accordingly, Ms. Byer exercised options to purchase 13,333 shares of Common
Stock and the remaining, unaccelerated options to purchase 26,667 shares of
Common Stock were automatically terminated.

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, has 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") 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 Unit
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 91.4% 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

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immediately prior to the expiration of such purchase, tender or exchange offer
and had thereupon accepted such purchase, tender or exchange offer.

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.

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 IPO with respect to OP Units issued
in the Formation Transactions 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.

For a description of certain special redemption and exchange rights for
persons who were issued OP Units in acquisitions of Properties after the IPO,
see "The Company--The Operating Partnership."

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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.

TAX MATTERS

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

The net income or net loss of the Operating Partnership is generally
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 Treasury 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

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to the expiration of seven years from the completion of the IPO, 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 AND MANAGEMENT STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of Common Stock (or Common Stock for which OP Units are exchangeable)
for (1) each person known by the Company to be the beneficial owner of five
percent or more of the Company's outstanding Common Stock (or Common Stock for
which OP Units are exchangeable), (2) each director and each Named Executive
Officer and (3) the directors and officers of the Company as a group. Except as
indicated below, all such Common Stock is owned directly, and the indicated
person has sole voting and investment power.

<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENTAGE OF COMMON
NAME AND ADDRESS(1) COMMON STOCK STOCK OUTSTANDING(2)
- -------------------------------------------------- ------------------- ---------------------
<S> <C> <C>
FMR Corp. ........................................ 2,609,300(3) 12.03%
82 Devonshire Street
Boston, MA 02109
Richard S. Ziman.................................. 1,758,306(4) 7.50%
Victor J. Coleman................................. 1,217,766(5) 5.32%
Diana M. Laing.................................... 5,000 *
Andrew J. Sobel................................... 3,750 *
Herbert L. Porter................................. 1,250 *
Carl D. Covitz.................................... -- --
Larry S. Flax..................................... 5,000 *
Steven C. Good.................................... -- --
Kenneth B. Roath.................................. -- --
All directors and officers as a group (9
persons)........................................ 2,215,876 9.27%
</TABLE>

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

* Less than one percent.

(1) Unless otherwise indicated, the address for each of the persons listed is
9100 Wilshire Boulevard, East Tower, Suite 700, Beverly Hills, CA 90212

(2) For Messrs. Ziman and Coleman, 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.

(3) According to a Schedule 13G filed with the SEC, the person has sole voting
power with respect to 145,800 of such shares and sole dispositive power of
all 2,609,300 of such shares as of February 10, 1997.

(4) Includes (a) 775,196 shares held by an entity 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) 353,212 shares owned by entities directly and
indirectly owned 100% by Mr. Ziman, and (c) 136,674 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 interests.

(5) Includes (a) 775,196 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) 99,458 shares owned by an entity owned 100% by Mr.
Coleman, and (c) 343,112 shares owned of record by Victor J. Coleman and
Wendy Coleman, Trustees, The Victor and Wendy Coleman Family Trust dated
March 26, 1997 of which Mr. Coleman and his wife, as trustees, have sole
voting and dispositive power.

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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, 29,692,833 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 shares of stock 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

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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 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 continue 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 is required to,

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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 are 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.

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 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. Except as otherwise described above, any change in the
Ownership Limit would require an amendment to the Charter. Amendments to the
Charter require the affirmative vote of holders owning at least two-thirds of
the shares of the Company's capital stock outstanding and entitled to vote
thereon.

Pursuant to 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 such other limit as provided in 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, or such other 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 excess shares (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 or such other limit as provided by the Charter or as otherwise
permitted by the Board of Directors, and distribute to the Prohibited Transferee
or Prohibited Owner an amount equal to the lesser of the price paid by the
Prohibited Transferee or Prohibited Owner 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

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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
or Prohibited Owner, as applicable, prior to the discovery by the Company that
such shares had 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
stock held in the trust. Upon such a sale to the Company, the interest of the
Beneficiary in the shares sold shall terminate and the Trustee shall distribute
the net proceeds of the sale to the Prohibited Transferee or Prohibited Owner.

If any purported transfer of shares of Common Stock would cause the Company
to be beneficially owned by fewer than 100 persons, such transfer will be null
and void in its entirety, and the intended transferee shall acquire no rights to
the stock.

All certificates representing shares of Common Stock will bear a legend
referring to the restrictions described above. The foregoing ownership
limitations 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.

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 or such other
limit as provided by the Charter or as otherwise permitted by the Board of
Directors.

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

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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 currently
has one vacancy on its seven director 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 July 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.

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

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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, and such resolutions also
require that any decision to opt back in be subject to the approval of holders
of a majority of the shares of Common Stock.

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 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. Although there can be no assurance that such
provision will not be amended or eliminated at any time in the future, the
Company's Board of Directors has resolved that the provision may not be amended
or eliminated without the approval of holders of at least a majority of the
shares of Common Stock.

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 shares of stock
and the classification

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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.

SHARES AVAILABLE FOR FUTURE SALE

GENERAL

Upon the completion of the Offering, the Company will have outstanding
31,692,833 shares of Common Stock (33,192,833 shares if the Underwriters'
overallotment option is exercised in full). In addition, 2,971,756 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 Unit
Participants or acquired by any Unit 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

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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 one year has 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 sale provisions, notice requirements and the availability
of current public information about the Company. If two 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.

In connection with the IPO, Messrs. Ziman and Coleman 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 IPO 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 IPO. 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 issued options to purchase
approximately 890,000 shares of Common Stock to directors, executive officers
and certain key employees prior to the completion of the IPO and has reserved
596,667 additional shares for future issuance under the Stock Incentive Plan.
Prior to the expiration of the initial 12-month period following the
consummation of the IPO, 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.

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
such sales occur, could adversely affect prevailing market prices of the Common
Stock. See "Risk Factors--Possible Adverse Effect on Common Stock Price of
Shares Available for Future Sale" and "Partnership Agreement--Transferability of
Interests."

REGISTRATION RIGHTS

The Company has granted the Unit Participants 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 IPO. 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 CONSIDERATIONS

The following summary of material federal income tax considerations
regarding the Company and the Offering is based on current law, is for general
information only and is not tax advice. The information set

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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, certain financial institutions, life insurance companies, dealers in
securities or currencies, stockholders holding Common Stock as part of a
conversion transaction, as part of a hedge or hedging transaction, or as a
position in a straddle for tax purposes, tax-exempt organizations (except to the
extent discussed under the heading "Taxation of Tax-Exempt Stockholders") or
foreign corporations or partnerships 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 stockholders.

The information in this section is based on the Code, current, temporary and
proposed Treasury Regulations promulgated thereunder, the legislative history of
the Code, current administrative interpretations and practices of the IRS
(including its practices and policies as expressed in certain private letter
rulings which are not binding on the IRS except with respect to the particular
taxpayer who requests and receives such ruling), and court decisions, all as of
the date hereof. No assurance can be given that future legislation, Treasury
Regulations, administrative interpretations and practices and/or court decisions
will not adversely affect existing interpretations thereof. Any such change
could apply retroactively to transactions preceeding the date of the change. The
Company has not requested, and does not plan to request, any ruling from the IRS
concerning the tax treatment of the Company or the Operating Partnership. Thus,
no assurance can be provided that the statements set forth herein (which are, in
any event, not binding on the IRS or courts) will not be challenged by the IRS
or will be sustained by a court if so challenged.

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 has been organized and operated 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 was organized in conformity with the requirements for
qualification as a REIT, and its proposed method of operation will enable it to
continue 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

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fashion. Moreover, such qualification and taxation as a REIT depends upon the
Company's ongoing 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" (defined generally as property acquired by
the Company through foreclosure or otherwise after a default on a loan secured
by the property or a lease of the 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 Treasury 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,

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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).

The Company believes that it has issued sufficient shares of Common Stock
with sufficient diversity of ownership 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 has 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 has and intends to continue 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, subject to certain exceptions in the year in which the
Company is liquidated, 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 is deemed to have commenced on the
date of acquisition.

Rents received by the Company 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

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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 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 has received since the IPO certain 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, however, has recently discontinued all management activities with
respect to third party owned properties and believes that the aggregate amount
of its nonqualifying income in any taxable year, including the aforementioned
management 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 100% tax would be
imposed on an amount equal to (a) the gross income attributable to the greater
of the amount by which the Company failed the 75% or 95% test multiplied by (b)
a fraction intended to reflect the Company's profitability, 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

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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 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 has and intends to continue to maintain
adequate records of the value of its assets in order 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 excess of the
net income, if any, from foreclosure property over the tax imposed on such
income, minus (ii) the excess of the sum of certain items of noncash income
(I.E., income attributable to leveled stepped rents, original issue discount or
purchase money debt, or a like-kind exchange that is later determined to be
taxable) over 5% of the "REIT taxable income" as described in clause (i)(a)
above. 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
believes that it has and intends to continue 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.

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The Company's REIT taxable income has been and is expected to continue to 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.

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. In addition, a recent federal budget proposal
contains language which, if enacted in its present form, would result in the
immediate taxation of all gain inherent in a C corporation's assets upon an
election by such corporation to become a REIT for taxable years beginning after
January 1, 1998, which could effectively preclude the Company from re-electing
REIT status following a termination of its REIT qualification.

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 otherwise available with respect
to dividends received by U.S. Stockholders

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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 or her 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
or her 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 or her 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 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."

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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
(generally, shares of Common Stock, the acquisition of which was financed
through a borrowing by the tax exempt stockholder) 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 if 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" 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 is not now, and does not in the future 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 including, for example, if the investment in the Company is
connected to the conduct by a Non-U.S. Stockholder of a U.S. trade or business.
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.

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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 for
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 for
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. The Company
has and expects to continue to withhold United States federal income tax at the
rate of 30% on the gross amount of any dividend paid to a Non-U.S. Stockholder
unless (i) a lower treaty rate applies and the required form evidencing
eligibility for that reduced rate is filed with the Company, or (ii) the
Non-U.S. Stockholder files an IRS Form 4224 with the Company claiming that the
dividend is "effectively connected" income.

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. For FIRPTA withholding
purposes (discussed below), such distributions (I.E., distributions that are not
made out of earnings and profits) will be treated as consideration for the sale
or exchange of shares of Common Stock or Preferred 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 or her
stock, the tax treatment of which is described below. As a result of a
legislative change made by the Small Business Job Protection Act of 1996, it
appears that the Company will be required to withhold 10% of any distribution in
excess of the Company's current and accumulated earnings and profits.
Consequently, although the Company intends to withhold at a rate of 30% on the
entire amount of any distribution (or a lower applicable treaty rate), to the
extent that the Company does not do so, any portion of a distribution not
otherwise subject to withholding at a rate of 30% (or a lower applicable treaty
rate) will be subject to withholding at a rate of 10%. 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

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States trade or business, in which case the Non-U.S. Stockholder will be subject
to the same treatment as domestic stockholders with 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. A Non-U.S.
Stockholder would thus generally be entitled to offset its gross income by
allowable deductions and would pay tax on the resulting taxable income 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 and is not entitled to treaty relief or exemption, 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. To the extent that such withholding
exceeds the actual tax owed by the Non-U.S. Stockholder, the Non-U.S.
Stockholder may claim a refund from the IRS.

The Company or any nominee (E.G., a broker holding shares in street name)
may rely on a certificate of non-foreign status on Form W-8 or Form W-9 to
determine whether withholding is required on gains realized from the disposition
of United States real property interests. A domestic person who holds shares of
Common Stock or Preferred Stock on behalf of a Non-U.S. Stockholder will
generally bear the burden of withholding, unless the Company has properly
designated the appropriate portion of a distribution as a capital gain dividend.

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 the Foreign Investment in Real Property
Tax Act of 1980 ("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
it is 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 (i) 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, which nonresident alien individual
will be subject to a 30% United States withholding tax on the amount of such
individual's gain, or (ii) the investment in 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 holders (except that a 30% branch profits tax may also apply as
described above).

If the Company does not qualify as or ceases to be a
"domestically-controlled REIT," 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"
unless the shares are "regularly traded" (as defined by applicable Treasury
Regulations) on an established securities market (E.G., the New York Stock
Exchange) and the selling Non-U.S. Stockholder held no more than 5% (after
applying certain constructive ownership rules) of the shares of Common Stock
during the shorter of (i) the period during which the taxpayer held such shares,
or (ii) the 5-year period ending on the date of the disposition of such shares.
If gain on the sale or exchange of shares of Common Stock were subject to

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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 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 are 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

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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.

Prior to January 1, 1997, an organization formed as a partnership or a
limited liability company was treated as a partnership for Federal income tax
purposes rather than as a corporation only if it had no more than two of the
four corporate characteristics that the Treasury Regulations in effect at that
time used to distinguish a partnership from a corporation for tax purposes.
These four characteristics were (i) continuity of life, (ii) centralization of
management, (iii) limited liability and (iv) free transferability of interests.
Under final Treasury Regulations which became effective January 1, 1997, the
four factor test has been eliminated and an entity formed as a partnership or as
a limited liability company will be taxed as a partnership for Federal income
tax purposes unless it specifically elects otherwise. These newly promulgated
Treasury Regulations provide that the IRS will not challenge the classification
of an existing partnership or limited liability company for tax periods prior to
January 1, 1997, so long as (a) the entity had a reasonable basis for its
claimed classification, (b) the entity and all its members recognized the
federal income tax consequences of any changes in the entity's classification
within the 60 months prior to January 1, 1997, and (c) neither the entity nor
any member of the entity had been notified in writing on or before May 8, 1996,
that the classification of the entity was under examination by the IRS. Unless
it elects otherwise, a domestic business entity not otherwise classified as a
corporation, which has at least two members and was in existence prior to
January 1, 1997, will have the same classification for federal income tax
purposes that it claimed under the Treasury Regulations in effect prior to that
date. The Operating Partnership intends to claim classification as a partnership
for its taxable year ending December 31, 1996.

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 certain 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.

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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 are 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 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
elected to account for Book-Tax Differences with respect to the Properties
initially contributed to the Operating Partnership using the "traditional
method."

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

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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 CONSIDERATIONS

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 THE
EMPLOYEE RETIREMENT INCOME SECURITY ACT, AS AMENDED ("ERISA") AND THE PROHIBITED
TRANSACTIONS PROVISIONS OF SECTION 4975 OF THE CODE THAT MAY BE RELEVANT TO A
PROSPECTIVE PURCHASER (INCLUDING A PROSPECTIVE PURCHASER THAT IS AN EMPLOYEE
BENEFIT PLAN SUBJECT TO ERISA, ANOTHER TAX-QUALIFIED PENSION, PROFIT SHARING OR
STOCK BONUS PLAN, AN INDIVIDUAL RETIREMENT ACCOUNT OR ANNUITY ("IRA") OR A
MEDICAL SAVINGS ACCOUNT (A "MSA"). 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 TO
ERISA, A TAX-QUALIFIED PENSION, PROFIT SHARING OR STOCK BONUS PLAN, AN IRA, A
MSA, 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 AND OTHER LAWS WITH RESPECT TO THE PURCHASE, OWNERSHIP,
OR SALE OF SHARES OF THE COMMON STOCK BY SUCH PLAN, IRA OR MSA.

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, the ERISA Plan 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

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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 Tax-Exempt Stockholders."

The fiduciary of an ERISA Plan, or an IRA, a MSA or a qualified pension,
profit sharing or stock bonus plan not subject to ERISA, that is subject to
Section 4975 of the Code ("Other Plans") should ensure that the purchase of
Common Stock will not constitute a prohibited transaction under Section 4975 of
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, AN OTHER PLAN OR
ANOTHER EMPLOYEE BENEFIT 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 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
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

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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 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 of Maryland law 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. ("Lehman"), Alex. Brown & Sons Incorporated, A.G. Edwards & Sons,
Inc., Morgan Stanley & Co. Incorporated, Smith Barney Inc., EVEREN Securities,
Inc. 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>
UNDERWRITER SHARES
- ------------------------------------------------------------------------------- -------------
<S> <C>
Lehman Brothers Inc............................................................
Alex. Brown & Sons Incorporated................................................
A.G. Edwards & Sons, Inc.......................................................
Morgan Stanley & Co. Incorporated..............................................
Smith Barney Inc...............................................................
EVEREN Securities, Inc.........................................................
Raymond James & Associates, Inc................................................
-------------
Total...................................................................... 10,000,000
-------------
-------------
</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 1,500,000 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.

In connection with the IPO, Messrs. Ziman and Coleman 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 IPO without the consent of Lehman. Such
restrictions do not apply to any OP Units or other shares of Common Stock
purchased or otherwise acquired by Messrs. Ziman or Coleman following the IPO.

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

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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.

Certain of the Underwriters and their affiliates have from time to time
performed, and may continue to perform in the future, various investment banking
and commercial services for the Company, for which they received customary
compensation. In connection with the IPO, Lehman received an advisory fee equal
to 0.5% of the gross proceeds of the IPO for advisory services in connection
with the evaluation, analysis and structuring of the Company's formation as a
REIT, and Lehman Brothers Holdings, Inc., an affiliate of Lehman ("Lehman
Holdings") was repaid mortgage loans in the principal amount of approximately
$202 million made by it to certain affiliates of the Company prior to the IPO.
On June 11, 1997, the Company entered into the $175 million Mortgage Financing
with Lehman Holdings. The Mortgage Financing refinanced the Company's then
existing $175 million mortgage loan from Lehman Holdings.

Until the distribution of the Common Stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the Underwriters and
certain selling group members to bid for and purchase shares of Common Stock. As
an exception to these rules, the Representatives are permitted to engage in
certain transactions that stabilize the price of the Common Stock. Such
transactions may consist of bids or purchases for the purpose of pegging, fixing
or maintaining the price of the Common Stock.

If the Underwriters create a short position in the Common Stock in
connection with the Offering (I.E., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus), the Representatives
may reduce that short position by purchasing Common Stock in the open market.
The Representatives also may elect to reduce any short position by exercising
all or part of the over-allowment option described herein.

The Representatives also may impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representatives purchase
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group members
who sold those shares as part of the Offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
the Offering.

Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the
Representatives will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.

EXPERTS

The consolidated balance sheet of Arden Realty, Inc. and the combined
balance sheet of the Arden Predecessors as of December 31, 1996 and 1995,
respectively, and the related consolidated statements of operations,
stockholders' equity and cash flows of Arden Realty, Inc. for the period from
October 9, 1996 (commencement of operations) to December 31, 1996 and the
related combined statements of operations, owners' equity and cash flows of the
Arden Predecessors for the period from January 1, 1996 to October 8, 1996 and
for the years ended December 31, 1995 and 1994; the combined statement of
revenue and certain expenses of the 1996 Pre IPO Properties for the year ended
December 31, 1995; the combined statement of revenue and certain expenses of 303
Glenoaks and 12501 East Imperial Highway for the year ended December 31, 1995;
the statements of revenue and certain expenses of 10351 Santa Monica and 2730
Wilshire for the twelve months ended October 31, 1996; the combined statement of
revenue and certain expenses of Burbank Plaza and California Federal Building
for the twelve months ended October 31, 1996; the statement of revenue and
certain expenses of Center Promenade for the period from January 1, 1996 to

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December 17, 1996; the statement of revenue and certain expenses of Los Angeles
Corporate Center for the period from January 1, 1996 to December 18, 1996; the
statement of revenue and certain expenses of 5200 West Century for the period
from January 1, 1996 to December 19, 1996; the statement of revenue and certain
expenses of Sumitomo Bank Building for the period from January 1, 1996 to
December 20, 1996; the statement of revenue and certain expenses of 10350 Santa
Monica for the period from January 1, 1996 to December 27, 1996; the statements
of revenue and certain expenses of 535 Brand for each of the three years in the
period ended December 31, 1996; the statements of revenue and certain expenses
of 10780 Santa Monica, Noble Professional Center, South Bay Centre, 8383
Wilshire, Parkway Center, Centerpointe La Palma, Pacific Gateway II, Crown
Cabot, and 1100 Glendon for the year ended December 31, 1996; the combined
statement of revenue and certain expenses of Whittier Financial Center,
Clarendon Crest and California Twin Centre for the year ended December 31, 1996;
and the combined statement of revenue and certain expenses of 1000 Town Center
and Mariner Court for the year ended December 31, 1996, 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. In addition, the description of federal income tax
consequences contained in this Prospectus under the heading "Federal Income Tax
Considerations" is based upon the opinion of Latham & Watkins. Latham & Watkins
will rely upon the opinion of Ballard Spahr Andrews & Ingersoll as to all
matters of Maryland law. Certain legal matters will be passed upon for the
Underwriters by Hogan & Hartson L.L.P.

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 is 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 is required to file reports and other information with the
Commission pursuant to the Securities Exchange Act of 1934. In addition to
applicable legal or NYSE requirements, if any, holders of shares of Common Stock
will receive annual reports containing audited financial statements with a
report thereon by the Company's independent certified public accounts, and
quarterly reports containing unaudited financial information for each of the
first three quarters of each fiscal year.

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<PAGE>
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.

"1996 ECONOMIC REPORT" means THE 1996 ECONOMIC REPORT OF THE GOVERNOR OF
CALIFORNIA.

"401(K) PLAN" means the Arden Realty Section 401(k) Savings/Retirement Plan.

"ACM" means asbestos-containing materials.

"ACQUIRED PROPERTIES" means the 21 Properties acquired by the Company since
its IPO.

"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 May 1, 1997 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 PREDECESSORS" means Namiz and certain Namiz affiliated entities which
were engaged in owning, acquiring, managing, leasing and renovating office
properties in Southern California prior to the Company's formation and the
consummation of its IPO.

"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 PEER GROUP" means for each of the Properties and Pending Acquisitions
the group of properties identified by Cushman & Wakefield that are most similar
in terms of quality, market position and tenant appeal to such property.

"C&W PEER GROUP RENT" means, for each of the Properties and Pending
Acquisitions, the mid-point of the range of the weighted average annual asking
rents (for full service gross leases only) for such property's C&W Peer Group
properties as of approximately May 1, 1997. Any net leases for properties in the
applicable C&W Peer Group have been adjusted to full-service gross leases by
adding estimated recoverable expenses for similar properties.

"CASH AVAILABLE FOR DISTRIBUTION" means Funds from Operations less estimated
reserves for non-revenue enhancing leasing commissions, tenant improvements and
capital expenditures.

"CASH PARTICIPANTS" means the participants in the Formation Transactions
who, pursuant to the Option Agreements, received cash from the Company in
exchange for their interests in the Arden Predecessors and in certain of the
Initial Properties.

"CHARTER" means the charter of the Company.

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"CNB CREDIT FACILITY" means the Company's unsecured line of credit with a
total commitment of $10,000,000 from City National Bank.

"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.

"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, the Operating Partnership and
their subsidiaries.

"CONTRIBUTION AGREEMENTS" means separate contribution agreements between (i)
the Operating Partnership and the Unit Participants whereby certain interests in
the Arden Predecessors and in certain of the Initial Properties held by such
Unit Participants were contributed to the Operating Partnership in exchange for
OP Units and (ii) the Operating Partnership and Namiz whereby Namiz contributed
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.

"CPI" means the Consumer Price Index.

"CREDIT FACILITY" means the Company's $300 million credit facility with a
group of banks led by Wells Fargo.

"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 C corporation.

"ENVIRONMENTAL LAWS" means the various Federal, state and local laws,
ordinances and regulations relating to the protection of the environment.

"ENVIRONMENTAL SITE ASSESSMENTS" means the Phase I Environmental Assessments
and other environmental investigations performed by independent environmental
consultants at the Properties and Pending Acquisitions.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

"ERISA PLAN" means an employee benefit plan subject to ERISA.

"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

"FORMATION TRANSACTIONS" means the transactions described herein under the
heading "Formation Transactions" which were consummated in connection with the
Company's formation and IPO in October 1996.

"GAAP" means generally accepted accounting principles.

"INITIAL PROPERTIES" means the initial 24 office properties which comprised
the Company's portfolio upon consummation of the IPO.

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"INTERESTED STOCKHOLDER" means any person who beneficially owns ten percent
or more of the voting power of a corporation's shares.

"IPO" means the Company's initial public offering of Common Stock which
closed in October of 1996.

"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 (irrespective of whether such space is
currently occupied).

"LEHMAN" means Lehman Brothers, Inc.

"LEHMAN HOLDINGS" means Lehman Brothers Holdings, Inc., an affiliate of
Lehman.

"LENDERS" means the group of banks led by Wells Fargo which extended the
$300 million Credit Facility to the Company.

"LIMITED PARTNERS" means the limited partners of the Operating Partnership.

"LAEDC" means the Los Angeles Economic Development Corporation.

"MGCL" means the Maryland General Corporation Law, as amended.

"MORTGAGE FINANCING" means the new $175 million mortgage financing from
Lehman Holdings which the Company executed on June 11, 1997 to refinance its
previously existing $175 million mortgage financing.

"MORTGAGE FINANCING PROPERTIES" means the 18 Properties, held by a special
purpose subsidiary of the Company, which are subject to cross-collateralized and
cross-defaulted first mortgage liens as security for the Mortgage Financing.

"MSA" means a medical savings account.

"NAMED EXECUTIVE OFFICERS" means the Chief Executive Officer and the
Company's other four most highly compensated executive officers.

"NAMIZ" means NAMIZ, Inc., a California corporation formerly known as Arden
Realty Group, Inc., a California corporation, and the Company's immediate
predecessor.

"NAREIT" means the National Association of Real Estate Investment Trusts.

"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
the Cash Participants whereby certain interests in the Arden Predecessors and in
certain of the Initial Properties were transferred to the Company in exchange
for cash concurrently with the IPO.

"OP UNITS" means the limited and general partner interests in the Operating
Partnership.

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"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.

"PENDING ACQUISITIONS" means the nine additional office properties which the
Company expects to acquire. The Company has executed eight contracts and entered
one letter of intent to acquire the nine Pending Acquisitions within 60 days
after the Offering.

"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.

"PMSA" means primary metropolitan statistical area.

"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 or such other limit as provided
by the Charter or as otherwise permitted by the Board of Directors.

"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 45 office properties referred to herein which
comprise the Company's portfolio of Southern California office properties.

"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 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.

"REPRESENTATIVES" means Lehman Brothers Inc., Alex. Brown & Sons
Incorporated, A.G. Edwards & Sons, Inc., Morgan Stanley & Co. Incorporated,
Smith Barney Inc., EVEREN Securities, Inc. and Raymond James & Associates, Inc.

"RESTRICTED SHARES" means the shares of Common Stock acquired by any Unit
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.

"SFAS" means Statements of Financial Accounting Standards.

"STOCK INCENTIVE PLAN" means the 1996 Stock Incentive Plan of Arden Realty,
Inc. and Arden Realty Limited Partnership.

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"SWAP AGREEMENT" means the interest rate floor and cap transactions with a
notional amount of $155 million which the Company entered, effective January 2,
1997, to convert floating rate liabilities to fixed rate liabilities.

"TOTAL ACQUISITION COST" means all purchase costs, closing costs and
anticipated capital expenditures for, and carrying costs during, renovations.

"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, A.G. Edwards & Sons, Inc.,
Morgan Stanley & Co. Incorporated, Smith Barney Inc., EVEREN Securities, Inc.,
and Raymond James & Associates, Inc. are acting as representatives.

"UNIT PARTICIPANTS" means the participants in the Formation Transactions
who, pursuant to the Contribution Agreements, received OP Units from the
Operating Partnership in exchange for their interests in the Arden Predecessors,
certain of the Initial Properties and certain other assets.

"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.

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INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

Pro Forma Condensed Consolidated Financial Statements (Unaudited):....... F-6

Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1997
(Unaudited).......................................................... F-7

Pro Forma Condensed Consolidated Statement of Operations for the Three
Months Ended March 31, 1997 (Unaudited).............................. F-8

Pro Forma Condensed Consolidated Statement of Operations for the Year
Ended December 31, 1996 (Unaudited).................................. F-9

Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited).......................................................... F-10

ARDEN REALTY, INC. AND THE ARDEN PREDECESSORS

Report of Independent Auditors......................................... F-17

Consolidated Balance Sheets as of March 31, 1997 (Unaudited) and
December 31, 1996 and Combined Balance Sheet as of December 31,
1995................................................................. F-18

Consolidated Statements of Operations for the three months ended March
31, 1997 (Unaudited) and the period from October 9, 1996 to December
31, 1996 and Combined Statements of Operations for the three months
ended March 31, 1996 (Unaudited) and for the period January 1, 1996
to October 8, 1996 and for the years ended December 31, 1995 and
1994................................................................. F-19

Consolidated Statements of Stockholders' Equity for the three months
ended March 31, 1997 (Unaudited) and for the period from October 9,
1996 to December 31, 1996 and Combined Statements of Owners' Equity
for the period from January 1, 1996 to October 8, 1996 and for the
years ended December 31, 1995 and 1994............................... F-20

Consolidated Statements of Cash Flows for the three months ended March
31, 1997 (Unaudited) and the period from October 9, 1996 to December
31, 1996 and Combined Statements of Cash Flows for the three months
ended March 31, 1996 (Unaudited) and for the period January 1, 1996
to October 8, 1996 and for the years ended December 31, 1995 and
1994................................................................. F-21

Notes to Financial Statements.......................................... F-22

Schedule III--Commercial Office Properties and Accumulated
Depreciation......................................................... F-39

INITIAL PROPERTIES ACQUIRED IN 1996
1996 PRE IPO PROPERTIES

Combined Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-41

Combined Statement of Revenue and Certain Expenses for the Year Ended
December 31, 1995.................................................... F-42

Notes to Combined Statement of Revenue and Certain Expenses............ F-43
</TABLE>

F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
303 GLENOAKS AND 12501 EAST IMPERIAL HIGHWAY

Combined Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-45

Combined Statement of Revenue and Certain Expenses for the Year Ended
December 31, 1995.................................................... F-46

Notes to Combined Statement of Revenue and Certain Expenses............ F-47

PROPERTIES ACQUIRED IN 1996 SUBSEQUENT TO THE IPO
10351 SANTA MONICA

Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-49

Statement of Revenue and Certain Expenses for the Twelve Months Ended
October 31, 1996..................................................... F-50

Notes to Statement of Revenue and Certain Expenses..................... F-51

2730 WILSHIRE

Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-52

Statement of Revenue and Certain Expenses for the Twelve Months Ended
October 31, 1996..................................................... F-53

Notes to Statement of Revenue and Certain Expenses..................... F-54

BURBANK EXECUTIVE PLAZA AND CALIFORNIA FEDERAL BUILDING

Combined Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-55

Combined Statement of Revenue and Certain Expenses for the Twelve
Months Ended October 31, 1996........................................ F-56

Notes to Combined Statement of Revenue and Certain Expenses............ F-57

CENTER PROMENADE

Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-58

Statement of Revenue and Certain Expenses for the Period January 1,
1996 to December 17, 1996............................................ F-59

Notes to Statement of Revenue and Certain Expenses..................... F-60

LOS ANGELES CORPORATE CENTER

Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-61

Statement of Revenue and Certain Expenses for the Period January 1,
1996 to December 18, 1996............................................ F-62

Notes to Statement of Revenue and Certain Expenses..................... F-63
</TABLE>

F-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
5200 WEST CENTURY

Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-64

Statement of Revenue and Certain Expenses for the Period January 1,
1996 to December 19, 1996............................................ F-65

Notes to Statement of Revenue and Certain Expenses..................... F-66

SUMITOMO BANK BUILDING

Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-67

Statement of Revenue and Certain Expenses for the Period January 1,
1996 to December 20, 1996............................................ F-68

Notes to Statement of Revenue and Certain Expenses..................... F-69

10350 SANTA MONICA

Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-70

Statement of Revenue and Certain Expenses for the Period January 1,
1996 to December 27, 1996............................................ F-71

Notes to Statement of Revenue and Certain Expenses..................... F-72

THE 1997 ACQUISITIONS
535 BRAND

Statements of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-73

Statements of Revenue and Certain Expenses for the Years Ended December
31, 1996, 1995 and 1994.............................................. F-74

Notes to Statements of Revenue and Certain Expenses.................... F-75

WHITTIER FINANCIAL CENTER, CLARENDON CREST AND CALIFORNIA TWIN CENTRE

Combined Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-76

Combined Statement of Revenue and Certain Expenses for the Year Ended
December 31, 1996.................................................... F-77

Notes to Combined Statement of Revenue and Certain Expenses............ F-78

10780 SANTA MONICA

Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-80

Statement of Revenue and Certain Expenses for the Year Ended December
31, 1996............................................................. F-81

Notes to Statement of Revenue and Certain Expenses..................... F-82
</TABLE>

F-3
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
NOBLE PROFESSIONAL CENTER

Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-83

Statement of Revenue and Certain Expenses for the Year Ended December
31, 1996............................................................. F-84

Notes to Statement of Revenue and Certain Expenses..................... F-85

SOUTH BAY CENTRE

Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-86

Statement of Revenue and Certain Expenses for the Year Ended December
31, 1996............................................................. F-87

Notes to Statement of Revenue and Certain Expenses..................... F-88

8383 WILSHIRE

Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-89

Statement of Revenue and Certain Expenses for the Year Ended December
31, 1996............................................................. F-90

Notes to Statement of Revenue and Certain Expenses..................... F-91

PARKWAY CENTER

Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-92

Statement of Revenue and Certain Expenses for the Year Ended December
31, 1996............................................................. F-93

Notes to Statement of Revenue and Certain Expenses..................... F-94

CENTERPOINTE LA PALMA

Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-95

Statement of Revenue and Certain Expenses for the Year Ended December
31, 1996............................................................. F-96

Notes to Statement of Revenue and Certain Expenses..................... F-97

PENDING ACQUISITIONS
1100 GLENDON

Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-98

Statement of Revenue and Certain Expenses for the Year Ended December
31, 1996............................................................. F-99

Notes to Statement of Revenue and Certain Expenses..................... F-100
</TABLE>

F-4
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PACIFIC GATEWAY II

Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-101

Statement of Revenue and Certain Expenses for the Year Ended December
31, 1996............................................................. F-102

Notes to Statement of Revenue and Certain Expenses..................... F-103

1000 TOWN CENTER AND MARINER COURT

Combined Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-104

Combined Statement of Revenue and Certain Expenses for the Year Ended
December 31, 1996.................................................... F-105

Notes to Combined Statement of Revenue and Certain Expenses............ F-106

CROWN CABOT

Statement of Revenue and Certain Expenses:

Report of Independent Auditors......................................... F-107

Statement of Revenue and Certain Expenses for the Year Ended December
31, 1996............................................................. F-108

Notes to Statement of Revenue and Certain Expenses..................... F-109
</TABLE>

F-5
<PAGE>
ARDEN REALTY, INC.

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

The following unaudited pro forma condensed consolidated balance sheet as of
March 31, 1997 is presented as if the following transactions had been
consummated on March 31, 1997: (i) the acquisition of properties acquired
subsequent to March 31, 1997 (the "Second Quarter 1997 Acquisitions"); (ii) the
acquisition of the Pending Acquisitions (as described in this prospectus); (iii)
the closings of the Mortgage Financing and the Credit Facility; and (iv) the
completion of the Offering. The following unaudited pro forma condensed
consolidated statements of operations for the three months ended March 31, 1997
and for the year ended December 31, 1996 are presented as if: (i) the
consummation of the IPO, the Offering and related Formation Transactions; (ii)
the acquisition of properties acquired during 1996 (the "1996 Acquisitions");
(iii) the acquisition of properties acquired during 1997 (the "1997
Acquisitions"); (iv) the acquisition of the Pending Acquisitions; and (v) the
closing of the Mortgage Financing and the amendment to the Credit Facility had
occurred at January 1, 1996. These pro forma condensed consolidated financial
statements should be read in conjunction with the historical consolidated and
combined financial statements and notes thereto of the Company and the Arden
Predecessors included elsewhere in this Prospectus.

The pro forma condensed consolidated financial statements are not
necessarily indicative of what the actual financial position or results of
operations would have been had the Company completed the transactions described
above, nor do they purport to represent the future financial position of the
Company.

F-6
<PAGE>
ARDEN REALTY, INC.

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF MARCH 31, 1997
(UNAUDITED)
(IN THOUSANDS)

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-----------------------------------------------------------------
SECOND
QUARTER ARDEN
ARDEN 1997 PENDING OTHER REALTY, INC.
REALTY, INC. ACQUISITIONS(A) OFFERING(B) ACQUISITIONS(C) ADJUSTMENTS(D) PRO FORMA
------------- ------------- ------------- ------------- ----------------- -------------

<S> <C> <C> <C> <C> <C> <C>
ASSETS

Commercial office
properties--net............... $ 580,636 $ 188,450 $ -- $ 139,630 $ -- $ 908,716
Cash and cash equivalents....... 822 (800) 246,644 (137,480) (101,314) --
(3,872)
(4,000)
Restricted cash................. -- -- -- -- 4,000 4,000
Rents and other receivables..... 2,093 -- -- -- -- 2,093
Deferred rent................... 6,609 -- -- -- -- 6,609
Prepaid financing and leasing
costs--net.................... 4,485 -- -- -- 3,872 8,357
Prepaid expenses and other
assets........................ 4,693 (850) -- (150) -- 3,693
------------- ------------- ------------- ------------- ----------------- -------------
Total assets................ $ 599,338 $ 186,800 $ 246,644 $ 2,000 $ (101,314) $ 933,468
------------- ------------- ------------- ------------- ----------------- -------------
------------- ------------- ------------- ------------- ----------------- -------------

LIABILITIES AND STOCKHOLDERS' EQUITY

Mortgage loans payable.......... $ 137,800 $ 37,200 $ -- $ -- $ -- $ 175,000
Unsecured lines of credit....... 60,000 149,600 -- 2,000 (101,314) 110,286
Accounts payable and accrued
expenses...................... 9,243 -- -- -- -- 9,243
Security deposits............... 3,958 -- -- -- -- 3,958
Dividends and distributions
payable....................... 8,677 -- -- -- -- 8,677
------------- ------------- ------------- ------------- ----------------- -------------
Total liabilities........... 219,678 186,800 -- 2,000 (101,314) 307,164
------------- ------------- ------------- ------------- ----------------- -------------
Minority interests in Operating
Partnership................... 47,563 -- -- -- -- 47,563
------------- ------------- ------------- ------------- ----------------- -------------
Stockholders' equity:
Common Stock.................. 217 -- 100 -- -- 317
Additional paid-in capital.... 331,880 -- 246,544 -- -- 578,424
Accumulated deficit........... -- -- -- -- -- --
Retained earnings............. -- -- -- -- -- --
------------- ------------- ------------- ------------- ----------------- -------------
Total stockholders'
equity.................... 332,097 -- 246,644 -- -- 578,741
------------- ------------- ------------- ------------- ----------------- -------------
Total liabilities and
stockholders' equity...... $ 599,338 $ 186,800 $ 246,644 $ 2,000 $ (101,314) $ 933,468
------------- ------------- ------------- ------------- ----------------- -------------
------------- ------------- ------------- ------------- ----------------- -------------
</TABLE>

See accompanying notes.

F-7
<PAGE>
ARDEN REALTY, INC.

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
---------------------------------------------
PRE-ACQUISITION
PERIOD FOR
THE ARDEN
ARDEN 1997 PENDING OTHER REALTY, INC.
REALTY, INC. ACQUISITIONS(F) ACQUISITIONS(G) ADJUSTMENTS PRO FORMA
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES
Rental.................................... $ 21,892 $ 6,960 $ 4,205 $ 387(H) $ 33,444
Tenant reimbursements..................... 958 305 104 -- 1,367
Parking--net.............................. 1,490 346 105 -- 1,941
Other..................................... 576 67 26 -- 669
------------- ------ ------ ------------- -------------
24,916 7,678 4,440 387 37,421
Other income................................ 54 -- -- -- 54
------------- ------ ------ ------------- -------------
Total revenues.......................... 24,970 7,678 4,440 387 37,475

EXPENSES
Property expenses......................... 7,894 2,540 1,476 279(J) 12,189
REIT general and administrative........... 918 -- -- 82(K) 1,000
Interest.................................. 3,024 -- -- 2,335(L) 5,359
Depreciation and amortization............. 3,562 -- -- 1,958(M) 5,520
------------- ------ ------ ------------- -------------
Total expenses.......................... 15,398 2,540 1,476 4,654 24,068
------------- ------ ------ ------------- -------------
Income before minority interests............ 9,572 5,138 2,964 (4,267) 13,407
Minority interests.......................... (1,134) -- -- (6) (N) (1,140)
------------- ------ ------ ------------- -------------
Net income.................................. $ 8,438 $ 5,138 $ 2,964 $ (4,273) $ 12,267
------------- ------ ------ ------------- -------------
------------- ------ ------ ------------- -------------
Weighted average common shares outstanding
before the conversion of OP Units......... 21,921 31,921
------------- -------------
------------- -------------
Net Income per common share................. $ 0.38 $ 0.38
------------- -------------
------------- -------------
Pro forma net income per share reflecting
the pro forma effects of solely the
Offering and the purchase of the Pending
Acquisitions(P)........................... $ 0.39
-------------
-------------
</TABLE>

See accompanying notes.

F-8
<PAGE>
ARDEN REALTY, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
-------------------------------------------------------------
EQUITY IN NET
ARDEN ARDEN LOSS OF
REALTY, INC. PREDECESSORS NONCOMBINED PRE-ACQUISITION
CONSOLIDATED COMBINED ENTITIES PERIOD FOR
OCT. 9, 1996 JAN. 1, 1996 JAN. 1, 1996 THE
TO TO TO 1996 1997
DEC. 31, 1996 OCT. 8, 1996 OCT. 8, 1996 ACQUISITIONS(E) ACQUISITIONS(F)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES
Rental................................... $ 17,041 $ 32,287 $ 12,828 $ 23,095 $ 28,520
Tenant reimbursements.................... 803 2,031 243 733 1,419
Parking-net.............................. 1,215 3,692 846 1,161 1,346
Other.................................... 375 1,125 357 606 117
------------- ------------- ------------- ------------- -------------
19,434 39,135 14,274 25,595 31,402
Other income............................... 138 1,330 -- -- --
------------- ------------- ------------- ------------- -------------
Total revenues......................... 19,572 40,465 14,274 25,595 31,402
------------- ------------- ------------- ------------- -------------

EXPENSES
Property expenses........................ 6,005 14,224 6,053 11,449 10,712
General and administrative............... 753 1,758 -- -- --
Interest................................. 1,280 24,521 7,356 -- --
Depreciation and amortization............ 3,108 5,264 2,705 -- --
------------- ------------- ------------- ------------- -------------
Total expenses......................... 11,146 45,767 16,114 11,449 10,712
------------- ------------- ------------- ------------- -------------
Equity in net (loss) of noncombined
entities................................. -- (336) 336 -- --
------------- ------------- ------------- ------------- -------------
Income (loss) before minority interests and
extraordinary items...................... 8,426 (5,638) (1,504) 14,146 20,690
Minority interests......................... (993) 721 (721) -- --
------------- ------------- ------------- ------------- -------------
Income (loss) before extraordinary items... 7,433 (4,917) (2,225) 14,146 20,690
Extraordinary (loss) gain on early
extinguishment of debt, net of minority
interests share.......................... (13,105) 1,877 -- -- --
------------- ------------- ------------- ------------- -------------
Net (loss) income.......................... $ (5,672) $ (3,040) $ (2,225) $ 14,146 $ 20,690
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
Weighted average common shares outstanding
before conversion of OP Units............ 21,680
-------------
-------------
Net (loss) income per common share......... $ (.26)
-------------
-------------
Pro forma net income per share reflecting
the pro forma effects solely of the
Offering and the purchase of the Pending
Acquisitions(P)..........................

ARDEN
PENDING OTHER REALTY, INC.
ACQUISITIONS(G) ADJUSTMENTS PRO FORMA
------------- ---------------- -------------
<S> <C> <C> <C>
REVENUES
Rental................................... $ 16,624 $ 1,816(H) $ 132,211
Tenant reimbursements.................... 414 -- 5,643
Parking-net.............................. 403 -- 8,663
Other.................................... 559 -- 3,139
------------- -------- -------------
18,000 1,816 149,656
Other income............................... -- (1,253)(I) 215
------------- -------- -------------
Total revenues......................... 18,000 563 149,871
------------- -------- -------------
EXPENSES
Property expenses........................ 6,111 1,226(J) 55,780
General and administrative............... -- 1,489(K) 4,000
Interest................................. -- (11,721)(L) 21,436
Depreciation and amortization............ -- 10,644(M) 21,721
------------- -------- -------------
Total expenses......................... 6,111 1,638 102,937
------------- -------- -------------
Equity in net (loss) of noncombined
entities................................. -- -- --
------------- -------- -------------
Income (loss) before minority interests and
extraordinary items...................... 11,889 (1,075) 46,934
Minority interests......................... -- (2,996)(N) (3,989)
------------- -------- -------------
Income (loss) before extraordinary items... 11,889 (4,071) 42,945
Extraordinary (loss) gain on early
extinguishment of debt, net of minority
interests share.......................... -- 11,228(O) --
------------- -------- -------------
Net (loss) income.......................... $ 11,889 $ 7,157 $ 42,945
------------- -------- -------------
------------- -------- -------------
Weighted average common shares outstanding
before conversion of OP Units............ 31,680
-------------
-------------
Net (loss) income per common share......... $ 1.36
-------------
-------------
Pro forma net income per share reflecting
the pro forma effects solely of the
Offering and the purchase of the Pending
Acquisitions(P).......................... $ 0.01
-------------
-------------
</TABLE>

See accompanying notes.

F-9
<PAGE>
ARDEN REALTY, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)
(IN THOUSANDS)

1. ADJUSTMENTS TO THE PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

The adjustments to the Pro Forma Condensed Consolidated Balance Sheet as of
March 31, 1997 are as follows:

A. Acquisition of the Second Quarter 1997 Acquisitions with $1,650,000 of
cash and deposits and with proceeds of $37,200,000 of mortgage loans payable and
$149,600,000 on the unsecured lines of credit

Purchase price and actual and estimated additional closing costs of the
Second Quarter 1997 Acquisitions are as follows:

<TABLE>
<CAPTION>
PURCHASE
SECOND QUARTER 1997 ACQUISITIONS PRICE
- ---------------------------------------------------------------------- -------------
<S> <C>
10780 Santa Monica.................................................... $ 10,550
Clarendon Crest....................................................... 5,250
Noble Professional Center............................................. 6,750
South Bay Centre...................................................... 19,150
8383 Wilshire......................................................... 59,100
Parkway Center........................................................ 7,450
Centerpointe La Palma................................................. 80,200
-------------
Total............................................................... $ 188,450
-------------
-------------
</TABLE>

B. Sale of 10,000,000 shares of Common Stock in the Offering:

<TABLE>
<S> <C>
Gross proceeds from the Offering...................................... $ 260,625
Costs associated with the Offering.................................... (13,981)
-------------
246,644
-------------
-------------

Par value of Common Stock............................................. 100
Additional paid in capital from proceeds from sale of Common Stock.... 246,544
-------------
$ 246,644
-------------
-------------
</TABLE>

F-10
<PAGE>
ARDEN REALTY, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)
(IN THOUSANDS)

1. ADJUSTMENTS TO THE PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
C. Acquisition of the Pending Acquisitions with use of proceeds from the
Offering and borrowings under the lines of credit

Purchase price and actual and estimated additional closing costs of the
Pending Acquisitions are as follows:

<TABLE>
<CAPTION>
PENDING ACQUISITIONS
- ----------------------------------------------------------------------
<S> <C>
1000 Town Center...................................................... $ 14,050
Mariner Court......................................................... 11,800
Pacific Gateway II.................................................... 25,225
Crown Cabot........................................................... 28,300
299 Euclid............................................................ 7,200
Harbor Corporate Center............................................... 4,450
1821 Dyer............................................................. 7,230
1100 Glendon.......................................................... 29,575
Carlsberg Corporate Center............................................ 11,800
-------------
Total............................................................... $ 139,630
-------------
-------------
</TABLE>

D. Repayments of mortgage loans and lines of credit

<TABLE>
<S> <C>
Proceeds from the Mortgage Financing.................................. $ 175,000
Repayment of mortgage loan with proceeds from the Mortgage
Financing........................................................... (175,000)
Additional draws on the Credit Facility to pay financing costs
incurred in connection with the Mortgage Financing and the amendment
to the Credit Facility.............................................. 3,872
Additional draws on the Credit Facility to fund required reserve
account in accordance with the Mortgage Financing................... 4,000
Proceeds from the Offering used to pay down lines of credit........... (109,186)
-------------
$ (101,314)
-------------
-------------
</TABLE>

F-11
<PAGE>
ARDEN REALTY, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)
(IN THOUSANDS)

2. ADJUSTMENTS TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

The pro forma adjustments reflected in the Pro Forma Condensed Consolidated
Statements of Operations for the three months ended March 31, 1997 and the year
ended December 31, 1996 are set forth below:

E. Represents the preacquisition period for the 17 properties acquired in
1996.

1996 ACQUISITIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
400 IMPERIAL 10351
CORPORATE 5832 9665 BANK 100 303 SANTA
POINTE BOLSA WILSHIRE TOWER BROADWAY NORWALK GLENOAKS MONICA
------------- ----- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue
Rental............. $ 390 $ 80 $ 548 $ 1,351 $ 1,554 $ 1,387 $ 1,980 $ 1,134
Tenant
reimbursements... 103 19 29 107 40 48 11
Parking--net....... 28 10 58 124 88 66 129 99
Other.............. 23 32 15 74 4 138 7
----- --- ----- ----------- ----------- ----------- ----------- -----------
Total revenues... 544 90 657 1,519 1,823 1,497 2,295 1,251
Property expenses.... 123 8 203 574 581 578 956 551
----- --- ----- ----------- ----------- ----------- ----------- -----------
Excess of revenue
over certain
expenses............ $ 421 $ 82 $ 454 $ 945 $ 1,242 $ 919 $ 1,339 $ 700
----- --- ----- ----------- ----------- ----------- ----------- -----------
----- --- ----- ----------- ----------- ----------- ----------- -----------

<CAPTION>
BURBANK
EXECUTIVE
PLAZA AND LOS
CALIFORNIA ANGELES SUMITOMO 10350
2730 GRAND FEDERAL CENTER CORPORATE 5200 WEST BANK SANTA
WILSHIRE AVENUE BUILDING PROMENADE CENTER CENTURY BUILDING MONICA
----------- ----------- ----------- ------------- ----------- ----------- ----------- -----------
<S> <C>
Revenue
Rental............. $ 960 $ -- $ 2,156 $ 2,097 $ 5,882 $ 1,021 $ 1,926 $ 629
Tenant
reimbursements... -- -- 51 128 115 79 3
Parking--net....... 43 -- 164 40 254 58
Other.............. 12 -- 288 2 9 2
----------- ----- ----------- ------ ----------- ----------- ----------- -----
Total revenues... 1,015 -- 2,320 2,148 6,298 1,178 2,268 692
Property expenses.... 451 -- 976 982 2,881 1,188 1,070 327
----------- ----- ----------- ------ ----------- ----------- ----------- -----
Excess of revenue
over certain
expenses............ $ 564 $ -- $ 1,344 $ 1,166 $ 3,417 $ (10) $ 1,198 $ 365
----------- ----- ----------- ------ ----------- ----------- ----------- -----
----------- ----- ----------- ------ ----------- ----------- ----------- -----

TOTAL
---------
Revenue
Rental............. $ 23,095
Tenant
reimbursements... 733
Parking--net....... 1,161
Other.............. 606
---------
Total revenues... 25,595
Property expenses.... 11,449
---------
Excess of revenue
over certain
expenses............ $ 14,146
---------
---------
</TABLE>

F. Represents the actual preacquisition results for the 1997 Acquisitions:

THE 1997 ACQUISITIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
WHITTIER
FINANCIAL,
CLARENDON
10780 CREST, AND NOBLE
535 SANTA CALIFORNIA 6800 PROFESSIONAL
BRAND MONICA TWIN CENTRE OWENSMOUTH CENTER
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue
Rental.................................. $ 707 $ 1,455 $ 5,580 $ 532 $ 794
Tenant reimbursements................... 74 57 225 26 5
Parking--net ........................... 90 136 228 -- 51
Other................................... -- 2 15 5 --
----- ----------- ----------- ----- -----
Total revenues........................ 871 1,650 6,048 563 850
Property expenses......................... 459 417 1,757 485 347
----- ----------- ----------- ----- -----
Excess of revenue over certain expenses... $ 412 $ 1,233 $ 4,291 $ 78 $ 503
----- ----------- ----------- ----- -----
----- ----------- ----------- ----- -----

SOUTH BAY 8383 PARKWAY CENTERPOINTE
CENTRE WILSHIRE CENTER LA PALMA TOTAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue
Rental.................................. $ 2,691 $ 6,628 $ 911 $ 9,222 $ 28,520
Tenant reimbursements................... 143 -- 92 797 1,419
Parking--net ........................... -- 832 -- 9 1,346
Other................................... 26 31 -- 38 117
----------- ----------- ----------- ----------- -----------
Total revenues........................ 2,860 7,491 1,003 10,066 31,402
Property expenses......................... 1,270 2,867 276 2,834 10,712
----------- ----------- ----------- ----------- -----------
Excess of revenue over certain expenses... $ 1,590 $ 4,624 $ 727 $ 7,232 $ 20,690
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>

F-12
<PAGE>
ARDEN REALTY, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)
(IN THOUSANDS)

2. ADJUSTMENTS TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(CONTINUED)

PRE-ACQUISITION PERIOD FOR THE 1997 ACQUISITIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
WHITTIER
FINANCIAL,
CLARENDON
10780 CREST, AND NOBLE
535 SANTA CALIFORNIA 6800 PROFESSIONAL
BRAND MONICA TWIN CENTRE OWENSMOUTH CENTER
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue
Rental................................... $ 147 $ 385 $ 1,265 $ 153 $ 258
Tenant reimbursements.................... 3 4 51 1 1
Parking--net............................. 14 36 58 -- --
Other.................................... -- -- 3 -- --
----- ----- ----------- ----- -----
Total revenues......................... 164 425 1,377 154 259
Property expenses.......................... 98 115 395 121 125
----- ----- ----------- ----- -----
Excess of revenue over certain expenses.... $ 66 $ 310 $ 982 $ 33 $ 134
----- ----- ----------- ----- -----
----- ----- ----------- ----- -----

SOUTH BAY 8383 PARKWAY CENTERPOINTE
CENTRE WILSHIRE CENTER LA PALMA TOTAL
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue
Rental................................... $ 696 $ 1,688 $ 260 $ 2,108 $ 6,960
Tenant reimbursements.................... 29 -- 14 202 305
Parking--net............................. -- 236 -- 2 346
Other.................................... 3 22 -- 39 67
----- ----------- ----- ----------- -----------
Total revenues......................... 728 1,946 274 2,351 7,678
Property expenses.......................... 277 774 56 579 2,540
----- ----------- ----- ----------- -----------
Excess of revenue over certain expenses.... $ 451 $ 1,172 $ 218 $ 1,772 $ 5,138
----- ----------- ----- ----------- -----------
----- ----------- ----- ----------- -----------
</TABLE>

G. Represents the actual historical results for the Pending Acquisitions:

PENDING ACQUISITIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1000
TOWN CENTER
AND HARBOR
MARINER PACIFIC CROWN CORPORATE
COURT GATEWAY II CABOT 299 EUCLID CENTER
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue
Rental.............................................. $ 3,798 $ 3,355 $ 3,002 $ -- $ 776
Tenant reimbursements............................... 93 87 71 -- --
Parking--net........................................ -- -- -- -- --
Other............................................... -- 144 41 -- 5
----------- ----------- ----------- ----------- -----
Total revenues.................................... 3,891 3,586 3,114 -- 781
Property expenses..................................... 1,350 1,205 897 -- 246
----------- ----------- ----------- ----------- -----
Excess of revenue over certain expenses............... $ 2,541 $ 2,381 $ 2,217 $ -- $ 535
----------- ----------- ----------- ----------- -----
----------- ----------- ----------- ----------- -----

CARLSBERG
1100 CORPORATE
1821 DYER GLENDON CENTER TOTAL
----- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue
Rental.............................................. $ 593 $ 3,421 $ 1,679 $ 16,624
Tenant reimbursements............................... 133 -- 30 414
Parking--net........................................ -- 342 61 403
Other............................................... -- 350 19 559
----- ----------- ----------- -----------
Total revenues.................................... 726 4,113 1,789 18,000
Property expenses..................................... 92 1,608 713 6,111
----- ----------- ----------- -----------
Excess of revenue over certain expenses............... $ 634 $ 2,505 $ 1,076 $ 11,889
----- ----------- ----------- -----------
----- ----------- ----------- -----------
</TABLE>

F-13
<PAGE>
ARDEN REALTY, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)
(IN THOUSANDS)

2. ADJUSTMENTS TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(CONTINUED)

PENDING ACQUISITIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
1000
TOWN CENTER
AND HARBOR
MARINER PACIFIC CROWN CORPORATE
COURT GATEWAY II CABOT 299 EUCLID CENTER
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue
Rental.................................. $ 971 $ 823 $ 795 $ -- $ 179
Tenant reimbursements................... 23 21 19 -- --
Parking--net............................ 2 -- -- -- --
Other................................... -- 9 2 -- --
----- ----- ----- ----- -----
Total revenues........................ 996 853 816 -- 179
Property expenses......................... 312 289 201 -- 62
----- ----- ----- ----- -----
Excess of revenue over certain expenses... $ 684 $ 564 $ 615 $ -- $ 117
----- ----- ----- ----- -----
----- ----- ----- ----- -----

CARLSBERG
1100 CORPORATE
1821 DYER GLENDON CENTER TOTAL
----- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue
Rental.................................. $ 148 $ 845 $ 444 $ 4,205
Tenant reimbursements................... 33 -- 8 104
Parking--net............................ -- 88 15 105
Other................................... -- 10 5 26
----- ----- ----- -----------
Total revenues........................ 181 943 472 4,440
Property expenses......................... 27 417 168 1,476
----- ----- ----- -----------
Excess of revenue over certain expenses... $ 154 $ 526 $ 304 $ 2,964
----- ----- ----- -----------
----- ----- ----- -----------
</TABLE>

H. Increase in rental revenue to adjust the 1996 Acquisitions, the 1997
Acquisitions, and the Pending Acquisitions to straightline rental revenue
calculated as though the properties were purchased at January 1, 1996.

I. Decrease in other income to eliminate nonrecurring construction fees
which would not have been realized by the Company and certain management fees
that will not be earned.

J. Increase in property general and administrative expenses related to
additional property payroll costs relating to the 1997 Acquisitions and the
Pending Acquisitions for the period ended March 31, 1997 and to the 1996
Acquisitions, 1997 Acquisitions and the Pending Acquisitions for the period
ended December 31, 1996.

K. Increase in general and administrative expenses related to expected
level of operations as a public real estate investment trust and the incremental
increase relating to the management of additional properties.

F-14
<PAGE>
ARDEN REALTY, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)
(IN THOUSANDS)

2. ADJUSTMENTS TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(CONTINUED)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
1997 1996
------------- -------------
<S> <C> <C>
</TABLE>

L. Increase (decrease) in interest expense:

<TABLE>
<S> <C> <C>
Decrease in interest expense due to repayment of mortgage loans and
lines of credit..................................................... $ (3,024) $ (33,157)
Increase in interest expense related to the Mortgage Financing and
lines of credit with an interest rate of 7.52% and LIBOR plus 1.45%,
respectively, net of amounts capitalized............................ 5,048 20,191
Increase in amortization of finance costs related to the Mortgage
Financing and the amendment to the Credit Facility, due in seven and
three years, respectively........................................... 311 1,245
------------- -------------
Net increase (decrease) in interest expense........................... $ 2,335 $ (11,721)
------------- -------------
------------- -------------
</TABLE>

M. Increase in depreciation expense:

<TABLE>
<S> <C> <C>
Increase in depreciation expense to reflect a full quarter of
depreciation for the 1997 Acquisitions and the Pending Acquisitions
for the three months ended March 31, 1997 and a full year of
depreciation for the 1996 Acquisitions, 1997 Acquisitions, and the
Pending Acquisitions for the year ended December 31, 1996, utilizing
a 40 year useful life for buildings and a 10 year useful life for
improvements........................................................ $ 1,958 $ 10,514
Increase in depreciation due to the fair value of consideration paid
in excess of book value of interests in properties acquired from
nonaffiliates in connection with the completion of the IPO.......... -- 130
------------- -------------
Net increase in depreciation expense.................................. $ 1,958 $ 10,644
------------- -------------
------------- -------------
</TABLE>

N. To reflect adjustment for minority interest of 8.5% in the

<TABLE>
<S> <C> <C>
Operating Partnership
</TABLE>

O. To eliminate net extraordinary loss related to early extinguishment of
debt

F-15
<PAGE>
ARDEN REALTY, INC.

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)
(IN THOUSANDS)

2. ADJUSTMENTS TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(CONTINUED)
P. Additional proforma net income per share information is included below.

The following table sets forth the pro forma effects of the Offering and
solely the purchase of the Pending Acquisitions (in thousands, except per share
data):

<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
Historical net income (loss).................................................. $ 8,438 $ (5,672)
Arden Predecessors combined net loss.......................................... -- (3,040)
Pro forma net income of the Pending Acquisitions.............................. 2,225 9,051
------- -------
Pro forma net income of the Company and Pending Acquisitions.................. $ 10,663 $ 339
------- -------
------- -------
Common Stock outstanding on a historical basis................................ 21,921 21,680
Common Stock issued in the Offering to purchase the Pending Acquisitions...... 5,574 5,574
------- -------
Common Stock outstanding-pro forma............................................ 27,495 27,254
------- -------
------- -------
Net income per share reflecting the pro forma effects of the Offering and
purchase of the Pending Acquisitions......................................... $ 0.39 $ 0.01
------- -------
------- -------
</TABLE>

The following table sets forth the pro forma effect of solely the Offering
and repayment of the debt (in thousands, except per share data):

<TABLE>
<CAPTION>
THREE MONTHS OCTOBER 9, 1996
ENDED TO
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
Historical net income (loss).................................................. $ 8,438 $ (5,672)
Pro forma decrease in interest expense associated with the repayment of debt
outstanding at beginning of period........................................... 1,042 160
------- -------
Net income (loss) adjusted for repayment of debt.............................. $ 9,480 $ (5,512)
------- -------
------- -------
Common Stock outstanding on a historical basis................................ 21,921 21,680
Common Stock issued in the Offering for repayment of debt..................... 4,108 4,108
------- -------
Common Stock outstanding-pro forma............................................ 26,029 25,788
------- -------
------- -------
Net income (loss) per share reflecting the pro forma effect of the repayment
of debt...................................................................... $ 0.36 $ (0.21)
------- -------
------- -------
</TABLE>

F-16
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Arden Realty, Inc.

We have audited the accompanying consolidated balance sheet of Arden Realty,
Inc. and the combined balance sheet of the Arden Predecessors as of December 31,
1996 and 1995, respectively, and the related consolidated statements of
operations, stockholders' equity and cash flows of Arden Realty, Inc. for the
period from October 9, 1996 (commencement of operations) to December 31, 1996
and the related combined statements of operations, owners' equity and cash flows
of the Arden Predecessors for the period January 1, 1996 to October 8, 1996 and
for the years ended December 31, 1995 and 1994. Our audits also included the
financial statement schedule III, commercial office properties and accumulated
depreciation. These financial statements and the financial statement schedule
are the responsibility of the management of Arden Realty, Inc. Our
responsibility is to express an opinion on these financial statements and the
financial statement schedule based upon 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Arden Realty,
Inc. and the combined financial position of the Arden Predecessors at December
31, 1996 and 1995, respectively, and the consolidated results of operations and
cash flows of Arden Realty, Inc. for the period October 9, 1996 to December 31,
1996 and the combined results of operations and cash flows of the Arden
Predecessors for the period January 1, 1996 to October 8, 1996 and for the years
ended December 31, 1995 and 1994 in conformity with generally accepted
accounting principles. Also, in our opinion, the financial statement schedule
referred to above, when considered in relation to the basic financial statements
taken as a whole, presents fairly, in all material respects, the information
required to be set forth therein.

Ernst & Young LLP

Los Angeles, California
January 31, 1997

F-17
<PAGE>
ARDEN REALTY, INC. CONSOLIDATED BALANCE SHEETS
AND
ARDEN PREDECESSORS COMBINED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
ARDEN REALTY, INC. ARDEN
----------------------------- PREDECESSORS
DECEMBER 31, DECEMBER 31,
1996 1995
MARCH 31, ------------- -------------
1997
-------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Commercial office properties:
Land.................................................................. $ 131,238 $ 116,513 $ 24,193
Buildings and improvements............................................ 456,495 417,970 138,171
Tenant improvements................................................... 13,413 12,224 1,806
------------- ------------- -------------
601,146 546,707 164,170
Less: accumulated depreciation........................................ (20,510) (17,139) (3,296)
------------- ------------- -------------
Commercial office properties-net........................................ 580,636 529,568 160,874
Cash and cash equivalents............................................... 822 7,632 790
Restricted cash......................................................... -- -- 12,249
Rent and other receivables.............................................. 2,093 2,293 1,095
Deferred rent........................................................... 6,609 6,069 1,778
Prepaid financing and leasing costs, net of accumulated amortization of
$1,100, $859, and $421, respectively.................................. 4,485 4,013 1,359
Prepaid expenses and other assets....................................... 4,693 1,681 1,071
Investments in noncombined entities..................................... -- -- 3,163
------------- ------------- -------------
Total assets........................................................ $ 599,338 $ 551,256 $ 182,379
------------- ------------- -------------
------------- ------------- -------------

LIABILITIES
Mortgage loans payable.................................................. $ 137,800 $ 104,000 $ 167,638
Unsecured lines of credit............................................... 60,000 51,000 813
Accounts payable and accrued expenses................................... 9,243 6,178 3,398
Deferred interest....................................................... -- -- 884
Security deposits....................................................... 3,958 3,590 1,430
Dividends and distributions payable..................................... 8,677 8,844 --
------------- ------------- -------------
Total liabilities................................................... 219,678 173,612 174,163
------------- ------------- -------------
Minority interests in Operating Partnership............................. 47,563 45,667 --
Minority interests in combined entities................................. -- -- 100
STOCKHOLDERS' EQUITY/OWNERS' EQUITY
Preferred stock, $.01 par value, 20,000,000 shares authorized, none
issued................................................................ -- -- --
Common stock, $.01 par value, 100,000,000 shares authorized, 21,692,833
and 21,679,500 issued and outstanding, respectively................... 217 217 --
Additional paid-in capital.............................................. 331,880 337,432 --
Accumulated deficit..................................................... -- (5,672) --
Owners' equity.......................................................... -- -- 8,116
------------- ------------- -------------
Total stockholders' equity/owners' equity........................... 332,097 331,977 8,116
------------- ------------- -------------
Total liabilities and stockholders' equity/owners' equity........... $ 599,338 $ 551,256 $ 182,379
------------- ------------- -------------
------------- ------------- -------------
</TABLE>

See accompanying notes.

F-18
<PAGE>
ARDEN REALTY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
AND
ARDEN PREDECESSORS COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
ARDEN PREDECESSORS
----------------------------
ARDEN REALTY, FOR THE
ARDEN REALTY, ARDEN INC. YEARS
INC. PREDECESSORS ----------------- ENDED
----------------- ----------------- FOR THE PERIOD FOR THE PERIOD DECEMBER
FOR THE THREE FOR THE THREE OCTOBER 9, 1996 JANUARY 1, 1996 31,
MONTHS ENDED MONTHS ENDED TO TO ---------
MARCH 31, 1997 MARCH 31, 1996 DECEMBER 31, 1996 OCTOBER 8, 1996 1995
----------------- ----------------- ----------------- ----------------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES
Revenues from rental operations:
Rental................................. $ 21,892 $ 8,607 $ 17,041 $ 32,287 $ 8,832
Tenant reimbursements.................. 958 638 803 2,031 403
Parking--net of expenses............... 1,490 879 1,215 3,692 751
Other rental operations................ 576 280 375 1,125 250
----------------- ----------------- ----------------- ------- ---------
24,916 10,404 19,434 39,135 10,236
Other income............................. 54 415 138 1,330 1,457
----------------- ----------------- ----------------- ------- ---------
Total revenues....................... 24,970 10,819 19,572 40,465 11,693
----------------- ----------------- ----------------- ------- ---------
EXPENSES
Property expenses:
Repairs and maintenance................ 2,841 930 1,980 3,092 1,027
Utilities.............................. 2,423 706 1,844 3,456 953
Real estate taxes...................... 1,378 702 1,033 2,031 502
Insurance.............................. 384 781 290 2,460 279
Ground rent............................ 51 44 78 806 19
Marketing and other.................... 817 452 780 2,379 560
----------------- ----------------- ----------------- ------- ---------
Total property expenses.............. 7,894 3,615 6,005 14,224 3,340
General and administrative............... 918 364 753 1,758 1,377
Interest................................. 3,024 6,662 1,280 24,521 5,537
Depreciation and amortization............ 3,562 1,582 3,108 5,264 1,898
----------------- ----------------- ----------------- ------- ---------
Total expenses....................... 15,398 12,223 11,146 45,767 12,152
----------------- ----------------- ----------------- ------- ---------
Equity in net (loss) income of noncombined
entities................................. -- (84) -- (336) (116)
----------------- ----------------- ----------------- ------- ---------
Income (loss) before minority interests and
extraordinary items...................... 9,572 (1,488) 8,426 (5,638) (575)
Minority interests' share of loss (income)
of Arden Predecessors.................... -- 187 -- 721 (1)
Minority interests in Operating
Partnership.............................. (1,134) -- (993) -- --
----------------- ----------------- ----------------- ------- ---------
Income (loss) before extraordinary items... 8,438 (1,301) 7,433 (4,917) (576)
Extraordinary (loss) gain on early
extinguishment of debt, net of minority
interests' share of $1,798 for the period
October 9, 1996 to December 31, 1996..... -- -- (13,105) 1,877 --
----------------- ----------------- ----------------- ------- ---------
Net income (loss).......................... $ 8,438 $ (1,301) $ (5,672) $ (3,040) $ (576)
----------------- ----------------- ----------------- ------- ---------
----------------- ----------------- ----------------- ------- ---------
Net income (loss) per common share:
Income before extraordinary item......... $ 0.38 $ 0.34
Extraordinary loss on early
extinguishment of debt................. -- (0.60)
----------------- -----------------
Net income (loss) per common share....... $ 0.38 $ (0.26)
----------------- -----------------
----------------- -----------------
Weighted average common shares
outstanding.............................. 21,921,256 21,679,500
----------------- -----------------
----------------- -----------------

<CAPTION>
1994
---------
<S> <C>
REVENUES
Revenues from rental operations:
Rental................................. $ 5,157
Tenant reimbursements.................. 217
Parking--net of expenses............... 382
Other rental operations................ 111
---------
5,867
Other income............................. 685
---------
Total revenues....................... 6,552
---------
EXPENSES
Property expenses:
Repairs and maintenance................ 901
Utilities.............................. 581
Real estate taxes...................... 272
Insurance.............................. 50
Ground rent............................ --
Marketing and other.................... 387
---------
Total property expenses.............. 2,191
General and administrative............... 689
Interest................................. 1,673
Depreciation and amortization............ 1,143
---------
Total expenses....................... 5,696
---------
Equity in net (loss) income of noncombined
entities................................. 201
---------
Income (loss) before minority interests and
extraordinary items...................... 1,057
Minority interests' share of loss (income)
of Arden Predecessors.................... 1
Minority interests in Operating
Partnership.............................. --
---------
Income (loss) before extraordinary items... 1,058
Extraordinary (loss) gain on early
extinguishment of debt, net of minority
interests' share of $1,798 for the period
October 9, 1996 to December 31, 1996..... --
---------
Net income (loss).......................... $ 1,058
---------
---------
Net income (loss) per common share:
Income before extraordinary item.........
Extraordinary loss on early
extinguishment of debt.................
Net income (loss) per common share.......
Weighted average common shares
outstanding..............................
</TABLE>

See accompanying notes.

F-19
<PAGE>
ARDEN REALTY, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNTS CAPITAL DEFICIT EQUITY
------------ ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at October 8, 1996.................................. 100
Retirement of originally issued shares.................... (100)
Common Stock bonus to certain employees................... 5,000
Sale of Common Stock net of offering costs of $36,181..... 21,674,500 $ 217 $ 397,092 $ 397,309
Distributions paid to Arden Predecessors.................. -- -- (16,554) (16,554)
Allocation of minority interests in Operating
Partnership............................................. -- -- (35,301) (35,301)
Net loss.................................................. -- -- -- $ (5,672) (5,672)
Dividends declared and payable............................ -- -- (7,805) -- (7,805)
------------ ----- ---------- ------------ ------------
Balance at December 31, 1996................................ 21,679,500 $ 217 $ 337,432 $ (5,672) $ 331,977
------------ ----- ---------- ------------ ------------
------------ ----- ---------- ------------ ------------
Common Stock issued in connection with the exercise of
options (Unaudited)....................................... 13,333 -- 267 -- 267
Stock option compensation (Unaudited)....................... -- -- 92 -- 92
Net income (Unaudited)...................................... -- -- -- 8,438 8,438
Dividend declared and payable (Unaudited)................... -- -- (5,911) (2,766) (8,677)
------------ ----- ---------- ------------ ------------
Balance at March 31, 1997 (Unaudited)....................... 21,692,833 $ 217 $ 331,880 $ -- $ 332,097
------------ ----- ---------- ------------ ------------
------------ ----- ---------- ------------ ------------
</TABLE>

See accompanying notes.

ARDEN PREDECESSORS

COMBINED STATEMENTS OF OWNERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
OWNERS'
EQUITY
-------------
<S> <C>
Balance at December 31, 1993.................................................................................. $ 2,722
Owners' contributions....................................................................................... 9,452
Owners' distributions....................................................................................... (1,389)
Net income.................................................................................................. 1,058
-------------
Balance at December 31, 1994.................................................................................. 11,843
Owners' contributions....................................................................................... 7,427
Owners' distributions....................................................................................... (10,578)
Net loss.................................................................................................... (576)
-------------
Balance at December 31, 1995.................................................................................. 8,116
Owners' contributions....................................................................................... 2,923
Owners' distributions....................................................................................... (2,309)
Net loss for the period January 1 to October 8, 1996........................................................ (3,040)
-------------
Balance at October 8, 1996.................................................................................... $ 5,690
-------------
-------------
</TABLE>

See accompanying notes.

F-20
<PAGE>
ARDEN REALTY, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
AND
ARDEN PREDECESSORS COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ARDEN
REALTY, INC.
ARDEN ARDEN ---------------
REALTY, INC. PREDECESSORS FOR THE PERIOD
--------------- --------------- OCTOBER 9, 1996
FOR THE THREE FOR THE THREE TO
MONTHS ENDED MONTHS ENDED DECEMBER 31,
MARCH 31, 1997 MARCH 31, 1996 1996
--------------- --------------- ---------------
(UNAUDITED)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)........................................... $ 8,438 $ (1,301) $ (5,672)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Extraordinary loss (gain) on early extinguishment of
debt.................................................... -- -- 13,105
Minority interests in Operating Partnership............... 1,134 -- 993
Equity in net loss (income) of noncombined entities....... -- 84 --
(Loss) income allocable to minority interests of Arden
Predecessors............................................ -- (187) --
Depreciation and amortization............................. 3,562 1,582 3,108
Amortization of loan costs and fees....................... 50 30 8
Decrease (increase) in rents and other receivables........ 200 (640) 557
Increase in deferred rent................................. (540) (496) (618)
(Increase) decrease in prepaid financing and leasing
costs................................................... (745) 38 (1,201)
(Increase) decrease in prepaid expenses and other
assets.................................................. (2,887) (225) 499
Increase (decrease) in accounts payable and accrued
expenses................................................ 3,065 640 (2,911)
Increase in deferred interest............................. -- 2,046 --
Increase in security deposits............................. 368 460 797
--------------- --------------- ---------------
Net cash provided by operating activities................... 12,645 2,031 8,665
--------------- --------------- ---------------
INVESTING ACTIVITIES:
Acquisitions and improvements to commercial office
properties................................................ (53,677) (95,157) (164,763)
Decrease (increase) in investments in noncombined
entities.................................................. -- -- --
--------------- --------------- ---------------
Net cash used in investing activities....................... (53,677) (95,157) (164,763)
--------------- --------------- ---------------
FINANCING ACTIVITIES:
Cash from contributed net assets............................ -- -- 23,707
Distributions to Arden Predecessors in exchange for
partnership assets........................................ -- -- (16,554)
Proceeds from mortgage loans................................ 33,800 100,036 104,000
Repayment of mortgage loans................................. -- (1,311) (368,471)
Proceeds from unsecured lines of credit..................... 9,000 26 51,000
Repayments of unsecured lines of credit..................... -- (250) (3,737)
Payments of additional interest............................. -- -- (23,524)
Proceeds from issuance of Common Stock, net of offering
costs..................................................... 267 -- 397,309
(Increase) decrease in restricted cash...................... -- (8,018) --
Contributions from minority interests....................... -- 1,000 --
Distributions to minority interests......................... -- (13) --
Owners' contributions....................................... -- 2,500 --
Dividends paid/owners' distributions........................ (8,845) (549) --
--------------- --------------- ---------------
Net cash provided by financing activities................... 34,222 93,421 163,730
--------------- --------------- ---------------
Net (decrease) increase in cash and cash equivalents........ (6,810) 295 7,632
Cash and cash equivalents at beginning of period............ 7,632 790 --
--------------- --------------- ---------------
Cash and cash equivalents at end of period.................. $ 822 $ 1,085 $ 7,632
--------------- --------------- ---------------
--------------- --------------- ---------------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest, net of interest
capitalized............................................... $ 2,860 $ 4,260 $ 3,130
--------------- --------------- ---------------
--------------- --------------- ---------------

ARDEN PREDECESSORS
---------------------------------------------------
FOR THE
FOR THE PERIOD YEARS ENDED
JANUARY 1, 1996 DECEMBER 31,
TO ---------------------------------
OCTOBER 8, 1996 1995 1994
--------------- --------------- ---------------

<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)........................................... $ (3,040) $ (576) $ 1,058
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Extraordinary loss (gain) on early extinguishment of
debt.................................................... (1,877) -- --
Minority interests in Operating Partnership............... -- -- --
Equity in net loss (income) of noncombined entities....... 336 116 (201)
(Loss) income allocable to minority interests of Arden
Predecessors............................................ (721) 1 (1)
Depreciation and amortization............................. 5,264 1,898 1,143
Amortization of loan costs and fees....................... 202 211 21
Decrease (increase) in rents and other receivables........ (1,866) (1,074) 198
Increase in deferred rent................................. (1,735) (672) (746)
(Increase) decrease in prepaid financing and leasing
costs................................................... (1,243) (633) (582)
(Increase) decrease in prepaid expenses and other
assets.................................................. (1,136) (947) (428)
Increase (decrease) in accounts payable and accrued
expenses................................................ 2,883 2,501 267
Increase in deferred interest............................. 7,607 884 --
Increase in security deposits............................. 547 1,121 105
--------------- --------------- ---------------
Net cash provided by operating activities................... 5,221 2,830 834
--------------- --------------- ---------------
INVESTING ACTIVITIES:
Acquisitions and improvements to commercial office
properties................................................ (119,083) (127,663) (10,622)
Decrease (increase) in investments in noncombined
entities.................................................. -- 4,305 (7,299)
--------------- --------------- ---------------
Net cash used in investing activities....................... (119,083) (123,358) (17,921)
--------------- --------------- ---------------
FINANCING ACTIVITIES:
Cash from contributed net assets............................ -- -- --
Distributions to Arden Predecessors in exchange for
partnership assets........................................ -- -- --
Proceeds from mortgage loans................................ 120,485 142,501 8,139
Repayment of mortgage loans................................. (5,051) (7,060) --
Proceeds from unsecured lines of credit..................... 5,188 3,310 1,240
Repayments of unsecured lines of credit..................... (2,264) (3,244) (791)
Payments of additional interest............................. -- -- --
Proceeds from issuance of Common Stock, net of offering
costs..................................................... -- -- --
(Increase) decrease in restricted cash...................... 2,166 (11,649) 94
Contributions from minority interests....................... 1,000 -- 100
Distributions to minority interests......................... (64) -- --
Owners' contributions....................................... 2,923 7,427 9,452
Dividends paid/owners' distributions........................ (2,309) (10,578) (1,389)
--------------- --------------- ---------------
Net cash provided by financing activities................... 122,074 120,707 16,845
--------------- --------------- ---------------
Net (decrease) increase in cash and cash equivalents........ 8,212 179 (242)
Cash and cash equivalents at beginning of period............ 790 611 853
--------------- --------------- ---------------
Cash and cash equivalents at end of period.................. $ 9,002 $ 790 $ 611
--------------- --------------- ---------------
--------------- --------------- ---------------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest, net of interest
capitalized............................................... $ 15,719 $ 4,022 $ 1,547
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>

See accompanying notes.

F-21
<PAGE>
ARDEN REALTY, INC.
AND ARDEN PREDECESSORS

NOTES TO FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

Arden Realty, Inc. (the "Company"), through its controlling interest in
Arden Realty Limited Partnership (the "Operating Partnership"), is engaged in
the ownership, acquisition, management, renovation, operation, and leasing of
commercial office properties (collectively, the "Properties") located in
Southern California. The Company was formed in 1996 to continue and expand the
real estate business of NAMIZ, Inc., formerly known as Arden Realty Group, Inc.
("Namiz"), and a group of affiliated entities (the "Arden Predecessors").

ORGANIZATION AND FORMATION OF THE COMPANY

The Company was incorporated in Maryland in May 1996. On October 9, 1996,
the Company completed an initial public offering (the "IPO") of 18,847,500
shares of $.01 par value common stock (the "Common Stock"). The IPO price was
$20.00 per share resulting in gross proceeds of $376,950,000. Also on October 9,
1996, the underwriters exercised their over allotment option and, accordingly,
the Company issued an additional 2,827,000 shares of Common Stock and received
gross proceeds of $56,540,000. The aggregate proceeds to the Company, net of
underwriters' discount, advisory fee and offering costs aggregating $36,181,000,
were approximately $397,309,000.

Concurrently with the consummation of the IPO, the Company and the Operating
Partnership engaged in the following transactions (the "Formation
Transactions"):

- Pursuant to separate contribution agreements (the "Contribution
Agreements"), the following additional contributions were made by certain
other participants in the Formation Transactions (the "Unit Participants")
to the Operating Partnership in exchange for limited partner interests in
the Operating Partnership ("OP Units"): (i) the remaining interests in the
Arden Predecessors and in certain of the Initial Properties (I.E., all
interests not acquired by the Company pursuant to the Option Agreements)
and (ii) certain assets, including management contracts relating to
certain of the Initial Properties and the contract rights to purchase two
properties (303 Glenoaks and 12501 East Imperial Highway). The Unit
Participants making such contributions (a total of seven individuals and
entities including Namiz, Richard Ziman, Victor Coleman, and Arthur
Gilbert), received an aggregate of 2,889,071 OP Units, with a value of
approximately $57.8 million based on the IPO price of the Common Stock.

F-22
<PAGE>
ARDEN REALTY, INC.
AND ARDEN PREDECESSORS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

1. DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- The Company, through the Operating Partnership, borrowed $57 million
aggregate principal amount under a one year loan which is non-recourse to
the Company and the Operating Partnership and at the closing of the IPO
was secured by cross-collateralized and cross-defaulted first mortgage
liens on nine of the Initial Properties.

- Approximately $33 million of the net proceeds of the IPO were used by the
Operating Partnership to purchase two properties, 303 Glenoaks and 12501
East Imperial Highway.

- The Company used a portion of the proceeds of the IPO and the mortgage
financing in place to repay approximately $370 million of mortgage debt
secured by the Initial Properties and indebtedness outstanding under lines
of credit assumed by the Operating Partnership in the Formation
Transactions.

The transfer of the Initial Properties and operating interests of affiliates
of the Company to the Operating Partnership for cash or OP Units has been
accounted for at the historical cost of those interests, similar to a pooling of
interests. All transfers by nonaffiliates have been accounted for at the fair
value of the OP Units issued or cash consideration paid.

2. BASIS OF PRESENTATION AND SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES

ARDEN REALTY, INC.

The accompanying consolidated financial statements of Arden Realty, Inc.
include the accounts of the Company and the Operating Partnership. All
significant intercompany balances and transactions have been eliminated in
consolidation.

The minority interests at December 31, 1996 represent a limited partnership
interest in the Operating Partnership of approximately 12%.

ARDEN PREDECESSORS

The Arden Predecessors were not a legal entity but rather a combination of
partnerships and an affiliated real estate management corporation. The
properties and entities were all managed by Messrs. Ziman and Coleman. In those
instances where the financial interests held by Messrs. Ziman, Coleman, Gilbert
and their affiliates were also controlling interests, the entities have been
combined in the accompanying financial statements. Minority interests have been
recorded for those entities that the affiliated Unit Participants controlled but
were not wholly owned. Where controlling interests were not held by these
affiliated Unit Participants, or the Arden Predecessor did not have the
unilateral right to refinance the debt on the property, the entities were
accounted for as investments in noncombined entities utilizing the equity method
of accounting.

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.

F-23
<PAGE>
ARDEN REALTY, INC.
AND ARDEN PREDECESSORS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. BASIS OF PRESENTATION AND SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
COMMERCIAL OFFICE PROPERTIES AND FURNITURE, FIXTURES AND EQUIPMENT

The properties are recorded at cost less accumulated depreciation. If
impairment conditions exist, the Company makes 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 Company would recognize an
impairment loss to the extent the carrying amount exceeds the fair value of 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 by the Company or the Arden Predecessors.

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
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 consisted 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. Upon
completion of the Formation Transactions, all restricted cash was released.

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 rent. 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.

STOCK OPTIONS, GRANTS AND APPRECIATION RIGHTS

The Company follows Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," and the related interpretations in accounting
for employee stock options, grants and appreciation rights. In accordance with
FASB No. 123, "Accounting for Stock Based Compensation," the Company has elected
to provide the required footnote disclosures (see Note 13).

F-24
<PAGE>
ARDEN REALTY, INC.
AND ARDEN PREDECESSORS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. BASIS OF PRESENTATION AND SUMMARY OF OTHER SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
INCOME TAXES

Prior to October 9, 1996 the combined and noncombined entities that made up
the Arden Predecessors consisted of a Subchapter S corporation, limited
liability companies and partnerships. Taxable income for such entities is
recorded on the separate tax returns of the membership unit holders and
individual partners and, accordingly, no provision for income taxes was recorded
in the accompanying financial statements of the Arden Predecessors.

The Company generally will not be subject to federal income taxes as long as
it qualifies as a real estate investment trust ("REIT"). A REIT will generally
not be subject to federal income taxation on that portion of income that
qualifies as REIT taxable income and to the extent that it distributes such
taxable income to its stockholders and complies with certain requirements. As a
REIT, the Company is allowed to reduce taxable income by all or a portion of
distributions to stockholders and must distribute at least 95% of its taxable
income to qualify as a REIT. As dividends have eliminated taxable income, no
federal income tax provision has been reflected in the accompanying consolidated
financial statements. State income tax requirements are essentially the
equivalent of the federal rules.

During 1996, the Company declared a dividend of $.36 per share, payable to
record owners of the shares on December 31, 1996. For federal income tax
purposes, $.28 per share was reported to stockholders as ordinary income for
1996. The remaining $.08 per share will be reported to stockholders in 1997.

PER SHARE DATA

Net income (loss) per share of Common Stock is based upon the weighted
average number of common shares outstanding during the period. Primary earnings
per share of Common Stock are based upon the weighted average number of such
shares outstanding and the assumed equivalent shares outstanding during the
period. The assumed exercise of outstanding stock options, using the treasury
stock method, is not materially dilutive and such amounts are not presented. The
conversion of OP Units into Common Stock (see Note 7) would have no effect on
per share amounts as the OP Units share proportionately with the shares of
Common Stock in the results of the Operating Partnership.

RECLASSIFICATIONS

Certain prior year amounts have been reclassified in order to conform to the
current year presentation.

UNAUDITED INTERIM STATEMENTS

The consolidated financial statements as of March 31, 1997 and for the three
months ended March 31, 1997 and the combined financial statements for the three
months ended March 31, 1996 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 and all such adjustments are of
a normal, recurring nature.

F-25
<PAGE>
ARDEN REALTY, INC.
AND ARDEN PREDECESSORS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. COMMERCIAL OFFICE PROPERTIES

The Company and 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 $57,000, $8,000, and $265,000 for the period October 9, 1996 to December 31,
1996 and the years ended December 31, 1995, and 1994, respectively.

Nine of the commercial office properties are encumbered by the $104,000,000
mortgage loan (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
2013. The future minimum lease payments to be received under leases existing as
of December 31, 1996, are as follows:

<TABLE>
<S> <C>
1997.......................................... $79,279,000
1998.......................................... 67,629,000
1999.......................................... 56,086,000
2000.......................................... 42,927,000
2001.......................................... 33,273,000
Thereafter.................................... 61,262,000
-----------
$340,456,000
-----------
-----------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses. The Company leases the land
underlying either the office buildings and/or parking structures of five of its
buildings.

Future minimum ground lease payments due under existing ground leases are as
follows:

<TABLE>
<S> <C>
1997........................................... $1,440,000
1998........................................... 1,440,000
1999........................................... 1,506,000
2000........................................... 1,130,000
2001........................................... 1,093,000
Thereafter..................................... 59,214,000
----------
$65,823,000
----------
----------
</TABLE>

4. INVESTMENTS IN NONCOMBINED ENTITIES

The Company's affiliates did not own controlling financial interests in
certain of the Arden Predecessors. These investments were accounted for
utilizing the equity method of accounting. Under such accounting method, the net
equity investment of the Company's affiliates was reflected on the combined
balance sheets, and the combined statements of operations included the
affiliates' share of net income or loss from the entities. Subsequent to the
IPO, the Company acquired the nonaffiliated Cash Participants'

F-26
<PAGE>
ARDEN REALTY, INC.
AND ARDEN PREDECESSORS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. INVESTMENTS IN NONCOMBINED ENTITIES (CONTINUED)
interests and accordingly, consolidates the accounts of these properties. The
affiliates' ownership interest in each entity was as follows:

<TABLE>
<CAPTION>
AFFILIATES'
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>

Although the Company's affiliates owned a 77.5% interest in 5000 Spring
Associates Tenancy-in-Common, they did not have the unilateral right to
refinance the property. As a result, this investment was accounted for utilizing
equity accounting.

Condensed combined balance sheets and operating information is presented
below for all noncombined entities.

CONDENSED COMBINED BALANCE SHEETS OF NONCOMBINED ENTITIES
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
1995
------------
<S> <C>
Assets:
Land.......................................................................... $ 16,229
Buildings and improvements.................................................... 75,376
Tenant improvements........................................................... 2,957
------------
94,562
Less: Accumulated Depreciation................................................ (3,354)
------------
91,208
Other assets.................................................................. 7,220
------------
Total assets................................................................ $ 98,428
------------
------------
Liabilities and owners' equity:
Mortgage loans payable........................................................ $ 85,545
Other liabilities............................................................. 3,248
Predecessors' equity.......................................................... 3,163
Other owners' equity.......................................................... 6,472
------------
Total liabilities and owners' equity........................................ $ 98,428
------------
------------
</TABLE>

F-27
<PAGE>
ARDEN REALTY, INC.
AND ARDEN PREDECESSORS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. INVESTMENTS IN NONCOMBINED ENTITIES (CONTINUED)
CONDENSED COMBINED STATEMENTS OF OPERATIONS OF NONCOMBINED ENTITIES
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE THREE FOR THE PERIOD FOR THE YEARS ENDED
MONTHS ENDED JANUARY 1, 1996 DECEMBER 31,
MARCH 31, 1996 TO --------------------
(UNAUDITED) OCTOBER 8, 1996 1995 1994
--------------- ----------------- --------- ---------
<S> <C> <C> <C> <C>
Revenues.................................................. $ 4,312 $ 14,274 $ 17,720 $ 7,736
------ ------- --------- ---------
Expenses:
Property operating expenses............................. 1,773 6,053 7,758 3,331
Interest................................................ 2,170 7,356 8,243 3,436
Depreciation and amortization........................... 814 2,705 2,475 1,041
------ ------- --------- ---------
Total expenses........................................ 4,757 16,114 18,476 7,808
------ ------- --------- ---------
Net (loss)............................................ $ (445) $ (1,840) $ (756) $ (72)
------ ------- --------- ---------
------ ------- --------- ---------
</TABLE>

In 1994, the noncombined entities incurred losses totaling $466,000 on
Beverly Atrium and Woodland Hills Financial Center as a result of an earthquake
in Los Angeles County, California. This amount is included in property operating
expenses.

The significant accounting policies used by the noncombined entities are
similar to those used by the Arden Predecessors.

MORTGAGE LOANS PAYABLE OF NONCOMBINED ENTITIES

Mortgage loans payable consisted of six loans collateralized by various
properties, bearing interest based on various indices plus a specified margin.
One of the loans required additional interest of $434,000 or approximately 2% of
the original principal balance. In connection with the IPO, the Company repaid
all of its mortgage debt, including the amounts payable by the noncombined
entities.

5. MORTGAGE LOANS PAYABLE

The Company has a mortgage loan due to Lehman Capital, a division of Lehman
Brothers Holdings Inc. ("Lehman"), for $104,000,000 dated October 9, 1996. The
loan is secured by nine fully cross-collateralized and cross-defaulted first
trust deeds on real property bearing interest at LIBOR plus 1.5% on or before
March 31, 1997 and LIBOR plus 2.0% for any subsequent period through maturity.
Interest only payments are to be made monthly and all principal and unpaid
interest is due on September 30, 1997.

The LIBOR rate was 5.6% and 5.7% at December 31, 1996 and 1995,
respectively.

The Arden Predecessors had two mortgage loans totaling $142,200,000, at
December 31, 1995 and two totaling $120,260,000 incurred subsequent to December
31, 1995. These loans were payable to Lehman and were secured by fourteen first
deeds of trust and one second deed of trust, bearing interest at LIBOR plus 5.5%
and 4.5%, respectively. The loan agreements required additional interest of
$21,875,000 (Tier I Additional Interest) which was due to increase the day after
the first anniversary date of the loans by $5,129,000 (Tier II Additional
Interest). One of the loans provided for additional interest of $5,129,000 to
accrue after the second anniversary of the loan (Tier III Additional Interest).

The Arden Predecessors had a mortgage loan due to banks totaling
$25,438,000, dated March 1, 1993. The loan was secured by a first trust deed on
real property, bearing interest, at the option of the Arden

F-28
<PAGE>
ARDEN REALTY, INC.
AND ARDEN PREDECESSORS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. MORTGAGE LOANS PAYABLE (CONTINUED)
Predecessors, 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 were due monthly,
and monthly payments of principal began March 1, 1996.

In connection with the IPO, the Company repaid all of the Arden
Predecessor's mortgage debt. These repayments resulted in: (i) an extraordinary
gain to the Arden Predecessors of $1,877,000 relating to a partial forgiveness
of debt by one lender negotiated by the Arden Predecessors in anticipation of
the IPO; and (ii) an extraordinary loss to the Company of $14,857,000
($13,105,000, net of minority interests) relating to the payments of the
unamortized portions of the Tier I additional interest and unamortized loan
fees.

Effective January 2, 1997, the Company entered into interest rate floor and
cap transactions with a notional amount of $155,000,000. The Company has entered
into these agreements to convert floating rate liabilities to fixed rate
liabilities. The agreements fix the LIBOR portion of the interest rate on the
Company's variable rate debt at 6.6% through March 2004. The Company does not
hold or issue the interest rate floor and cap agreements for trading purposes.
The Company is exposed to possible credit risk if the counterparties fail to
perform, however, this risk is minimized by entering into the agreements with
significant financial institutions.

6. UNSECURED LINES OF CREDIT

The Company has a line of credit, with a total commitment of $150,000,000
from a group of banks led by Wells Fargo. The Company may borrow $75,000,000 on
an unsecured basis with the remainder to be secured by real property. The
aggregate outstanding balance was $51,000,000 (unsecured) at December 31, 1996.
The line accrues interest at LIBOR plus 1.5% for secured borrowings, and LIBOR
plus 1.75% for unsecured borrowings. The line is scheduled to mature on January
1, 1999, subject to a one-year extension at the request of the Company and if
certain conditions are met. The undisbursed portion at December 31, 1996 was
$99,000,000.

The Arden Predecessors had 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 loans accrued interest at the
Prime Rate. These loans were repaid in connection with the IPO.

7. STOCKHOLDERS' EQUITY

An OP Unit and a share of Common Stock have essentially the same economic
characteristics as they share equally in the total net income or loss and
distributions of the Operation Partnership. Beginning on the first anniversary
of the consummation of the IPO, OP Units issued in the Formation Transactions
may be redeemed for cash or, at the election of the Company, for shares of
common stock on a one-for-one basis.

8. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosures of estimated fair value of financial instruments
at December 31, 1996 were determined by management, using available market
information and appropriate valuation methodologies. Considerable judgment is
necessary to interpret market data and develop estimated fair value. The use of
different market assumptions and/or estimation methodologies may have a material
effect on the estimated fair value amounts.

F-29
<PAGE>
ARDEN REALTY, INC.
AND ARDEN PREDECESSORS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

8. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Cash equivalents, accounts payable, the line of credit and other financial
instruments are carried at amounts which reasonably approximate their fair value
amounts.

The mortgage note payable of the Company has an estimated aggregate fair
value which approximates its carrying value. Estimated fair value is based on
interest rates currently available to the Company for issuance of debt with
similar terms and remaining maturities.

The mortgage loans payable of the Arden Predecessors as of December 31, 1995
consisted primarily of mortgage loans with loan to value ratios in excess of
conforming loans generally offered by financial institutions. These loans
provided for variable indexed rates and, in most cases, significant additional
interest due at maturity. Accordingly, management believed it was 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 carrying amounts of financial instruments
approximated their fair values.

9. NON-CASH INVESTING AND FINANCING ACTIVITIES

Additional supplemental disclosures of non-cash investing and financing
activities for the period from October 9, 1996 to December 31, 1996 are as
follows:

(1) The following summarizes the net assets contributed in exchange for
2,889,071 OP Units (in thousands):

<TABLE>
<S> <C>
ASSETS:
Commercial office properties, net................................. $ 366,324
Cash and cash equivalents......................................... 23,707
Rents and other receivables....................................... 2,850
Deferred rent receivable.......................................... 5,451
Prepaid financing and leasing costs, net.......................... 3,841
Prepaid expenses and other assets................................. 2,157
---------
Total assets.................................................... $ 404,330
---------
---------

LIABILITIES:
Notes payable--affiliates......................................... $ 368,471
Mortgages and notes payable....................................... 3,737
Unsecured lines of credit......................................... 9,089
Accrued expenses and other liabilities............................ 9,505
Deferred interest deposits........................................ 2,794
---------
Total liabilities............................................... 393,596
---------
Owners' equity contributed........................................ $ 10,734
---------
---------
</TABLE>

(2) The Company purchased a 310,910 square foot multi-tenant office building
for $9,962,000 of cash and the issuance of 55,805 OP Units valued at $1,430,000.

For the three months ended March 31, 1997 (Unaudited), the Company purchased
a 155,189 square foot office building for $18,737,000 utilizing proceeds from
the mortgage financing with Lehman and the issuance of 26,880 OP Units valued at
approximately $763,000.

F-30
<PAGE>
ARDEN REALTY, INC.
AND ARDEN PREDECESSORS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

10. COMMITMENTS AND CONTINGENCIES

OFFICE RENT EXPENSE

The Company leases 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 three years and $62,000 in the final year. The lease expires June
30, 2000. The Company has the right to renew the lease for two, one-year terms
prior to expiration of the initial lease terms, and may cancel the lease at any
time with 90 days' notice.

LITIGATION

Management does not believe there is any litigation threatened against the
Company or 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 consolidated financial statements of the Company or the combined
financial statements of the Arden Predecessors.

CONCENTRATION OF CREDIT RISK

The Company maintains its 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 believes that the risk is not significant.

11. RELATED PARTY TRANSACTIONS

Included in other income are management fees of $95,000, and $213,000 for
1995 and 1994, respectively, from various affiliated partnerships.

12. PROPERTY ACQUISITIONS

In February 1996, the Arden Predecessors acquired four office buildings
totaling 913,000 square feet for a purchase price of $93.0 million. The
buildings are located in Beverly Hills, Culver City, Huntington Beach, and San
Diego, California. The purchase was financed by a mortgage loan from Lehman
which was repaid in connection with the IPO (see Note 5).

In July 1996, the Predecessors acquired a 192,000 square feet building
located in Long Beach, California for $19.8 million. The purchase was financed
by a mortgage loan from Lehman which was repaid in connection with the IPO (see
Note 5).

In conjunction with the IPO in October 1996, the Company acquired two
buildings totaling 298,000 square feet for $34.7 million. The buildings are
located in Burbank and Norwalk, California and were purchased with proceeds from
the IPO.

In October 1996, the Company purchased a 96,300 square foot building located
in Los Angeles, California for $11.0 million. The purchase was financed with
proceeds from the mortgage financing payable to Lehman.

In November 1996, the Company completed a series of transactions to acquire
three office properties, including an 84,500 square foot building located in El
Segundo, California for $3.5 million, two office buildings totaling 142,900
square feet located in Burbank, California for $13.0 million, and a project
located in Santa Monica, California comprised of a 55,100 square foot office and
12,700 square foot 16 unit

F-31
<PAGE>
ARDEN REALTY, INC.
AND ARDEN PREDECESSORS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

12. PROPERTY ACQUISITIONS (CONTINUED)
apartment complex for $9.5 million. All three acquisitions were funded with
proceeds from the mortgage financing payable to Lehman and its line of credit.

In December 1996, the Company completed a series of transactions to acquire
five office properties. The acquisitions included:

<TABLE>
<CAPTION>
PURCHASE PRICE
SQUARE FEET LOCATION (IN MILLIONS)
- ----------- ---------------------- ---------------
<C> <S> <C>
174,800 Ventura, CA $ 11.6
389,300 Monterey Park, CA 42.0
110,600 Sherman Oaks, CA 12.8
310,990 Los Angeles, CA 11.4
42,300 Los Angeles, CA 4.3
</TABLE>

These acquisitions were funded with proceeds from the mortgage financing
payable to Lehman, draws from the unsecured line of credit, and the issuance of
55,805 OP Units.

13. STOCK INCENTIVE PLAN

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee and directors stock options,
stock grants and stock appreciation rights because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of employee and director stock options
granted by the Company equals the market price of the underlying stock on the
date of grant, no compensation expense is recognized.

The Company established a stock incentive plan for the purpose of attracting
and retaining executive officers, directors and other key employees. As of
December 31, 1996, 1,500,000 of the Company's authorized shares have been
reserved for the issuance of options, grants and appreciation rights under such
plan and options to purchase an aggregate of 905,000 shares were granted on
October 4, 1996 at an exercise price equal to the IPO price of $20.00 per share.
A total of 865,000 of the options will vest in three equal annual installments
and 40,000 will vest in four equal annual installments from the grant date.

On December 2, 1996, and December 27, 1996, 10,000 and 15,000 options,
respectively, were granted at exercise prices equal to $24.38 and $26.63,
respectively (the market prices at the date of grant). All of the holders of
these options have a ten year period to exercise, and all options vest in three
equal annual installments from the respective grant dates.

Pro forma information regarding net income and earnings per share is
required by Statement 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method of that
Statement. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for 1996: risk-free interest rate of 6.7%; dividend yield 5.8%;
volatility factor of the expected market price of the Company's Common Stock of
.23; and a weighted average expected life of the option of ten years.

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

F-32
<PAGE>
ARDEN REALTY, INC.
AND ARDEN PREDECESSORS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

13. STOCK INCENTIVE PLAN (CONTINUED)
Company's employee and directors stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee and director stock options.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The Company's
pro forma information follows (in thousands, except earnings per share
information):

<TABLE>
<CAPTION>
FOR THE PERIOD
OCTOBER 9, 1996
TO
DECEMBER 31, 1996
-----------------
<S> <C>
Pro forma income before extraordinary items................................ $ 7,189
Extraordinary loss on early extinguishment of debt......................... (13,105)
--------
Net loss................................................................... $ (5,916)
--------
--------
Pro forma income before extraordinary items per share...................... $ 0.33
Extraordinary loss on early extinguishment of debt......................... (0.60)
--------
Pro forma net loss......................................................... $ (0.27)
--------
--------
</TABLE>

A summary of the Company's stock option activity, and related information
for the period October 9, 1996 to December 31, 1996 follows:

<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31, 1997 (UNAUDITED)
------------------------------
OPTIONS WEIGHTED-AVERAGE OPTIONS WEIGHTED-AVERAGE
(000S) EXERCISE PRICE (000S) EXERCISE PRICE
----------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C>
Outstanding, beginning of period...... -- -- 930 $ 20.15
Granted............................... 930 $ 20.15 10 27.00
Exercised............................. -- -- (13) 20.00
Forfeited............................. -- -- (37) 20.00
----- ------ ----- ------
Outstanding, December 31, 1996........ 930 $ 20.15 890 $ 20.24
----- ------ ----- ------
----- ------ ----- ------
Exercisable at end of year............ -- -- -- --
Weighted-average fair value of options
granted............................. $ 3.40
-----
-----
</TABLE>

Exercise prices for options outstanding as of December 31, 1996 ranged from
$20.00 to $26.63. The weighted average remaining contractual life of those
options is 9.8 years.

14. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

The unaudited pro forma condensed consolidated statement of operations for
the year ended December 31, 1996 is presented as if the IPO, the Formation
Transactions, and the acquisitions of the Properties acquired during 1996 prior
to the IPO and at the time of the IPO (the "Initial Properties") and the
acquisition of the nine properties acquired subsequent to the IPO through
December 31, 1996 had all occurred at the beginning of the year.

The pro forma condensed consolidated statement of operations is not
necessarily indicative of what the Company's results of operations would have
been assuming the completion of the Formation

F-33
<PAGE>
ARDEN REALTY, INC.
AND ARDEN PREDECESSORS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

14. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(CONTINUED)
Transactions, the IPO, and acquisitions at the beginning of the period
indicated, nor does it purport to project the Company's results of operations
for any future period.

ARDEN REALTY, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
(A)
EQUITY IN NET
LOSS OF
ARDEN ARDEN NONCOMBINED (B) (C) (D)
REALTY, INC. PREDECESSORS ENTITIES PRE-ACQUISITION PRE-ACQUISITION PRE-ACQUISITION
OCTOBER 9, JANUARY 1, JANUARY 1, PERIOD FOR PERIOD FOR PERIOD FOR
1996 TO 1996 TO 1996 TO PROPERTIES PROPERTIES ACQUISITIONS
DECEMBER 31, OCTOBER 8, OCTOBER 8, ACQUIRED PRIOR ACQUIRED AT THE SUBSEQUENT TO
1996 1996 1996 TO THE IPO TIME OF THE IPO THE IPO
------------ ------------ ------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Revenues from rental
operations:
Rental...................... $ 17,041 $ 32,287 $ 12,828 $ 3,923 $ 3,367 $ 15,805
Tenant reimbursements....... 803 2,031 243 258 88 387
Parking, net of expenses.... 1,215 3,692 846 308 195 658
Other rental operations..... 375 1,125 357 144 142 320
------------ ------------ ------------- ------- ------- ---------------
19,434 39,135 14,274 4,633 3,792 17,170
Other income.................. 138 1,330 -- -- -- --
------------ ------------ ------------- ------- ------- ---------------
Total revenue............... 19,572 40,465 14,274 4,633 3,792 17,170
------------ ------------ ------------- ------- ------- ---------------
EXPENSES
Property expenses............. 6,005 14,224 6,053 1,489 1,534 8,426
General and administrative.... 753 1,758 -- -- -- --
Interest...................... 1,280 24,521 7,356 -- -- --
Depreciation and
amortization................. 3,108 5,264 2,705 -- -- --
------------ ------------ ------------- ------- ------- ---------------
Total expenses.............. 11,146 45,767 16,114 1,489 1,534 8,426
------------ ------------ ------------- ------- ------- ---------------
Equity in net (loss) of
noncombined entities......... -- (336) 336 -- -- --
------------ ------------ ------------- ------- ------- ---------------
Income (loss) before minority
interests and extraordinary
items........................ 8,426 (5,638) (1,504) 3,144 2,258 8,744
Minority interests............ (993) 721 (721) -- -- --
------------ ------------ ------------- ------- ------- ---------------
Income (loss) before
extraordinary items.......... 7,433 (4,917) (2,225) 3,144 2,258 8,744
Extraordinary (loss) gain on
early extinguishment of debt,
net of minority interests
share........................ (13,105) 1,877 -- -- -- --
------------ ------------ ------------- ------- ------- ---------------
Net loss...................... $ (5,672) $ (3,040) $ (2,225) $ 3,144 $ 2,258 $ 8,744
------------ ------------ ------------- ------- ------- ---------------
------------ ------------ ------------- ------- ------- ---------------
Weighted average common shares
outstanding before conversion
of OP Units.................. 21,679,500
------------
------------
Net (loss) income per common
share........................ $ (0.26)
------------
------------

ARDEN
REALTY,
PRO FORMA INC. PRO
TOTAL ADJUSTMENTS FORMA
--------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Revenues from rental
operations:
Rental...................... $ 85,251 $ 64(E) $ 85,315
Tenant reimbursements....... 3,810 -- 3,810
Parking, net of expenses.... 6,914 -- 6,914
Other rental operations..... 2,463 -- 2,463
--------- ----------- -----------
98,438 64 98,502
Other income.................. 1,468 (1,253)(F) 215
--------- ----------- -----------
Total revenue............... 99,906 (1,189) 98,717
--------- ----------- -----------
EXPENSES
Property expenses............. 37,731 108(G) 37,839
General and administrative.... 2,511 1,289(H) 3,800
Interest...................... 33,157 (22,632)(I) 10,525
Depreciation and
amortization................. 11,077 2,693(J) 13,770
--------- ----------- -----------
Total expenses.............. 84,476 (18,542) 65,934
--------- ----------- -----------
Equity in net (loss) of
noncombined entities......... -- -- --
--------- ----------- -----------
Income (loss) before minority
interests and extraordinary
items........................ 15,430 17,353 32,783
Minority interests............ (993) (2,928)(K) (3,921)
--------- ----------- -----------
Income (loss) before
extraordinary items.......... 14,437 14,425 28,862
Extraordinary (loss) gain on
early extinguishment of debt,
net of minority interests
share........................ (11,228) 11,228(L) --
--------- ----------- -----------
Net loss...................... $ 3,209 $ 25,653 $ 28,862
--------- ----------- -----------
--------- ----------- -----------
Weighted average common shares
outstanding before conversion
of OP Units.................. 21,679,500
-----------
-----------
Net (loss) income per common
share........................ $ 1.33
-----------
-----------
</TABLE>

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

(A) To account for Arden Predecessor entities on a post-offering consolidated
basis.

(B) To record the pre-offering historical activity of the Initial Properties
acquired prior to the IPO.

F-34
<PAGE>
ARDEN REALTY, INC.
AND ARDEN PREDECESSORS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

14. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(CONTINUED)
(D) To record the pre-acquisition combined financial activity of the following
acquisitions subsequent to the Offering:

<TABLE>
<CAPTION>
PROPERTY ACQUISITION DATE
- ------------------------------------------------------------------------------------ --------------------
<S> <C>
10351 Santa Monica October 1996
2730 Wilshire November 1996
Burbank Executive Plaza November 1996
California Federal Building November 1996
Grand Avenue Plaza November 1996
Los Angeles Corporate Center December 1996
Sumitomo Bank Building December 1996
5200 West Century December 1996
Center Promenade December 1996
10350 Santa Monica December 1996
</TABLE>

(E) Increase in rental revenue to adjust the Initial Properties for straightline
rental revenue.

(F) Decrease in other income to eliminate non-recurring construction fees which
would not have been realized by the Company and certain management fees that
will not be earned.

(G) Increase in property general and administrative expense related to
additional property payroll costs relating to the Initial Properties and the
properties acquired subsequent to the IPO.

(H) Increase in general and administrative expenses related to expected level of
operations as a public real estate investment trust.

(I) Decrease in interest expense:

<TABLE>
<S> <C>
Decrease in interest expense due to repayment of mortgage loans............. $ (31,877)
Increase in interest expense related to the new mortgage loan and line of
credit with an interest rate of LIBOR plus 1.5% and LIBOR plus 1.75%,
respectively, due in one year, net of amounts capitalized.................. 9,050
Increase in amortization of finance costs related to the line of credit..... 195
---------
Net decrease in interest expense............................................ $ (22,632)
---------
---------
</TABLE>

(J) Increase in depreciation expense:

<TABLE>
<S> <C>
Increase in depreciation expense to reflect a full year of depreciation for
the 1996 Initial Properties and acquisitions subsequent to the IPO,
utilizing a 40 year useful life for buildings and a ten year useful life for
improvements................................................................ $ 2,563
Increase in depreciation due to the fair value of consideration paid in
excess of book value of interests in properties acquired from
nonaffiliates............................................................... 130
---------
$ 2,693
---------
---------
</TABLE>

(K) Adjustment for minority interest of 12% in the Operating Partnership.

(L) To eliminate extraordinary loss related to early extinguishment of debt.

F-35
<PAGE>
ARDEN REALTY, INC.
AND ARDEN PREDECESSORS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

15. OTHER EVENTS RELATING TO THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)

COMMERCIAL OFFICE PROPERTIES

In March 1997, the Company completed a series of transactions to acquire
four office properties located in California, including a 109,187 square foot
building located in Glendale from a related party for $10.2 million, an 80,014
square foot building in Woodland Hills for $7.5 million, a 135,415 square foot
building in Whittier for $14.3 million, and a 155,189 square foot building in
Bakersfield for $19.5 million. These acquisitions were funded with existing
working capital, and proceeds from the mortgage financing payable to Lehman and
the unsecured lines of credit. In addition, 26,880 OP Units, valued at
approximately $763,000, were issued in conjunction with the purchase of the
property located in Bakersfield.

In April 1997, the Company purchased an additional four office properties
located in California, including a 43,063 square foot building located in
Woodland Hills for $5.2 million, a 51,828 square foot building in Sherman Oaks
for $6.7 million, a 92,486 square foot building in West Los Angeles for $10.6
million and a 202,830 square foot building in Gardena for $19.1 million. These
acquisitions were funded with proceeds from the mortgage financing payable to
Lehman and draws from the unsecured lines of credit.

In May 1997, the Company purchased an additional two office properties
located in California, including a 417,463 square foot office property in
Beverly Hills, California for $59.0 million and a 61,333 square foot office
property in Bakersfield, California for $7.4 million. These acquisitions were
funded with proceeds from the the Company's revolving credit agreement.

In June 1997, the Company purchased a 597,550 square foot office property in
La Palma, California for $80.1 million. This acquisition was funded with
proceeds from the Company's Credit Facility.

MORTGAGE NOTES PAYABLE

On June 11, 1997, the Company refinanced its existing $175 million mortgage
loan payable to Lehman with a new $175 million mortgage financing (the "Mortgage
Financing") from Lehman. The Mortgage Financing is non-recourse and secured by
fully cross-collateralized and cross-defaulted first mortgage liens on 18 of the
Company's properties which are held by a special purpose subsidiary of the
Company, and has a fifteen year term. The Company may repay the principal amount
on June 10, 2004 (Anticipated Repayment Date, as defined). The Mortgage
Financing bears interest at a fixed rate of 7.5% through the Anticipated
Repayment Date and bears interest at the greater of (i) 9.52% and (ii) the sum
of 3% and the average of the yields of the U.S. Treasury Constant Maturities
with terms most nearly approximating those of U.S. Obligations having maturities
as close as possible to the seventh anniversary of the Anticipated Repayment
Date, as determined by Lehman. The Company intends to repay the Mortgage
Financing on the Anticipated Repayment Date. The Mortgage Financing requires
monthly payments of interest only with all principal due in a balloon payment at
maturity. The Mortgage Financing is subject to certain covenants and requires a
compensating balance of $4 million.

The LIBOR rate was 5.8% and 5.6% at March 31, 1997 and December 31, 1996,
respectively.

On May 5, 1997, the Company entered into a revolving credit agreement with
Wells Fargo Bank (the "Bridge Facility"). The Bridge Facility is unsecured,with
a total commitment of $110,000,000.

F-36
<PAGE>
ARDEN REALTY, INC.
AND ARDEN PREDECESSORS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

15. OTHER EVENTS RELATING TO THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
(CONTINUED)
On June 11, 1997, the Company amended its then existing credit facility with
a $300 million unsecured line of credit (the "Credit Facility") from a group of
banks led by Wells Fargo (the "Lenders"). The interest rate of the Credit
Facility ranges between LIBOR plus 1.2% and LIBOR plus 1.45% depending on the
leverage ratio of the Company. Once the Company achieves a long-term, unsecured,
investment grade debt rating, the interest rate may be lowered to between LIBOR
plus 0.9% to LIBOR plus 1.15% depending on such debt rating. Under certain
circumstances, the Company has the option to convert the interest rate from
LIBOR to the prime rate plus 0.5%. The outstanding principal balance of the
Credit Facility is due on June 1, 2000.

The Credit Facility is subject to customary conditions to closing and
borrowing, contains representations and warranties and defaults customary in
REIT financings, and contains 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 documentation) and requirements to maintain a
pool of unencumbered properties which meet certain defined characteristics and
are approved by the Lenders. The Credit Facility also contains restrictions on,
among other things, indebtedness, investments, distributions, liens and mergers.

Pursuant to a separate agreement, Wells Fargo has advanced $26 million to
the Company which is secured by two Properties. This advance bears interest at
the Wells Fargo Prime Rate and is scheduled to mature on July 10, 1997. Upon
receipt of the Lender's consent to add the two Properties which currently secure
this advance to the Credit Facility's unencumbered pool of properties, the
Company will draw down $26 million from the Credit Facility to repay the
advance.

The City National Bank Prime Rate was 8.5% at March 31, 1997.

STOCKHOLDERS EQUITY

In March 1997, options to purchase 13,333 shares of Common Stock were
exercised.

On March 28, 1997, the Operating Partnership issued 26,880 OP Units valued
at approximately $763,000 in connection with the acquisition of the property
located in Bakersfield, California.

Net income per share was calculated using the weighted average number of
shares of Common Stock outstanding of 21,921,256 for the three months ended
March 31, 1997.

In February 1997, the Financing Accounting Standards Board (FASB), issued
Statement of Financial Accounting Standards No. 128 "Earnings Per Share" which
is required to be adopted on December 31, 1997. At that time the Company will be
required to change the method currently used to compute earnings per share and
to restate all prior periods. Under the new requirements for calculating primary
earnings per share, the dilutive effect of stock options will be excluded. This
pronouncement will not have a material impact on primary earnings per share for
the first quarter ended March 31, 1997. The Company has not yet determined what
the impact of Statement 128 will be on the calculation of fully diluted earnings
per share.

F-37
<PAGE>
ARDEN REALTY, INC.
AND ARDEN PREDECESSORS

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

15. OTHER EVENTS RELATING TO THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED)
(CONTINUED)
PROPOSED TRANSACTION

The Company intends to consummate a public offering (the "Offering") of
10,000,000 shares of its Common Stock. In connection with the Offering, the
Company intends to use the net proceeds to acquire nine properties for
approximately $139,630,000 and repay approximately net $101,314,000 of its
Credit Facility.

PRO FORMA NET INCOME PER SHARE

The following table sets forth the effects of solely the Offering and
repayment of debt with the proceeds of the Offering (in thousands, except per
share data):

<TABLE>
<CAPTION>
THREE MONTHS OCTOBER 9, 1996
ENDED TO
MARCH 31, 1997 DECEMBER 31, 1996
-------------- -----------------
<S> <C> <C>
Historical net income (loss).................................................. $ 8,438 $ (5,672)
Pro forma decrease in interest expense associated with the repayment of debt
outstanding at the beginning of the period................................... 1,042 160
------- -------
Net income adjusted for repayment of debt..................................... $ 9,480 $ (5,512)
------- -------
------- -------
Common Stock outstanding on a historical basis................................ 21,921 21,680
Common Stock issued in the Offering for repayment of debt..................... 4,108 4,108
------- -------
Shares of Common Stock outstanding -- pro forma............................... 26,029 25,788
------- -------
------- -------
Net income (loss) per share reflecting the pro forma effect of the repayment
of debt...................................................................... $ 0.36 $ (0.21)
------- -------
------- -------
</TABLE>

F-38
<PAGE>
ARDEN REALTY, INC.
SCHEDULE III
COMMERCIAL OFFICE PROPERTIES AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SQUARE FOOT DATA)
<TABLE>
<CAPTION>
COSTS
CAPITALIZED
INITIAL COSTS BASIS STEP-UP SUBSEQUENT TO
------------------------ ------------------------ ACQUISITION
SQUARE BUILDINGS AND BUILDINGS AND ---------------
PROPERTY NAME FOOTAGE LAND IMPROVEMENTS LAND IMPROVEMENTS IMPROVEMENTS(2)
- ----------------------- ------------- -------- ------------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Century Park Center.... 243,404 $ 7,189 $ 16,742 -- -- $ 4,935
Beverly Atrium......... 61,314 4,127 11,513 $ 117 $ 328 637
Woodland Hills......... 224,955 6,566 14,754 365 880 2,005
222 South Harbor....... 175,391 515 11,199 94 2,075 1,029
425 Broadway........... 71,589 1,500 4,436 305 918 292
1950 Sawtelle.......... 103,772 1,988 7,263 -- -- 443
Bristol Plaza.......... 84,014 1,820 3,380 257 485 310
16000 Ventura.......... 174,841 1,700 17,189 185 1,929 1,021
5000 East Spring....... 163,358 -- 11,658 -- 424 1,502
70 South Lake.......... 100,133 1,360 9,097 -- -- 170
Westwood Terrace....... 135,943 2,103 16,850 -- -- 240
Westlake--5601
Lindero.............. 105,830 2,577 6,067 -- -- 1,561
The New Wilshire....... 202,704 1,200 19,902 -- -- 819
Calabasas Commerce
Center............... 123,121 1,262 9,725 -- -- 11
Long Beach--DF&G....... 272,013 -- 14,452 -- -- 23
Skyview Center......... 391,675 6,514 33,701 -- -- 1,221
400 Corporate Pointe... 164,598 3,382 17,527 75 390 351
5832 Bolsa............. 49,355 690 3,526 15 80 95
9665 Wilshire.......... 158,684 6,697 22,230 139 473 771
Imperial Bank Tower.... 540,413 3,722 35,184 64 625 3,471
100 Broadway........... 191,727 4,570 15,255 -- -- 363
Norwalk................ 122,175 4,508 5,532 -- -- --
303 Glenoaks........... 175,449 6,500 18,132 -- -- 244
10351 Santa Monica..... 96,251 3,080 7,906 -- -- 115
2730 Wilshire.......... 67,820 3,515 5,944 -- -- 33
Grand Avenue........... 84,500 620 2,832 -- -- 57
Burbank Executive
Plaza................ 60,395 1,100 4,384 -- -- 29
California Federal
Building............. 82,467 1,500 5,981 -- -- --
Center Promenade....... 174,837 2,310 9,266 -- -- --
Los Angeles Corporate
Center............... 389,293 26,781 15,139 -- -- --
5200 West Century...... 310,910 2,080 9,360 -- -- --
Sumitomo Bank
Building............. 110,641 2,560 10,257 -- -- --
10350 Santa Monica..... 42,292 861 3,456 -- -- --
------------- -------- ------------- -------- ------ -------
5,455,864 $114,897 $ 399,839 $ 1,616 $ 8,607 $ 21,748
------------- -------- ------------- -------- ------ -------
------------- -------- ------------- -------- ------ -------

TOTAL COSTS
-----------------------
BUILDINGS
AND ACCUMULATED YEAR
PROPERTY NAME LAND IMPROVEMENTS TOTAL DEPRECIATION(1) ENCUMBRANCES(3) BUILT
- ----------------------- -------- ------------ -------- --------------- --------------- --------
<S> <C> <C> <C> <C> <C> <C>
Century Park Center.... $ 7,189 $ 21,677 $ 28,866 $ 3,371 1972
Beverly Atrium......... 4,244 12,478 16,722 1,281 1989
Woodland Hills......... 6,931 17,639 24,570 1,942 1972
222 South Harbor....... 609 14,303 14,912 949 $ 6,225 1986
425 Broadway........... 1,805 5,646 7,451 340 3,575 1984
1950 Sawtelle.......... 1,988 7,706 9,694 442 4,925 1988
Bristol Plaza.......... 2,077 4,175 6,252 237 -- 1982
16000 Ventura.......... 1,885 20,139 22,024 966 9,100 1980
5000 East Spring....... -- 13,584 13,584 973 6,575 1989
70 South Lake.......... 1,360 9,267 10,627 287 -- 1982
Westwood Terrace....... 2,103 17,090 19,193 514 10,125 1988
Westlake--5601
Lindero.............. 2,577 7,628 10,205 672 -- 1989
The New Wilshire....... 1,200 20,721 21,921 610 -- 1989
Calabasas Commerce
Center............... 1,262 9,736 10,998 289 -- 1990
Long Beach--DF&G....... -- 14,475 14,475 413 -- 1987
Skyview Center......... 6,514 34,922 41,436 1,063 27,300 1981
400 Corporate Pointe... 3,457 18,268 21,725 491 -- 1987
5832 Bolsa............. 705 3,701 4,406 98 -- 1985
9665 Wilshire.......... 6,836 23,474 30,310 593 16,750 1972
Imperial Bank Tower.... 3,786 39,280 43,066 990 19,425 1982
100 Broadway........... 4,570 15,618 20,188 246 -- 1987
Norwalk................ 4,508 5,532 10,040 63 -- 1978
303 Glenoaks........... 6,500 18,376 24,876 157 -- 1983
10351 Santa Monica..... 3,080 8,021 11,101 41 -- 1984
2730 Wilshire.......... 3,515 5,977 9,492 19 -- 1985
Grand Avenue........... 620 2,889 3,509 9 -- 1980
Burbank Executive
Plaza................ 1,100 4,413 5,513 13 -- 1983
California Federal
Building............. 1,500 5,981 7,481 19 -- 1978
Center Promenade....... 2,310 9,266 11,576 10 -- 1982
Los Angeles Corporate
Center............... 26,781 15,139 41,920 16 -- 1986
5200 West Century...... 2,080 9,360 11,440 10 -- 1982
Sumitomo Bank
Building............. 2,560 10,257 12,817 11 -- 1970
10350 Santa Monica..... 861 3,456 4,317 4 -- 1979
-------- ------------ -------- ------- ---------------
$116,513 $ 430,194 $546,707 $ 17,139 $ 104,000
-------- ------------ -------- ------- ---------------
-------- ------------ -------- ------- ---------------
</TABLE>

- ----------------------------------
(1) The depreciable life for buildings and improvements ranges from ten to forty
years. Tenant improvements are depreciated over the remaining term of the
lease.

(2) Includes total capitalized interest of $685.

(3) All of these Properties are collateral for a single mortgage loan. The
encumbrance allocated to an individual property is based on the related
individual release price.

F-39
<PAGE>
ARDEN REALTY, INC.

SCHEDULE III--COMMERCIAL OFFICE PROPERTIES AND ACCUMULATED DEPRECIATION
(CONTINUED)

The changes in real estate for each of the periods in the three years ended
December 31, 1996 are as follows:

<TABLE>
<CAPTION>
YEARS ENDED
OCTOBER 9, 1996 JANUARY 1, 1996 DECEMBER 31,
TO TO ---------------------
DECEMBER 31, 1996 OCTOBER 8, 1996 1995 1994
----------------- ----------------- ---------- ---------
<S> <C> <C> <C> <C>
Real estate balance at beginning of period.......... $ 283,579 $ 164,170 $ 36,507 $ 25,885
Improvements........................................ 2,366 6,626 2,245 1,955
Consolidation of non-combined entities(1)........... 96,935 -- -- --
Acquisition of properties........................... 153,604 112,783 125,418 8,667
Consideration paid in exchange for interests of
non-affiliates.................................... 10,223 -- -- --
-------- -------- ---------- ---------
Balance at end of period............................ $ 546,707 $ 283,579 $ 164,170 $ 36,507
-------- -------- ---------- ---------
-------- -------- ---------- ---------
</TABLE>

The changes in accumulated depreciation, exclusive of amounts relating to
equipment, autos, and furniture and fixtures for each of the periods in the
three years ended December 31, 1996 are as follows:

<TABLE>
<CAPTION>
YEARS ENDED
OCTOBER 9, 1996 JANUARY 1, 1996 DECEMBER 31,
TO TO --------------------
DECEMBER 31, 1996 OCTOBER 8, 1996 1995 1994
----------------- ----------------- --------- ---------
<S> <C> <C> <C> <C>
Balance at beginning of period.......................... $ 8,345 $ 3,296 $ 1,530 $ 481
Depreciation for period................................. 2,948 5,049 1,766 1,049
Consolidation of non-combined entities(1)............... 5,846 -- -- --
------- ------ --------- ---------
Balance at end of period................................ $ 17,139 $ 8,345 $ 3,296 $ 1,530
------- ------ --------- ---------
------- ------ --------- ---------
</TABLE>

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

(1) The non-combined entities were consolidated as a result of the Company
purchasing the controlling interests as part of the Formation Transactions.

F-40
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders

Arden Realty, Inc.

We have audited the accompanying combined statement of revenue and certain
expenses of the 1996 Pre IPO Properties for the year ended December 31, 1995.
This combined statement of revenue and certain expenses is the responsibility of
the management. 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. 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 Pre IPO Properties for the year ended
December 31, 1995, in conformity with generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
April 10, 1996,
except for Note 1,
as to which the
date is October 9, 1996

F-41
<PAGE>
1996 PRE IPO PROPERTIES

COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental........................................................................ $ 19,391
Tenant reimbursements......................................................... 961
Parking--net of expenses...................................................... 1,859
Other......................................................................... 350
-----------
Total revenue............................................................... 22,561
-----------

CERTAIN EXPENSES:
Property operating and maintenance............................................ 5,401
Real estate taxes............................................................. 1,753
Insurance..................................................................... 521
Ground rent................................................................... 1,067
Bad debts..................................................................... 106
-----------
Total certain expenses...................................................... 8,848
-----------
Excess of revenue over certain expenses................................... $ 13,713
-----------
-----------
</TABLE>

See accompanying notes to combined statement of revenue and certain expenses.

F-42
<PAGE>
1996 PRE IPO PROPERTIES

NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1995

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying combined statement of revenue and certain expenses includes
the combined operations of five commercial office properties located in southern
California which were acquired in 1996 (the "Pre IPO Properties") from
nonaffiliated third parties. The properties were acquired 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,
entered 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 NAMIZ, Inc., a California corporation, since their acquisition by the
Arden Predecessors.

The Pre IPO Properties are as follows:

<TABLE>
<CAPTION>
APPROXIMATE
RENTABLE
SOUTHERN CALIFORNIA SQUARE ACQUISITION
PROPERTY NAME LOCATION FOOTAGE ACQUISITION 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 statement was prepared to comply with rules and regulations
of the Securities and Exchange Commission. The accompanying statement was
prepared on a combined basis because the properties were controlled by the Arden
Predecessors. There are no interproperty accounts to be eliminated.

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 the
Pre IPO 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 Pre IPO Properties.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

F-43
<PAGE>
1996 PRE IPO PROPERTIES

NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES (CONTINUED)

FOR THE YEAR ENDED DECEMBER 31, 1995

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RISKS AND UNCERTAINTIES

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.................................................... 34,744,000
-----------
$119,227,000
-----------
-----------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the properties is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts.

F-44
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Arden Realty, Inc.

We have audited the accompanying combined statement of revenue and certain
expenses of 303 Glenoaks and 12501 Imperial Highway for the year ended December
31, 1995. This combined statement of revenue and certain expenses is the
responsibility of the management of 303 Glenoaks and 12501 Imperial Highway. Our
responsibility is to express an opinion on the combined statement of revenue and
certain expenses based on our audit.

In our opinion, the combined statement of revenue and certain expenses of
303 Glenoaks and 12501 Imperial Highway presents fairly, in all material
respects, the combined revenue and certain expenses, as defined above, of 303
Glenoaks and 12501 Imperial Highway for the year ended December 31, 1995, in
conformity with generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
April 19, 1996,
except for Note 1,
as to which the
date is October 9, 1996

F-45
<PAGE>
303 GLENOAKS AND 12501 IMPERIAL HIGHWAY
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental........................................................................ $ 4,280
Tenant reimbursements......................................................... 54
Parking--net of expenses...................................................... 133
Other......................................................................... 85
-----------
Total revenue............................................................... 4,552
-----------
CERTAIN EXPENSES:
Property operating and maintenance............................................ 1,606
Real estate taxes............................................................. 412
Insurance..................................................................... 151
Bad debts..................................................................... 18
Other......................................................................... 41
-----------
Total certain expenses...................................................... 2,228
-----------
Excess of revenue over certain expenses................................... $ 2,324
-----------
-----------
</TABLE>

See accompanying notes to combined statement of revenue and certain expenses.

F-46
<PAGE>
303 GLENOAKS AND 12501 IMPERIAL HIGHWAY
NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying combined statement of revenue and certain expenses includes
the combined operations of two commercial office properties located in southern
California (the "Properties") which were acquired by Arden Realty, Inc., a
Maryland corporation (the "Company") from the same nonaffiliated third party,
concurrently with the consummation of the Company's initial public offering of
Common Stock.

The Properties are as follows:

<TABLE>
<CAPTION>
APPROXIMATE
SOUTHERN RENTABLE
CALIFORNIA SQUARE ACQUISITION
PROPERTY NAME LOCATION FOOTAGE PRICE
- ----------------------------------------------------- ---------- ------------ -------------
<S> <C> <C> <C>
303 Glenoaks......................................... Burbank 175,449 $ 24,632,000
12501 East Imperial.................................. Norwalk 122,175 10,040,000
------------ -------------
297,624 $ 34,672,000
------------ -------------
------------ -------------
</TABLE>

BASIS OF PRESENTATION

The accompanying combined statement has been prepared to comply with rules
and regulations of the Securities and Exchange Commission.

The accounts of the Properties are combined in the statement of revenue and
certain expenses and 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 the
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 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>
303 GLENOAKS AND 12501 IMPERIAL HIGHWAY
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 December 31, 1995 are as follows:

<TABLE>
<CAPTION>
<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
-------------
$ 20,968,000
-------------
-------------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Properties is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts.

F-48
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Arden Realty, Inc.

We have audited the accompanying statement of revenue and certain expenses
of 10351 Santa Monica for the twelve months ended October 31, 1996. This
statement of revenue and certain expenses is the responsibility of the
management of 10351 Santa Monica. 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. 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 of 10351 Santa
Monica presents fairly, in all material respects, the revenue and certain
expenses, as defined above, of 10351 Santa Monica for the twelve months ended
October 31, 1996, in conformity with generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
February 5, 1997

F-49
<PAGE>
10351 SANTA MONICA

STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE TWELVE MONTHS ENDED OCTOBER 31, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental............................................................................ $ 1,386
Tenant reimbursements............................................................. 9
Parking--net of expenses.......................................................... 119
Other............................................................................. 7
---------
Total revenue................................................................... 1,521
---------
CERTAIN EXPENSES:
Property operating and maintenance................................................ 527
Real estate taxes................................................................. 81
Insurance......................................................................... 36
---------
Total certain expenses.......................................................... 644
---------
Excess of revenue over certain expenses....................................... $ 877
---------
---------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-50
<PAGE>
10351 SANTA MONICA

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE TWELVE MONTHS ENDED OCTOBER 31, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statement of revenue and certain expenses includes the
operations of 10351 Santa Monica (the "Property") located in Southern California
which was acquired by Arden Realty, Inc. (the "Company") from a nonaffiliated
third party. The Property was acquired for $11,000,000 and has approximately
96,251 rentable square feet.

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with rules and
regulations of the Securities and Exchange Commission.

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 the
Property have been excluded. Excluded expenses consist of interest, depreciation
and amortization and property general and administrative costs not directly
comparable to the future operation of the Property.

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 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.

2. COMMERCIAL OFFICE PROPERTY

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996, are as follows:

<TABLE>
<S> <C>
1997............................................................ $1,374,000
1998............................................................ 1,121,000
1999............................................................ 991,000
2000............................................................ 805,000
2001............................................................ 677,000
Thereafter...................................................... 804,000
---------
$5,772,000
---------
---------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Property is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts. At October 31, 1996, two of the Property's tenants
accounted for approximately 31% of the Property's aggregate annualized base
rent.

F-51
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders

Arden Realty, Inc.

We have audited the accompanying statement of revenue and certain expenses
of 2730 Wilshire for the twelve months ended October 31, 1996. This statement of
revenue and certain expenses is the responsibility of the management of 2730
Wilshire. 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 of 2730
Wilshire presents fairly, in all material respects, the revenue and certain
expenses, as defined above, of 2730 Wilshire for the twelve months ended October
31, 1996, in conformity with generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
February 5, 1997

F-52
<PAGE>
2730 WILSHIRE

STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE TWELVE MONTHS ENDED OCTOBER 31, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental............................................................................ $ 1,039
Parking--net of expenses.......................................................... 46
Other............................................................................. 15
---------
Total revenue................................................................... 1,100
---------
CERTAIN EXPENSES:
Property operating and maintenance................................................ 340
Real estate taxes................................................................. 102
Insurance......................................................................... 44
---------
Total certain expenses.......................................................... 486
---------
Excess of revenue over certain expenses....................................... $ 614
---------
---------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-53
<PAGE>
2730 WILSHIRE

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE TWELVE MONTHS ENDED OCTOBER 31, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statement of revenue and certain expenses includes the
operations of 2730 Wilshire (the "Property") located in Southern California
which was acquired by Arden Realty, Inc. (the "Company") from a nonaffiliated
third party. The Property was acquired for $9,500,000 and has approximately
67,820 rentable square feet, of which 12,740 represents 16 multi-family housing
units, the rents of which are partially subsidized by the Department of Housing
and Urban Development. The multi-family housing units are leased on a month to
month basis.

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with rules and
regulations of the Securities and Exchange Commission.

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 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.

2. COMMERCIAL OFFICE PROPERTY

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996, are as follows:

<TABLE>
<S> <C>
1997............................................................ $ 991,000
1998............................................................ 903,000
1999............................................................ 888,000
2000............................................................ 755,000
2001............................................................ 528,000
Thereafter...................................................... 569,000
---------
$4,634,000
---------
---------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses or the multi-family housing
units.

Office space in the Property is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts. At October 31, 1996, one of the Property's tenants
acccounted for approximately 15% of the Property's aggregate annualized base
rent.

F-54
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders

Arden Realty, Inc.

We have audited the accompanying combined statement of revenue and certain
expenses of Burbank Executive Plaza and California Federal Building for the
twelve months ended October 31, 1996. This combined statement of revenue and
certain expenses is the responsibility of the management of Burbank Executive
Center. Our responsibility is to express an opinion on the combined statement of
revenue and certain expenses based on our audit.

In our opinion, the combined statement of revenue and certain expenses of
Burbank Executive Plaza and California Federal Building presents fairly, in all
material respects, the combined revenue and certain expenses, as defined above,
of Burbank Executive Plaza and California Federal Building for the twelve months
ended October 31, 1996, in conformity with generally accepted accounting
principles.

Ernst & Young LLP

Los Angeles, California
February 7, 1997

F-55
<PAGE>
BURBANK EXECUTIVE PLAZA AND CALIFORNIA FEDERAL BUILDING

COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE TWELVE MONTHS ENDED OCTOBER 31, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental............................................................................ $ 2,353
Parking--net of expenses.......................................................... 173
---------
Total revenue................................................................... 2,526
---------

CERTAIN EXPENSES:
Property operating and maintenance................................................ 823
Real estate taxes................................................................. 185
Insurance......................................................................... 45
---------
Total certain expenses.......................................................... 1,053
---------
Excess of revenue over certain expenses....................................... $ 1,473
---------
---------
</TABLE>

See accompanying notes to combined statement of revenue and certain expenses.

F-56
<PAGE>
BURBANK EXECUTIVE PLAZA AND CALIFORNIA FEDERAL BUILDING

NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE TWELVE MONTHS ENDED OCTOBER 31, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying combined statement of revenue and certain expenses includes
the operations of Burbank Executive Plaza and California Federal Building (the
"Properties") located in Southern California which was acquired by Arden Realty,
Inc. (the "Company") from the same nonaffiliated third party. The Properties
were acquired for $13,000,000 and has approximately 142,862 rentable square
feet.

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with rules and
regulations of the Securities and Exchange Commission.

The accounts of the Properties are combined in the statement of revenue and
certain expenses and there are no interproperty accounts to be eliminated. 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 the
Properties have been excluded. Excluded expenses consist of interest,
depreciation and amortization and property general and administrative costs not
directly comparable to the future operation of the Properties.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

RISKS AND UNCERTAINTIES

The preparation of combined 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 combined
financial statements and the reported amounts 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 December 31, 1996, are as follows:

<TABLE>
<S> <C>
1997............................................................ $2,186,000
1998............................................................ 1,610,000
1999............................................................ 1,319,000
2000............................................................ 668,000
2001............................................................ 601,000
Thereafter...................................................... 675,000
---------
$7,059,000
---------
---------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Properties is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts. At October 31, 1996, four of the Properties'
tenants accounted for approximately 56% of the Properties' aggregate annualized
base rent.

F-57
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders

Arden Realty, Inc.

We have audited the accompanying statement of revenue and certain expenses
of Center Promenade for the period January 1, 1996 to December 17, 1996. This
statement of revenue and certain expenses is the responsibility of the
management of Center Promenade. 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 of Center
Promenade presents fairly, in all material respects, the revenue and certain
expenses, as defined above, of Center Promenade for the period January 1, 1996
to December 17, 1996, in conformity with generally accepted accounting
principles.

Ernst & Young LLP

Los Angeles, California
February 5, 1997

F-58
<PAGE>
CENTER PROMENADE

STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE PERIOD JANUARY 1, 1996 TO DECEMBER 17, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental............................................................................ $ 2,097
Tenant reimbursements............................................................. 51
---------
Total revenue................................................................... 2,148
---------

CERTAIN EXPENSES:
Property operating and maintenance................................................ 756
Real estate taxes................................................................. 171
Insurance......................................................................... 50
Bad debts......................................................................... 5
---------
Total certain expenses.......................................................... 982
---------
Excess of revenue over certain expenses....................................... $ 1,166
---------
---------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-59
<PAGE>
CENTER PROMENADE

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE PERIOD JANUARY 1, 1996 TO DECEMBER 17, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statement of revenue and certain expenses includes the
operations of Center Promenade (the "Property") located in Southern California
which was acquired by Arden Realty, Inc. (the "Company") from a nonaffiliated
third party. The Property was acquired for $11,550,000 and has approximately
174,837 rentable square feet.

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with rules and
regulations of the Securities and Exchange Commission.

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 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.

2. COMMERCIAL OFFICE PROPERTY

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996, are as follows:

<TABLE>
<S> <C>
1997............................................................ $1,661,000
1998............................................................ 1,462,000
1999............................................................ 1,151,000
2000............................................................ 683,000
2001............................................................ 407,000
Thereafter...................................................... 213,000
---------
$5,577,000
---------
---------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Property is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts.

F-60
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders

Arden Realty, Inc.

We have audited the accompanying statement of revenue and certain expenses
of Los Angeles Corporate Center for the period January 1, 1996 to December 18,
1996. This statement of revenue and certain expenses is the responsibility of
the management of Los Angeles Corporate Center. 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 of Los Angeles
Corporate Center presents fairly, in all material respects, the revenue and
certain expenses, as defined above, of Los Angeles Corporate Center for the
period January 1, 1996 to December 18, 1996, in conformity with generally
accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
February 5, 1997

F-61
<PAGE>
LOS ANGELES CORPORATE CENTER

STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE PERIOD JANUARY 1, 1996 TO DECEMBER 18, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental................................ $5,882
Tenant reimbursements................. 128
Other................................. 288
------
Total revenue....................... 6,298
------

CERTAIN EXPENSES:
Property operating and maintenance.... 2,090
Real estate taxes..................... 367
Insurance............................. 217
Other................................. 207
------
Total certain expenses.............. 2,881
------
Excess of revenue over certain
expenses......................... $3,417
------
------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-62
<PAGE>
LOS ANGELES CORPORATE CENTER

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE PERIOD JANUARY 1, 1996 TO DECEMBER 18, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statement of revenue and certain expenses includes the
operations of Los Angeles Corporate Center (the "Property") located in Southern
California which was acquired by Arden Realty, Inc. (the "Company"), from a
nonaffiliated third party. The Property was acquired for $41,850,000 and has
approximately 389,293 rentable square feet.

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with rules and
regulations of the Securities and Exchange Commission.

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 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.

2. COMMERCIAL OFFICE PROPERTY

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996, are as follows:

<TABLE>
<S> <C>
1997.................................... $ 6,304,000
1998.................................... 3,979,000
1999.................................... 1,715,000
2000.................................... 996,000
2001.................................... 473,000
Thereafter.............................. --
-----------
$13,467,000
-----------
-----------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Property is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts. At December 18, 1996, two of the Property's tenants
accounted for approximately 68% of the Property's aggregate annualized base
rent.

F-63
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders

Arden Realty, Inc.

We have audited the accompanying statement of revenue and certain expenses
of 5200 West Century for the period January 1, 1996 to December 19, 1996. This
statement of revenue and certain expenses is the responsibility of the
management of 5200 West Century. 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 of 5200 West
Century presents fairly, in all material respects, the revenue and certain
expenses, as defined above, of 5200 West Century for the period January 1, 1996
to December 19, 1996, in conformity with generally accepted accounting
principles.

Ernst & Young LLP

Los Angeles, California
February 5, 1997

F-64
<PAGE>
5200 WEST CENTURY

STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE PERIOD JANUARY 1, 1996 TO DECEMBER 19, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental............................................................................ $ 1,021
Tenant reimbursements............................................................. 115
Parking--net of expenses.......................................................... 40
Other............................................................................. 2
---------
Total revenue................................................................... 1,178
---------

CERTAIN EXPENSES:
Property operating and maintenance................................................ 841
Real estate taxes................................................................. 135
Insurance......................................................................... 212
---------
Total certain expenses.......................................................... 1,188
---------
Excess of revenue over certain expenses....................................... $ (10)
---------
---------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-65
<PAGE>
5200 WEST CENTURY

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE PERIOD JANUARY 1, 1996 TO DECEMBER 19, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statement of revenue and certain expenses includes the
operations of 5200 West Century (the "Property") located in Southern California
which was acquired by Arden Realty, Inc. (the "Company") from a nonaffiliated
third party. The Property was acquired for $11,400,000 and has approximately
310,910 rentable square feet.

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with rules and
regulations of the Securities and Exchange Commission.

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 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.

2. COMMERCIAL OFFICE PROPERTY

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996, are as follows:

<TABLE>
<S> <C>
1997............................................................ $ 783,000
1998............................................................ 750,000
1999............................................................ 684,000
2000............................................................ 575,000
2001............................................................ 562,000
Thereafter...................................................... 3,258,000
---------
$6,612,000
---------
---------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Property is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts. At December 19, 1996, two of the Property's tenants
accounted for approximately 53% of the Property's aggregate annualized base
rent.

F-66
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Arden Realty, Inc.

We have audited the accompanying statement of revenue and certain expenses
of Sumitomo Bank Building for the period January 1, 1996 to December 20, 1996.
This statement of revenue and certain expenses is the responsibility of the
management of Sumitomo Bank Building. 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 of Sumitomo
Bank Building presents fairly, in all material respects, the revenue and certain
expenses, as defined above, of Sumitomo Bank Building for the period January 1,
1996 to December 20, 1996, in conformity with generally accepted accounting
principles.

Ernst & Young LLP

Los Angeles, California
February 5, 1997

F-67
<PAGE>
SUMITOMO BANK BUILDING

STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE PERIOD JANUARY 1, 1996 TO DECEMBER 20, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental............................................................................ $ 1,926
Tenant reimbursements............................................................. 79
Parking--net of expenses.......................................................... 254
Other............................................................................. 9
---------
Total revenue................................................................... 2,268
---------
CERTAIN EXPENSES:
Property operating and maintenance................................................ 859
Real estate taxes................................................................. 161
Insurance......................................................................... 51
---------
Total certain expenses.......................................................... 1,071
---------
Excess of revenue over certain expenses....................................... $ 1,197
---------
---------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-68
<PAGE>
SUMITOMO BANK BUILDING

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE PERIOD JANUARY 1, 1996 TO DECEMBER 20, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statement of revenue and certain expenses includes the
operations of Sumitomo Bank Building (the "Property") located in Southern
California which was acquired by Arden Realty, Inc. (the "Company") from a
nonaffiliated third party. The Property was acquired for $12,800,000 and has
approximately 110,641 rentable square feet.

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with rules and
regulations of the Securities and Exchange Commission.

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 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.

2. COMMERCIAL OFFICE PROPERTY

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996, are as follows:

<TABLE>
<S> <C>
1997............................................................ $1,655,000
1998............................................................ 1,223,000
1999............................................................ 730,000
2000............................................................ 385,000
2001............................................................ 93,000
Thereafter...................................................... --
---------
$4,086,000
---------
---------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Property is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts. At December 20, 1996, one of the Property's tenants
accounted for approximately 11% of the Property's aggregate annualized base
rent.

F-69
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Arden Realty, Inc.

We have audited the accompanying statement of revenue and certain expenses
of 10350 Santa Monica for the period January 1, 1996 to December 27, 1996. This
statement of revenue and certain expenses is the responsibility of the
management of 10350 Santa Monica. 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 of 10350 Santa
Monica presents fairly, in all material respects, the revenue and certain
expenses, as defined above, of 10350 Santa Monica for the period January 1, 1996
to December 27, 1996, in conformity with generally accepted accounting
principles.

Ernst & Young LLP

Los Angeles, California
February 5, 1997

F-70
<PAGE>
10350 SANTA MONICA

STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE PERIOD JANUARY 1, 1996 TO DECEMBER 27, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental.............................................................................. $ 629
Tenant reimbursements............................................................... 3
Parking--net of expenses............................................................ 58
Other............................................................................... 2
---------
Total revenue..................................................................... 692
---------
CERTAIN EXPENSES:
Property operating and maintenance.................................................. 271
Real estate taxes................................................................... 45
Insurance........................................................................... 11
---------
Total certain expenses............................................................ 327
---------
Excess of revenue over certain expenses......................................... $ 365
---------
---------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-71
<PAGE>
10350 SANTA MONICA

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE PERIOD JANUARY 1, 1996 TO DECEMBER 27, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statement of revenue and certain expenses includes the
operations of 10350 Santa Monica (the "Property") located in Southern California
which was acquired by Arden Realty, Inc. (the "Company") from a nonaffiliated
third party. The Property was acquired for $4,300,000 and has approximately
42,292 rentable square feet.

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with rules and
regulations of the Securities and Exchange Commission.

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 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.

2. COMMERCIAL OFFICE PROPERTY

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996, are as follows:

<TABLE>
<S> <C>
1997.................................................... $ 583,000
1998.................................................... 402,000
1999.................................................... 265,000
2000.................................................... 156,000
2001.................................................... 28,000
Thereafter.............................................. 14,000
---------
$1,448,000
---------
---------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Property is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts. At December 27, 1996, two of the Property's tenants
accounted for approximately 30% of the Property's aggregate annualized base
rent.

F-72
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Arden Realty, Inc.

We have audited the accompanying statements of revenue and certain expenses
of 535 Brand for each of the three years in the period ended December 31, 1996.
This statement of revenue and certain expenses is the responsibility of the
management of 535 Brand. Our responsibility is to express an opinion on the
statements 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 statements of revenue and certain
expenses 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.

The accompanying statements of revenue and certain expenses were prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission. 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 statements are not intended to be a complete
presentation of the revenue and expenses of the property.

In our opinion, the statements of revenue and certain expenses of 535 Brand
present fairly, in all material respects, the revenue and certain expenses, as
defined above, of 535 Brand for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
March 4, 1997

F-73
<PAGE>
535 BRAND
STATEMENTS OF REVENUE AND CERTAIN EXPENSES
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
REVENUE:
Rental................................................................................. $ 707 $ 799 $ 870
Tenant reimbursements.................................................................. 74 86 102
Parking--net of expenses............................................................... 90 92 84
--------- --------- ---------
Total revenue...................................................................... 871 977 1,056
--------- --------- ---------
CERTAIN EXPENSES:
Property operating and maintenance..................................................... 350 359 404
Real estate taxes...................................................................... 75 74 71
Insurance.............................................................................. 34 27 27
--------- --------- ---------
Total certain expenses............................................................. 459 460 502
--------- --------- ---------
Excess of revenue over certain expenses.......................................... $ 412 $ 517 $ 554
--------- --------- ---------
--------- --------- ---------
</TABLE>

See accompanying notes to statements of revenue and certain expenses.

F-74
<PAGE>
535 BRAND

NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES

FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statements of revenue and certain expenses include the
operations of 535 Brand (the "Property") located in Southern California which
was acquired by Arden Realty, Inc. (the "Company"), from Arthur Gilbert, a
minority interest OP Unit holder and former member of the Board of Directors of
the Company. The Property was acquired for $10,175,000 and has 109,187 rentable
square feet.

BASIS OF PRESENTATION

The accompanying statements have been prepared to comply with rules and
regulations of the Securities and Exchange Commission.

The accompanying statements are 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 the
Property have been excluded. Excluded expenses consist of interest, depreciation
and amortization and property general and administrative costs not directly
comparable to the future operation of the Property.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

USE OF ESTIMATES

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.

2. COMMERCIAL OFFICE PROPERTY

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997.................................................... $ 372,000
1998.................................................... 298,000
1999.................................................... 248,000
2000.................................................... 221,000
2001.................................................... 215,000
Thereafter.............................................. 342,000
---------
$1,696,000
---------
---------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Property is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts. At December 31, 1996, two of the Property's tenants
accounted for approximately 55% of the Property's aggregate annualized base
rent.

F-75
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Arden Realty, Inc.

We have audited the accompanying combined statement of revenue and certain
expenses of the Whittier Financial Center, Clarendon Crest and California Twin
Centre (the "Properties") for the year ended December 31, 1996. This combined
statement of revenue and certain expenses is the responsibility of the
management of the Properties. Our responsibility is to express an opinion on the
combined statement of revenue and certain expenses based on our audit.

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. 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 Properties.

In our opinion, the combined statement of revenue and certain expenses of
Whittier Financial Center, Clarendon Crest and California Twin Centre presents
fairly, in all material respects, the revenue and certain expenses, as defined
above, of the Properties for the year ended December 31, 1996, in conformity
with generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
February 24, 1997

F-76
<PAGE>
WHITTIER FINANCIAL CENTER, CLARENDON CREST AND CALIFORNIA TWIN CENTRE

COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental............................................................................ $ 5,580
Tenant reimbursements............................................................. 225
Parking--net of expenses.......................................................... 228
Other............................................................................. 15
---------
Total revenue................................................................... 6,048
---------
CERTAIN EXPENSES:
Property operating and maintenance................................................ 1,243
Real estate taxes................................................................. 350
Insurance......................................................................... 164
---------
Total certain expenses.......................................................... 1,757
---------
Excess of revenue over certain expenses....................................... $ 4,291
---------
---------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-77
<PAGE>
WHITTIER FINANCIAL CENTER, CLARENDON CREST AND CALIFORNIA TWIN CENTRE

NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying combined statement of revenue and certain expenses include
the operations of three commercial office properties located in Southern
California (the "Properties") which were acquired by Arden Realty, Inc., a
Maryland corporation (the "Company") from the same nonaffiliated third party.

The Properties acquired are as follows:

<TABLE>
<CAPTION>
APPROXIMATE
SOUTHERN RENTABLE
CALIFORNIA SQUARE ACQUISITION
PROPERTY NAME LOCATION FOOTAGE PRICE
- -------------------------------------------- ------------------ ------------ -------------
<S> <C> <C> <C>
Whittier Financial Center................... Whittier 135,415 $ 14,327,000
Clarendon Crest............................. Woodland Hills 43,063 5,222,000
California Twin Centre...................... Bakersfield 155,189 19,528,000
-------------
$ 39,077,000
-------------
-------------
</TABLE>

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with rules and
regulations of the Securities and Exchange Commission. The accompanying
statement was prepared on a combined basis because the properties were acquired
from a single owner. There are no interproperty accounts to be eliminated.

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 the
Properties have been excluded. Excluded expenses consist of interest,
depreciation and amortization and property general and administrative costs not
directly comparable to the future operation of the Properties.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

USE OF ESTIMATES

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.

F-78
<PAGE>
WHITTIER FINANCIAL CENTER, CLARENDON CREST AND CALIFORNIA TWIN CENTRE

NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES (CONTINUED)

FOR THE YEAR ENDED DECEMBER 31, 1996

2. COMMERCIAL OFFICE PROPERTIES

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997................................................... $5,650,000
1998................................................... 5,406,000
1999................................................... 5,214,000
2000................................................... 4,959,000
2001................................................... 3,507,000
Thereafter............................................. 4,000,000
----------
$28,736,000
----------
----------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Properties is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts. At December 31, 1996, five of the Properties'
tenants accounted for approximately 60% of the Properties' aggregate annualized
base rent.

F-79
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Arden Realty, Inc.

We have audited the accompanying statement of revenue and certain expenses
of 10780 Santa Monica for the year ended December 31, 1996. This statement of
revenue and certain expenses is the responsibility of the management of 10780
Santa Monica. 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 of 10780 Santa
Monica presents fairly, in all material respects, the revenue and certain
expenses, as defined above, of 10780 Santa Monica for the year ended December
31, 1996, in conformity with generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
February 28, 1997

F-80
<PAGE>
10780 SANTA MONICA
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental............................................................................ $ 1,455
Tenant reimbursements............................................................. 57
Parking--net of expenses.......................................................... 136
Other............................................................................. 2
---------
Total revenue................................................................... 1,650
---------
CERTAIN EXPENSES:
Property operating and maintenance................................................ 303
Real estate taxes................................................................. 88
Insurance......................................................................... 26
---------
Total certain expenses.......................................................... 417
---------
Excess of revenue over certain expenses....................................... $ 1,233
---------
---------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-81
<PAGE>
10780 SANTA MONICA

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statement of revenue and certain expenses include the
operations of 10780 Santa Monica (the "Property") located in Southern California
which was acquired by Arden Realty, Inc. (the "Company"), from a nonaffiliated
third party. The Property was acquired for $10,533,000 and has 92,486 rentable
square feet.

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with rules and
regulations of the Securities and Exchange Commission.

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 the
Property have been excluded. Excluded expenses consist of interest, depreciation
and amortization and property general and administrative costs not directly
comparable to the future operation of the Property.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

USE OF ESTIMATES

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.

2. COMMERCIAL OFFICE PROPERTY

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997.................................................... $1,024,000
1998.................................................... 679,000
1999.................................................... 481,000
2000.................................................... 315,000
2001.................................................... 155,000
Thereafter.............................................. --
---------
$2,654,000
---------
---------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Property is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts.

F-82
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Arden Realty, Inc.

We have audited the accompanying statement of revenue and certain expenses
of Noble Professional Center for the year ended December 31, 1996. This
statement of revenue and certain expenses is the responsibility of the
management of Noble Professional Center. 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 of Noble
Professional Center presents fairly, in all material respects, the revenue and
certain expenses, as defined above, of Noble Professional Center for the year
ended December 31, 1996, in conformity with generally accepted accounting
principles.

Ernst & Young LLP

Los Angeles, California
March 7, 1997

F-83
<PAGE>
NOBLE PROFESSIONAL CENTER
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental............................................................................. $ 794
Tenant reimbursements.............................................................. 5
Parking--net of expenses........................................................... 51
---------
Total revenue.................................................................... 850
---------
CERTAIN EXPENSES:
Property operating and maintenance................................................. 258
Real estate taxes.................................................................. 59
Insurance.......................................................................... 30
---------
Total certain expenses........................................................... 347
---------
Excess of revenue over certain expenses........................................ $ 503
---------
---------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-84
<PAGE>
NOBLE PROFESSIONAL CENTER

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statement of revenue and certain expenses include the
operations of Noble Professional Center (the "Property") located in Southern
California which was acquired by Arden Realty, Inc. (the "Company"), from a
nonaffiliated third party. The Property was acquired for $6,720,000 and has
approximately 51,828 rentable square feet.

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with the rules and
regulations of the Securities and Exchange Commission.

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 the
Property have been excluded. Excluded expenses consist of interest, depreciation
and amortization and property general and administrative costs not directly
comparable to the future operation of the Property.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

USE OF ESTIMATES

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.

2. COMMERCIAL OFFICE PROPERTY

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997.................................................... $ 848,000
1998.................................................... 868,000
1999.................................................... 554,000
2000.................................................... 301,000
2001.................................................... 135,000
Thereafter.............................................. 25,000
---------
$2,731,000
---------
---------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Property is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts. At December 31, 1996, three of the Property's
tenants accounted for approximately 54% of the Property's aggregate annualized
base rent.

F-85
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Arden Realty, Inc.

We have audited the accompanying statement of revenue and certain expenses
of South Bay Centre for the year ended December 31, 1996. This statement of
revenue and certain expenses is the responsibility of the management of South
Bay Centre. 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 of South Bay
Centre presents fairly, in all material respects, the revenue and certain
expenses, as defined above, of South Bay Centre for the year ended December 31,
1996, in conformity with generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
May 7, 1997

F-86
<PAGE>
SOUTH BAY CENTRE
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental............................................................................ $ 2,691
Tenant reimbursements............................................................. 143
Other............................................................................. 26
---------
Total revenue................................................................... 2,860
---------
CERTAIN EXPENSES:
Property operating and maintenance................................................ 974
Real estate taxes................................................................. 190
Insurance......................................................................... 106
---------
Total certain expenses.......................................................... 1,270
---------
Excess of revenue over certain expenses....................................... $ 1,590
---------
---------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-87
<PAGE>
SOUTH BAY CENTRE

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statement of revenue and certain expenses include the
operations of South Bay Centre (the "Property") located in Southern California
which was acquired by Arden Realty, Inc. (the "Company"), from a nonaffiliated
third party. The Property was acquired for $19,100,000 and has 202,830 rentable
square feet.

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with rules and
regulations of the Securities and Exchange Commission.

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 the
Property have been excluded. Excluded expenses consist of interest, depreciation
and amortization, land lease expense, and property general and administrative
costs not directly comparable to the future operation of the Property.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

USE OF ESTIMATES

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.

2. COMMERCIAL OFFICE PROPERTY

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997................................................... $11,521,000
1998................................................... 10,622,000
1999................................................... 9,466,000
2000................................................... 7,718,000
2001................................................... 5,362,000
Thereafter............................................. 6,774,000
----------
$51,463,000
----------
----------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Property is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts. At December 31, 1996, two of the Property's tenants
accounted for approximately 54% of the Property's aggregate annualized base
rent.

F-88
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Arden Realty, Inc.

We have audited the accompanying statement of revenue and certain expenses
of 8383 Wilshire for the year ended December 31, 1996. This statement of revenue
and certain expenses is the responsibility of the management of 8383 Wilshire.
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 of 8383
Wilshire presents fairly, in all material respects, the revenue and certain
expenses, as defined above, of 8383 Wilshire for the year ended December 31,
1996, in conformity with generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
April 24, 1997

F-89
<PAGE>
8383 WILSHIRE

STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental............................................................................ $ 6,628
Parking--net of expenses.......................................................... 832
Other income...................................................................... 31
---------
Total revenue................................................................... 7,491
---------
CERTAIN EXPENSES:
Property operating and maintenance................................................ 2,003
Real estate taxes................................................................. 634
Insurance......................................................................... 230
---------
Total certain expenses.......................................................... 2,867
---------
Excess of revenue over certain expenses....................................... $ 4,624
---------
---------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-90
<PAGE>
8383 WILSHIRE

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statement of revenue and certain expenses include the
operations of 8383 Wilshire (the "Property") located in Southern California
which was acquired by Arden Realty, Inc. (the "Company"), from a nonaffiliated
third party. The Property was acquired for approximately $59,000,000 and has
417,463 rentable square feet.

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with rules and
regulations of the Securities and Exchange Commission.

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 the
Property have been excluded. Excluded expenses consist of interest, depreciation
and amortization and property general and administrative costs not directly
comparable to the future operation of the Property.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

USE OF ESTIMATES

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.

2. COMMERCIAL OFFICE PROPERTY

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997................................................... $5,881,000
1998................................................... 4,654,000
1999................................................... 3,981,000
2000................................................... 3,238,000
2001................................................... 2,448,000
Thereafter............................................. 3,784,000
----------
$23,986,000
----------
----------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Property is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts.

F-91
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Arden Realty, Inc.

We have audited the accompanying statement of revenue and certain expenses
of Parkway Center for the year ended December 31, 1996. This statement of
revenue and certain expenses is the responsibility of the management of Parkway
Center. 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 of Parkway
Center presents fairly, in all material respects, the revenue and certain
expenses, as defined above, of Parkway Center for the year ended December 31,
1996, in conformity with generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
May 6, 1997

F-92
<PAGE>
PARKWAY CENTER

STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental............................................................................ $ 911
Tenant reimbursements............................................................. 92
---------
Total revenue................................................................... 1,003
---------
CERTAIN EXPENSES:
Property operating and maintenance................................................ 208
Real estate taxes................................................................. 61
Insurance......................................................................... 7
---------
Total certain expenses.......................................................... 276
---------
Excess of revenue over certain expenses....................................... $ 727
---------
---------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-93
<PAGE>
PARKWAY CENTER

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statement of revenue and certain expenses include the
operations of Parkway Center (the "Property") located in Southern California
which was acquired by Arden Realty, Inc. (the "Company"), from a nonaffiliated
third party. The Property was acquired for $7,400,000 and has 61,333 rentable
square feet.

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with rules and
regulations of the Securities and Exchange Commission.

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 the
Property have been excluded. Excluded expenses consist of interest, depreciation
and amortization, land lease expense, and property general and administrative
costs not directly comparable to the future operation of the Property.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

USE OF ESTIMATES

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.

2. COMMERCIAL OFFICE PROPERTY

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997.................................................... $1,051,000
1998.................................................... 1,002,000
1999.................................................... 915,000
2000.................................................... 863,000
2001.................................................... 519,000
Thereafter.............................................. 512,000
---------
$4,862,000
---------
---------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Property is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts. At December 31, 1996, three of the Property's
tenants accounted for approximately 70% of the Property's aggregate annualized
base rent.

F-94
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Arden Realty, Inc.

We have audited the accompanying statement of revenue and certain expenses
of Centerpointe La Palma for the year ended December 31, 1996. This statement of
revenue and certain expenses is the responsibility of the management of
Centerpointe La Palma. 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 of
Centerpointe La Palma presents fairly, in all material respects, the revenue and
certain expenses, as defined above, of Centerpointe La Palma for the year ended
December 31, 1996, in conformity with generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
April 30, 1997

F-95
<PAGE>
CENTERPOINTE LA PALMA

STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental........................................................................... $ 9,222
Tenant reimbursements............................................................ 797
Parking--net of expenses......................................................... 9
Other............................................................................ 38
---------
Total revenue.................................................................. 10,066
---------
CERTAIN EXPENSES:
Property operating and maintenance............................................... 2,042
Real estate taxes................................................................ 620
Insurance........................................................................ 172
---------
Total certain expenses......................................................... 2,834
---------
Excess of revenue over certain expenses...................................... $ 7,232
---------
---------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-96
<PAGE>
CENTERPOINTE LA PALMA

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statement of revenue and certain expenses include the
operations of Centerpointe La Palma (the "Property") located in Southern
California which will be acquired by Arden Realty, Inc. (the "Company"), from a
nonaffiliated third party. The Property was acquired for $80,100,000 and has
597,550 rentable square feet.

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with rules and
regulations of the Securities and Exchange Commission.

Excluded expenses consist of interest, depreciation and amortization, land
lease expense, and property general and administrative costs not directly
comparable to the future operation of the Property.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

USE OF ESTIMATES

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.

2. COMMERCIAL OFFICE PROPERTY

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997................................................... $8,123,000
1998................................................... 7,317,000
1999................................................... 5,686,000
2000................................................... 4,741,000
2001................................................... 4,117,000
Thereafter............................................. 14,960,000
----------
$44,944,000
----------
----------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Property is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts. At December 31, 1996, one of the Property's tenants
accounted for approximately 25% of the Property's aggregate annualized base
rent.

F-97
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Arden Realty, Inc.

We have audited the accompanying statement of revenue and certain expenses
of 1100 Glendon for the year ended December 31, 1996. This statement of revenue
and certain expenses is the responsibility of the management of 1100 Glendon.
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 of 1100
Glendon presents fairly, in all material respects, the revenue and certain
expenses, as defined above, of 1100 Glendon for the year ended December 31,
1996, in conformity with generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
May 30, 1997

F-98
<PAGE>
1100 GLENDON

STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental............................................................................ $ 3,421
Gain on lease termination......................................................... 308
Parking--net of expenses.......................................................... 342
Other............................................................................. 42
---------
Total revenue................................................................... 4,113
---------
CERTAIN EXPENSES:
Property operating and maintenance................................................ 1,279
Real estate taxes................................................................. 169
Insurance......................................................................... 160
---------
Total certain expenses.......................................................... 1,608
Excess of revenue over certain expenses....................................... $ 2,505
---------
---------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-99
<PAGE>
1100 GLENDON

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statement of revenue and certain expenses include the
operations of 1100 Glendon (the "Property") located in Southern California which
is to be acquired by Arden Realty, Inc. (the "Company"), from a nonaffiliated
third party. The Property is to be acquired for approximately $29,500,000 and
has 282,013 rentable square feet.

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with rules and
regulations of the Securities and Exchange Commission.

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 the
Property have been excluded. Excluded expenses consist of interest, depreciation
and amortization and property general and administrative costs not directly
comparable to the future operation of the Property.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

USE OF ESTIMATES

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.

2. COMMERCIAL OFFICE PROPERTY

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997.................................................... $1,853,000
1998.................................................... 909,000
1999.................................................... 499,000
2000.................................................... 294,000
2001.................................................... 192,000
Thereafter.............................................. 286,000
---------
$4,033,000
---------
---------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Property is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts.

F-100
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Arden Realty, Inc.

We have audited the accompanying statement of revenue and certain expenses
of Pacific Gateway II for the year ended December 31, 1996. This statement of
revenue and certain expenses is the responsibility of the management of Pacific
Gateway II. 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 of Pacific
Gateway II presents fairly, in all material respects, the revenue and certain
expenses, as defined above, of Pacific Gateway II for the year ended December
31, 1996, in conformity with generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
June 6, 1997

F-101
<PAGE>
PACIFIC GATEWAY II
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental............................................................................ $ 3,355
Tenant reimbursements............................................................. 87
Other income...................................................................... 144
---------
Total revenue................................................................... 3,586
---------
CERTAIN EXPENSES:
Property operating and maintenance................................................ 925
Real estate taxes................................................................. 214
Insurance......................................................................... 66
---------
Total certain expenses.......................................................... 1,205
---------
Excess of revenue over certain expenses....................................... $ 2,381
---------
---------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-102
<PAGE>
PACIFIC GATEWAY II

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statement of revenue and certain expenses include the
operations of Pacific Gateway II (the "Property") located in Southern California
which will be acquired by Arden Realty, Inc. (the "Company"), from a
nonaffiliated third party. The Property will be acquired for approximately
$25,150,000 and have 223,731 rentable square feet.

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with rules and
regulations of the Securities and Exchange Commission.

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 the
Property have been excluded. Excluded expenses consist of interest, depreciation
and amortization and property general and administrative costs not directly
comparable to the future operation of the Property.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

USE OF ESTIMATES

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.

2. COMMERCIAL OFFICE PROPERTY

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997................................................... $3,403,000
1998................................................... 2,829,000
1999................................................... 2,632,000
2000................................................... 2,322,000
2001................................................... 1,426,000
Thereafter............................................. 2,340,000
----------
$14,952,000
----------
----------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Property is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts. At December 31, 1996, three of the Property's
tenants accounted for approximately 53% of the Property's aggregate annualized
base rent.

F-103
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Arden Realty, Inc.

We have audited the accompanying combined statement of revenue and certain
expenses of 1000 Town Center and Mariner Court for the year ended December 31,
1996. This combined statement of revenue and certain expenses is the
responsibility of the management of 1000 Town Center and Mariner Court. Our
responsibility is to express an opinion on the combined statement of revenue and
certain expenses based on our audit.

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. 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 combined statement of revenue and certain expenses of
1000 Town Center and Mariner Court presents fairly, in all material respects,
the combined revenue and certain expenses, as defined above, of 1000 Town Center
and Mariner Court for the year ended December 31, 1996, in conformity with
generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
May 2, 1997

F-104
<PAGE>
1000 TOWN CENTER AND MARINER COURT
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental............................................................................ $ 3,798
Tenant reimbursements............................................................. 93
---------
Total revenue................................................................... 3,891
---------

Certain Expenses:
Property operating and maintenance................................................ 1,007
Real estate taxes................................................................. 264
Insurance......................................................................... 79
---------
Total certain expenses.......................................................... 1,350
---------
Excess of revenue over certain expenses....................................... $ 2,541
---------
---------
</TABLE>

See accompanying notes to combined statement of revenue and certain expenses.

F-105
<PAGE>
1000 TOWN CENTER AND MARINER COURT

NOTES TO COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying combined statement of revenue and certain expenses includes
the operations of 1000 Town Center and Mariner Court (the "Properties") located
in Southern California which will be acquired by Arden Realty, Inc. (the
"Company"), from a nonaffiliated third party. The Properties will be acquired
for approximately $25,750,000 and have 213,089 rentable square feet.

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with rules and
regulations of the Securities and Exchange Commission.

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 the
Properties have been excluded. Excluded expenses consist of interest,
depreciation and amortization and property general and administrative costs not
directly comparable to the future operation of the Properties.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

USE OF ESTIMATES

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.

2. COMMERCIAL OFFICE PROPERTY

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997................................................... $3,576,000
1998................................................... 3,331,000
1999................................................... 2,840,000
2000................................................... 1,923,000
2001................................................... 1,104,000
Thereafter............................................. 698,000
----------
$13,472,000
----------
----------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Properties is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts. At December 31, 1996, four of the Properties'
tenants accounted for approximately 55% of the Properties' aggregate annualized
base rent.

F-106
<PAGE>
REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
Arden Realty, Inc.

We have audited the accompanying statement of revenue and certain expenses
of Crown Cabot for the year ended December 31, 1996. This statement of revenue
and certain expenses is the responsibility of the management of Crown Cabot. 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 of Crown Cabot
presents fairly, in all material respects, the revenue and certain expenses, as
defined above, of Crown Cabot for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.

Ernst & Young LLP

Los Angeles, California
May 2, 1997

F-107
<PAGE>
CROWN CABOT
STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)

<TABLE>
<S> <C>
REVENUE:
Rental............................................................................ $ 3,002
Tenant reimbursements............................................................. 71
Other income...................................................................... 41
---------
Total revenue................................................................... 3,114
---------
CERTAIN EXPENSES:
Property operating and maintenance................................................ 582
Real estate taxes................................................................. 213
Insurance......................................................................... 102
---------
Total certain expenses.......................................................... 897
---------
Excess of revenue over certain expenses....................................... $ 2,217
---------
---------
</TABLE>

See accompanying notes to statement of revenue and certain expenses.

F-108
<PAGE>
CROWN CABOT

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

FOR THE YEAR ENDED DECEMBER 31, 1996

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

The accompanying statement of revenue and certain expenses include the
operations of Crown Cabot (the "Property") located in Southern California which
will be acquired by Arden Realty, Inc. (the "Company"), from a nonaffiliated
third party. The Property will be acquired for approximately $28,225,000 and has
172,900 rentable square feet.

BASIS OF PRESENTATION

The accompanying statement has been prepared to comply with rules and
regulations of the Securities and Exchange Commission.

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 the
Property have been excluded. Excluded expenses consist of interest, depreciation
and amortization and property general and administrative costs not directly
comparable to the future operation of the Property.

REVENUE RECOGNITION

Rental revenue is recognized on a straight-line basis over the terms of the
related leases.

USE OF ESTIMATES

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.

2. COMMERCIAL OFFICE PROPERTY

The future minimum lease payments to be received under existing operating
leases as of December 31, 1996 are as follows:

<TABLE>
<S> <C>
1997............................................................ $3,218,000
1998............................................................ 2,359,000
1999............................................................ 1,579,000
2000............................................................ 1,072,000
2001............................................................ 465,000
Thereafter...................................................... 12,000
---------
$8,705,000
---------
---------
</TABLE>

The above future minimum lease payments do not include specified payments
for tenant reimbursements of operating expenses.

Office space in the Property is generally leased to tenants under lease
terms which provide for the tenants to pay increases in operating expenses in
excess of specified amounts. At December 31, 1996, two of the Property's tenants
accounted for approximately 33% of the Property's aggregate annualized base
rent.

F-109
<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....................................... 15
The Company........................................ 26
Business and Growth Strategies..................... 28
Use of Proceeds.................................... 31
Price Range of Common Stock and Distribution
History.......................................... 31
Capitalization..................................... 33
Selected Financial Information..................... 34
Management's Discussion and Analysis of Financial
Condition and Results of Operations.............. 38
Southern California Economy and Office Markets..... 50
Properties......................................... 55
Office Submarkets and Property Information......... 76
Management......................................... 93
Formation Transactions............................. 101
Policies With Respect to Certain Activities........ 103
Certain Transactions............................... 106
Partnership Agreement.............................. 107
Principal and Management Stockholders.............. 111
Capital Stock...................................... 112
Certain Provisions of Maryland Law and the
Company's Charter and Bylaws..................... 115
Shares Available for Future Sale................... 118
Federal Income Tax Considerations.................. 119
ERISA Considerations............................... 133
Underwriting....................................... 136
Experts............................................ 137
Legal Matters...................................... 138
Additional Information............................. 138
Glossary........................................... 139
Index to Financial Statements...................... F-1
</TABLE>

10,000,000 SHARES

ARDEN REALTY, INC.

COMMON STOCK

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

PROSPECTUS
, 1997

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

LEHMAN BROTHERS

ALEX. BROWN & SONS
INCORPORATED

A.G. EDWARDS & SONS, INC.

MORGAN STANLEY DEAN WITTER

SMITH BARNEY INC.

EVEREN SECURITIES, INC.

RAYMOND JAMES &
ASSOCIATES, INC.

ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

<TABLE>
<S> <C>
Registration Fee - Securities and Exchange Commission............. $ 90,824
NASD Fee.......................................................... 30,472
New York Stock Exchange Listing Fee............................... 50,000
Transfer Agent and Registrar's Fees............................... --
Printing and Engraving Expenses................................... 250,000
Legal Fees and Expenses (other than Blue Sky)..................... 100,000
Accounting Fees and Expenses...................................... 100,000
Blue Sky Fees and Expenses........................................ 7,500
Miscellaneous Expenses............................................ 321,204
---------
Total......................................................... $ 950,000
---------
---------
</TABLE>

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
were issued to the Unit Participants in return for (i) the contribution of
certain interests in the Arden Predecessors and in certain of the Initial
Properties to the Operating Partnership and (ii) the contribution by Namiz of
certain of its assets, including management contracts relating to certain of the
Initial Properties and the contract rights to purchase two properties (303
Glenoaks and 12501 East Imperial Highway). On December 20, 1996, the Operating
Partnership issued 55,805 OP Units to Hapsmith-Praxis Partners, a California
limited partnership, in consideration of the contribution of its interest in
5200 West Century (valued at $1.43 million) to the Operating Partnership. On
March 27, 1997, the Operating Partnership issued 26,880 OP Units to CalTwin
Investors, L.L.C., a Delaware limited liability company, in consideration of the
contribution of its interest in California Twin Centre (valued at $762,720) to
the Operating Partnership. Each of the aforementioned issuances of OP Units was
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 heading "Formation Transactions" and "The Company--Operating Partnership"
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

II-1
<PAGE>
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 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.

<TABLE>
<S> <C>
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)

Pro Forma Condensed Consolidated Financial Statements (Unaudited):

Pro Forma Condensed Consolidated Balance Sheet as of March 31, 1997
(Unaudited)

Pro Forma Condensed Consolidated Statement of Operations for the Three
Months Ended March 31, 1997 (Unaudited)

Pro Forma Condensed Consolidated Statement of Operations for the Year
Ended December 31, 1996 (Unaudited)

Notes to Pro Forma Condensed Consolidated Financial Statements
(Unaudited)

ARDEN REALTY, INC. AND THE ARDEN PREDECESSORS

Report of Independent Auditors

Consolidated Balance Sheets as of March 31, 1997 (Unaudited) and
December 31, 1996 and Combined Balance Sheet as of December 31, 1995

Consolidated Statements of Operations for the three months ended March
31, 1997 (Unaudited) and the period from October 9, 1996 to December
31, 1996 and Combined Statements of Operations for the three months
ended March 31, 1996 (Unaudited) and the period January 1, 1996 to
October 8, 1996 and for the years ended December 31, 1995 and 1994
</TABLE>

II-2
<PAGE>
<TABLE>
<S> <C>
Consolidated Statements of Stockholders' Equity for the three months
ended March 31, 1997 (Unaudited) and the period from October 9, 1996
to December 31, 1996 and Combined Statements of Owners' Equity for
the period from January 1, 1996 to October 8, 1996 and for the years
ended December 31, 1995 and 1994

Consolidated Statements of Cash Flows for the three months ended March
31, 1997 (Unaudited) and the period from October 9, 1996 to December
31, 1996 and Combined Statements of Cash Flows for the three months
ended March 31, 1996 (Unaudited) and the period January 1, 1996 to
October 8, 1996 and for the years ended December 31, 1995 and 1994

Notes to Financial Statements

Schedule III--Commercial Office Properties and Accumulated Depreciation

INITIAL PROPERTIES ACQUIRED IN 1996
1996 PRE IPO PROPERTIES

Combined Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Combined Statement of Revenue and Certain Expenses for the Year Ended
December 31, 1995

Notes to Combined Statement of Revenue and Certain Expenses

303 GLENOAKS AND 12501 EAST IMPERIAL HIGHWAY

Combined Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Combined Statement of Revenue and Certain Expenses for the Year Ended
December 31, 1995

Notes to Combined Statement of Revenue and Certain Expenses

PROPERTIES ACQUIRED IN 1996 SUBSEQUENT TO THE IPO
10351 SANTA MONICA

Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Statement of Revenue and Certain Expenses for the Twelve Months Ended
October 31, 1996

Notes to Statement of Revenue and Certain Expenses

2730 WILSHIRE

Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Statement of Revenue and Certain Expenses for the Twelve Months Ended
October 31, 1996

Notes to Statement of Revenue and Certain Expenses

BURBANK EXECUTIVE PLAZA AND CALIFORNIA FEDERAL BUILDING

Combined Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Combined Statement of Revenue and Certain Expenses for the Twelve
Months Ended October 31, 1996
</TABLE>

II-3
<PAGE>
<TABLE>
<S> <C>
Notes to Combined Statement of Revenue and Certain Expenses

CENTER PROMENADE

Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Statement of Revenue and Certain Expenses for the Period January 1,
1996 to December 17, 1996

Notes to Statement of Revenue and Certain Expenses
LOS ANGELES CORPORATE CENTER

Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Statement of Revenue and Certain Expenses for the Period January 1,
1996 to December 18, 1996

Notes to Statement of Revenue and Certain Expenses
5200 WEST CENTURY

Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Statement of Revenue and Certain Expenses for the Period January 1,
1996 to December 19, 1996

Notes to Statement of Revenue and Certain Expenses
SUMITOMO BANK BUILDING

Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Statement of Revenue and Certain Expenses for the Period January 1,
1996 to December 20, 1996

Notes to Statement of Revenue and Certain Expenses
10350 SANTA MONICA

Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Statement of Revenue and Certain Expenses for the Period January 1,
1996 to December 27, 1996

Notes to Statement of Revenue and Certain Expenses
THE 1997 ACQUISITIONS
535 BRAND

Statements of Revenue and Certain Expenses:

Report of Independent Auditors

Statements of Revenue and Certain Expenses for the Years Ended December
31, 1996, 1995 and 1994

Notes to Statements of Revenue and Certain Expenses

WHITTIER FINANCIAL CENTER, CLARENDON CREST AND CALIFORNIA TWIN CENTRE

Combined Statement of Revenue and Certain Expenses:

Report of Independent Auditors
</TABLE>

II-4
<PAGE>
<TABLE>
<S> <C>
Combined Statement of Revenue and Certain Expenses for the Year Ended
December 31, 1996

Notes to Combined Statement of Revenue and Certain Expenses

10780 SANTA MONICA

Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Statement of Revenue and Certain Expenses for the Year Ended December
31, 1996

Notes to Statement of Revenue and Certain Expenses

NOBLE PROFESSIONAL CENTER

Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Statement of Revenue and Certain Expenses for the Year Ended December
31, 1996

Notes to Statement of Revenue and Certain Expenses

SOUTH BAY CENTRE

Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Statement of Revenue and Certain Expenses for the Year Ended December
31, 1996

Notes to Statement of Revenue and Certain Expenses

8383 WILSHIRE

Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Statement of Revenue and Certain Expenses for the Year Ended December
31, 1996

Notes to Statement of Revenue and Certain Expenses

PARKWAY CENTER

Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Statement of Revenue and Certain Expenses for the Year Ended December
31, 1996

Notes to Statement of Revenue and Certain Expenses

CENTERPOINTE LA PALMA

Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Statement of Revenue and Certain Expenses for the Year Ended December
31, 1996

Notes to Statement of Revenue and Certain Expenses

PENDING ACQUISITIONS
1100 GLENDON

Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Statement of Revenue and Certain Expenses for the Year Ended December
31, 1996

Notes to Statement of Revenue and Certain Expenses
</TABLE>

II-5
<PAGE>
<TABLE>
<S> <C>
PACIFIC GATEWAY II

Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Statement of Revenue and Certain Expenses for the Year Ended December
31, 1996

Notes to Statement of Revenue and Certain Expenses

1000 TOWN CENTER AND MARINER COURT

Combined Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Combined Statement of Revenue and Certain Expenses for the Year Ended
December 31, 1996

Notes to Combined Statement of Revenue and Certain Expenses

CROWN CABOT

Statement of Revenue and Certain Expenses:

Report of Independent Auditors

Statement of Revenue and Certain Expenses for the Year Ended December
31, 1996

Notes to Statement of Revenue and Certain Expenses
</TABLE>

(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* Restated Charter of the Company.
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* 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.
10.4 Credit Facility documentation consisting of First Amended and Restated Revolving
Credit Agreement by and among the Operating Partnership and Chase Manhattan
Bank, Lehman Brothers Realty Corporation, and Wells Fargo Bank.
10.5 Mortgage Financing documentation consisting of Loan Agreement by and between the
Company's special purpose financing subsidiary and Lehman Brothers Realty
Corporation. (The Loan Agreement includes the Mortgage Note, Deed of Trust, and
Form of Tenant Estoppel Certificate and Agreement as exhibits.)
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 5000 East Spring Street.
</TABLE>

II-6
<PAGE>
<TABLE>
<C> <S>
10.12* Ground lease for 4811 Airport Plaza Drive.
10.13* Ground lease for 4900/10 Airport Plaza Drive.
10.14* Ground lease for parking structure at the Anaheim City Centre.
11.1 Computation of Fully-Diluted Earnings Per Share.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
23.2+ Consent of Ballard Spahr Andrews & Ingersoll (contained in Exhibit 5.1).
23.3+ Consent of Latham & Watkins (contained in Exhibit 8.1).
24. Power of Attorney (see Page II-8).
27. Financial Data Schedule.
</TABLE>

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

* Filed as an exhibit to Registration Statement on Form S-11 (No. 333-8163)
declared effective on October 3, 1996 and incorporated herein by reference.

+ To be filed by amendment.

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-7
<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 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 twenty-fifth day of June, 1997.

ARDEN REALTY, INC.

By: /s/ RICHARD S. ZIMAN

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

Richard S. Ziman
CHAIRMAN OF THE BOARD OF DIRECTORS
AND CHIEF EXECUTIVE OFFICER

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Richard S. Ziman or Victor J. Coleman or
any one of them, his or her attorneys-in-fact and agents, each with full power
of substitution and resubstitution for him or her in any and all capacities, to
sign any or all amendments or post-effective amendments to this Registration
Statement or a Registration Statement prepared in accordance with Rule 462 of
the Securities Act, and to file the same, with exhibits thereto and other
documents in connection herewith or in connection with the registration of the
Common Stock under the Securities Exchange Act of 1934, as amended, with the
Securities and Exchange Commission, granting unto each of such attorneys-in-fact
and agents full power and authority to do and perform each and every act and
thing requisite and necessary in connection with such matters and hereby
ratifying and confirming all that each of such attorneys-in-fact and agents or
his or her substitutes may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities
indicated on June 25, 1997.

TITLE
-------------------------

Chairman of the Board of
/s/ RICHARD S. Directors and
ZIMAN Chief Executive Officer
- ----------------------------------- (Principal Executive
Richard S. Ziman Officer)

/s/ VICTOR J.
COLEMAN President, Chief
- ----------------------------------- Operating Officer and
Victor J. Coleman Director

/s/ DIANA M. Chief Financial Officer
LAING and Secretary (Principal
- ----------------------------------- Financial and Accounting
Diana M. Laing Officer)

/s/ LARRY S.
FLAX
- ----------------------------------- Director
Larry S. Flax

II-8
<PAGE>
<TABLE>
<C> <S>
/s/ KENNETH B.
ROATH
- ----------------------------------- Director
Kenneth B. Roath

/s/ STEVEN C.
GOOD
- ----------------------------------- Director
Steven C. Good
</TABLE>

II-9
<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* Restated Charter of the Company.
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* 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.
10.4 Credit Facility documentation consisting of First Amended and Restated Revolving Credit
Agreement by and among the Operating Partnership and Chase Manhattan Bank, Lehman
Brothers Realty Corporation, and Wells Fargo Bank.
10.5 Mortgage Financing documentation consisting of Loan Agreement by and between the
Company's special purpose financing subsidiary and Lehman Brothers Realty Corporation.
(The Loan Agreement includes the Mortgage Note, Deed of Trust, and Form of Tenant
Estoppel Certificate and Agreement as exhibits.)
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 5000 East Spring Street.
10.12* Ground lease for 4811 Airport Plaza Drive.
10.13* Ground lease for 4900/10 Airport Plaza Drive.
10.14* Ground lease for parking structure at the Anaheim City Centre.
11.1 Computation of Fully-Diluted Earnings Per Share.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ernst & Young LLP.
23.2+ Consent of Ballard Spahr Andrews & Ingersoll (contained in Exhibit 5.1).
23.3+ Consent of Latham & Watkins (contained in Exhibit 8.1).
24. Power of Attorney (see Page II-8).
27. Financial Data Schedule.
</TABLE>

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

* Filed as an exhibit to Registration Statement on Form S-11 (No. 333-8163)
dated July 16, 1996 and incorporated herein by reference.

+ To be filed by amendment.

<PAGE>

8,000,000 SHARES

ARDEN REALTY, INC.
(A MARYLAND CORPORATION)
COMMON STOCK, $.01 PAR VALUE PER SHARE

UNDERWRITING AGREEMENT

July ___, 1997

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, Inc., a Maryland corporation (the "Company"), proposes to
sell 8,000,000 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 1,200,000 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.

As used in this Agreement, "Operating Partnership" shall mean Arden
Realty Limited Partnership, a Maryland limited partnership; "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

<PAGE>

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-______)
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.

(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

-2-

<PAGE>

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 concerning such 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 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, the Operating Partnership and
their subsidiaries taken as a whole (a "Material Adverse Effect").

(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. The Operating Partnership is 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 _____% of all outstanding partnership interests in
the Operating Partnership.

-3-

<PAGE>

(e) Each of the subsidiaries (as defined in Section 15) of the
Company and/or the Operating Partnership has been duly organized and
is a validly existing corporation or limited partnership, as the case
may be, in good standing in California and is in good standing in each
other jurisdiction in which 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; each subsidiary has all power
and authority necessary to own or hold its respective properties and
to conduct the businesses in which it is engaged; and none of the
subsidiaries (other than the Operating Partnership and Arden Realty
Finance, L.P.) is a "significant subsidiary," as such term is defined
in Rule 405 of the Rules and Regulations.

(f) 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; 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; and all of the issued shares of
capital stock or partnership interests, as the case may be, of each
subsidiary of the Company or the Operating Partnership have been duly
and validly authorized and issued and are fully paid and non-
assessable (solely with respect to corporate subsidiaries) and are
owned directly or indirectly by the Company or the Operating
Partnership, free and clear of all liens, encumbrances equities or
claims.

(g) 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.

(h) The limited Partnership Interests in the Operating
Partnership (the "Units") to be issued to the Company have been duly
authorized for issuance by the Operating Partnership and at each
Delivery Date will be validly issued and fully paid. Immediately
after the First Delivery Date, ________ Units will be issued and
outstanding. All outstanding Units have been offered and sold in
compliance with

-4-

<PAGE>

all applicable laws (including, without limitation, federal and
state securities laws).

(i) None of the Company, the Operating Partnership or any
subsidiary 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,
the Operating Partnership or any of their subsidiaries 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.

(j) This Agreement has been duly authorized, executed and
delivered by the Company and the Operating Partnership.

(k) The execution, delivery and performance of this Agreement by
the Company and the Operating Partnership and the consummation of the
transactions contemplated hereby 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,
the Operating Partnership or any of their subsidiaries is a party or
by which the Company, the Operating Partnership or any of their
subsidiaries 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, individually or in the aggregate, would not have a Material
Adverse Effect); nor will such actions result in any violation of the
provisions of the charter, by-laws or partnership agreement of the
Company, the Operating Partnership or any of their subsidiaries or any
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company, the Operating
Partnership or any of their subsidiaries or any of the properties,
assets or business owned by them; 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 on or prior to the Closing Date
and (c) such consents, approvals, authorizations, orders, filings or
registrations, the absence of which, individually or in the aggregate

-5-

<PAGE>

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.

(l) 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.

(m) 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 unissued shares of the
Stock to be issued and sold by the Company to the Underwriters
hereunder pursuant to the Company's charter or by-laws or any
agreement or other instrument.

(n) Except as described in the Prospectus, 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, other
than shares issued pursuant to employee benefit plans, qualified stock
option plans or other employee compensation plans or pursuant to
outstanding options, warrants or rights.

(o) Since the date of the latest audited financial statements
included in the Prospectus and except as disclosed in the Prospectus,
(i) there has been no material adverse change in the financial
condition, results of operation or business of the Company, the
Operating Partnership or any of their subsidiaries, 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 business or property of the Company, the Operating
Partnership or any of their subsidiaries 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,
(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

-6-

<PAGE>

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, the Operating Partnership or any of their subsidiaries.

(p) 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.

(q) 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 7(f) 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.

(r) (i) The Company, the Operating Partnership and their
subsidiaries have good and marketable title in fee simple to all real
property and good title to all personal property owned by them, 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,
the Operating Partnership and their subsidiaries (except for such real
property, buildings and personal property as are described in

-7-

<PAGE>

subparagraph (ii) below); and (ii) all real property, buildings and
personal property held under lease by the Company, the Operating
Partnership and their subsidiaries 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, the Operating Partnership and
their subsidiaries.

(s) Except as described in the Prospectus, the Company, the
Operating Partnership and their subsidiaries 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 their
respective properties and as is customary for companies engaged in
similar businesses in similar industries.

(t) The Company, the Operating Partnership and their
subsidiaries 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.

(u) Except as described in the Prospectus, there are no legal or
governmental proceedings pending to which the Company, the Operating
Partnership, or any of their subsidiaries is a party or of which any
property or assets of the Company, the Operating Partnership or any of
their subsidiaries is the subject which, if determined adversely to
the Company, the Operating Partnership or any of their subsidiaries,
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.

(v) The Company is 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

-8-

<PAGE>

Company's qualification as a REIT are true, complete and correct in
all material respects.

(w) 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.

(x) No relationship, direct or indirect, exists between or among
the Company, the Operating Partnership or any of their subsidiaries on
the one hand, and the directors, officers, stockholders, limited
partners, customers or suppliers of any of such entities on the other
hand, which is required to be described in the Prospectus which is not
so described.

(y) There is (i) no material unfair labor practice complaint
pending against the Company, the Operating Partnership or any of their
subsidiaries 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 of their subsidiaries or, to the best
knowledge of the Company, threatened against any of them, (ii) no
material strike, labor dispute, slowdown or stoppage pending against
the Company, the Operating Partnership or any of their subsidiaries
nor, to the best knowledge of the Company, threatened against the
Company, the Operating Partnership or any of their subsidiaries which
in any case would have a Material Adverse Effect.

(z) The Company, the Operating Partnership and their
subsidiaries 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, the Operating Partnership
or any of their subsidiaries would have any liability; the Company,
the Operating Partnership or any of their subsidiaries 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, the Operating Partnership or

-9-

<PAGE>

any of their subsidiaries 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.

(aa) The Company, the Operating Partnership and their
subsidiaries 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, the Operating Partnership or any
of their subsidiaries which has had (nor does the Company have any
knowledge of any tax deficiency which, individually or in the
aggregate, if determined adversely to the Company, the Operating
Partnership or any of their subsidiaries would have) a Material
Adverse Effect.

(ab) 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, the Operating Partnership
and their subsidiaries 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, the Operating Partnership and their subsidiaries, taken as a
whole or (iv) declared or paid any dividend on their stock.

(ac) The Company, the Operating Partnership and their
subsidiaries (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.

(ad) None of the Company, the Operating Partnership or any of
their subsidiaries is (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

-10-

<PAGE>

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.

(ae) None of the Company, the Operating Partnership or any
of their subsidiaries, nor any director, officer, agent, employee
or other person associated with or acting on behalf of the Company,
the Operating Partnership or any of their subsidiaries, 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.

(af) 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 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 or any of their subsidiaries
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 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 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

-11-

<PAGE>

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 or any of their subsidiaries or
with respect to which the Company, the Operating Partnership, 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 any of the properties
owned or leased by the Company, the Operating Partnership or any of
their subsidiaries except such tanks, individually or in the
aggregate, the existence of which would not have a Material Adverse
Effect.

(ag) None of the Company, the Operating Partnership or 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.

(ah) The Stock has been approved for listing on the New York
Stock Exchange subject to official notice of issuance.

(ai) None of the Company, the Operating Partnership or any of
their subsidiaries, or any of their directors, officers or controlling
persons, has taken or will take, directly or indirectly, any action
resulting in a violation of Regulation M 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.

(aj) 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

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<PAGE>

the Company or from transferring any of the Operating Partnership's
property or assets to the Company.

(ak) The Company, the Operating Partnership and their
subsidiaries 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 of
their subsidiaries to comply with all presently applicable provisions
of the Americans with Disabilities Act, individually or in the
aggregate, would result in a Material Adverse Effect.

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 8,000,000 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 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 1,200,000 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 4 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. 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 ________ 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

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<PAGE>

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 persons will be offered by the Underwriters
to the public upon the terms and conditions set forth in the Prospectus.]

4. 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

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<PAGE>

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 4
(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 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.

5. 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

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<PAGE>

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 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.

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<PAGE>

(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
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

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<PAGE>

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) To apply the net proceeds from the sale of the Stock being
sold by the Company as set forth in the Prospectus.

(l) To take such steps as shall be necessary to ensure that
neither the Company, the Operating Partnership nor any subsidiary
shall 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.

6. 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 5(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 3; 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 6 and in
Section 11 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.

7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The respective
obligations of the Underwriters hereunder are subject to the accuracy, when made

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<PAGE>

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 5(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 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 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

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<PAGE>

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 in good standing in the State of California;

(iii) Arden Realty Finance Partnership, L.P. ("Arden
Realty LP") is a limited partnership duly formed and existing
under and by virtue of the laws of the State of California and is
in good standing with the Secretary of State of California.
Arden Realty LP has full power as a limited partnership to
conduct its business as described in the Prospectus. Arden
Realty Finance, Inc. ("Arden Realty Inc.") is a corporation duly
incorporated and existing under and by virtue of the laws of the
State of California and is in good standing with the Secretary of
State of California. Arden Realty Inc. has full corporate power
to conduct its business as described in the Prospectus.

(iv) 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

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<PAGE>

Partnership and of each of the subsidiaries 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 or of the general partner 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;

(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 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;

(vi) 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;

(vii) 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, the Operating Partnership or any of
their subsidiaries is a party or of which any property or assets
of the Company, the Operating Partnership or any of their
subsidiaries is the subject which, if determined adversely to the
Company, the Operating Partnership or any of their subsidiaries,
would have a Material Adverse Effect; 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.

(viii) 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

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<PAGE>

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;

(ix) 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;

(x) 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;

(xi) To such counsel's knowledge, 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 or filed as exhibits to the Registration
Statement;

(xii) This Agreement has been duly authorized, executed
and delivered by the Company and the Operating Partnership;

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<PAGE>

(xiii) 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 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 except for such conflicts, breaches,
violations or defaults that, individually or in the aggregate,
would not have a Material Adverse Effect, nor will such actions
result in any violation of the provisions of the charter or by-
laws of the Company or Arden Realty Inc. or the Agreement of
Limited Partnership of the Operating Partnership or Arden Realty
LP 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, the Operating Partnership or any
of their subsidiaries 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 on or 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;

(xiv) 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;

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<PAGE>

(xv) Neither the Company, the Operating Partnership nor any
of their subsidiaries is an "investment company" as such term is
defined in the Investment Company Act of 1940, as amended;

(xvi) [The issuances of securities described in Items 32
and 33 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;] and

(xvii) 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 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 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 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

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<PAGE>

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 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

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<PAGE>

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
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 and the Operating Partnership 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 7(a) and 7(i) have been fulfilled; and

(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.

(i) (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

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<PAGE>

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.

(j) 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 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.

(k) 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.

(l) 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.

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.

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<PAGE>

8. 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 8(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

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<PAGE>

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 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.

(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 8(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 8 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 8, 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

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<PAGE>

this Section 8 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 8. If any such claim or
action shall be brought against an indemnified party, and it shall notify the
indemnifying party 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 8 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 8 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. 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 8 shall
for any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 8(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) 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

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<PAGE>

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, the Operating Partnership
and the Underwriters agree that it would not be just and equitable if
contributions pursuant to this Section 8(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 8(d) shall be
deemed to include, for purposes of this Section 8(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 8(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 8(d) are several in proportion to their respective underwriting
obligations and not joint.

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<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 stabilization on the inside front cover page of,
under the caption "Underwriting" (excluding the last two paragraphs under
such caption) 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.

9. 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 6 and 11. 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 9, 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

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<PAGE>

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.

10. 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 7(i) or 7(j), shall have occurred
or if the Underwriters shall decline to purchase the Stock for any reason
permitted under this Agreement.

11. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If the Company shall
fail to tender the Stock for delivery to the Underwriters by reason of any
failure, refusal 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 7(j)), 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 9 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.

12. 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 8(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);

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<PAGE>

PROVIDED, HOWEVER, that any notice to an Underwriter pursuant to Section 8(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.

13. 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 contained in Section 8(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 13 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 13, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.

14. 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.

15. 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 2.

16. 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.

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<PAGE>

17. 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.

18. 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, INC.

By: _______________________________________
Name:
Title:

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<PAGE>

ARDEN REALTY LIMITED PARTNERSHIP, the
Operating Partnership

By: Arden Realty, 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

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<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 8,000,000
---------

<PAGE>

SCHEDULE 2

SUBSIDIARIES

Arden Realty Finance, L.P., a California limited partnership

Arden Realty Finance, Inc., a California corporation

<PAGE>
Exhibit 10.4

_______________________________________________________
_______________________________________________________

FIRST AMENDED AND RESTATED REVOLVING
CREDIT AGREEMENT

AMONG

ARDEN REALTY LIMITED PARTNERSHIP,
A MARYLAND LIMITED PARTNERSHIP,
AS BORROWER,

AND

WELLS FARGO BANK, NATIONAL ASSOCIATION,
COMMERZBANK AG, LOS ANGELES BRANCH, DRESDNER BANK AG,
NEW YORK BRANCH AND GRAND CAYMAN BRANCH,
FLEET NATIONAL BANK, KEYBANK NATIONAL ASSOCIATION, MANUFACTURERS BANK,
SIGNET BANK, LEHMAN BROTHERS REALTY CORPORATION,
CHASE MANHATTAN BANK, BANKERS TRUST COMPANY,
THE FIRST NATIONAL BANK OF CHICAGO,
AND PNC BANK, NATIONAL ASSOCIATION,
TOGETHER WITH THOSE ASSIGNEES
BECOMING PARTIES HERETO PURSUANT
TO SECTION 11.20, AS LENDERS,

CHASE MANHATTAN BANK AND LEHMAN BROTHERS REALTY CORPORATION,
AS CO-AGENTS,

AND

WELLS FARGO BANK, NATIONAL ASSOCIATION,
AS AGENT

Dated as of June 11, 1997

_______________________________________________________
_______________________________________________________

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TABLE OF CONTENTS

Page
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ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Computation of Time Periods . . . . . . . . . . . . . . . . . . . .32
1.3 Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32

ARTICLE 2 ADVANCES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33

2.1 Loan Advances and Repayment . . . . . . . . . . . . . . . . . . . .33
2.2 Authorization to Obtain Advances. . . . . . . . . . . . . . . . . .36
2.3 Lenders' Accounting . . . . . . . . . . . . . . . . . . . . . . . .37
2.4 Interest on the Advances. . . . . . . . . . . . . . . . . . . . . .37
2.5 Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
2.6 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
2.7 Notice of Increased Costs . . . . . . . . . . . . . . . . . . . . .45
2.8 Voluntary Termination or Reduction of
Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . . .45

ARTICLE 3 CONDITIONS TO ADVANCES. . . . . . . . . . . . . . . . . . . . . . .46

3.1 Conditions to Initial Advances. . . . . . . . . . . . . . . . . . .46
3.2 Conditions Precedent to All Advances. . . . . . . . . . . . . . . .47

ARTICLE 4 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . .48

4.1 Representations and Warranties as to
Borrower, Etc. . . . . . . . . . . . . . . . . . . . . . . . .48
4.2 Representations and Warranties as to the REIT . . . . . . . . . . .55

ARTICLE 5 REPORTING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . .58

5.1 Financial Statements and Other Financial and Operating Information.59
5.2 Environmental Notices . . . . . . . . . . . . . . . . . . . . . . .65
5.3 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . .66

ARTICLE 6 AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . .67

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6.1 With Respect to Borrower. . . . . . . . . . . . . . . . . . . . . .67
6.2 With Respect to the REIT. . . . . . . . . . . . . . . . . . . . . .69

ARTICLE 7 NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . .71

7.1 With Respect to all Parties . . . . . . . . . . . . . . . . . . . .71
7.2 Amendment of Constituent Documents. . . . . . . . . . . . . . . . .73
7.3 Minimum Ownership Interest of Richard Ziman . . . . . . . . . . . .73
7.4 Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . .73
7.5 Margin Regulations. . . . . . . . . . . . . . . . . . . . . . . . .74
7.6 Organization of Borrower, Etc.. . . . . . . . . . . . . . . . . . .74
7.7 With Respect to the REIT. . . . . . . . . . . . . . . . . . . . . .74

ARTICLE 8 FINANCIAL COVENANTS . . . . . . . . . . . . . . . . . . . . . . . .75

8.1 Tangible Net Worth. . . . . . . . . . . . . . . . . . . . . . . . .75
8.2 Maximum Total Liabilities to Gross Asset Value. . . . . . . . . . .75
8.3 Minimum Interest Coverage Ratio . . . . . . . . . . . . . . . . . .75
8.4 Minimum Fixed Charge Coverage Ratio . . . . . . . . . . . . . . . .75
8.5 Minimum Unencumbered Pool . . . . . . . . . . . . . . . . . . . . .75
8.6 Minimum Unsecured Interest Expense Coverage . . . . . . . . . . . .75
8.7 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . .75
8.8 Investments; Asset Mix. . . . . . . . . . . . . . . . . . . . . . .76
8.9 Secured Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . .77

ARTICLE 9 EVENTS OF DEFAULT; RIGHTS AND REMEDIES. . . . . . . . . . . . . . .77

9.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . .77
9.2 Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . .81
9.3 Rescission. . . . . . . . . . . . . . . . . . . . . . . . . . . . .82

ARTICLE 10 AGENCY PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . .83

10.1 Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . .83
10.2 Nature of Duties. . . . . . . . . . . . . . . . . . . . . . . . . .83
10.3 Disbursements of Advances . . . . . . . . . . . . . . . . . . . . .84
10.4 Distribution and Apportionment of Payments. . . . . . . . . . . . .85
10.5 Rights, Exculpation, Etc. . . . . . . . . . . . . . . . . . . . . .87
10.6 Reliance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87
10.7 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . .87
10.8 Agent Individually. . . . . . . . . . . . . . . . . . . . . . . . .88
10.9 Successor Agent; Resignation of Agent; Removal

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of Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .88
10.10 Consent and Approvals. . . . . . . . . . . . . . . . . . . . . . .89
10.11 Certain Agency Provisions Relating to
Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . .91
10.12 Ratable Sharing. . . . . . . . . . . . . . . . . . . . . . . . . .91
10.13 Delivery of Documents. . . . . . . . . . . . . . . . . . . . . . .92
10.14 Notice of Events of Default. . . . . . . . . . . . . . . . . . . .92

ARTICLE 11 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . .93

11.1 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .93
11.2 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .94
11.3 Change in Accounting Principles and "Funds
from Operations" Definition . . . . . . . . . . . . . . . . . . . .95
11.4 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . .96
11.5 Independence of Covenants . . . . . . . . . . . . . . . . . . . . .97
11.6 Notices and Delivery. . . . . . . . . . . . . . . . . . . . . . . .97
11.7 Survival of Warranties, Indemnities and
Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . .98
11.8 Failure or Indulgence Not Waiver; Remedies Cumulative . . . . . . .98
11.9 Payments Set Aside. . . . . . . . . . . . . . . . . . . . . . . . .98
11.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . .98
11.11 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .98
11.12 Governing Law; Waiver. . . . . . . . . . . . . . . . . . . . . . .99
11.13 Limitation of Liability. . . . . . . . . . . . . . . . . . . . . .99
11.14 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . .99
11.15 Consent to Jurisdiction and Service of
Process; Waiver of Jury Trial. . . . . . . . . . . . . . . . . . .99
11.16 Counterparts; Effectiveness; Inconsistencies . . . . . . . . . . 100
11.17 Performance of Obligations . . . . . . . . . . . . . . . . . . . 100
11.18 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . 100
11.19 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 100
11.20 Assignments and Participations . . . . . . . . . . . . . . . . . 101

LIST OF EXHIBITS AND SCHEDULES

Exhibits:

A - Form of Assignment and Assumption Agreement

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B - Form of Compliance Certificate
C - Form of Fixed Rate Notice
D - Form of Guaranty
E - Form of Note
F - Form of Notice of Borrowing
G - Form of Pricing Certificate
H - Form of Solvency Certificate

Schedules:

1.1A - Pro Rata Shares of Lenders
1.1B - List of Predecessor Entity Properties
2.1(e) - Adjusting Purchase Payments
2.2 - Employees Authorized to Sign Notices of Borrowing
4.1(c) - Ownership of Borrower
4.1(j) - List of Litigation
4.1(s) - Environmental Matters
4.1(v) - Management Agreements
4.2(l) - Benefit Plans
8.5 - List of Unencumbered Assets

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FIRST AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT

THIS FIRST AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT, dated as
of June 11, 1997 (as amended, supplemented or modified from time to time, the
"Agreement"), is made and entered into by and among ARDEN REALTY LIMITED
PARTNERSHIP, a Maryland limited partnership ("Borrower"), each of the Lenders,
as hereinafter defined, CHASE MANHATTAN BANK, a New York banking corporation
("Chase Manhattan Bank"), and LEHMAN BROTHERS REALTY CORPORATION, a Delaware
corporation ("Lehman Brothers"), as Co-Agents, and WELLS FARGO BANK, NATIONAL
ASSOCIATION ("Wells Fargo"), as Agent.

RECITALS

(a) Pursuant to the Original Credit Agreement, the Original Lenders
made the Original Loan to Borrower.

(b) Effective as of the Closing Date, Union Bank of California, N.A.,
will no longer be a Lender and Signet Bank, a Virginia corporation, Lehman
Brothers, Chase Manhattan Bank and Bankers Trust Company, a New York banking
corporation, will become Lenders.

(c) Borrower, the Lenders and Agent desire to amend and restate the
Original Credit Agreement and certain of the Original Loan Documents, all as
more particularly set forth below.

NOW, THEREFORE, Borrower, the Lenders and Agent do hereby amend and
restate the Original Credit Agreement as follows:

ARTICLE 1

DEFINITIONS

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1.1 CERTAIN DEFINED TERMS. The following terms used in this Agreement
shall have the following meanings (such meanings to be applicable, except to the
extent otherwise indicated in a definition of a particular term, both to the
singular and the plural forms of the terms defined):

"ACCOUNTANTS" means any (i) "big six" accounting firm or (ii) another
firm of certified public accountants of recognized national standing selected by
Borrower and acceptable to Agent.

"ACQUISITION PRICE" means the aggregate purchase price for an asset,
including bona fide purchase money financing provided by the seller and all
other Indebtedness encumbering such asset at the time of acquisition.

"ADVANCE" means any advance made or to be made to Borrower pursuant to
ARTICLE 2, and includes each Base Rate Advance and each LIBOR Advance.

"AFFILIATES" as applied to any Person, means any other Person directly
or indirectly controlling, controlled by, or under common control with, that
Person. For purposes of this definition, "control" (including, with
correlative meanings, the terms "controlling", "controlled by" and "under common
control with"), as applied to any Person, means (a) the possession, directly or
indirectly, of the power to vote ten percent (10%) or more of the Securities
having voting power for the election of directors of such Person or otherwise to
direct or cause the direction of the management and policies of that Person,
whether through the ownership of voting Securities or by contract or otherwise,
or (b) the ownership of ten percent (10%) or more of the outstanding general
partnership or other ownership interests of such Person.

"AGENT" means Wells Fargo in its capacity as agent for the Lenders
under this Agreement, and any successor Agent appointed pursuant hereto.
"Agent" shall not include either and/or both Co-Agents.

"APPLICABLE LIBOR RATE MARGIN" means, for each Pricing Period, the
interest rate margin set forth below

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(expressed in basis points per annum) opposite the Applicable Pricing Level for
that Pricing Period:

Applicable
Pricing Level Margin
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I 90.00
II 100.00
III 110.00
IV 115.00
V 120.00
VI 130.00
VII 145.00

"APPLICABLE PRICING LEVEL" means (a) for the Pricing Period from the
Closing Date and ending on August 19, 1997, Pricing Level VII and (b) for each
Pricing Period thereafter, the pricing level set forth below opposite, as
applicable, either (i) if Agent did not receive a Rating Notice, the Total
Liabilities to Gross Asset Value Ratio as of the last day of the Fiscal Quarter
most recently ended prior to the commencement of that Pricing Period, or (ii) if
Agent did receive a Rating Notice, the Borrower's Long-Term Unsecured Senior
Debt Rating as of such last day of the Fiscal Quarter most recently ended as
determined by Agent:

Borrower's Long-Term
Pricing Level Unsecured Senior Debt Rating
------------- ----------------------------

I A-/A3 or higher
II BBB+/Baa1
III BBB/Baa2
IV BBB-/Baa3

Total Liabilities to
Gross Asset Value Ratio
-----------------------

V Less than or equal to 35%
VI Greater than 35%, but less than 45%
VII Equal to or greater than 45%

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If the Applicable Pricing Level for any Pricing Period is to be determined based
upon the ratio of Total Liabilities to Gross Asset Value and in the event that
Borrower does not deliver a Pricing Certificate with respect to such Pricing
Period prior to the commencement of such Pricing Period, then until (but only
until) such Pricing Certificate is delivered the applicable Pricing Level for
that Pricing Period shall be Pricing Level VII. "Borrower's Long-Term Unsecured
Senior Debt Rating" referred to above shall be the lower of such Rating as set
by Standard & Poor's and as set by any one of Moody's Investors Service, Inc.,
Duff and Phelps, Fitch Investors Service, Inc. or another nationally-recognized
rating agency acceptable to Agent.

"ASSIGNMENT AND ASSUMPTION" means an Assignment and Assumption
Agreement in the form of EXHIBIT A hereto (with blanks appropriately filled in)
delivered to Agent in connection with each assignment of a Lender's interest
under this Agreement pursuant to SECTION 11.20.

"BASE RATE" means, on any day, the higher of (a) the rate of interest
per annum established from time to time by Agent at its principal office in
San Francisco, California, and designated as its prime rate as in effect on such
day and (b) the Federal Funds Rate in effect on such day PLUS one-half of
one percent (0.5%) per annum.

"BASE RATE ADVANCE" means an Advance bearing interest at the Base
Rate.

"BENEFIT PLAN" means any employee pension benefit plan as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) in respect of which a
Person or an ERISA Affiliate is, or within the immediately preceding five (5)
years was, an "employer" as defined in Section 3(5) of ERISA.

"BORROWER" means Arden Realty Limited Partnership, a Maryland limited
partnership.

"BRIDGE LOAN" means the "Advances" as defined in the Bridge Loan
Credit Agreement.

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"BRIDGE LOAN CREDIT AGREEMENT" means that certain Revolving Credit
Agreement, dated as of May 5, 1997, by and between Borrower, as borrower, and
Wells Fargo, as lender.

"BUSINESS DAY" means (a) with respect to any Advance, payment or rate
determination of LIBOR Advances, a day, other than a Saturday or Sunday, on
which Agent is open for business in San Francisco and on which dealings in
Dollars are carried on in the London interbank market, and (b) for all other
purposes any day excluding Saturday, Sunday and any day which is a legal holiday
under the laws of the State of California, or is a day on which banking
institutions located in California are required or authorized by law or other
governmental action to close.

"CAPITAL LEASE" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.

"CAPITAL LEASE OBLIGATIONS" means all monetary obligations of a Person
under any Capital Lease.

"CAPITALIZED LOAN FEES" means, with respect to the REIT and any
Consolidated Entity, and with respect to any period, (a) any up-front, closing
or similar fees paid by such Person in connection with the incurring or
refinancing of Indebtedness during such period and (b) all other costs incurred
in connection with the incurring or refinancing of Indebtedness during such
period, including, without limitation, appraisal fees paid to lenders, costs and
expenses incurred in connection with Swap Agreements, phase 1 environmental
report review fees paid to lenders and legal fees, in each of the foregoing
cases, that are capitalized on the balance sheet of such Person and amortized
over the term of such Indebtedness.

"CAPITAL STOCK" means, with respect to any Person, all (i) shares,
interests, participations or other equivalents (howsoever designated) of capital
stock or partnership or other equity interests of such Person and (ii) rights
(other than debt securities convertible into capital stock or other equity

<PAGE>

interests), warrants or options to acquire any such capital stock or partnership
or other equity interests of such Person. The term "Capital Stock" includes the
Partnership Units of the Borrower.

"CARRYOVER PRINCIPAL BALANCE" means $54,200,000, which is the
outstanding principal balance of the Original Loan as of the date of this
Agreement.

"CASH" means, when used in connection with any Person, all monetary
and nonmonetary items owned by that Person that are treated as cash in
accordance with GAAP, consistently applied.

"CASH EQUIVALENTS" means (a) marketable direct obligations issued
or unconditionally guaranteed by the United States Government or issued by an
agency thereof and backed by the full faith and credit of the United States,
in each case maturing within one (1) year after the date of acquisition
thereof; (b) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within ninety (90) days after the
date of acquisition thereof and, at the time of acquisition, having one of
the two highest ratings obtainable from any two of Standard & Poor's, Moody's
Investors Service, Inc., Duff and Phelps, or Fitch Investors Service, Inc.
(or, if at any time no two of the foregoing shall be rating such obligations,
then from such other nationally recognized rating services as may be
acceptable to Agent) and not listed for possible down-grade in Credit Watch
published by Standard & Poor's; (c) commercial paper, other than commercial
paper issued by Borrower or any of its Affiliates, maturing no more than
ninety (90) days after the date of creation thereof and, at the time of
acquisition, having a rating of at least A-1 or P-1 from either Standard &
Poor's, or Moody's Investors Service, Inc. or, if at any time neither
Standard & Poor's, nor Moody's Investors Service, Inc. shall be rating such
obligations, then the highest rating from such other nationally recognized
rating services as may be acceptable to Agent); and (d) domestic and
Eurodollar certificates of deposit or time deposits or bankers' acceptances
maturing within ninety (90) days after the date of

<PAGE>

acquisition thereof, overnight securities repurchase agreements, or reverse
repurchase agreements secured by any of the foregoing types of securities or
debt instruments issued, in each case, by any commercial bank organized under
the laws of the United States of America or any state thereof or the District of
Columbia or Canada which at the time of acquisition (A) has (or, in the case of
a bank which is a subsidiary, such bank's parent has) a rating of its senior
unsecured debt obligations of not less than Baa-2 by Moody's Investors
Service, Inc. or a comparable rating by a rating agency acceptable to Agent and
(B) has total assets in excess of Ten Billion Dollars ($10,000,000,000).

"CITY NATIONAL BANK LOAN" means revolving loans made by City National
Bank to Borrower in an aggregate committed principal amount which shall not
exceed $10,000,000 pursuant to the terms of that certain Loan Agreement dated
March 12, 1997 between Borrower and City National Bank, as amended through the
date of this Agreement.

"CLOSING DATE" means the date on which the applicable conditions
contained in SECTIONS 3.1 and 3.2 are satisfied or waived. Within five
(5) Business Days of the occurrence thereof, the Agent shall deliver written
notice to the Borrower and the Lenders confirming the date on which the Closing
Date occurs.

"CMBS ENTITIES" means, collectively, Arden Realty Finance, Inc., a
California corporation, which is a wholly-owned subsidiary corporation of the
REIT, and Arden Realty Finance Partnership, L.P., a California limited
partnership, with respect to which limited partnership Arden Realty
Finance, Inc., is the sole general partner and Borrower is a limited partner.

"CO-AGENTS " means Chase Manhattan Bank and Lehman Brothers. Neither
Co-Agent shall have any rights, duties or responsibilities under the Loan
Documents beyond those of a Lender.

"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.

<PAGE>

"COMMISSION" means the Securities and Exchange Commission.

"COMMITMENT" means, subject to SECTIONS 2.7 and 2.8, $300,000,000. As
of the Closing Date, the respective Pro Rata Shares of the Lenders with respect
to the Commitment are set forth in SCHEDULE 1.1A.

"COMPLIANCE CERTIFICATE" means a certificate in the form of EXHIBIT C
hereto delivered to Agent by Borrower pursuant to SECTION 5.1(d) or other
provision of this Agreement and covering compliance with the covenants contained
in SECTION 7.3 and ARTICLE 8.

"CONSOLIDATED ENTITY" means, collectively, (i) the Borrower and
(ii) any other Person the accounts of which are consolidated with those of the
REIT in the consolidated financial statements of the REIT in accordance with
GAAP.

"CONSTRUCTION IN PROGRESS" means land on which Borrower has commenced,
and is diligently proceeding with, the construction of an Office Property. If,
after Borrower has commenced the construction of an Office Property, such
construction ceases for 45 or more consecutive days, such land shall cease to be
Construction in Progress and shall become Land until Borrower starts
construction of the Office Property again.

"CONTAMINANT" means any pollutant (as that term is defined in 42
U.S.C. 9601(33)) or toxic pollutant (as that term is defined in 33 U.S.C.
1362(13)), hazardous substance (as that term is defined in 42 U.S.C. 9601(14)),
hazardous chemical (as that term is defined by 29 CFR Section 1910.1200(c)),
toxic substance, hazardous waste (as that term is defined in 42 U.S.C. 6903(5)),
radioactive material, special waste, petroleum (including crude oil or any
petroleum-derived substance, waste, or breakdown or decomposition product
thereof), any constituent of any such substance or waste, including, but not
limited to, polychlorinated biphenyls and asbestos, or any other substance or
waste deleterious to the environment the release, disposal or remediation of
which is

<PAGE>

now or at any time becomes subject to regulation under any Environmental Law.

"CONTRACTUAL OBLIGATION" as applied to any Person, means any provision
of any Securities issued by that Person or any indenture, mortgage, deed of
trust, lease, contract, undertaking, document or instrument to which that Person
is a party or by which it or any of its properties is bound, or to which it or
any of its properties is subject (including, without limitation, any restrictive
covenant affecting such Person or any of its properties).

"CONTRIBUTION AGREEMENT" means (i) that certain Contribution Agreement
made as of October 9, 1996, by and among Richard S. Ziman, an individual,
Montour Realty Associates, a California general partnership, Metropolitan Falls
Partners, a California general partnership, Intercity Building Associates, a
California general partnership, Victor J. Coleman, an individual, Coleman
Enterprises, Inc., a California corporation, Ziman Realty Partners, a California
general partnership, Broad Base Investments II, LLC, a Nevada limited liability
company, Michele Byer, individually and as trustee of the Michele Byer Trust, a
revocable inter vivos trust dated September 20, 1996, Anaheim Properties LLC, a
California limited liability company, Arden Century Associates, a California
general partnership, Arden Sawtelle Associates, a California general
partnership, the REIT and Borrower and (ii) any other agreement between the
Borrower and a CMBS Entity providing for contribution by the Borrower of certain
contributions it receives from its limited partners with respect to Debt of the
CMBS Entity and on substantially similar terms as the Contribution Agreement
described in the foregoing clause (i). Borrower shall deliver to Agent a copy
of each Contribution Agreement entered into after the date of this Agreement.

"COURT ORDER" means any judgment, writ, injunction, decree, rule or
regulation of any court or Governmental Authority binding upon the Person in
question.

"DEBT" means, with respect to any Person, without duplication, the
principal amount of (a) its liabilities for

<PAGE>

borrowed money, (b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable in the ordinary course of
business, but including, without limitation, all liabilities created or arising
under any conditional sale or other title retention agreement with respect to
any property), (c) its Capitalized Lease Obligations, (d) any liabilities for
borrowed money secured by a Lien with respect to any property owned by such
Person (whether or not it is assumed by such Person or such Person otherwise
becomes liable for such liabilities), (e) all liabilities with respect to any
unreimbursed draws on letters of credit and (f) any guaranty of such Person with
respect to any of the foregoing.

"DEBT SERVICE" means, for any period, Interest Expense for such period
PLUS scheduled principal amortization (excluding any balloon or bullet payment
due at maturity) for such period on all Debt of the REIT and the Consolidated
Entities and on the REIT's and each Consolidated Entity's pro rata share of all
Debt of each Unconsolidated Joint Venture. For purposes of the foregoing
definition, the REIT's and such Consolidated Entity's pro rata share of such
Debt shall be deemed to be equal to the product of (i) such Debt, multiplied by
(ii) the percentage of the total outstanding Capital Stock of such
Unconsolidated Joint Venture held by the REIT or such Consolidated Entity,
expressed as a decimal.

"DEFAULTING LENDER" means any Lender which fails or refuses to perform
its obligations under this Agreement within the time period specified for
performance of such obligation or, if no time frame is specified, if such
failure or refusal continues for a period of five (5) Business Days after notice
from Agent.

"DEPRECIATION AND AMORTIZATION EXPENSE" means (without duplication),
for any period, the sum for such period of (i) total depreciation and
amortization expense, whether paid or accrued, of the REIT and the Consolidated
Entities, plus (ii) the REIT's and each Consolidated Entity's pro rata share of
depreciation and amortization expenses of Unconsolidated Joint Ventures. For
purposes of this definition, the REIT's and such Consolidated Entity's pro rata
share of

<PAGE>

depreciation and amortization expense of any Unconsolidated Joint Venture shall
be deemed equal to the product of (i) the depreciation and amortization expense
of such Unconsolidated Joint Venture, multiplied by (ii) the percentage of the
total outstanding Capital Stock of such Unconsolidated Joint Venture held by the
REIT or such Consolidated Entity, expressed as a decimal.

"DESIGNATED MARKET" means, with respect to any LIBOR Advance, the
London interbank LIBOR market or such other interbank LIBOR market as may be
designated in writing from time to time by the Requisite Lenders.

"DISQUALIFIED STOCK" means any capital stock, warrants, options or
other rights to acquire capital stock (but excluding any debt security which is
convertible, or exchangeable, for capital stock), which, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable prior to the Maturity Date, pursuant to a sinking fund obligation or
otherwise, or is or may be redeemable at the option of the holder thereof, in
whole or in part, prior to the Maturity Date. Borrower's Partnership Units
shall not be considered Disqualified Stock.

"DOL" means the United States Department of Labor and any successor
department or agency.

"DOLLARS" AND "$" means the lawful money of the United States of
America.

"EBITDA" means, for any period, Net Income, plus (without duplication)
(a) Interest Expense, (b) Tax Expense, (c) Depreciation and Amortization Expense
and (d) cash dividends and distributions actually received by the REIT or any
Consolidated Entity from any Unconsolidated Joint Venture, in each case for such
period.

"ENVIRONMENTAL LAWS" has the meaning set forth in SECTION 4.1(s).

<PAGE>

"ENVIRONMENTAL LIEN" means a Lien in favor of any Governmental
Authority for (a) any liability under Environmental Laws, or (b) damages arising
from, or costs incurred by such Governmental Authority in response to, a Release
or threatened Release of a Contaminant into the environment.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.

"ERISA AFFILIATE" means, with respect to any Person, any
(a) corporation which is, becomes, or is deemed to be a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Code) as such Person, (b) partnership, trade or business (whether or not
incorporated) which is, becomes or is deemed to be under common control (within
the meaning of Section 414(c) of the Code) with such Person, (c) solely for
purposes of potential liability under Section 302(c)(11) of ERISA and
Section 412(c)(11) of the Code and the lien created under Section 302(f) of
ERISA and Section 412(n) of the Code, Person which is, becomes or is deemed to
be a member of the same "affiliated service group" (as defined in Section 414(m)
of the Code) as such Person, or (d) solely for purposes of potential liability
under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the
lien created under Section 302(f) of ERISA and Section 412(n) of the Code, other
organization or arrangement described in Section 414(o) of the Code which is,
becomes or is deemed to be required to be aggregated pursuant to regulations
issued under Section 414(o) of the Code with such Person pursuant to
Section 414(o) of the Code.

"EVENT OF DEFAULT" means any of the occurrences so defined in
ARTICLE 9.

"FDIC" means the Federal Deposit Insurance Corporation or any
successor thereto.

"FEDERAL FUNDS RATE" means, as of any date of determination, the rate
set forth in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Board (including any
such

<PAGE>

successor, "H.15(519)") for such date opposite the caption "Federal Funds
(Effective)". If on any relevant date the appropriate rate for such date is not
yet published in H.15(519), the rate for such date will be the arithmetic mean
of the rates for the last transaction in overnight Federal funds arranged prior
to 9:00 a.m. (New York City time) on that date by each of three leading brokers
of Federal Funds transactions in New York City selected by the Agent. For
purposes of this Agreement, any change in the Base Rate due to a change in the
Federal Funds Rate shall be effective as of the opening of business on the
effective date of such change.

"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System or any governmental authority succeeding to its functions.

"FIRREA" means the Financial Institutions Recovery, Reform and
Enforcement Act of 1989, as amended from time to time.

"FISCAL QUARTER" means each three-month period ending on March 31,
June 30, September 30 and December 31; provided, however, that notwithstanding
the foregoing, the first "Fiscal Quarter" of the REIT and the Consolidated
Entities shall be the period commencing on October 9, 1996 and ending on
December 31, 1996.

"FISCAL YEAR" means the fiscal year of Borrower which shall be the
twelve (12) month period ending on the last day of December in each year.

"FIXED CHARGE COVERAGE RATIO" means, at any time, the ratio of
(i) EBITDA for the Fiscal Quarter then most recently ended, to (ii) Fixed
Charges for such period.

"FIXED CHARGES" means, for any period, the sum of the amounts for such
period of (i) scheduled payments of principal of Debt of the REIT and the
Consolidated Entities (other than any payment of the entire unpaid balance of
any such Debt at its final maturity or balloon payment, referred to herein as a
"BULLET PAYMENT"), (ii) the REIT's and each Consolidated Entity's pro rata share
of scheduled payments of principal of

<PAGE>

Debt of Unconsolidated Joint Ventures (other than bullet payments) that does not
otherwise constitute Debt of and is not otherwise recourse to the REIT or such
Consolidated Entity or their assets, (iii) Interest Expense, (iv) an amount
equal to $0.3125 per quarter, multiplied by the weighted average gross leasable
area, measured in square feet and weighted by acquisition date, of all Real
Properties held by the REIT or any of the Consolidated Entities, (v) the REIT's
and each Consolidated Entity's pro rata share of an amount equal to the product
(the "Clause (v) Product") of $0.3125 per quarter, multiplied by the weighted
average gross leasable area, measured in square feet and weighted by acquisition
date, of all Real Properties held by Unconsolidated Joint Ventures and (vi) Tax
Expense, in each case, at the end of such period. For purposes of clause (ii),
the REIT's and such Consolidated Entity's pro rata share of payments by any
Unconsolidated Joint Venture shall be deemed equal to the product of (a) the
payments made by such Unconsolidated Joint Venture, multiplied by (b) the
percentage of the total outstanding Capital Stock of such Unconsolidated Joint
Venture held by the REIT or such Consolidated Entity, expressed as a decimal.
For purposes of clause (v), the REIT's and such Consolidated Entity's pro rata
share of the Clause (v) Product shall be deemed equal to the product of (a) the
Clause (v) Product, multiplied by (b) the percentage of the total outstanding
Capital Stock of such Unconsolidated Joint Ventures held by the REIT or such
Consolidated Entity, expressed as a decimal.

"FIXED RATE NOTICE" means, with respect to a LIBOR Advance pursuant to
SECTION 2.1(b), a notice substantially in the form of EXHIBIT C.

"FIXED RATE PRICE ADJUSTMENT" has the meaning given to such term in
SECTION 2.4(h)(iii).

"FUNDING DATE" means, with respect to any Advance, the date of the
funding of such Advance.

"FUNDS FROM OPERATIONS" shall be interpreted consistently with the
NAREIT Definition and, subject to SECTION 11.3, shall mean, for any period, net
income for such period excluding gains (or losses) from debt restructuring and

<PAGE>

sales of Real Property, plus the portion of Depreciation and Amortization
Expenses during such period which is attributable to Real Property, and after
adjustments for Unconsolidated Joint Ventures. (Adjustments for Unconsolidated
Joint Ventures shall be calculated to reflect funds from operations on the same
basis.)

"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, or in such other statements by such
other entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination.

"GOVERNMENTAL AUTHORITY" means any nation or government, any federal,
state, local, municipal or other political subdivision thereof or any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.

"GROSS ASSET VALUE" means, as of the date of determination, the sum of
(without duplication):

(i) the product of (x) EBITDA of the REIT and the Consolidated
Entities for the fiscal period consisting of the Fiscal Quarter most recently
ended (less EBITDA attributable to Real Property acquired during such Fiscal
Quarter from persons other than Predecessor Entities or Borrower or Affiliates
of Borrower), multiplied by 4, multiplied by (y) 10.0;

(ii) Cash and Cash Equivalents held by the REIT and the Consolidated
Entities on the last day of such most recently ended Fiscal Quarter; and

(iii) ninety percent (90%) of the Acquisition Price for Real Property
acquired by the REIT and the Consolidated Entities (from persons other than
Predecessor Entities or Borrower or Affiliates of Borrower) during such Fiscal
Quarter.

<PAGE>

"GUARANTY" means a guaranty of payment in the form of EXHIBIT D.

"GUARANTY OBLIGATION" means, as to any Person, any (a) guarantee by
that Person of Indebtedness of, or other obligation performable by, any other
Person or (b) assurance given by that Person to an obligee of any other Person
with respect to the performance of an obligation by, or the financial condition
of, such other Person, whether direct, indirect or contingent, INCLUDING any
purchase or repurchase agreement covering such obligation or any collateral
security therefor, any agreement to provide funds (by means of loans, capital
contributions or otherwise) to such other Person, any agreement to support the
solvency or level of any balance sheet item of such other Person or any
"keep-well" or other arrangement of whatever nature given for the purpose of
assuring or holding harmless such obligee against loss with respect to any
obligation of such other Person; PROVIDED, HOWEVER, that the term Guaranty
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Guaranty
Obligation in respect of Indebtedness shall be deemed to be an amount equal to
the stated or determinable amount of the related Indebtedness (unless the
Guaranty Obligation is limited by its terms to a lesser amount, in which case to
the extent of such amount) or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by the Person
in good faith. The amount of any other Guaranty Obligation shall be deemed to
be zero unless and until the amount thereof has been (or in accordance with
Financial Accounting Standards Board Statement No. 5 should be) quantified and
reflected or disclosed in the consolidated financial statements (or notes
thereto) of such Person.

"INDEBTEDNESS" means, as to any Person (without duplication), (a) all
indebtedness, obligations or other liabilities of such Person for borrowed
money, whether or not subordinated and whether with or without recourse beyond
any collateral security, (b) all indebtedness, obligations or other liabilities
of such Person evidenced by Securities or other similar instruments, (c) all
reimbursement obligations and other liabilities of such Person with respect to
letters of

<PAGE>

credit or banker's acceptances issued for such Person's account, (d) all
obligations of such Person to pay the deferred purchase price of Property or
services, (e) the principal portion of Capital Lease Obligations of such Person
set forth in the financial statements of such Person and, with respect to each
operating lease, including all ground leases to the extent not treated as
Capital Leases, the present value of all rental payments due over the remaining
term of such lease (using a discount rate of 10%), PROVIDED, HOWEVER, that, to
the extent any ground lease payment has been deducted in determining Net Income,
then such present value shall not be counted as Indebtedness in calculating the
ratio set forth in Section 9.2, (f) all Guaranty Obligations of such Person,
(g) all Contractual Obligations of such Person, (h) all indebtedness,
obligations or other liabilities of such Person or others secured by a Lien on
any asset of such Person, whether or not such indebtedness, obligations or
liabilities are assumed by, or are a personal liability of, such Person
(including, without limitation, the principal amount of any assessment or
similar indebtedness encumbering any property), (i) all indebtedness,
obligations or other liabilities (other than interest expense liability) in
respect of foreign currency exchange agreements, (j) ERISA obligations currently
due and payable, (k) as applied to the REIT and the Consolidated Entities, all
indebtedness, obligations or other liabilities of Unconsolidated Joint Ventures
which are recourse to the REIT and/or any of the Consolidated Entities, (l) the
REIT's and Consolidated Entities' pro rata share of Nonrecourse Debt of
Unconsolidated Joint Ventures, (m) the amount which would be owed by such Person
to any counterparty under any Swap Agreement(s) in the event such Swap
Agreement(s) were terminated as of any date of determination of Indebtedness,
(n) improvement and assessment district taxes (including, without limitation,
taxes under the Mello-Roos Community Facilities Act of 1982,) assessed or
otherwise due with respect to any Property of such Person, and (o) without
duplication or limitation, all liabilities and other obligations included in the
financial statements (or notes thereto) of such Person as prepared in accordance
with GAAP. For purposes of clause (l), the REIT's and the Consolidated
Entities' pro rata share of Nonrecourse Debt of any Unconsolidated Joint Venture
shall be deemed to be equal to the product of (i) the Nonrecourse Debt of such
Unconsolidated

<PAGE>

Joint Venture, multiplied by (ii) the percentage of the total outstanding
Capital Stock of such Joint Venture held by the REIT or any Consolidated Entity,
expressed as a decimal. With respect to any agreement entered into by such
Person to purchase Real Property, "Indebtedness" shall not include any amount in
excess of the amount (if any) which such Person is obligated to pay as
liquidated damages under such agreement in the event such Person breaches its
obligation to purchase such Real Property.

"INTANGIBLE ASSETS" means assets that are considered intangible assets
under GAAP, including customer lists, goodwill, computer software, copyrights,
trade names, trademarks, patents and Capitalized Loan Fees (other than
capitalized interest with respect to construction in progress).

"INTEREST COVERAGE RATIO" means, at any time, the ratio of (i) EBITDA
for the Fiscal Quarter then most recently ended (or, if shorter, for the period
from the Closing Date to the end of such period), to (ii) Interest Expense for
such period.

"INTEREST EXPENSE" means, for any period, the sum (without
duplication) for such period of (i) total interest expense, whether paid or
accrued, of the REIT and the Consolidated Entities and the portion of any
Capitalized Lease Obligations allocable to interest expense during such period,
including the REIT's and each Consolidated Entity's share of interest expenses
in Unconsolidated Joint Ventures but excluding amortization or writeoff of debt
discount and expense (except as provided in clause (ii) below), (ii) with
respect to the REIT and the Consolidated Entities, amortization of costs related
to Swap Agreements, (iii) with respect to the REIT and the Consolidated
Entities, capitalized interest, (iv) amortization of Capitalized Loan Fees,
(v) to the extent not included in clauses (i), (ii), (iii) and (iv), the REIT's
and each Consolidated Entity's pro rata share of interest expense and other
amounts of the type referred to in such clauses of the Unconsolidated Joint
Ventures, and (vi) interest incurred on any liability or obligation that
constitutes a Guaranty Obligation of the REIT or any Consolidated Entity. For
purposes of clause (v), the REIT's and such Consolidated

<PAGE>

Entity's pro rata share of interest expense or other amount of any
Unconsolidated Joint Venture shall be deemed equal to the product of (a) the
interest expense or other relevant amount of such Unconsolidated Joint Venture,
multiplied by (b) the percentage of the total outstanding Capital Stock of such
Unconsolidated Joint Venture held by the REIT or such Consolidated Entity,
expressed as a decimal.

"INTEREST PERIOD" means, with respect to each LIBOR Advance, a period
commencing on a Business Day and ending one (1), two (2), three (3) or six (6)
months thereafter, as specified by the Borrower pursuant to SECTION 2.1(B),
PROVIDED that any such period that would otherwise end on a day that is not a
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such period shall
end on the immediately preceding Business Day.

"INVESTMENT" means, with respect to any Person, (i) any direct or
indirect purchase or other acquisition by that Person of stock or securities, or
any beneficial interest in stock or other securities, of any other Person, any
partnership interest (whether general or limited) in any other Person, or all or
any substantial part of the business or assets of any other Person, (ii) any
direct or indirect loan, advance or capital contribution by that Person to any
other Person, including all indebtedness and accounts receivable from that other
Person that are not current assets or did not arise from sales to that other
Person in the ordinary course of business. The amount of any Investment shall
be the original cost of such Investment, plus the cost of all additions thereto,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment.

"INVESTMENT MORTGAGES" mean mortgages or deeds of trust securing
indebtedness owned by Borrower.

"IRS" means the Internal Revenue Service and any Person succeeding to
the functions thereof.

"JOINT VENTURE" means a joint venture, partnership, limited liability
company, business trust or similar arrange-

<PAGE>

ment, whether in corporate, partnership or other legal form; provided that, as
to any such arrangement in corporate form, such corporation shall not, as to any
Person of which such corporation is a Subsidiary, be considered to be a Joint
Venture to which such Person is a party.

"LAND" means unimproved (except as otherwise provided in the
definition of "Construction in Progress") land. "Land" does not include
Construction in Progress.

"LENDER TAXES" has the meaning given to such term in SECTION 2.4(G).

"LENDERS" means Wells Fargo (for so long as it holds an interest in a
Note) and any other bank, finance company, insurance or other financial
institution which is or becomes a party to this Agreement by execution of a
counterpart signature page hereto or an Assignment and Assumption, as assignee.
At all times that there are no Lenders other than Wells Fargo, the terms
"Lender" and "Lenders" means Wells Fargo (for so long as it holds an interest in
a Note) in its individual capacity. With respect to matters requiring the
consent to or approval of all Lenders at any given time, all then existing
Defaulting Lenders will be disregarded and excluded, and, for voting purposes
only, "all Lenders" shall be deemed to mean "all Lenders other than Defaulting
Lenders".

"LIABILITIES AND COSTS" means all claims, judgments, liabilities,
obligations, responsibilities, losses, damages (including lost profits),
punitive or treble damages, costs, disbursements and expenses (including,
without limitation, reasonable attorneys', experts' and consulting fees and
costs of investigation and feasibility studies), fines, penalties and monetary
sanctions, interest, direct or indirect, known or unknown, absolute or
contingent, past, present or future.

"LIBOR ADVANCE" means an Advance bearing interest at a fixed rate of
interest determined by reference to the LIBOR Rate.

"LIBOR OFFICE" means, relative to any Lender, the office of such
Lender designated as such on the counterpart

<PAGE>

signature pages hereto or such other office of a Lender as designated from time
to time by notice from such Lender to Agent, whether or not outside the
United States, which shall be making or maintaining LIBOR Advances of such
Lender.

"LIBOR RATE" means, with respect to any LIBOR Advance, the rate per
annum (determined solely by the Agent and rounded upward to the next 1/16th of
one percent ) at which deposits in Dollars are offered by the Agent in the
Designated Market at approximately 9:00 a.m. (California time) two (2) Business
Days prior to the first day of the applicable Interest Period in an amount
approximately equal to such LIBOR Advance, and for a period of time comparable
to the number of days in the applicable Interest Period. The determination of
the LIBOR Rate by Agent shall be conclusive in the absence of manifest error.
The foregoing rate of interest shall be reserve adjusted by dividing the LIBOR
Rate by one (1.00) minus the LIBOR Reserve Percentage, with such quotient to be
rounded upward to the nearest whole multiple of one-hundredth of one percent
(0.01%). All references in this Agreement or other Loan Documents to the LIBOR
Rate include the aforesaid reserve adjustment.

"LIBOR RESERVE PERCENTAGE" means, relative to any Interest Period for
LIBOR Advances made by any Lender, the reserve percentage (expressed as a
decimal) equal to the actual aggregate reserve requirements (including all
basic, emergency, supplemental, marginal and other reserves and taking into
account any transactional adjustments or other scheduled changes in reserve
requirements) announced within Agent as the reserve percentage applicable to
Agent as specified under regulations issued from time to time by the Federal
Reserve Board. The LIBOR Reserve Percentage shall be based on Regulation D of
the Federal Reserve Board or other regulations from time to time in effect
concerning reserves for "Eurocurrency Liabilities" from related institutions as
though Agent were in a net borrowing position.

"LIEN" means any mortgage, deed of trust, pledge, negative pledge,
hypothecation, collateral assignment, deposit arrangement, security interest,
encumbrance (including, but not limited to, easements, rights-of-way, zoning
restrictions and

<PAGE>

the like), lien (statutory or other), preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever,
including without limitation any conditional sale or other title retention
agreement, the interest of a lessor under a Capital Lease, any financing lease
having substantially the same economic effect as any of the foregoing, and the
filing of any financing statement or document having similar effect (other than
a financing statement filed by a "true" lessor pursuant to 9408 of the Uniform
Commercial Code) naming the owner of the asset to which such Lien relates as
debtor, under the Uniform Commercial Code or other comparable law of any
jurisdiction.

"LOAN ACCOUNT" has the meaning given to such term in SECTION 2.3.

"LOAN DOCUMENTS" means this Agreement, the Notes, the Guaranty and all
other agreements, instruments and documents (together with amendments and
supplements thereto and replacements thereof) now or hereafter executed by the
REIT or Borrower which evidence, guarantee or secure the Obligations, in each
case either as originally executed or as the same may from time to time be
supplemented, modified, amended, renewed, extended or supplanted.

"MAJOR AGREEMENTS" means, with respect to any Real Property included
within the Unencumbered Pool or which Borrower proposes for inclusion within the
Unencumbered Pool, (a) a lease of such Real Property with respect to 25,000
square feet or more of gross leasable area, and (b) each ground lease affecting
such Real Property.

"MATERIAL ADVERSE EFFECT" means, with respect to a Person, a material
adverse effect upon the condition (financial or otherwise), operations,
performance or properties of such Person. The phrase "has a Material Adverse
Effect" or "will result in a Material Adverse Effect" or words substantially
similar thereto shall in all cases be intended to mean "has resulted, or will or
could reasonably be anticipated to result, in a Material Adverse Effect", and
the phrase "has no (or does not have a) Material Adverse Effect" or "will not
result in a Material Adverse Effect" or words substantially similar thereto

<PAGE>

shall in all cases be intended to mean "does not or will not or could not
reasonably be anticipated to result in a Material Adverse Effect".

"MATURITY DATE" has the meaning given to such term in SECTION 2.1(D).

"MINORITY INTERESTS" means that portion of "minority interests" as set
forth in the REIT's financial statements which is attributable to the ownership
interest in Borrower of Persons other than the REIT.

"MULTIEMPLOYER PLAN" means an employee benefit plan defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding
six (6) years was, contributed to by a Person or an ERISA Affiliate.

"NAREIT DEFINITION" has the meaning given to such term in SECTION
11.3.

"NET INCOME" means, for any period, total net income (or loss) of the
REIT and the Consolidated Entities for such period, provided that there shall be
excluded therefrom (i) any charge attributable to, or otherwise on account of,
the Minority Interests, (ii) any income or loss attributable to extraordinary
items (including, without limitation, any income or loss attributable to
restructuring of Indebtedness), (iii) gains and losses from sales of assets,
(iv) the Borrower's pro rata share of the income (or loss) of any Unconsolidated
Joint Venture for such period, and (v) except to the extent otherwise included
hereunder, the income (or loss) of any Person accrued prior to the date it
becomes a Consolidated Entity or is merged with the REIT or any Consolidated
Entity or such Person's assets are acquired by the REIT or any Consolidated
Entity. For purposes of this definition, the Borrower's pro rata share of
income (or loss) of any Unconsolidated Joint Venture shall be deemed equal to
the product of (i) the income (or loss) of such Unconsolidated Joint Venture,
multiplied by (ii) the percentage of the total outstanding Capital Stock of such
Person held by the Borrower, expressed as a decimal.

<PAGE>

"NET OFFERING PROCEEDS" means (a) all cash proceeds received by the
REIT as a result of the sale of common, preferred or other classes of stock of
the REIT (if and only to the extent reflected in stockholders' equity on the
consolidated balance sheet of the REIT prepared in accordance with GAAP) LESS
customary costs, expenses and discounts of issuance paid by the REIT (all of
which proceeds shall be concurrently contributed by the REIT to Borrower as
additional capital as provided in SECTION 6.2(h), BELOW), PLUS (b) all cash and
the fair market value of the net equity of all properties contributed to
Borrower by one or more Persons in exchange for limited partnership interests in
Borrower.

"NON-PRO RATA ADVANCE" means an Advance with respect to which fewer
than all Lenders have funded their respective Pro Rata Shares of such Advance
and the failure of the non-funding Lender or Lenders to fund its or their
respective Pro Rata Shares of such Advance constitutes a breach of this
Agreement.

"NONRECOURSE DEBT" means any Debt: (a) under the terms of which the
payee's remedies upon the occurrence of a default are limited to specific,
identified assets of the payor which secure such Debt; and (b) for the repayment
of which the payor has no personal liability beyond the loss of such specified
assets, except for liability for fraud, material misrepresentations or misuse or
misapplication of insurance proceeds, condemnation awards or rents, existence of
hazardous waste or other customary exceptions to nonrecourse provisions.

"NOTE" means the promissory note made by Borrower to a Lender
evidencing the Advances under that Lender's Pro Rata Share of the Commitment,
either as originally executed or as the same may from time to time be
supplemented, modified, amended, renewed, extended or supplanted. The Notes
shall be substantially in the form of EXHIBIT E.

"NOTICE OF BORROWING" means, with respect to a proposed Advance
pursuant to SECTION 2.1(B), a notice substantially in the form of EXHIBIT F.

<PAGE>

"OBLIGATIONS" means all present and future obligations and liabilities
of the Borrower of every type and description arising under or in connection
with this Agreement, the Notes and the other Loan Documents due or to become due
to the Lenders or any Person entitled to indemnification, or any of their
respective successors, transferees or assigns, whether for principal, interest,
fees, expenses, indemnities or other amounts (including attorneys' fees and
expenses) and whether due or not due, direct or indirect, joint and/or several,
absolute or contingent, voluntary or involuntary, liquidated or unliquidated,
determined or undetermined, and whether now or hereafter existing, renewed or
restructured, whether or not from time to time decreased or extinguished and
later increased, created or incurred, whether or not arising after the
commencement of a proceeding under the Bankruptcy Code (including post-petition
interest) and whether or not allowed or allowable as a claim in any such
proceeding, and whether or not recovery of any such obligation or liability may
be barred by a statute of limitations or such obligation or liability may
otherwise be unenforceable.

"OFFICE PROPERTY" means any Real Property that is an office building
and any related parking facility.

"OFFICER'S CERTIFICATE" means a certificate signed by a specified
officer of a Person certifying as to the matters set forth therein.

"ORIGINAL CREDIT AGREEMENT" means that certain Revolving Credit
Agreement, dated as of December 17, 1996, by and among Borrower, as borrower,
and Wells Fargo, Commerzbank AG, Los Angeles Branch, Dresdner Bank AG, New York
Branch and Grand Cayman Branch, Fleet National Bank, KeyBank National
Association, Manufacturers Bank, Union Bank of California, N.A., The First
National Bank of Chicago, and PNC Bank, NA, as lenders, and Wells Fargo, as
agent, as from time to time amended, supplemented or otherwise modified.

"ORIGINAL LENDERS" means the "Lenders" as defined in the Original
Credit Agreement.

<PAGE>

"ORIGINAL LOAN DOCUMENTS" means the "Loan Documents" as defined in the
Original Credit Agreement.

"ORIGINAL LOAN" means the "Line B Advances" as defined in the Original
Credit Agreement.

"ORIGINAL NOTES" means the "Notes" as defined in the Original Credit
Agreement.

"PARTNERSHIP UNITS" has the meaning established for that term in the
Partnership Agreement of the Borrower.

"PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to the functions thereof.

"PERMIT" means any permit, approval, authorization, license, variance
or permission required from a Governmental Authority under an applicable
Requirement of Law.

"PERMITTED LIENS" mean:

(a) Liens (other than Environmental Liens and any Lien imposed under
ERISA) for taxes, assessments or charges of any Governmental Authority or
claims not yet due and any such taxes, assessments, charges or claims which
are due if they are being contested by Borrower in accordance with
SECTION 6.1(d);

(b) Liens (other than any Lien imposed under ERISA) incurred or
deposits made in the ordinary course of business (including without
limitation surety bonds and appeal bonds) in connection with workers'
compensation, unemployment insurance and other types of social security
benefits or to secure the performance of tenders, bids, leases, contracts
(other than for the repayment of Indebtedness), and statutory obligations;

(c) Liens imposed by laws, such as mechanics' liens and other similar
liens arising in the ordinary course of business which secure payment of
obligations not more than thirty (30) days past due or are being contested
as permitted under this Agreement;

<PAGE>

(d) any Liens which are approved by Requisite Lenders; and

(e) rights of lessees under leases and the rights of lessors under
Capital Leases.

"PERSON" means any natural person, corporation, limited partnership,
general partnership, joint stock company, limited liability company, limited
liability partnership, joint venture, association, company, trust, bank, trust
company, land trust, business trust or other organization, whether or not a
legal entity, or any other nongovernmental entity, or any Governmental
Authority.

"PLAN" means an employee benefit plan defined in Section 3(3) of ERISA
(other than a Multiemployer Plan) in respect of which Borrower or an ERISA
Affiliate, as applicable, is an "employer" as defined in Section 3(5) of ERISA.

"PREDECESSOR ENTITY" means Arden Realty Group, Inc., a California
corporation ("Arden Realty California"), or any Person who was at any time an
Affiliate of Arden Realty California or any Person that owned any of the Real
Properties listed on SCHEDULE 1.1B and contributed such Real Properties to the
REIT or the Borrower.

"PRICE ADJUSTMENT DATE" has the meaning given to such term in
SECTION 2.4(h)(iii).

"PRICING CERTIFICATE" means a certificate in the form of EXHIBIT G,
properly completed and signed by the chief financial officer, chief executive
officer or chief operating officer of Borrower. Each Pricing Certificate shall
be in such detail and contain such supporting information as Agent may
reasonably require.

"PRICING PERIOD" means (a) the period commencing on the Closing Date
and ending on August 19, 1997, (b) the period commencing on each August 20 and
ending on the next following November 19, (c) the period commencing on each
November 20 and ending on the next following February 19, (d) the period
commencing on each February 20 and ending on the next following

<PAGE>

May 19, and (e) the period commencing on each May 20 and ending on the next
following August 19.

"PRO RATA SHARE" means, with respect to each Lender, the percentage of
the Commitment set forth opposite the name of that Lender on SCHEDULE 1.1B, as
such percentage may be increased or decreased pursuant to an Assignment and
Assumption executed in accordance with Section 11.20.

"PROCEEDINGS" means, collectively, all actions, suits and proceedings
before, and investigations commenced or threatened by or before, any court or
Governmental Authority with respect to a Person.

"PROPERTY" means, as to any Person, any real or personal property,
building, facility, structure, equipment or unit, or other asset owned and
operated by such Person in the ordinary course of its business.

"PROPERTY EXPENSES" means, for any Office Property, all operating
expenses relating to such Office Property, including the following items
(provided, however, that Property Expenses shall not include Debt Service,
tenant improvement costs, leasing commissions, capital improvements,
Depreciation and Amortization Expenses and any extraordinary items not
considered operating expenses under GAAP):

(i) all expenses for the operation of such Office Property,
including any management fees payable under management contracts,
landscaping costs, janitorial costs, costs for trash pickup and security
costs and all insurance expenses, but not including any expenses incurred
in connection with a sale or other capital or interim capital transaction;

(ii) water charges, property taxes, sewer rents and other
impositions, other than fines, penalties, interest or such impositions (or
portions thereof) that are payable by reason of the failure to pay an
imposition timely;

<PAGE>

(iii) the cost of routine maintenance, repairs and minor
alterations, to the extent they can be expensed under GAAP; and

(iv) if Borrower's interest in such Office Property is a ground
leasehold interest, rents paid by Borrower under the ground lease for such
Office Property.

"PROPERTY INCOME" means, for any Office Property, all gross revenue
from the ownership and/or operation of such Office Property (but excluding
income from a sale or other capital item transaction), service fees and charges,
all tenant expense reimbursement income payable with respect to such Office
Property (but not such reimbursement for expenditures not deducted as a Property
Expense), and proceeds of business interruption insurance specifically allocable
to such Office Property.

"PROPERTY INFORMATION" means the following information and other items
with respect to each Real Property which Borrower intends to designate as an
Unencumbered Asset to be added to the Unencumbered Pool:

(i) A physical description of such Real Property, the date upon
which such Real Property was acquired or is proposed to be acquired by
Borrower, the Acquisition Price of such Real Property, if the building
located on such Real Property or the use of such building does not conform
to applicable zoning ordinances and laws, a description of such
nonconformity and whether such building or use is a legal nonconforming
use, a copy of any reports delivered to Borrower with respect to the
structural integrity of improvements located on such Real Property and
Borrower's preliminary budget for nonrevenue enhancing capital expenditures
for such Real Property for the next succeeding eight (8) Fiscal Quarters;

(ii) A current operating statement for such Real Property,
audited or certified by Borrower as being true and correct in all material
respects and prepared in accordance with GAAP, and comparative operating
statements for the current interim fiscal period and for the previous

<PAGE>

two (2) Fiscal Years (or such lesser period as it has been operating);
PROVIDED, HOWEVER, that, if Borrower shall have owned such Real Property
for less than the period to be covered by such operating statements and
comparative operating statements, then the audit and certification
requirements shall extend only to the period of ownership by Borrower, and
Borrower shall provide to Agent complete copies of any operating statements
prepared by former owner(s) of such Real Property with respect to the
remainder of the periods required hereunder, if the same are available to
Borrower;

(iii) A current Rent Roll for such Real Property, certified by
Borrower as being true and correct (or if Borrower does not presently own
the Property, a copy of the Rent Roll prepared by the seller thereof);

(iv) A "Phase I" environmental assessment of such Real Property
not more than twelve (12) months old, prepared by an environmental
engineering firm reasonably acceptable to Agent;

(v) Copies of all Major Agreements affecting such Real Property;

(vi) A copy of Borrower's most recent Owner's or Leasehold
Policy of Title Insurance, if any, covering such Real Property or, for Real
Property to be acquired, a preliminary title report; and

(vii) If Borrower's interest in such Real Property is a ground
leasehold interest, a copy of the ground lease pursuant to which Borrower
leases such Real Property and all amendments thereto and memoranda thereof.

"PROPERTY NOI" means, for any Office Property for any period, (i) all
Property Income for such period, minus (ii) all Property Expenses for such
period.

"RATING NOTICE" means written notice from Borrower to Agent delivered
during the period commencing on the first day of a Fiscal Quarter and ending on
the 45th day of such Fiscal

<PAGE>

Quarter and certifying that, as of the last day of the Fiscal Quarter most
recently ended, (i) Borrower's long-term unsecured senior Debt was rated by
Standard & Poor's (and setting forth such rating and certifying thereto),
(ii) Borrower's long-term unsecured senior Debt was rated by one of the other
rating agencies referred to in the last sentence of the definition of
"Applicable Pricing Level" (and setting forth such rating and certifying
thereto) and (iii) the lower of such ratings was BBB- (which is a Standard &
Poor's rating or its equivalent by such other rating agency) or higher.

"REAL PROPERTY" means each lot or parcel (or portions thereof) of real
property, improvements and fixtures thereon and appurtenances thereto now or
hereafter owned or leased by the Borrower or any other Consolidated Entity.

"REGULATIONS G, T, U AND X" mean such Regulations of the Federal
Reserve Board as in effect from time to time.

"REIT" means Arden Realty, Inc., a Maryland corporation.

"RELEASE" means the release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment or into or out of any Property, including the
movement of Contaminants through or in the air, soil, surface water, groundwater
or property.

"REMEDIAL ACTION" means any action required by applicable
Environmental Laws to (a) clean up, remove, treat or in any other way address
Contaminants in the indoor or outdoor environment; (b) prevent the Release or
threat of Release or minimize the further Release of Contaminants so they do not
migrate or endanger or threaten to endanger public health or welfare or the
indoor or outdoor environment; or (c) perform pre-remedial studies and
investigations and post-remedial monitoring and care.

"RENT ROLL" means, with respect to any Real Property, a rent roll for
such Real Property stating for each tenancy within such Real Property the
identity of the lessee, the suite

<PAGE>

designation of the space leased, the gross leasable area included within such
space, the date of commencement and the date of termination of such tenancy, the
periods of any options to extend or terminate such tenancy, the base rent and
any escalations or operating expense reimbursement payable in respect of such
tenancy and the type of lease (I.E., gross or degree to which net of expenses,
taxes and other items).

"REPORTABLE EVENT" means any of the events described in
Section 4043(c) of ERISA, other than an event for which the thirty (30) day
notice requirement is waived by regulations.

"REQUIREMENTS OF LAW" means, as to any Person, the charter and by-
laws, partnership agreement or other organizational or governing documents of
such Person, and any law, rule or regulation, Permit, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject, including without limitation, the Securities
Act, the Securities Exchange Act, Regulations G, T, U and X, FIRREA and any
certificate of occupancy, zoning ordinance, building, environmental or land use
requirement or Permit or occupational safety or health law, rule or regulation.

"REQUISITE LENDERS" means, collectively, Agent and Lenders whose Pro
Rata Shares, in the aggregate, are at least sixty-six and two-thirds
percent (66-2/3%), PROVIDED that, in determining such percentage at any given
time, all then existing Defaulting Lenders will be disregarded and excluded and
the Pro Rata Shares of Lenders shall be redetermined, for voting purposes only,
to exclude the Pro Rata Shares of such Defaulting Lenders.

"RESPONSIBLE OFFICIAL" means (a) when used with reference to a Person
other than an individual, any corporate officer of such Person, general partner
of such Person, corporate officer of a corporate general partner of such Person,
or corporate officer of a corporate general partner of a partnership that is a
general partner of such Person, or any other responsible official thereof acting
on behalf thereof,

<PAGE>

and (b) when used with reference to a Person who is an individual, such Person.

"S-11" means the Form S-11 Registration Statement under the Securities
Act filed by the REIT with the Commission on July 16, 1996, as amended.

"SECURITIES" means any stock, shares, voting trust certificates,
bonds, debentures, notes or other evidences of indebtedness, secured or
unsecured, convertible, subordinated or otherwise, or in general any instruments
commonly known as "securities", or any certificate of interest, shares, or
participations in temporary or interim certificates for the purchase or
acquisition of, or any right to subscribe to, purchase or acquire any of the
foregoing, but shall not include any evidence of the Obligations, PROVIDED that
Securities shall not include Cash Equivalents, Investment Mortgages or equity
investments in Unconsolidated Joint Ventures.

"SECURITIES ACT" means the Securities Act of 1933, as amended to the
date hereof and from time to time hereafter, and any successor statute.

"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended to the date hereof and from time to time hereafter, and any successor
statute.

"SENIOR LOANS" has the meaning given to such term in SECTION 10.4(b).

"SOLVENCY CERTIFICATE" means a certificate in the form of EXHIBIT H.

"SOLVENT" means as to any Person at the time of determination, that
such Person (a) owns Property the value of which (both at fair valuation and at
present fair saleable value) is greater than the amount required to pay all of
such Person's liabilities (including the probable amount of contingent
liabilities and debts); (b) is able to pay all of its debts as such debts mature
(including through refinancing on commercially reasonable terms); and (c) has
capital

<PAGE>

sufficient to carry on its business and transactions and all business and
transactions in which it is about to engage.

"STANDARD & POOR'S" means Standard & Poor's Ratings Services, a
division of The McGraw-Hill Companies.

"STOCKHOLDERS' EQUITY" means, as of any date of determination, the
consolidated Stockholders' Equity of the REIT as of that date determined in
accordance with GAAP and shown in the financial statements of the REIT and the
Consolidated Entities; provided that there shall be excluded from Stockholders'
Equity any amount attributable to Disqualified Stock.

"SUBSIDIARY" means, as of any date of determination and with respect
to any Person, any corporation, limited liability company or partnership
(whether or not, in either case, characterized as such or as a "joint venture"),
whether now existing or hereafter organized or acquired: (a) in the case of a
corporation or limited liability company, of which a majority of the Securities
having ordinary voting power for the election of directors or other governing
body (other than Securities having such power only by reason of the happening of
a contingency) are at the time beneficially owned by such Person and/or one or
more Subsidiaries of such Person, or (b) in the case of a partnership, of which
a majority of the partnership or other ownership interests are at the time
beneficially owned by such Person and/or one or more of its Subsidiaries.

"SWAP AGREEMENT" means a written agreement between Borrower and one or
more financial institutions providing for "swap", "cap", "collar", "floor," "buy
down" or other interest rate protection with respect to any Indebtedness, in
form and substance acceptable to Agent.

"TANGIBLE NET WORTH" means, at any time, the Stockholders' Equity,
PLUS Minority Interests, PLUS cumulative net additions of Depreciation and
Amortization Expense deducted in determining income for all Fiscal Quarters
ending after the "Closing Date" (as defined in the Original Credit Agreement),
MINUS Intangible Assets.

<PAGE>

"TAX EXPENSE" means (without duplication), for any period, total tax
expense (if any) attributable to income and franchise taxes based on or measured
by income, whether paid or accrued, of the REIT and the Consolidated Entities,
including the REIT's and each Consolidated Entity's pro rata share of tax
expenses in each Unconsolidated Joint Venture. For purposes of this definition,
the REIT's and such Consolidated Entity's pro rata share of any such tax expense
of such Unconsolidated Joint Venture shall be deemed equal to the product of (i)
such tax expense of such Unconsolidated Joint Venture, multiplied by (ii) the
percentage of the total outstanding Capital Stock of such Unconsolidated Joint
Venture held by the REIT or such Consolidated Entity, expressed as a decimal.

"TERMINATION EVENT" means (a) any Reportable Event, (b) the withdrawal
of a Person or an ERISA Affiliate of such Person from a Benefit Plan during a
plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, (c) the occurrence of an obligation arising under
Section 4041 of ERISA of a Person or an ERISA Affiliate of such Person to
provide affected parties with a written notice of an intent to terminate a
Benefit Plan in a distress termination described in Section 4041(c) of ERISA,
(d) the institution by the PBGC of proceedings to terminate any Benefit Plan
under Section 4042 of ERISA, (e) any event or condition which constitutes
grounds under Section 4042 of ERISA for the appointment of a trustee to
administer a Benefit Plan, (f) the partial or complete withdrawal of such Person
or any ERISA Affiliate of such Person from a Multiemployer Plan, or (g) the
adoption of an amendment by any Person or any ERISA Affiliate of such Person to
terminate any Benefit Plan.

"TOTAL LIABILITIES" means, at any time, without duplication, the
aggregate amount of (i) all Indebtedness and other liabilities of the REIT and
the Consolidated Entities reflected in the financial statements of the REIT or
disclosed in the financial notes thereto, plus (ii) all liabilities of all
Unconsolidated Joint Ventures that are recourse to the REIT or any Consolidated
Entity or any of its assets or that otherwise constitute Indebtedness of the
REIT or any Consolidated Entity, plus (iii) the REIT's and each Consolidated
Entity's pro rata share of all Indebtedness and

<PAGE>

other liabilities of any Unconsolidated Joint Venture not otherwise constituting
Indebtedness of the REIT or such Consolidated Entity, plus (iv) all Guaranty
Obligations of the REIT and the Consolidated Entities. For purposes of
clause (iii), the REIT's and such Consolidated Entity's pro rata share of all
Indebtedness and other liabilities of any Unconsolidated Joint Venture shall be
deemed equal to the product of (a) such Indebtedness or other liabilities,
multiplied by (b) the percentage of the total outstanding Capital Stock of such
Person held by the REIT or such Consolidated Entity, expressed as a decimal.
Total Liabilities shall not include Minority Interests.

"TO THE BEST KNOWLEDGE OF" means, when modifying a representation,
warranty or other statement of any Person, that the fact or situation described
therein is known by the Person (or, in the case of a person other than a natural
person, known by a Responsible Official of that Person) making the
representation, warranty or other statement, or with the exercise of reasonable
due diligence under the circumstances (in accordance with the standard of what a
reasonable Person in similar circumstances would have done) would have been
known by the Person (or, in the case of a Person other than a natural Person,
would have been known by a Responsible Official of that Person).

"UNCONSOLIDATED JOINT VENTURE" means any Joint Venture of the REIT or
any Consolidated Entity in which the REIT or such Consolidated Entity holds any
Capital Stock but which would not be combined with the REIT in the consolidated
financial statements of the REIT in accordance with GAAP.

"UNENCUMBERED ASSET VALUE" means, at any time, with respect to a
specified Unencumbered Asset, (i) for Unencumbered Assets that have been Wholly-
Owned by the Borrower or "Wholly-Owned" by a Predecessor Entity for at least one
full Fiscal Quarter at such time, the product of the Property NOI of such
Unencumbered Assets during the period of the full Fiscal Quarter ended most
recently multiplied by 4, divided by 10.0% (expressed as a decimal), or (ii) for
Unencumbered Assets that have been Wholly-Owned by the Borrower or a Predecessor
Entity for less than one full Fiscal Quarter at such time, an amount

<PAGE>

equal to ninety percent (90%) of the Acquisition Price for such Unencumbered
Assets.

"UNENCUMBERED ASSET" means any Real Property designated by Borrower
that satisfies all of the following conditions:

(i) is an Office Property;

(ii) is free and clear of any Lien, other than (a) easements,
covenants, and other restrictions, charges or encumbrances not securing
Indebtedness that do not interfere materially with the ordinary operations of
such Real Property and do not materially detract from the value of such Real
Property; (b) building restrictions, zoning laws and other Requirements of Law,
and (c) leases and subleases of such Real Property in the ordinary course of
business, and (d) Permitted Liens;

(iii) is Wholly-Owned;

(iv) such Real Property is not less than 70% leased;

(v) after adding such Real Property to the Unencumbered Pool, the
Real Properties in the Unencumbered Pool shall not be less than 85% leased; and

(vi) the Real Property has been expressly approved by the Requisite
Lenders in writing as an Unencumbered Asset.

As of the date hereof all Unencumbered Assets are described on
SCHEDULE 8.5, provided that if any Unencumbered Asset (including any of the
properties listed on SCHEDULE 8.5) no longer satisfies any of the conditions set
forth in the foregoing clauses (i) through (v), inclusive, the Requisite Lenders
shall have the right, at any time and from time to time, to notify the Borrower
that, effective upon the giving of such notice, such asset shall no longer be
considered an Unencumbered Asset. If the Borrower intends to designate a Real
Property as an Unencumbered Asset to be added to the Unencumbered Pool from time
to time, it will notify the Agent

<PAGE>

of such intention, which notice will include, with respect to such Real
Property, the Property Information with respect to such Real Property, and such
other information and items as may be reasonably requested by Agent with respect
to such Real Property. If the Borrower at any time intends to withdraw any Real
Property from the Unencumbered Pool, it shall (A) notify the Agent of its
intention, and (B) deliver to the Agent a certificate of its chief financial
officer, chief executive officer or chief operating officer setting forth the
calculations establishing that the Borrower will be in compliance with
SECTION 8.5 with giving effect to such withdrawal (and any concurrent addition
of Real Properties to the Unencumbered Pool), which calculations shall be in
such detail, and otherwise in such form and substance, as Agent reasonably
requires. Effective automatically upon receipt of such notice and certificate
by the Agent (or upon any later date stated in such notice), such Real Property
shall no longer constitute an Unencumbered Asset. The following three Real
Properties are set forth in SCHEDULE 8.5 under the heading "Real Properties
Conditionally Approved as Unencumbered Assets": 1970/1990 East Grand Avenue,
535 Brand Avenue and 5200 Century Boulevard. Each such Real Property is, as of
the date of this Agreement, less than 70% leased and has thus not satisfied the
condition set forth in clause (iv), above. However, all of the Lenders agree
that, with respect to each such Real Property, (1) all of the other conditions
set forth have been satisfied and (2) at such time as Borrower delivers to Agent
written evidence reasonably satisfactory to Agent ("Borrower's Unencumbered
Asset Notice") that such Real Property is 70% or more leased and provided that,
as reasonably determined by Agent, the conditions set forth in clauses (i),
(ii), and (v), above, remain satisfied, such Real Property shall become an
Unencumbered Asset without any further action by the Lenders as of the date on
which Agent, in response to its receipt of the Borrower's Unencumbered Asset
Notice, gives Borrower written confirmation that such Real Property is an
Unencumbered Asset. Agent shall deliver copies of each such notice to all
Lenders. No Unencumbered Asset shall be Construction in Progress.

"UNENCUMBERED POOL" means the pool of Unencumbered Assets.

<PAGE>

"UNENCUMBERED POOL STATEMENTS" has the meaning given to such term in
SECTION 5.1(f).

"UNMATURED EVENT OF DEFAULT" means an event which, with the giving of
notice or the lapse of time, or both, would constitute an Event of Default.

"UNSECURED FUNDED INDEBTEDNESS" means Debt that is not secured by any
Lien and includes, without limitation, outstanding Advances.

"UNSECURED INTEREST EXPENSE COVERAGE RATIO" means, at the time of
determination, the ratio of (i) Property NOI of all Unencumbered Assets for the
Fiscal Quarter then most recently ended (or, if shorter, for the period from the
Closing Date to the end of such period), to (ii) Interest Expense on all
Unsecured Funded Indebtedness for such period.

"UNUSED FACILITY FEE" has the meaning given to such term in
SECTION 2.5(B).

"WFB SWAP AGREEMENT" means any Swap Agreement entered into between
Wells Fargo and Borrower, including, without limitation, that certain ISDA
Master Agreement, dated as of December 17, 1996, between Borrower and Wells
Fargo.

"WHOLLY-OWNED" means, with respect to any Real Property, that title to
such Real Property is held in fee directly by the Borrower or that Borrower is
the lessee under a ground lease approved by the Agent.

1.2 COMPUTATION OF TIME PERIODS. In this Agreement, in the computation of
periods of time from a specified date to a later specified date, the word "from"
means "from and including" and the words "to" and "until" each mean to and
including". Periods of days referred to in this Agreement shall be counted in
calendar days unless Business Days are expressly prescribed.

<PAGE>

1.3 TERMS.

(a) Any accounting terms used in this Agreement which are not
specifically defined shall be construed in conformity with, and all financial
data required to be submitted by this Agreement shall be prepared in conformity
with, GAAP, EXCEPT as otherwise specifically prescribed in this Agreement.

(b) In each case where the consent or approval of Agent, all Lenders
and/or Requisite Lenders is required, or their non-obligatory action is
requested by Borrower, such consent, approval or action shall be in the sole and
absolute discretion of Agent and, as applicable, each Lender, unless otherwise
specifically indicated.

(c) Any time the word "or" is used herein, unless the context
otherwise clearly requires, it has the inclusive meaning represented by the
phrase "and/or". The words "hereof", "herein", "hereby", "hereunder" and
similar terms refer to this Agreement as a whole and not to any particular
provision of this Agreement. Article, section, subsection, clause, exhibit and
schedule references are to this Agreement unless otherwise specified. Any
reference in this Agreement to this Agreement or to any other Loan Document
includes any and all amendments, modifications, supplements, renewals or
restatements thereto or thereof, as applicable.

ARTICLE 2

ADVANCES

2.1 LOAN ADVANCES AND REPAYMENT.

(a) LOAN AVAILABILITY.

(i) Subject to the terms and conditions set forth in this
Agreement, Lenders hereby agree to make Advances to Borrower from time to
time during the period

<PAGE>

from the Closing Date to the Business Day next preceding the Maturity Date,
subject to the following:

(x) The aggregate principal amount of all outstanding
Advances shall not at any time exceed Three Hundred Million Dollars
($300,000,000); and

(y) the aggregate principal amount of all outstanding
Advances shall not at any time exceed the lesser of (1) the
Commitment or (2) the amount which, when combined with all
components of the unsecured Total Liabilities of the REIT and the
Consolidated Entities other than outstanding Advances as of the date
of determination, is equal to fifty percent (50%) of the aggregate
Unencumbered Asset Value of the Unencumbered Pool as of such date.

All Advances under this Agreement shall be made by Lenders simultaneously
and proportionately to their respective Pro Rata Shares. Borrower
acknowledges and agrees that neither the Agent nor any Lender shall be
responsible for any failure by any other Lender to perform its obligation
to make an Advance hereunder and that the Pro Rata Share of the
Commitment of any Lender shall not be increased or decreased as a result
of the failure by any other Lender to perform its obligation to make an
Advance. Advances may be voluntarily prepaid pursuant to SECTION 2.6(a)
and, subject to the provisions of this Agreement, any amounts so prepaid
may be reborrowed under this SECTION 2.1(a)(i). Interest shall accrue
and be payable on outstanding Advances as provided in SECTION 2.4. The
principal balance of the Advances shall be payable in full on the
Maturity Date. The obligation of Borrower to repay Advances will be
evidenced by the Notes.

(b) NOTICE OF BORROWING.

(i) Whenever Borrower desires to borrow under this
SECTION 2.1, but in no event more than five (5) times during any one (1)
calendar month, Borrower

<PAGE>

shall give Agent, at Wells Fargo Real Estate Group Disbursement Center,
2120 East Park Place, Suite 100, El Segundo, California 90245, Attention:
Ms. Rosalind McCall (telephone: (310) 335-9451; telecopier: (310) 615-
1014), with a copy to: Wells Fargo Bank, Real Estate Group, 333 South
Grand Avenue, 12th Floor, Los Angeles, California 90071, Attention:
Andrew Downs, or at such other addresses as Agent shall designate, an
original or facsimile Notice of Borrowing no later than 9:00 A.M.
(San Francisco time), not less than three (3) nor more than five (5)
Business Days prior to the proposed Funding Date of each Advance. Each
Notice of Borrowing shall specify (A) the Funding Date (which shall be a
Business Day) of the proposed Advance, (B) the amount of the proposed
Advance, PROVIDED that the aggregate amount of such proposed Advance
shall, if such Advance is a LIBOR Advance, equal One Million
Dollars ($1,000,000) or integral multiples of Fifty Thousand
Dollars ($50,000) in excess thereof, and PROVIDED FURTHER that the
aggregate amount of such proposed Advance shall, if such Advance is a
Base Rate Advance, be equal to or greater than Two Hundred Fifty
Thousand Dollars ($250,000), (C) whether the Advance to be made
thereunder will be a Base Rate Advance or a LIBOR Advance and, if a LIBOR
Advance, the Interest Period, and (D) the proposed use of such Advance.
Any Notice of Borrowing pursuant to this SECTION 2.1(b) shall be
irrevocable.

(ii) Borrower may elect (A) to convert LIBOR Advances or any
portion thereof into Base Rate Advances, or (B) to convert Base Rate
Advances or any portion thereof to LIBOR Advances, or (C) to convert
LIBOR Advances or any portion thereof into new LIBOR Advances, PROVIDED,
HOWEVER, that the aggregate amount of the Advances being converted into
or continued as LIBOR Advances shall, in the aggregate, equal One Million
Dollars ($1,000,000) or an integral multiple of Fifty Thousand
Dollars ($50,000) in excess thereof. The conversion of a LIBOR Advance
to a Base Rate Advance or to a new LIBOR Advance shall only occur on the
last Business Day of the Interest Period relating to such LIBOR Advance.
Each election under clause (B) above shall be made by

<PAGE>

Borrower giving Agent an original or facsimile Notice of Borrowing no
later than 9:00 A.M. (San Francisco time), not less than three (3) nor
more than five (5) Business Days prior to the date of proposed conversion
to a LIBOR Advance. Each election under clause (C) above shall be made
by Borrower giving Agent an original or facsimile Notice of Borrowing no
later than 9:00 A.M. (San Francisco time), not less than three (3) nor
more than five (5) Business Days prior to the last day of the Interest
Period for the LIBOR Advance in question. Each Notice of Borrowing
delivered pursuant to this SECTION 2.1(b)(ii) shall specify (1) the
amount of the new LIBOR Advance or Base Rate Advance, as the case may be,
(2) with respect to a new LIBOR Advance, the Interest Period therefor,
and (3) the date of the effectiveness of the LIBOR Rate or Base Rate, as
the case may be (which date shall be a Business Day).

(iii) Upon receipt of a Notice of Borrowing in proper form
requesting LIBOR Advances under subparagraph (i) or (ii) above, Agent
shall deliver a copy thereof (by facsimile) to each Lender by noon
(San Francisco time) on the same day of Agent's receipt thereof and shall
determine the LIBOR Rate applicable to the Interest Period for such LIBOR
Advances, and shall, two (2) Business Days prior to the beginning of such
Interest Period, give (by facsimile) a Fixed Rate Notice in respect
thereof to Borrower and Lenders; PROVIDED, HOWEVER, that failure to give
such notice to Borrower shall not affect the validity of such rate. Each
determination by Agent of the LIBOR Rate shall be conclusive and binding
upon the parties hereto in the absence of manifest error.

(iv) If Borrower does not make a timely election to convert
all or a portion of a LIBOR Advance into a new LIBOR Advance in
accordance with SECTION 2.1(b)(ii), such LIBOR Advance shall be
automatically converted to a Base Rate Advance upon expiration of the
Interest Period applicable to such LIBOR Advance.

<PAGE>

(c) MAKING OF ADVANCES. Subject to SECTION 10.3 or as otherwise
provided herein, Agent shall deposit the proceeds of each new Advance in
Borrower's account number 4600-598-411 at the Los Angeles main office of Agent.

(d) TERM. The outstanding balance of the Advances shall be payable
in full on the EARLIEST TO OCCUR OF, (i) June 1, 2000, (ii) the acceleration of
the Advances pursuant to SECTION 9.2(a), or (iii) Borrower's written notice to
Agent (pursuant to SECTION 2.8) of Borrower's election to prepay all accrued
Obligations and terminate the Commitment (said earliest date referred to herein
as the "Maturity Date").

(e) ORIGINAL LOAN.

(i) Effective as of the Closing Date, all Indebtedness and
Obligations of Borrower relating to the Original Loan and arising under the
Original Credit Agreement, the Original Notes and any other Original Loan
Documents are hereby amended and restated in full by this Agreement, the Notes
and the Loan Documents. On the Closing Date, the Original Notes shall be
canceled and promptly thereafter returned to Borrower. Without limiting the
generality of the foregoing, effective as of the Closing Date, the commitment to
disburse the "Line A Loan" (as defined in the Original Credit Agreement) and the
undisbursed portion of the Original Loan shall automatically terminate, and
Borrower acknowledges and agrees that, effective as of the Closing Date, no
Original Lender (or any Lender) shall have any further obligations to Borrower
under the Original Credit Agreement, the Original Notes or any other Original
Loan Documents.

(ii) On June 11, 1997, certain of the Lenders shall purchase,
and certain of the Lenders shall sell, to one another, the percentage interest
in the Commitment as reflected in SCHEDULE 2.1(e) hereto, in order to reallocate
the Carryover Principal Balance under the Notes among the Lenders to correspond
to the Pro Rata Shares of the Lenders specified in SCHEDULE 1.1A hereto. The
applicable purchase price payments are specified in SCHEDULE 2.1(e) hereto and
are referred to herein as the "Adjusting Purchase Payments". The

<PAGE>

Adjusting Purchase Payments shall be made to the Agent by the applicable
purchasing Lender by Federal Reserve wire transfer initiated by the payor no
later than 8:00 a.m. California time on June 11, 1997. Upon receipt of all such
payments, the Agent shall promptly send appropriate portions thereof to the
selling Lenders by Federal Reserve wire transfer. The parties to this Agreement
acknowledge that the Adjusting Purchase Payments do not include interest, which
Borrower is obligated pursuant to the terms of SECTION 6.1(k) to pay through and
including June 11, 1997.

2.2 AUTHORIZATION TO OBTAIN ADVANCES. SCHEDULE 2.2 sets forth the names
of those employees of Borrower authorized by Borrower to sign Notices of
Borrowing, and Agent and Lenders shall be entitled to rely on such Schedule
until notified in writing by Borrower of any change(s) of the persons so
authorized. Agent shall be entitled to act on the instructions of anyone
identifying himself or herself as one of the Persons authorized to execute a
Notice of Borrowing, and Borrower shall be bound thereby in the same manner as
if such Person were actually so authorized. Borrower agrees to indemnify,
defend and hold Lenders and Agent harmless from and against any and all
Liabilities and Costs which may arise or be created by the acceptance of
instructions in any Notice of Borrowing, unless caused by the gross negligence
or willful misconduct of the Person to be indemnified.

2.3 LENDERS' ACCOUNTING. Agent shall maintain a loan account (the "Loan
Account") on its books in which shall be recorded (a) the names and addresses
and the Pro Rata Shares of the Commitment of each of the Lenders, and principal
amount of Advances owing to each Lender from time to time, and (b) all Advances
and repayments of principal and payments of accrued interest, as well as
payments of fees required to be paid pursuant to this Agreement. All entries in
the Loan Account shall be made in accordance with Agent's customary accounting
practices as in effect from time to time. Monthly or at such other interval as
is customary with Agent's practice, Agent will render a statement of the Loan
Account to Borrower and will deliver a copy thereof to each Lender. Each such
statement shall be deemed final, binding and conclusive upon

<PAGE>

Borrower in all respects as to all matters reflected therein (absent manifest
error).

2.4 INTEREST ON THE ADVANCES.

(a) BASE RATE ADVANCES. Subject to SECTION 2.4(d), all Base Rate
Advances shall bear interest on the daily unpaid principal amount thereof from
the date made until paid in full at a fluctuating rate per annum equal to the
Base Rate. Base Rate Advances shall be made in minimum amounts of Two Hundred
Fifty Thousand Dollars ($250,000).

(b) LIBOR ADVANCES. Subject to SECTIONS 2.4(d) and 2.4(h), LIBOR
Advances shall bear interest on the unpaid principal amount thereof during the
Interest Period applicable thereto at a rate per annum equal to the sum of the
LIBOR Rate for such Interest Period PLUS the Applicable LIBOR Rate Margin.
LIBOR Advances shall be in amounts of One Million Dollars ($1,000,000) or Fifty
Thousand Dollar ($50,000) increments in excess thereof. No more than six (6)
LIBOR Advances shall be outstanding at any one time. Notwithstanding anything
to the contrary contained herein and subject to the default interest provisions
contained in SECTION 2.4(d), if an Event of Default occurs and as a result
thereof the Commitment is terminated, all LIBOR Advances will convert to Base
Rate Advances upon the expiration of the applicable Interest Periods therefor or
the date all Advances become due, whichever occurs first.

(c) INTEREST PAYMENTS. Subject to SECTION 2.4(d), interest accrued
on all Advances shall be payable by Borrower, in the manner provided in
SECTION 2.6(b), in arrears on the first Business Day of the first calendar month
following the Closing Date, the first Business Day of each succeeding calendar
month thereafter, and on the Maturity Date.

(d) DEFAULT INTEREST. Notwithstanding the rates of interest
specified in SECTIONS 2.4(a) and 2.4(b) and the payment dates specified in
SECTION 2.4(c), effective at the option of Requisite Lenders following the
occurrence and during the continuance of any Event of Default, the principal
balance of all Advances then outstanding and, to the extent permitted

<PAGE>

by applicable law, any interest payments not paid when due, shall bear interest,
payable upon demand, at a rate which is five percent (5%) per annum in excess of
the rate(s) of interest otherwise payable from time to time under this
Agreement. Notwithstanding anything to the contrary in any of the other Loan
Documents, all other amounts due Agent or Lenders (whether directly or for
reimbursement) under this Agreement or any of the other Loan Documents if not
paid when due, or if no time period is expressed, if not paid within ten (10)
days after demand, shall bear interest from and after demand at the rate set
forth in this SECTION 2.4(d).

(e) LATE FEE. Borrower acknowledges that late payment to Agent
will cause Agent and Lenders to incur costs not contemplated by this Agreement.
Such costs include, without limitation, processing and accounting charges.
Therefore, if Borrower fails timely to pay any sum due and payable hereunder
through the Maturity Date, unless waived by Agent pursuant to the last sentence
of this SECTION 2.4(e) or by Requisite Lenders, a late charge of four
cents ($.04) for each dollar of any such principal payment, interest or other
charge which is due hereon and which is not paid within fifteen (15) days after
such payment is due, shall be charged by Agent (for the benefit of Lenders) and
paid by Borrower for the purpose of defraying the expense incident to handling
such delinquent payment. Borrower, Lenders and Agent agree that this late
charge represents a reasonable sum considering all of the circumstances existing
on the date hereof and represents a fair and reasonable estimate of the costs
that Agent and Lenders will incur by reason of late payment. Borrower, Lenders
and Agent further agree that proof of actual damages would be costly and
inconvenient. Acceptance of any late charge shall not constitute a waiver of
the default with respect to the overdue installment, and shall not prevent Agent
from exercising any of the other rights available hereunder or under any other
Loan Document. Such late charge shall be paid without prejudice to any other
rights or remedies of Agent or any Lender. Lenders agree that, notwithstanding
the foregoing, no such late charge shall be charged by Agent or any Lender if
the outstanding Advances are then bearing interest at the default rate of
interest set forth in SECTION 2.4(d). Agent is hereby authorized on behalf of
all Lenders, without the

<PAGE>

necessity of any notice to, or further consent from, any Lender, to waive the
imposition of the late fees provided for in this SECTION 2.4(e) up to a maximum
of three (3) times per calendar year.

(f) COMPUTATION OF INTEREST. Interest shall be computed on the
basis of the actual number of days elapsed in the period during which interest
or fees accrue and a year of three hundred sixty (360) days. In computing
interest on any Advance, subject to Section 2.6(b), the date of the making of
the Advance shall be included and the date of payment shall be excluded;
PROVIDED, HOWEVER, that if an Advance is repaid on the same day on which it is
made, one (1) day's interest shall be paid on that Advance. Notwithstanding any
provision in this SECTION 2.4, interest in respect of any Advance shall not
exceed the maximum rate permitted by applicable law.

(g) CHANGES; LEGAL RESTRICTIONS. In the event that, after the
Closing Date, (i) the adoption of or any change in any law, treaty, rule,
regulation, guideline or determination of a court or Governmental Authority or
any change in the interpretation or application thereof by a court or
Governmental Authority, or (ii) compliance by Agent or any Lender with any
request or directive made or issued after the Closing Date (whether or not
having the force of law and whether or not the failure to comply therewith would
be unlawful) from any central bank or other Governmental Authority or quasi-
governmental authority:

(A) subjects Agent or any Lender to any tax, duty or other
charge of any kind with respect to the Commitment, this Agreement or any
of the other Loan Documents, including the Notes or the Advances, or
changes the basis of taxation of payments to Agent or such Lender of
principal, fees, interest or any other amount payable hereunder, except
for net income, gross receipts, gross profits or franchise taxes imposed
by any jurisdiction and not specifically based upon loan transactions
(all such non-excepted taxes, duties and other charges being hereinafter
referred to as "Lender Taxes");

<PAGE>

(B) imposes, modifies or holds applicable, in the
determination of Agent or any Lender, any reserve, special deposit,
compulsory loan, FDIC insurance, capital allocation or similar
requirement against assets held by, or deposits or other liabilities in
or for the account of, advances or loans by, or other credit extended by,
or any other acquisition of funds by, Agent or such Lender or any
applicable lending office (except to the extent that the reserve and FDIC
insurance requirements are reflected in the "Base Rate" or in determining
the LIBOR Rate); or

(C) imposes on Agent or any Lender any other condition
materially more burdensome in nature, extent or consequence than those in
existence as of the Closing Date,

and the result of any of the foregoing is to increase the cost to Agent or any
Lender of making, renewing, maintaining or participating in the Advances or to
reduce any amount receivable thereunder; THEN, in any such case, Borrower shall
promptly pay to Agent or such Lender, as applicable, within seven (7) days after
Borrower's receipt of written demand, such amount or amounts (based upon a
reasonable allocation thereof by Agent or such Lender to the financing
transactions contemplated by this Agreement and affected by this SECTION 2.4(g))
as may be necessary to compensate Agent or such Lender for any such additional
cost incurred or reduced amounts received. Agent or such Lender shall deliver
to Borrower and in the case of a delivery by Lender, such Lender shall also
deliver to Agent, a written statement of the claimed additional costs incurred
or reduced amounts received and the basis therefor as soon as reasonably
practicable after such Lender obtains knowledge thereof. If Agent or any Lender
subsequently recovers any amount of Lender Taxes previously paid by Borrower
pursuant to this SECTION 2.4(g), whether before or after termination of this
Agreement, then, upon receipt of good funds with respect to such recovery, Agent
or such Lender will refund such amount to Borrower if no Event of Default or
Unmatured Event of Default then exists or, if an Event of Default or Unmatured
Event of Default then exists, such amount will be credited to the Obligations in
the manner determined by Agent or such Lender.

<PAGE>

(h) CERTAIN PROVISIONS REGARDING LIBOR ADVANCES.

(i) LIBOR LENDING UNLAWFUL. If any Lender shall determine
(which determination shall, upon notice thereof to Borrower and Agent, be
conclusive and binding on the parties hereto) that after the Closing Date
the introduction of or any change in or in the interpretation of any law
makes it unlawful, or any central bank or other Governmental Authority
asserts that it is unlawful, for such Lender to make or maintain any
Advance as a LIBOR Advance, (A) the obligations of such Lender to make or
maintain any Advances as LIBOR Advances shall, upon such determination,
forthwith be suspended until such Lender shall notify Agent that the
circumstances causing such suspension no longer exist (and such Lender
shall give notice if such circumstances no longer exist), and (B) if
required by such law or assertion, the existing LIBOR Advances of such
Lender shall automatically convert into Base Rate Advances.

(ii) DEPOSITS UNAVAILABLE. If Agent shall have determined in
good faith that adequate means do not exist for ascertaining the interest
rate applicable hereunder to LIBOR Advances, then, upon notice from Agent
to Borrower the obligations of all Lenders to make or maintain Advances
as LIBOR Advances shall forthwith be suspended until Agent shall notify
Borrower that the circumstances causing such suspension no longer exist.
Agent will give such notice when it determines, in good faith, that such
circumstances no longer exist; PROVIDED, HOWEVER, that neither Agent nor
any Lender shall have any liability to any Person with respect to any
delay in giving such notice.

(iii) FIXED RATE PRICE ADJUSTMENT. Borrower acknowledges that
prepayment or acceleration of a LIBOR Advance during an Interest Period
shall result in Lenders incurring additional costs, expenses and/or
liabilities and that it is extremely difficult and impractical to
ascertain the extent of such costs, expenses and/or liabilities. (For
all purposes of this subparagraph (iii), any Advance not being made as a
LIBOR Advance

<PAGE>

in accordance with the Notice of Borrowing therefor, as a result of
Borrower's cancellation thereof, shall be treated as if such LIBOR
Advance had been prepaid.) Therefore, on the date a LIBOR Advance is
prepaid or the date all sums payable hereunder become due and payable, by
acceleration or otherwise ("Price Adjustment Date"), Borrower shall pay
to Agent, for the account of each Lender, in addition to all other sums
then owing, an amount ("Fixed Rate Price Adjustment") equal to the then
present value of (A) the amount of interest that would have accrued on
the LIBOR Advance for the remainder of the Interest Period at the rate
applicable to such LIBOR Advance, less (B) the amount of interest that
would accrue on the same LIBOR Advance for the same period if the LIBOR
Rate were set on the Price Adjustment Date. The present value shall be
calculated by using as a discount rate the LIBOR Rate quoted on the Price
Adjustment Date.

By initialing this provision where indicated Borrower waives any
right Borrower may have under California Civil Code Section 2954.10
to repay any LIBOR Advances, in whole or in part, without payment of
the Fixed Rate Price Adjustment upon acceleration of the maturity
date of such Advances, and Borrower further confirms that Lenders'
agreement to make LIBOR Advances at the interest rates and on the
other terms set forth herein constitutes adequate and valuable
consideration, given individual weight by Borrower, for this waiver
and agreement.

BORROWER'S INITIALS: _______________________

Within seven (7) days after Borrower's receipt of written notice from
Agent, Borrower shall immediately pay to Agent, for the account of
Lenders, the Fixed Rate Price Adjustment as calculated by Agent. Such
written notice (which shall include calculations in reasonable detail)
shall, in the absence of manifest error, be conclusive and binding on the
parties hereto.

<PAGE>

(iv) Borrower understands, agrees and acknowledges the
following: (A) no Lender has any obligation to purchase, sell and/or
match funds in connection with the use of the LIBOR Rate as a basis for
calculating the rate of interest on a LIBOR Rate Advance or a Fixed Rate
Price Adjustment; (B) the LIBOR Rate is used merely as a reference in
determining such rate and/or Fixed Rate Price Adjustment; and
(C) Borrower has accepted the LIBOR Rate as a reasonable and fair basis
for calculating such rate and a Fixed Rate Price Adjustment. Borrower
further agrees to pay the Fixed Rate Price Adjustment and Lender Taxes,
if any, whether or not a Lender elects to purchase, sell and/or match
funds.

(i) WITHHOLDING TAX EXEMPTION. At least five (5) Business Days
prior to the first day on which interest or fees are payable hereunder for the
account of any Lender, each Lender that is not incorporated under the laws of
the United States of America, or a state thereof, agrees that it will deliver to
Agent and Borrower two (2) duly completed copies of United States Internal
Revenue Service Form 1001 or Form 4224, certifying in either case that such
Lender is entitled to receive payments under this Agreement without deduction or
withholding of any United States federal income taxes. Each Lender which so
delivers a Form 1001 or Form 4224 further undertakes to deliver to Agent and
Borrower two (2) additional copies of such form (or any applicable successor
form) on or before the date that such form expires (currently, three (3)
successive calendar years for Form 1001 and one (1) calendar year for Form 4224)
or becomes obsolete or after the occurrence of any event requiring a change in
the most recent forms so delivered by it, and such amendments thereto or
extensions or renewals thereof as may be reasonably requested by Agent or
Borrower, in each case certifying that such Lender is entitled to receive
payments under this Agreement without deduction or withholding of any
United States federal income taxes, unless an event (including without
limitation any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Lender from duly completing
and delivering any such form with respect to it and such Lender advises Agent
that it is not

<PAGE>

capable of receiving payments without any deduction or withholding of
United States federal income taxes. If any Lender cannot deliver such form,
then Borrower may withhold from such payments such amounts as are required by
the Code.

2.5 FEES.

(a) COMMITMENT FEE. Borrower shall pay to Agent a commitment fee
in respect of the Commitment pursuant to a separate agreement between Agent and
Borrower.

(b) UNUSED FACILITY FEE. From and after the Closing Date and until
the Obligations are paid in full and this Agreement is terminated or, if sooner,
the date the Commitment terminates, and subject to SECTION 10.4(b), Borrower
shall pay to Agent, for the account of each Lender, a fee (the "Unused Facility
Fee") accruing at the "Unused Facility Fee Rate" (as that term is hereinafter
defined) upon an amount equal to (i) $300,000,000 less all reductions in the
Commitment pursuant to SECTION 2.7 or SECTION 2.8 MINUS (ii) the average daily
principal balance of all outstanding Advances as determined for each Fiscal
Quarter.

The Unused Facility Fee Rate shall be computed as follows:

(1) For any Fiscal Quarter in which the average daily principal
balance of all outstanding Advances is less than or equal to
$150,000,000, the Unused Facility Fee Rate shall be one-quarter
of one percent (0.25%) per annum;

(2) For any Fiscal Quarter in which the average daily principal
balance of all outstanding Advances is greater than
$150,000,000, the Unused Facility Fee Rate shall be one-eighth
of one percent (0.125%) per annum.

The Unused Facility Fee shall be payable, in the manner provided in
Section 2.5(d), in arrears on the first Business Day in each Fiscal Quarter,
beginning with the first Fiscal Quarter after the Closing Date, and shall be
payable on the

<PAGE>

Maturity Date or, if sooner, the date the Commitment terminates or on the date
of payment in full of all Obligations. The Unused Facility Fee shall be
prorated for any period of less than a full Fiscal Quarter.

(c) AGENCY FEES. Borrower shall pay Agent such fees as are
provided for in the agency fee agreement between Agent and Borrower, as in
existence from time to time.

(d) PAYMENT OF FEES. The fees described in this SECTION 2.5
represent compensation for services rendered and to be rendered separate and
apart from the lending of money or the provision of credit and do not constitute
compensation for the use, detention or forbearance of money, and the obligation
of Borrower to pay the fees described herein shall be in addition to, and not in
lieu of, the obligation of Borrower to pay interest, other fees and expenses
otherwise described in this Agreement. All fees shall be payable when due in
immediately available funds and shall be nonrefundable when paid. If Borrower
fails to make any payment of fees or expenses specified or referred to in this
Agreement due to Agent or Lenders, including without limitation those referred
to in this SECTION 2.5, in SECTION 11.1, or otherwise under this Agreement or
any separate fee agreement between Borrower and Agent or any Lender relating to
this Agreement, when due, the amount due shall bear interest until paid at the
Base Rate and after ten (10) days at the rate specified in SECTION 2.4(d) (but
not to exceed the maximum rate permitted by applicable law), and shall
constitute part of the Obligations. The Unused Facility Fee shall be calculated
on the basis of a 360-day year and the actual number of days elapsed.

2.6 PAYMENTS.

(a) VOLUNTARY PREPAYMENTS. Borrower may, upon not less than three
(3) Business Days prior written notice to Agent not later than 11:00 A.M. (San
Francisco time) on the date given, at any time and from time to time, prepay any
Advances in whole or in part. Any notice of prepayment given to Agent under
this SECTION 2.6(a) shall specify the date of prepayment and the aggregate
principal amount of the prepayment. In the event of a prepayment of LIBOR
Advances,

<PAGE>

Borrower shall pay any Fixed Rate Price Adjustment payable in respect thereof in
accordance with SECTION 2.4(h). Agent shall provide to each Lender a confirming
copy of such notice on the same Business Day such notice is received.

(b) MANNER AND TIME OF PAYMENT. All payments of principal,
interest and fees hereunder payable to Agent or the Lenders shall be made
without condition or reservation of right and free of set-off or counterclaim,
in Dollars and by wire transfer (pursuant to Agent's written wire transfer
instructions) of immediately available funds, to Agent, for the account of each
Lender entitled thereto not later than 11:00 A.M. (San Francisco time) on the
date due; and funds received by Agent after that time and date shall be deemed
to have been paid on the next succeeding Business Day.

(c) PAYMENTS ON NON-BUSINESS DAYS. Whenever any payment to be made
by Borrower hereunder shall be stated to be due on a day which is not a Business
Day, such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in the computation of the payment of
interest hereunder and of any of the fees specified in SECTION 2.5, as the case
may be.

2.7 NOTICE OF INCREASED COSTS. Each Lender agrees that, as promptly as
reasonably practicable after it becomes aware of the occurrence of an event or
the existence of a condition which would cause it to be affected by any of the
events or conditions described in SECTION 2.4(g) or (h), it will notify
Borrower, and provide a copy of such notice to Agent, of such event and the
possible effects thereof, PROVIDED that the failure to provide such notice shall
not affect such Lender's rights to reimbursement provided for herein. Provided
no Event of Default or Unmatured Event of Default has occurred and is
continuing, Borrower shall have the right (the "Payoff Right") to pay to such
Lender all principal, accrued and unpaid interest and any other amounts
(collectively, the "Payoff Amount") due such Lender under this Agreement and the
other Loan Documents (including amounts due such Lender under SECTION 2.4(g)).
Borrower may exercise the Payoff Right ONLY by delivering written notice of
Borrower's exercise of such Payoff Right to such Lender, the Agent and the other
Lenders

<PAGE>

within 15 days after Borrower's receipt of written notice from such Lender that
Borrower owes amounts under SECTION 2.4(g) and thereafter paying, in immediately
available funds, the Payoff Amount to such Lender within such 15-day period.
Upon such Lender's receipt of the Payoff Amount, such Lender's Pro Rata Share of
the Commitment shall be terminated, the Commitment shall be reduced by an amount
equal to such Lender's Pro Rata Share of the Commitment and the Pro Rata Shares
of the Commitment of the remaining Lenders shall be adjusted and the Agent shall
give written notice to each of the Lenders of the adjusted Pro Rata Shares.

2.8 VOLUNTARY TERMINATION OR REDUCTION OF COMMITMENT. At any time prior
to the Maturity Date, Borrower may, upon not less than 5 Business Days' prior
written notice to the Agent, terminate the Commitment in effect or permanently
reduce the Commitment in effect by an aggregate minimum amount of Twenty-
Five Million Dollars ($25,000,000) or any multiple of Five Million Dollars
($5,000,000) in excess thereof; PROVIDED, HOWEVER, that no such termination or
reduction shall be permitted if, after giving effect thereto and to any
prepayment of Advances made on the effective date of such termination or
reduction, as the case may be, the then outstanding principal amount of the
Advances would exceed the Commitment in effect; PROVIDED FURTHER, HOWEVER, that
once terminated or reduced in accordance with this SECTION 2.8, the Commitment
in effect may not thereafter be reinstated or increased; and PROVIDED FURTHER,
HOWEVER, that although the Commitment in effect may be terminated entirely
pursuant to this SECTION 2.8, the Commitment in effect shall not be reduced
below One Hundred Million Dollars ($100,000,000). All accrued and unpaid fees
due under SECTION 2.5 with respect to the portion of the Commitment in effect
being terminated or reduced shall be paid to the Agent on the funding date of
such termination or reduction.

<PAGE>

ARTICLE 3

CONDITIONS TO ADVANCES

3.1 CONDITIONS TO INITIAL ADVANCES. The obligation of Lenders to make
the initial Advances shall be subject to the satisfaction or waiver by Requisite
Lenders of each of the following conditions precedent on or before June 11,
1997:

(a) BORROWER LOAN DOCUMENTS. Borrower shall have executed and
delivered to Agent each of the following, in form and substance acceptable to
Agent and each other Lender:

(i) this Agreement;

(ii) the Notes; and

(iii) all other documents which Agent reasonably requires to
be executed by or on behalf of Borrower.

(b) REIT LOAN DOCUMENTS. The REIT shall have executed and
delivered to Agent each of the following, in form and substance acceptable to
Agent and each other Lender:

(i) the Guaranty; and

(ii) all other documents which Agent reasonably requires to be
executed by or on behalf of the REIT.

(c) CORPORATE AND PARTNERSHIP DOCUMENTS. Agent shall have received
the corporate and partnership formation and other governing documents of the
Borrower and the REIT, and a certificate of each such entity's Secretary or an
officer comparable thereto with respect to authorization, incumbency and all
organizational documents.

(d) SOLVENCY. Each of the REIT and Borrower shall be Solvent and
shall have delivered to Agent a Solvency Certificate to that effect.

<PAGE>

(e) FEES AND EXPENSES. Agent shall have received all fees then
due to Agent and to Lenders and shall have received reimbursement for all costs
and expenses for which Borrower is obligated pursuant to Section 11.1 and for
which Borrower has received an invoice, and Borrower shall have performed all of
its other obligations as set forth in the Loan Documents to make payments to
Agent on or before the Closing Date and all expenses of Agent incurred prior to
such Closing Date and for which Borrower has received an invoice shall have been
paid by Borrower.

(f) OPINION OF COUNSEL. Agent shall have received, on behalf of
Agent and Lenders, favorable opinions of counsel for Borrower and the REIT dated
as of the Closing Date, in form and substance reasonably satisfactory to Agent,
Lenders and their respective counsel.

(g) CONSENTS AND APPROVALS. All material licenses, permits,
consents, regulatory approvals and corporate action necessary to enter into the
financing transactions contemplated by this Agreement shall have been obtained
by Borrower and the REIT.

(h) The applicable Lenders shall have made the Adjusting Purchase
Payments as specified in SECTION 2.1(e).

3.2 CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation of each Lender
to make any Advance (including the initial Advance) requested to be made by it,
on any date, is subject to the satisfaction or waiver by Requisite Lenders of
the following conditions precedent as of such date:

(a) NOTICE OF BORROWING. With respect to a request for an Advance,
Agent shall have received, on or before the Funding Date and in accordance with
the provisions of SECTION 2.1(b), an original and duly executed Notice of
Borrowing.

(b) ADDITIONAL MATTERS. As of the Funding Date for any Advance and
after giving effect to the Advance being requested:

<PAGE>

(i) NO DEFAULT. After giving effect to the requested Advance,
no Event of Default or Unmatured Event of Default shall have occurred and
be continuing or would result from the making of the requested Advance
(it being intended that Lenders shall have no obligation to fund any
Advance during the period allowed under this Agreement for cure of any
event or condition which, if not cured during such period, would become
an Event of Default), and all of the covenants contained in SECTIONS 7.3
and 7.4, and ARTICLE 8 shall be satisfied;

(ii) REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties contained in this Agreement and in any
other Loan Document (other than those representations and warranties
which expressly provide that they speak as of a certain date (E.G., "as
of the Closing Date")) shall be true and correct in all material respects
on and as of such Funding Date, as though made on and as of such date,
and Borrower shall so certify;

(iii) NO MATERIAL ADVERSE CHANGE (BORROWER AND REIT). No
change shall have occurred which shall have a Material Adverse Effect on
Borrower or the REIT, as determined by Agent;

(iv) MATERIAL ADVERSE CHANGE (UNENCUMBERED ASSET). If a
change shall have occurred which shall have a Material Adverse Effect on
any Unencumbered Asset or the operating performance thereof, as
determined by Agent, the Unencumbered Asset Value of such Unencumbered
Asset shall not be included in the aggregate Unencumbered Asset Value of
the Unencumbered Pool for purposes of SECTION 2.1(a)(i)(y); and

(v) LITIGATION PROCEEDINGS. There shall not have been
instituted or threatened, any litigation or proceeding in any court or
before any Governmental Authority affecting or threatening to affect
Borrower or the REIT which, if adversely determined, would have a
Material Adverse Effect on Borrower or the REIT, as reasonably determined
by Agent.

<PAGE>

(vi) COMPLIANCE WITH SECTION 8.5. Borrower shall be in
compliance with SECTION 8.5 after such Advance is made.

Each submission by Borrower to Agent of a Notice of Borrowing with respect to an
Advance and the acceptance by Borrower of the proceeds of each such Advance made
hereunder shall constitute a representation and warranty by Borrower as of the
Funding Date in respect of such Advance that all the conditions contained in
this SECTION 3.2 have been satisfied.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

4.1 REPRESENTATIONS AND WARRANTIES AS TO BORROWER, ETC. In order to
induce Lenders to make the Advances, Borrower hereby represents and warrants to
Agent and Lenders as follows:

(a) ORGANIZATION; PARTNERSHIP POWERS. Borrower (i) is a limited
partnership duly organized, validly existing and in good standing under the laws
of Maryland, (ii) is duly qualified to do business as a foreign limited
partnership and in good standing under the laws of California and each other
jurisdiction in which it owns or leases real property or in which the nature of
its business requires it to be so qualified, except for those jurisdictions
where failure to so qualify and be in good standing would not have a Material
Adverse Effect on Borrower, and (iii) has all requisite partnership power and
authority to own, operate and encumber its Property and assets and to conduct
its business as presently conducted and as proposed to be conducted in
connection with and following the consummation of the transactions contemplated
by the Loan Documents.

(b) AUTHORITY. Borrower has the requisite partnership power and
authority to execute, deliver and perform each of the Loan Documents to which it
is or will be a party. The execution, delivery and performance thereof, and the
consummation of the transactions contemplated thereby, have been duly authorized
by all necessary actions. Each of the

<PAGE>

Loan Documents to which Borrower is a party has been duly and validly executed
and delivered by Borrower and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency and other laws affecting creditors' rights generally and
general equitable principles.

(c) OWNERSHIP OF BORROWER. All of the Partnership Units of the
Borrower are validly issued and non-assessable and as of the Closing Date are
owned of record in the percentage amounts and by the Persons set forth on
SCHEDULE 4.1(c), as amended from time to time. As of the Closing Date, the REIT
owns 21,692,833 Partnership Units of the Borrower, free and clear of any Liens.
Such Partnership Units were offered and sold in compliance in all material
respects with all Requirements of Law (including, without limitation, federal
and state securities laws). Except as set forth in SCHEDULE 4.1(c), there are
no outstanding securities convertible into or exchangeable for Partnership Units
of the Borrower, or options, warrants or rights to purchase any such Partnership
Units, or commitments of any kind for the issuance of additional Partnership
Units or any such convertible or exchangeable securities or options, warrants or
rights to purchase such Partnership Units. The REIT is the sole general partner
of the Borrower.

(d) NO CONFLICT. The execution, delivery and performance by
Borrower of the Loan Documents to which it is or will be a party, and each of
the transactions contemplated thereby, do not and will not (i) conflict with or
violate Borrower's limited partnership agreement or certificate of limited
partnership or other organizational documents, as the case may be, or
(ii) conflict with, result in a breach of or constitute (with or without notice
or lapse of time or both) a default under any Requirement of Law, Contractual
Obligation or Court Order of or binding upon Borrower, which would have a
Material Adverse Effect on Borrower or (iii) require termination of any
Contractual Obligation, which termination would have a Material Adverse Effect
on Borrower or (iv) result in or require the creation or imposition of any Lien
whatsoever upon any of the Properties or assets of Borrower (other than
Permitted Liens).

<PAGE>

(e) CONSENTS AND AUTHORIZATIONS. Borrower has obtained all
consents and authorizations required pursuant to its Contractual Obligations
with any other Person, and shall have obtained all consents and authorizations
of, and effected all notices to and filings with, any Governmental Authority, as
may be necessary to allow Borrower to lawfully execute, deliver and perform its
obligations under the Loan Documents to which Borrower is a party, except to the
extent that failure to obtain any such consent or authorization or to effect
such notice or filing would not have a Material Adverse Effect on Borrower.

(f) GOVERNMENTAL REGULATION. Neither Borrower nor the REIT is
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act, the Interstate Commerce Act, the Investment Company Act of
1940 or any other federal or state statute or regulation such that its ability
to incur indebtedness is limited or its ability to consummate the transactions
contemplated by the Loan Documents is materially impaired.

(g) FINANCIAL STATEMENTS; PROJECTIONS AND FORECASTS. Each of the
financial statements to be delivered to Agent pursuant to SECTIONS 5.1(b) and
(c) (i) has been, or will be, as applicable, prepared in accordance with the
books and records of the REIT and the Consolidated Entities on a consolidated
basis, and (ii) either fairly present in all material respects, or will fairly
present in all material respects, as applicable, the financial condition of the
REIT and the Consolidated Entities on a consolidated basis, at the dates thereof
(and, if applicable, subject to normal year-end adjustments) and the results of
its operations and cash flows, on a consolidated basis, for the period then
ended. Each of the projections delivered to Agent prior to the date hereof and
each of the projected consolidated cash flows to be delivered to Agent pursuant
to SECTION 5.1(e), (A) has been, or will be, as applicable, prepared by the REIT
in light of the past business and performance of the REIT or its predecessors in
interest on a consolidated basis and (B) represent, or will represent, as of the
date thereof, the reasonable good faith estimates of the REIT's financial
personnel as of their respective dates.

<PAGE>

(h) PRIOR OPERATING STATEMENTS. Each of the operating statements
pertaining to each of the Unencumbered Assets in the Unencumbered Pool prepared
by Borrower and delivered to Agent prior to the date hereof was prepared in
accordance with GAAP in effect on the date such operating statement of each such
Unencumbered Asset was prepared and fairly presents the results of operations of
such Unencumbered Asset for the period then ended; provided, however, that no
representation is made with respect to any period prior to the ownership of such
Unencumbered Asset by Borrower or a Predecessor Entity.

(i) UNENCUMBERED POOL STATEMENTS AND PROJECTIONS. Each of the
Unencumbered Pool Statements to be delivered to Agent pursuant to SECTION 5.1(f)
(i) has been or will be, as applicable, prepared in accordance with the books
and records of the applicable Unencumbered Asset and (ii) fairly presents or
will fairly present in all material respects, as applicable, the results of
operations of such Unencumbered Asset for the period then ended; provided,
however, that no representation is made with respect to any period prior to the
ownership of such Unencumbered Asset by Borrower or a Predecessor Entity.

(j) LITIGATION; ADVERSE EFFECTS.

(i) Except as otherwise disclosed on SCHEDULE 4.1(j), there
is no action, suit, proceeding, governmental investigation or
arbitration, at law or in equity, or before or by any Governmental
Authority, pending or, to the best of Borrower's knowledge, threatened
against Borrower or any Property of Borrower which, if adversely
determined, would result in a Material Adverse Effect on Borrower.

(ii) Borrower is not (A) in violation of any applicable law,
which violation has a Material Adverse Effect on Borrower, or (B) subject
to or in default with respect to any Court Order which has a Material
Adverse Effect on Borrower. There are no material Proceedings pending
or, to the best of Borrower's knowledge, threatened against Borrower or
any Unencumbered Asset

<PAGE>

which, if adversely decided, would have a Material Adverse Effect on
Borrower.

(k) NO MATERIAL ADVERSE CHANGE. Since the "Closing Date" (as
defined in the Original Credit Agreement) (i) there has occurred no event which
has a Material Adverse Effect on Borrower, and (ii) no material adverse change
in Borrower's ability to perform its obligations under the Loan Documents to
which it is a party or the transactions contemplated thereby has occurred.

(l) PAYMENT OF TAXES. All tax returns and reports to be filed by
Borrower have been timely filed, and all taxes, assessments, fees and other
governmental charges shown on such returns or otherwise payable by Borrower have
been paid when due and payable (other than real property taxes, which may be
paid prior to delinquency so long as no penalty or interest shall attach
thereto), except such taxes, if any, as are reserved against in accordance with
GAAP and are being contested in good faith by appropriate proceedings or such
taxes, the failure to make payment of which when due and payable will not have,
in the aggregate, a Material Adverse Effect on Borrower. Borrower has no
knowledge of any proposed tax assessment against Borrower that will have a
Material Adverse Effect on Borrower, which is not being actively contested in
good faith by Borrower.

(m) MATERIAL ADVERSE AGREEMENTS. Borrower is not a party to or
subject to any Contractual Obligation or other restriction contained in its
limited partnership agreement, certificate of limited partnership or similar
governing documents which has a Material Adverse Effect on Borrower.

(n) PERFORMANCE. Borrower is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any Contractual Obligation applicable to it, and no condition
exists which, with the giving of notice or the lapse of time or both, would
constitute a default under such Contractual Obligation, except where the
consequences, direct or indirect, of such default or defaults, if any, will not
have a Material Adverse Effect on Borrower.

<PAGE>

(o) FEDERAL RESERVE REGULATIONS. No part of the proceeds of the
Advances hereunder will be used to purchase or carry any "margin security" as
defined in Regulation G or for the purpose of reducing or retiring any
indebtedness which was originally incurred to purchase or carry any margin
security or for any other purpose which might constitute this transaction a
"purpose credit" within the meaning of said Regulation G. Neither Borrower nor
the REIT is engaged primarily in the business of extending credit for the
purpose of purchasing or carrying out any "margin stock" as defined in
Regulation U. No part of the proceeds of the Advances hereunder will be used
for any purpose that violates, or which is inconsistent with, the provisions of
Regulation X or any other regulation of the Federal Reserve Board.

(p) DISCLOSURE. The representations and warranties of Borrower
contained in the Loan Documents and all certificates, financial statements and
other documents delivered to Agent in connection therewith, do not contain any
untrue statement of a material fact or omit to state a material fact necessary,
in order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading; provided no
representation is made as to any information in the financial reports for any
Real Property prior to its ownership by Borrower or any Predecessor Entity. The
factual information in any document, certificate or written statement
(including, without limitation, the S-11) furnished to the Agent by or on behalf
of the REIT or any other Consolidated Entity with respect to the business,
assets, prospects, results of operations or financial condition of the REIT, the
Borrower or any other Consolidated Entity, including operating statements and
Rent Rolls for periods when the Real Property covered by such statements or Rent
Rolls is owned by Borrower, for use in connection with the transactions
contemplated by this Agreement, was true and correct in all material respects as
of the applicable date. There is no fact known to the REIT, Borrower or any
Consolidated Entity that has a Material Adverse Effect on Borrower, the REIT
and/or any such Consolidated Entity or could reasonably be expected to have a
Material Adverse Effect on Borrower, the REIT and/or any such Consolidated
Entity, which has not been disclosed herein or in such other documents,
certificates and statements. Borrower

<PAGE>

has given to Agent true, correct and complete copies of all Major Agreements,
organizational documents, financial statements of the REIT and the Consolidated
Entities, Unencumbered Pool Statements and all other documents and instruments
referred to in the Loan Documents as having been delivered to Agent. Borrower
has not intentionally withheld any material fact from Agent in regard to any
matter raised in the Loan Documents which would cause its representations and
warranties to be misleading. Notwithstanding the foregoing, with respect to
projections of Borrower's future performance such representations and warranties
are made in good faith and to the best judgment of Borrower as of the date
thereof.

(q) REQUIREMENTS OF LAW. The REIT and the Consolidated Entities
are in compliance with all Requirements of Law (including without limitation the
Securities Act and the Securities Exchange Act, and the applicable rules and
regulations thereunder, state securities law and "Blue Sky" laws) applicable to
it and its respective businesses, in each case, where the failure to so comply
will have a Material Adverse Effect on any such Person. The REIT has made all
filings with and obtained all consents of the Commission required under the
Securities Act and the Securities Exchange Act in connection with the execution,
delivery and performance by the REIT of the Loan Documents.

(r) PATENTS, TRADEMARKS, PERMITS, ETC. The REIT and the
Consolidated Entities own, are licensed or otherwise have the lawful right to
use, or have, all permits and other governmental approvals, patents, trademarks,
trade names, copyrights, technology, know-how and processes used in or necessary
for the conduct of each such Person's business as currently conducted, the
absence of which would have a Material Adverse Effect upon such Person. The use
of such permits and other governmental approvals, patents, trademarks, trade
names, copyrights, technology, know-how and processes by each such Person does
not infringe on the rights of any Person, subject to such claims and
infringements as do not, in the aggregate, give rise to any liability on the
part of any such Person which would have a Material Adverse Effect on any such
Person.

<PAGE>

(s) ENVIRONMENTAL MATTERS. Except as set forth on SCHEDULE 4.1(s)
or in any phase I environmental or other reports delivered to Agent, to the best
knowledge of Borrower (i) the operations of the REIT and Borrower comply in all
material respects with all applicable, local, state and federal environmental,
health-and safety Requirements of Law ("Environmental Laws"); (ii) none of the
Unencumbered Assets or operations thereon are subject to any Remedial Action or
other Liabilities and Costs arising from the Release or threatened Release of a
Contaminant into the environment in violation of any Environmental Laws, which
Remedial Action or other Liabilities and Costs would have a Material Adverse
Effect on Borrower and/or the REIT; (iii) neither the REIT nor the Borrower has
filed any notice under applicable Environmental Laws reporting a Release of a
Contaminant into the environment in violation of any Environmental Laws, except
as the same may have been heretofore remedied; (iv) there is not now on or in
any Unencumbered Assets (except in compliance in all material respects with all
applicable Environmental Laws): (A) any underground storage tanks, (B) any
asbestos-containing material, or (C) any polychlorinated biphenyls (PCB's) used
in hydraulic oils, electrical transformers or other equipment owned by such
Person; and (v) neither the REIT nor Borrower has received any notice or claim
to the effect that it is or may be liable to any Person as a result of the
Release or threatened Release of a Contaminant into the environment which would
have a Material Adverse Effect on the REIT or any of the Consolidated Entities.

(t) SOLVENCY. Borrower is and will be Solvent after giving effect
to the disbursements of the Advances and the payment and accrual of all fees
then payable.

(u) TITLE TO ASSETS. Borrower has good, indefeasible and
merchantable title to all Properties, including, without limitation, all
Unencumbered Assets, owned or leased by it.

(v) MANAGEMENT AGREEMENTS. Except as disclosed on SCHEDULE 4.1(v)
(as amended from time to time), Borrower is not a party or subject to any
management or "ground" leasing

<PAGE>

agreement with respect to any of the Properties included within the Unencumbered
Pool.

4.2 REPRESENTATIONS AND WARRANTIES AS TO THE REIT. In order to induce
Lenders to make the Advances, Borrower hereby represents and warrants to the
Agent and Lenders as follows:

(a) ORGANIZATION; CORPORATE POWERS. The REIT (i) is a corporation
duly organized, validly existing and in good standing under the laws of
Maryland, (ii) is duly qualified to do business as a foreign corporation and in
good standing under the laws of each jurisdiction in which it owns or leases
real property or in which the nature of its business requires it to be so
qualified, except for those jurisdictions where failure to so qualify and be in
good standing will not have a Material Adverse Effect on the REIT, and (iii) has
all requisite corporate power and authority to own, operate and encumber its
property and assets and to conduct its business as presently conducted and as
proposed to be conducted in connection with and following the consummation of
the transactions contemplated by the Loan Documents.

(b) AUTHORITY. The REIT has the requisite corporate power and
authority to execute, deliver and perform each of the Loan Documents to which it
is or will be a party. The execution, delivery and performance thereof, and the
consummation of the transactions contemplated thereby, have been duly authorized
by the Board of Directors of the REIT, and no other corporate proceedings on the
part of the REIT are necessary to consummate such transactions. Each of the
Loan Documents to which the REIT is a party has been duly executed and delivered
by the REIT and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to bankruptcy, insolvency and
other laws affecting creditors' rights generally and general equitable
principles.

(c) NO CONFLICT. The execution, delivery and performance by the
REIT of the Loan Documents to which it is party, and each of the transactions
contemplated thereby, do not and will not (i) conflict with or violate its
articles of incorporation, by-laws or other organizational documents,

<PAGE>

(ii) conflict with, result in a breach of or constitute (with or without notice
or lapse of time or both) a default under any Requirement of Law, Contractual
Obligation or Court Order of or binding upon the REIT, which would have a
Material Adverse Effect on the REIT, (iii) require termination of any
Contractual Obligation, which termination would have a Material Adverse Effect
on the REIT, (iv) result in or require the creation or imposition of any Lien
whatsoever upon any of the Properties or assets of the REIT, or (v) require any
approval of the stockholders of the REIT.

(d) CONSENTS AND AUTHORIZATIONS. The REIT has obtained all
consents and authorizations required pursuant to its Contractual Obligations
with any other Person, and, prior to the Closing Date, shall have obtained all
consents and authorizations of, and effected all notices to and filings with,
any Governmental Authority, as may be necessary to allow the REIT to lawfully
execute, deliver and perform its obligations under the Loan Documents to which
the REIT is a party.

(e) CAPITALIZATION. All of the capital stock of the REIT has been
issued in compliance in all material respects with all applicable Requirements
of Law.

(f) LITIGATION; ADVERSE EFFECTS.

(i) There is no action, suit, proceeding, governmental
investigation or arbitration, at law or in equity, by or before any
Governmental Authority, pending or, to best of Borrower's knowledge,
threatened against the REIT or any Property of the REIT, which will
(A) result in a Material Adverse Effect on the REIT, (B) materially and
adversely affect the ability of any party to any of the Loan Documents to
perform its obligations thereunder, or (C) materially and adversely
affect the ability of the REIT to perform its obligations as contemplated
in the Loan Documents.

(ii) The REIT is not (A) in violation of any applicable law,
which violation has a Material Adverse Effect on the REIT, or (B) subject
to or in default with

<PAGE>

respect to any Court Order which has a Material Adverse Effect on the
REIT. There are no Proceedings pending or, to the best of Borrower's
knowledge, threatened against the REIT, which, if adversely decided,
would have a Material Adverse Effect on the REIT or Borrower.

(g) NO MATERIAL ADVERSE CHANGE. Since the "Closing Date" (as
defined in the Original Credit Agreement), (i) there has occurred no event which
has a Material Adverse Effect on the REIT, and (ii) no material adverse change
has occurred in the REIT's ability to perform its obligations under the Loan
Documents to which it is a party or the transactions contemplated thereby.

(h) PAYMENT OF TAXES. All tax returns and reports to be filed by
the REIT have been timely filed, and all taxes, assessments, fees and other
governmental charges shown on such returns have been paid when due and payable,
except such taxes, if any, as are reserved against in accordance with GAAP and
are being contested in good faith by appropriate proceedings or such taxes, the
failure to make payment of which when due and payable would not have, in the
aggregate, a Material Adverse Effect on the REIT. The REIT has no knowledge of
any proposed tax assessment against the REIT that would have a Material Adverse
Effect on the REIT, which is not being actively contested in good faith by the
REIT.

(i) MATERIAL ADVERSE AGREEMENTS. The REIT is not a party to or
subject to any Contractual Obligation or other restriction contained in its
charter, by-laws or similar governing documents which has a Material Adverse
Effect on the REIT or the ability of the REIT to perform its obligations under
the Loan Documents to which it is a party.

(j) PERFORMANCE. The REIT is not in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any Contractual Obligation applicable to it, and no condition
exists which, with the giving of notice or the lapse of time or both, would
constitute a default under such Contractual Obligation, except where the
consequences, direct or indirect, of such default or

<PAGE>

defaults, if any, would not have a Material Adverse Effect on the REIT.

(k) DISCLOSURE. The representations and warranties of the REIT
contained in the Loan Documents, and all certificates, financial statements and
other documents delivered to Agent in connection therewith, do not contain any
untrue statement of a material fact or omit to state a material fact necessary,
in order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading. The REIT has not
intentionally withheld any material fact from Agent in regard to any matter
raised in the Loan Documents which would cause its representations and
warranties to be misleading. Notwithstanding the foregoing, with respect to
projections of the REIT's future performance such representations and warranties
are made in good faith and to the best judgment of the management of the REIT as
of the date thereof.

(l) ERISA. Neither the REIT nor any ERISA Affiliate thereof
(including, for all purposes under this SECTION 4.2(1), Borrower and the other
Consolidated Entities) has in the past five (5) years maintained or contributed
to or currently maintains or contributes to any Benefit Plan other than the
Benefit Plans identified on SCHEDULE 4.2(1) (as such Schedule may be amended
from time to time). Neither the REIT nor any ERISA Affiliate thereof has during
the past five (5) years maintained or contributed to or currently maintains or
contributes to any employee welfare benefit plan within the meaning of
Section 3(1) of ERISA which provides benefits to retirees other than benefits
required to be provided under Section 4980B of the Code and Sections 601 through
608 of ERISA (or any successor provisions thereto) or applicable state law.
Neither the REIT nor any ERISA Affiliate thereof is now contributing nor has it
ever contributed to or been obligated to contribute to any Multiemployer Plan,
no employees or former employees of the REIT, or such ERISA Affiliate, have been
covered by any Multiemployer Plan in respect of their employment by the REIT,
and no ERISA Affiliate of the REIT has or is likely to incur any withdrawal
liability with respect to any Multiemployer Plan which would have a Material
Adverse Effect on the REIT.

<PAGE>

(m) SOLVENCY. The REIT is and will be Solvent after giving effect
to the disbursements of the Advances and the payment and accrual of all fees
then payable.

(n) STATUS AS A REIT. The REIT (i) shall for its first taxable
year elect to qualify (but has not so elected as of the Closing Date), and for
each subsequent taxable year shall maintain its classification, as a real estate
investment trust as defined in Section 856 of the Code, (ii) has not engaged in
any "prohibited transactions" as defined in Section 856(b)(6)(iii) of the Code,
(iii) for its current "tax year" (as defined in the Code) is, and for all
taxable years subsequent to its election to be a real estate investment trust
shall remain, entitled to a dividends paid deduction which meets the
requirements of Section 857 of the Code and (iv) its ownership and method of
operation enable it to meet the requirements for taxation as a real estate
investment trust under the Code.

(o) OWNERSHIP. As of the Closing Date, the REIT does not own or
have any direct interest in any other Person, other than its ownership of the
general partnership interests in Borrower and its ownership of all of the
ownership interests in Arden Realty Finance, Inc.

(p) NYSE LISTING. The common stock of the REIT is, and is
reasonably expected to be, listed for trading and traded on the New York Stock
Exchange.

ARTICLE 5

REPORTING COVENANTS

Borrower covenants and agrees that, on and after the date hereof,
until payment in full of all of the Obligations, the expiration of the
Commitment and termination of this Agreement:

5.1 FINANCIAL STATEMENTS AND OTHER FINANCIAL AND OPERATING INFORMATION.
Borrower shall maintain or cause to be maintained a system of accounting
established and administered

<PAGE>

in accordance with sound business practices and consistent with past practice to
permit preparation of quarterly and annual financial statements in conformity
with GAAP, and each of the financial statements described below shall be
prepared on a consolidated basis for the REIT and the other Consolidated
Entities from such system and records. Borrower shall deliver or cause to be
delivered to Agent (with copies of bound materials sufficient for each Lender):

(a) COMMISSION FILINGS. Promptly following their filing with the
Commission, copies of all required reports and filings filed with the
Commission, including, without limitation, the Annual Report on Form 10-K, the
Quarterly Reports on Form 10-Q, registration statements, proxy statements and
the annual reports delivered to the shareholders of the REIT and the
Consolidated Entities.

(b) ANNUAL FINANCIAL STATEMENTS. Within ninety (90) days after the
close of each Fiscal Year, consolidated balance sheets, statements of
operations, stockholders' equity and cash flows for the REIT and the
Consolidated Entities (in the form provided to the Commission on the REIT's
Form 10-K), audited and certified without qualification by the Accountants and
accompanied by a statement that, in the course of their audit (conducted in
accordance with generally accepted auditing standards), the Accountants obtained
no knowledge that an Event of Default or Unmatured Event of Default occurred.
To the extent Agent desires additional details or supporting information with
respect to Unconsolidated Joint Ventures or individual Real Properties which are
not Unencumbered Assets within the Unencumbered Pool and which details and
information are not contained in the REIT's Form 10-K, Borrower shall provide
Agent with such details or supporting information as Agent requests which is
reasonably available to Borrower. Without limiting the foregoing, at Agent's
request, within ninety (90) days after the end of each Fiscal Year, Borrower,
with respect to Real Property which is not included within the Unencumbered
Pool, shall provide to Agent operating statements and a schedule setting forth
the percentage of leasable area leased to tenants in occupancy, with footnotes
indicating which leases are in default in rent payments by more than forty-five
(45) days (other than technical, nonmaterial disputes

<PAGE>

concerning percentage rentals due) and any other material provisions in respect
to which Borrower has issued a notice of default, for such Real Property.

(c) QUARTERLY FINANCIAL STATEMENTS CERTIFIED BY OFFICERS. As soon
as practicable, and in any event within forty-five (45) days after the end of
each Fiscal Quarter, consolidated balance sheets, statements of operations,
stockholders' equity and statements of cash flow for the REIT and the
Consolidated Entities, which may, in the case of the first three Fiscal
Quarters, be in the form provided to the Commission on the REIT's Form 10-Q, and
certified by the REIT's chief executive officer, chief operating officer, chief
financial officer or chief accounting officer.

(d) OFFICER'S CERTIFICATE OF BORROWER. (i) Together with each
delivery of any financial statement pursuant to subsection (c) above, an
Officer's Certificate of the REIT, stating that the executive officer who is the
signatory thereto (which officer shall be the chief executive officer, the chief
operating officer, the chief financial officer or the chief accounting officer
of the REIT) has reviewed, or caused under his or her supervision to be
reviewed, the terms of this Agreement and the other principal Loan Documents,
and has made, or caused to be made under his or her supervision, a review in
reasonable detail of the transactions and condition of the REIT and the
Consolidated Entities during the accounting period covered by such financial
statements of the REIT and the Consolidated Entities, and that such review has
not disclosed the existence at the end of such accounting period, and that the
signers do not have knowledge of the existence as of the date of the Officer's
Certificate, of any condition or event which constitutes an Event of Default or
Unmatured Event of Default, or, if any such condition or event exists,
specifying the nature and period of existence thereof and what action has been
taken, is being taken and is proposed to be taken with respect thereto; and
(ii) together with each delivery pursuant to subsection (c) above, a Compliance
Certificate demonstrating in reasonable detail (which detail shall include
actual calculations and such supporting information as Agent may reasonably
require) compliance at the end of such accounting

<PAGE>

periods with the covenants contained in SECTIONS 7.3 and ARTICLE 8.

(e) CASH FLOW PROJECTIONS. As soon as practicable, and in any
event, within one hundred twenty (120) days after the end of each Fiscal Year,
projected consolidated cash flows for the REIT and the Consolidated Entities for
the following Fiscal Year. Borrower shall also provide such additional
supporting details as Agent may reasonably request.

(f) UNENCUMBERED POOL STATEMENTS AND OPERATING RESULTS. As soon as
practicable, and in any event within forty-five (45) days after the end of each
Fiscal Quarter, quarterly operating statements for each Unencumbered Asset in
the Unencumbered Pool, in a form approved by Agent, which operating statements
shall include actual quarterly and year-to-date operating income results, and
Rent Rolls for each Unencumbered Asset within the Unencumbered Pool dated as of
the last day of such Fiscal Quarter (the "QUARTERLY UNENCUMBERED POOL
STATEMENTS"), in form and substance satisfactory to Agent, certified as being
true and correct in all material respects by the REIT's chief financial officer,
chief accounting officer, chief executive officer or chief operating officer.
In addition, as soon as practicable, and in any event within forty-five
(45) days after the end of the fourth Fiscal Quarter, a year-end operating
statement, in form approved by Agent, which operating statement shall include
year-to-date net operating income and net cash flow results for each
Unencumbered Asset within the Unencumbered Pool dated as of the last day of such
Fiscal Quarter (collectively, with the Quarterly Unencumbered Pool Statements,
the "UNENCUMBERED POOL STATEMENTS"). Agent shall also have the right to request
the foregoing information with respect to any Real Property owned by the REIT or
any Consolidated Entity.

(g) BUDGETS FOR UNENCUMBERED POOL. Not later than fifteen (15)
days prior to the beginning of each Fiscal Year, annual operating budgets
(including, without limitation, overhead items and capital expenditures) for
each Unencumbered Asset in the Unencumbered Pool for such Fiscal Year, prepared
on an annual basis, in a form approved by Agent, together with all supporting
details reasonably requested by Agent, and

<PAGE>

certified by the chief executive officer, chief operating officer, chief
financial officer or chief accounting officer of the REIT as being based upon
the REIT's reasonable good faith estimates, information and assumptions at the
time.

(h) KNOWLEDGE OF EVENT OF DEFAULT. Promptly upon a Responsible
Official of Borrower or the REIT obtaining knowledge (i) of any condition or
event which constitutes an Event of Default or Unmatured Event of Default, or
becoming aware that any Lender has given notice or taken any other action with
respect to a claimed Event of Default or Unmatured Event of Default or (ii) of
any condition or event which has a Material Adverse Effect on Borrower or the
REIT, an Officer's Certificate specifying the nature and period of existence of
any such condition or event, or specifying the notice given or action taken by
such Lender and the nature of such claimed Event of Default, Unmatured Event of
Default, event or condition, and what action Borrower and/or the REIT has taken,
is taking and proposes to take with respect thereto.

(i) LITIGATION, ARBITRATION OR GOVERNMENT INVESTIGATION. Promptly
upon a Responsible Official of Borrower or the REIT obtaining knowledge of
(i) the institution of, or threat of, any material action, suit, proceeding,
governmental investigation or arbitration against or affecting Borrower or the
REIT not previously disclosed in writing by Borrower to Agent pursuant to this
SECTION 5.1(i) or (ii) any material development in any action, suit, proceeding,
governmental investigation or arbitration already disclosed, which, in either
case, has, or if adversely determined is reasonably likely to have, a Material
Adverse Effect on Borrower or the REIT, a notice thereof to Agent and such other
information as may be reasonably available to it to enable Agent, Lenders and
their counsel to evaluate such matters.

(j) ERISA TERMINATION EVENT. As soon as possible, and in any event
within thirty (30) days after a Responsible Official of Borrower or the REIT
knows that a Termination Event has occurred, a written statement of the chief
financial officer of the REIT describing such Termination Event and the action,
if any, which Borrower, the REIT or any ERISA Affiliate of any of them has
taken, is taking or proposes to take, with

<PAGE>

respect thereto, and, when known, any action taken or threatened by the IRS, the
DOL or the PBGC with respect thereto.

(k) PROHIBITED ERISA TRANSACTION. As soon as possible, and in
any event within thirty (30) days, after a Responsible Official of Borrower,
the REIT or any ERISA Affiliate of any of them knows that a prohibited
transaction (defined in Section 406 of ERISA and Section 4975 of the Code and
which is not subject to a statutory or prohibited transaction class
exemption) has occurred, a statement of the chief financial officer of the
REIT describing such transaction.

(l) BENEFIT PLAN ANNUAL REPORT. On request of Agent, within
thirty (30) days after the filing thereof with the DOL, the IRS or the PBGC,
copies of each annual report, including Schedule B thereto, filed with
respect to each Benefit Plan of Borrower, the REIT or any ERISA Affiliate of
any of them.

(m) BENEFIT PLAN FUNDING WAIVER REQUEST. Within thirty (30)
days after the filing thereof with the IRS, a copy of each funding waiver
request filed with respect to any Benefit Plan of Borrower, the REIT or any
ERISA Affiliate of any of them and all communications received by Borrower,
the REIT or any ERISA Affiliate of any of them with respect to such request.

(n) ESTABLISHMENT OF BENEFIT PLAN AND INCREASE IN CONTRIBUTIONS
TO THE BENEFIT PLAN. Not less than ten (10) days prior to the effective date
thereof, a notice to Agent of the establishment of a Benefit Plan (or the
incurrence of any obligation to contribute to a Multiemployer Plan) by
Borrower, the REIT or any ERISA Affiliate of any of them. Within thirty (30)
days after the first to occur of an amendment of any then existing Benefit
Plan of Borrower, the REIT or any ERISA Affiliate of any of them which will
result in an increase in the benefits under such Benefit Plan or a
notification of any such increase, or the establishment of any new Benefit
Plan by Borrower, the REIT or any ERISA Affiliate of any of them or the
commencement of contributions to any Benefit Plan to which

<PAGE>

Borrower, the REIT or any ERISA Affiliate of any of them was not previously
contributing, a copy of said amendment, notification or Benefit Plan.

(o) QUALIFICATION OF ERISA PLAN. Promptly upon, and in any event
within thirty (30) days after, receipt by Borrower, the REIT or any ERISA
Affiliate of any of them of an unfavorable determination letter from the IRS
regarding the qualification of a Plan under Section 401(a) of the Internal
Revenue Code, a copy of said determination letter, if such disqualification
would have a Material Adverse Effect on Borrower or the REIT.

(p) MULTIEMPLOYER PLAN WITHDRAWAL LIABILITY. Promptly upon, and
in any event within thirty (30) days after receipt by Borrower, the REIT or
any ERISA Affiliate of any of them of a notice from a Multiemployer Plan
regarding the imposition of material withdrawal liability, a copy of said
notice.

(q) FAILURE TO MAKE SECTION 412 PAYMENT. Promptly upon, and in
any event within thirty (30) days after, Borrower, the REIT or any ERISA
Affiliate of any of them fails to make a required installment under
subsection (m) of Section 412 of the Internal Revenue Code or any other
payment required under Section 412 of the Internal Revenue Code on or before
the due date for such installment or payment, a notification of such failure,
if such failure could result in either the imposition of a Lien under said
Section 412 or otherwise have or could reasonably be anticipated to have a
Material Adverse Effect on Borrower or the REIT.

(r) FAILURE OF THE REIT TO QUALIFY AS REAL ESTATE INVESTMENT
TRUST. Promptly upon, and in any event within forty-eight (48) hours after a
Responsible Official of Borrower first has actual knowledge of (i) the REIT
failing to continue to qualify as a real estate investment trust as defined
in Section 856 of the Internal Revenue Code (or any successor provision
thereof), (ii) any act by the REIT causing its election to be taxed as a real
estate investment trust to be terminated, (iii) any act causing the REIT to
be subject to the taxes imposed by Section 857(b)(6) of the Internal Revenue
Code

<PAGE>

(or any successor provision thereto), or (iv) the REIT failing to be entitled
to a dividends paid deduction which meets the requirements of Section 857 of
the Internal Revenue Code, a notice of any such occurrence or circumstance.

(s) ASSET ACQUISITIONS AND DISPOSITIONS, INDEBTEDNESS, MERGER,
ETC. Without limiting, modifying or waiving any restriction in the Loan
Documents, concurrently with notice to Borrower's priority mailing list and
in all events not later than any public disclosure, written notice of any
material investments (other than in Cash Equivalents), material acquisitions,
asset purchases, dispositions, disposals, divestitures or similar
transactions involving Property, the raising of additional equity or the
incurring or repayment of material Debt, or any material merger, by or with
Borrower or the REIT, and, if requested by Agent after the consummation of
such transaction, a Compliance Certificate within 7 days after the date of
such request, in form and substance reasonably acceptable to Agent,
demonstrating in reasonable detail (which detail shall include actual
calculations and such supporting information as Agent may reasonably require)
compliance, after giving effect to such proposed transaction(s), with the
covenants contained in SECTION 7.3 and ARTICLE 8. For purposes of this
SECTION 5.1(s), any investment, acquisition, asset purchase, disposition,
disposal, divestiture, merger or similar transaction shall be considered
"material" if it involves assets exceeding five percent (5%) of the
Borrower's assets (as existing prior to giving effect to such transaction) or
if it involves the acquisition or disposition of Real Property. Borrower's
written notice of each Real Property acquisition or disposition shall contain
a description of all improvements which are a part of such Real Property, the
square footage of such improvements, the acquisition or disposition price and
such other information with respect thereto reasonably requested by the Agent.

(t) OTHER INFORMATION. Such other information, reports,
contracts, schedules, lists, documents, agreements and instruments in the
possession of the REIT or Borrower with respect to (i) the Unencumbered
Assets or any other assets of the REIT or Borrower or any other Consolidated
Entity (either on an individual or an aggregate basis), (ii) any material

<PAGE>

change in the REIT's investment, finance or operating policies, or (iii) the
REIT's, the Borrower's or any other Consolidated Entity's business, condition
(financial or otherwise), operations, performance, properties or prospects as
Agent may from time to time reasonably request, including, without
limitation, annual information with respect to cash flow projections,
budgets, operating statements (current year and immediately preceding year),
Rent Rolls, lease expiration reports, leasing status reports, note payable
summaries, bullet note summaries, equity funding requirements, contingent
liability summaries, line of credit summaries, line of credit collateral
summaries, wrap note or note receivable summaries, schedules of outstanding
letters of credit, summaries of Cash and Cash Equivalents, projections of
leasing fees and overhead budgets. Provided that Agent gives Borrower
reasonable prior notice and an opportunity to participate, Borrower hereby
authorizes Agent to communicate with the Accountants and authorizes the
Accountants to disclose to Agent any and all financial statements and other
information of any kind, including copies of any management letter or the
substance of any oral information, that such accountants may have with
respect to the Unencumbered Assets or the REIT's, Borrower's or any
Consolidated Entity's condition (financial or otherwise), operations,
properties, performance and prospects. Concurrently therewith, Agent will
notify Borrower of any such communication and, at Agent's request, Borrower
shall deliver a letter addressed to the Accountants instructing them to
disclose such information in compliance with this SECTION 5.1(t).

(u) PRESS RELEASES; SEC FILINGS AND FINANCIAL STATEMENTS.
Telephonic or telecopy notice to Agent concurrently with or prior to issuance
of any material press release concerning the REIT or Borrower and, as soon as
practicable after filing with the Commission, all reports and notices, proxy
statements, registration statements and prospectuses of the REIT. All
materials sent or made available generally by the REIT to the holders of its
publicly-held Securities or filed with the Commission, including all periodic
reports required to be filed with the Commission, shall be delivered by
Borrower or the REIT to Agent as soon as available.

<PAGE>

(v) ACCOUNTANT REPORTS. Copies of all reports prepared by the
Accountants and submitted to Borrower or the REIT in connection with each
annual, interim or special audit or review of the financial statements or
practices of Borrower or the REIT, including the comment letter submitted by
the Accountants in connection with their annual audit.

5.2 ENVIRONMENTAL NOTICES. Borrower shall notify Agent, in writing,
as soon as practicable, and in any event within ten (10) days after a
Responsible Official of Borrower's or the REIT's learning thereof, of any:
(a) written notice or claim to the effect that the REIT, Borrower or any
Consolidated Entity is or may be liable to any Person as a result of any
material Release or threatened Release of any Contaminant into the
environment; (b) written notice that the REIT, Borrower or any Consolidated
Entity is subject to investigation by any Governmental Authority evaluating
whether any Remedial Action is needed to respond to the Release or threatened
Release of any Contaminant into the environment; (c) written notice that any
Property of the REIT, Borrower or any Consolidated Entity is subject to an
Environmental Lien; (d) written notice of violation of any Environmental Laws
to the REIT, Borrower or any Consolidated Entity or awareness of a condition
which might reasonably result in a notice of violation of any Environmental
Laws by the REIT, Borrower or any Consolidated Entity; (e) commencement or
written threat of any judicial or administrative proceeding alleging a
violation of any Environmental Laws; (f) written notice from a Governmental
Authority of any changes to any existing Environmental Laws that will have a
Material Adverse Effect on the operations of the REIT, Borrower or any
Consolidated Entity; or (g) any proposed acquisition of stock, assets, real
estate or leasing of property, or any other action by Borrower that, to the
best of Borrower's knowledge, could subject the REIT, Borrower or any
Consolidated Entity to environmental, health or safety Liabilities and Costs
that will have a Material Adverse Effect on the REIT, Borrower or any
Consolidated Entity. With regard to the matters referred to in clauses (a)
through (e) above, the same shall apply in respect of each Unencumbered Asset
only if the matter will have a Material Adverse Effect on such Unencumbered
Asset and, in the case of other Real Property of the REIT, Borrower or any
Consolidated Entity, only if the

<PAGE>

matter will have a Material Adverse Effect on the REIT, Borrower or such
Consolidated Entity.

5.3 CONFIDENTIALITY. Confidential information obtained by Agent or
Lenders pursuant to this Agreement or in connection with the Advances shall
not be disseminated by Agent or Lenders and shall not be disclosed to third
parties except (a) to regulators, taxing authorities and other Governmental
Authorities having jurisdiction over Agent or such Lender or otherwise in
response to Requirements of Law, (b) to their respective auditors and legal
counsel and in connection with regulatory, administrative and judicial
proceedings as necessary or relevant, including enforcement proceedings
relating to the Loan Documents, and (c) to any prospective assignee of or
participant in a Lender's interest under this Agreement or any prospective
purchaser of the assets or a controlling interest in any Lender, provided
that such prospective assignee, participant or purchaser first agrees to be
bound by the provisions of this SECTION 5.3. In connection with disclosures
of confidential information to any non-governmental third-party, the
Lender(s) from whom the same has been requested shall, to the extent feasible
and permitted, give prior notice of such request to Borrower; however,
neither Agent nor any such Lender shall incur any liability to Borrower for
failure to do so. For purposes hereof, "confidential information" shall mean
all nonpublic information obtained by Agent or Lenders, unless and until such
information becomes publicly known, other than as a result of unauthorized
disclosure by Agent or Lenders of such information.

ARTICLE 6

AFFIRMATIVE COVENANTS

Borrower covenants and agrees that, on and after the date hereof,
until payment in full of all of the Obligations, the expiration of the
Commitment and termination of this Agreement:

<PAGE>

6.1 WITH RESPECT TO BORROWER:

(a) EXISTENCE. Borrower shall at all times maintain its existence
as a limited partnership and preserve and keep in full force and effect its
rights and franchises unless the failure to maintain such rights and franchises
does not have a Material Adverse Effect on Borrower.

(b) QUALIFICATION, NAME. Borrower shall qualify and remain
qualified to do business in each jurisdiction in which the nature of its
business requires it to be so qualified except for those jurisdictions where
failure to so qualify does not have a Material Adverse Effect on Borrower.
Borrower will transact business solely in its own name.

(c) COMPLIANCE WITH LAWS, ETC. Borrower shall (i) comply with all
Requirements of Law, and all restrictive covenants affecting Borrower or the
Properties, performance, prospects, assets or operations of Borrower, and
(ii) obtain as needed all Permits necessary for its operations and maintain such
in good standing, except in each of the foregoing cases where the failure to do
so will not have a Material Adverse Effect on Borrower.

(d) PAYMENT OF TAXES AND CLAIMS. Borrower shall pay (i) all
taxes, assessments and other governmental charges imposed upon it or on any
of its properties or assets or in respect of any of its franchises, business,
income or Property before any penalty or interest accrues thereon, the
failure to make payment of which will have a Material Adverse Effect on
Borrower, and (ii) all claims (including, without limitation, claims for
labor, services, materials and supplies) for sums, material in the aggregate
to Borrower, which have become due and payable and which by law have or may
become a Lien other than a judgment lien upon any of Borrower's Properties or
assets, prior to the time when any penalty or fine shall be incurred with
respect thereto. Notwithstanding the foregoing, Borrower may contest by
appropriate legal proceedings conducted in good faith and with due diligence,
the amount, validity or application, in whole or in part, of any taxes,
assessments, other governmental charges or claims described above, provided
that Borrower shall provide such security as may be reasonably

<PAGE>

required by Agent to insure ultimate payment of the same and to prevent any sale
or forfeiture of any of Borrower's Property (or any portion thereof or interest
therein), provided however, that the provisions of this SECTION 6.1(d) shall not
be construed to permit Borrower to contest the payment of any Obligations or any
other sums payable by Borrower to Agent or Lenders hereunder or under any other
Loan Document. Notwithstanding any of the foregoing, Borrower shall indemnify,
defend and save Agent and Lenders harmless from and against any liability, cost
or expense of any kind that may be imposed on Agent or Lenders in connection
with any such contest and any loss resulting therefrom.

(e) MAINTENANCE OF PROPERTIES; INSURANCE. Borrower shall
maintain in good repair, working order and condition, excepting ordinary wear
and tear, all of its Property and will make or cause to be made all
appropriate repairs, renewals and replacements thereof. Borrower shall
maintain (a) insurance with responsible companies in such amounts and against
such risks as is usually carried by companies engaged in similar businesses
and owning similar properties in the same general areas in which Borrower
operates, (b) insurance required by any Governmental Authority having
jurisdiction over Borrower, and (c) all other insurance reasonably required
by Agent from time to time. Neither Borrower nor any other Consolidated
Entity shall assign or otherwise transfer, or grant a security interest in,
any casualty insurance carried by it or in the proceeds of such insurance in
a manner which is disproportionate to the value of all of the Real Property
insured by Borrower or such Consolidated Entity.

(f) INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSION.
Borrower shall permit, and shall cause the REIT to permit, any authorized
representatives designated by any Lender to visit and inspect any of its
Properties (subject to rights of tenants), including all Unencumbered Assets,
upon reasonable prior notice, to inspect financial and accounting records and
leases, and to make copies and take extracts therefrom, all at such times
during normal business hours and as often as any Lender may reasonably
request; provided that all such visits and inspections shall be coordinated
through the Agent and provided that the Agent shall give reasonable prior
notice to

<PAGE>

Borrower of all such visits and inspections. In connection therewith,
Borrower shall pay all expenses required by SECTION 11.1. Borrower will keep
proper books of record and account in which entries, in conformity with GAAP
and as otherwise required by this Agreement and applicable Requirements of
Law, shall be made of all dealings and transactions in relation to its
businesses and activities and as otherwise required under SECTION 5.1.

(g) MAINTENANCE OF PERMITS, ETC. Borrower will maintain in full
force and effect all Permits, franchises, patents, trademarks, trade names,
copyrights, authorizations or other rights necessary for the operation of its
business, except where the failure to obtain any of the foregoing would not
have a Material Adverse Effect on Borrower; and notify Agent in writing,
promptly after learning thereof, of the suspension, cancellation, revocation
or discontinuance of, or of any pending or threatened action or proceeding
seeking to suspend, cancel, revoke or discontinue, any material Permit,
patent, trademark, trade name, copyright, governmental approval, franchise
authorization or right.

(h) CONDUCT OF BUSINESS. Except for Investments expressly
permitted pursuant to SECTION 8.8 and investments in Cash and Cash
Equivalents, Borrower shall engage only in the business of acquiring,
developing, owning, operating and managing income producing Office Properties
within the continental United States and any business activities and
investments of Borrower incidental thereto.

(i) USE OF PROCEEDS. Borrower shall use the proceeds of the
Advances only for pre-developments costs, development costs, acquisition costs,
capital improvements, working capital, equity investments, repayment of
Indebtedness, including required interest and/or principal payments thereon and
for any other general corporate purposes, including distributions permitted
hereunder.

(j) REPAYMENT OF BRIDGE LOAN. Borrower shall repay to Wells Fargo
Bank, on June 11, 1997, the outstanding principal balance of, and all accrued
and unpaid interest on, the Bridge Loan with an Advance hereunder.

<PAGE>

(k) PAYMENT OF INTEREST ON ORIGINAL LOAN. Borrower shall pay to
Agent, on June 11, 1997, all accrued and unpaid interest under the Original
Loan.

6.2 WITH RESPECT TO THE REIT:

(a) CORPORATE EXISTENCE. The REIT shall at all times maintain its
corporate existence and preserve and keep in full force and effect its rights
and franchises unless the failure to maintain such rights and franchises will
not have a Material Adverse Effect on the REIT.

(b) QUALIFICATION, NAME. The REIT shall qualify and remain
qualified to do business in each jurisdiction in which the nature of its
business requires it to be so qualified except for those jurisdictions where
failure to so qualify does not have a Material Adverse Effect on the REIT. The
REIT will transact business solely in its own name.

(c) SECURITIES LAW COMPLIANCE. The REIT shall comply in all
material respects with all rules and regulations of the Commission and file all
reports required by the Commission relating to the REIT's publicly-held
Securities.

(d) CONTINUED STATUS A REIT; PROHIBITED TRANSACTIONS. The REIT
(i) will continue to be a real estate investment trust as defined in Section
856 of the Code (or any successor provision thereto), (ii) will not revoke
its election (once made) to be a real estate investment trust, (iii) will not
engage in any "prohibited transactions" as defined in Section 856(b)(6)(iii)
of the Code (or any successor provision thereto), and (iv) will continue to
be entitled to a dividend paid deduction meeting the requirements of Section
857 of the Code.

(e) NYSE LISTED COMPANY. The common stock of the REIT shall at
all times be listed for trading on the New York Stock Exchange.

(f) COMPLIANCE WITH LAWS, ETC. The REIT shall (i) comply with all
Requirements of Law and restrictive covenants affecting the REIT and (ii) obtain
as needed all

<PAGE>

Permits necessary for its operations and maintain such in good standing, except
in each of the foregoing cases where the failure to do so will not have a
Material Adverse Effect on the REIT.

(g) PAYMENT OF TAXES AND CLAIMS. The REIT shall pay (i) all
taxes, assessments and other governmental charges imposed upon it or on any
of its properties or assets or in respect of any of its franchises, business,
income or Property before any penalty or interest accrues thereon, the
failure to make payment of which will have a Material Adverse Effect on the
REIT, and (ii) all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums, material in the aggregate to the
REIT, which have become due and payable and which by law have or may become a
Lien other than a judgment lien upon any of the REIT's Properties or assets,
prior to the time when any penalty or fine shall be incurred with respect
thereto. Notwithstanding the foregoing, the REIT may contest by appropriate
legal proceedings conducted in good faith and with due diligence, the amount,
validity or application, in whole or in part, of any taxes, assessments,
other governmental charges or claims described above, provided that the REIT
shall provide such security as may be required by Agent to insure ultimate
payment of the same and to prevent any sale or forfeiture of any of the
REIT's Property (or any portion thereof or interest therein), provided,
however, that the provisions of this SECTION 6.2(g) shall not be construed to
permit the REIT to contest the payment of any obligations owed to Agent or
Lenders or any other sums payable by the REIT to Agent or Lenders hereunder
or under any other Loan Document. Notwithstanding any of the foregoing, the
REIT shall indemnify, defend and save Agent and Lenders harmless from and
against any liability, cost or expense of any kind that may be imposed on
Agent or Lenders in connection with any such contest and any loss resulting
therefrom.

(h) NET OFFERING PROCEEDS. Unless otherwise agreed in writing
by Requisite Lenders, the REIT shall immediately contribute any Net Offering
Proceeds to Borrower.

<PAGE>

ARTICLE 7

NEGATIVE COVENANTS

Borrower covenants and agrees that, on and after the date hereof,
until payment in full of all of the Obligations, the expiration of the
Commitment and termination of this Agreement:

7.1 WITH RESPECT TO ALL PARTIES. Neither Borrower nor the REIT shall:

(a) RESTRICTIONS ON FUNDAMENTAL CHANGES.

(i) The REIT and Consolidated Entities shall not enter into
any merger, consolidation or reorganization or any sale of all or a
substantial portion of the assets of the REIT and the Consolidated
Entities, taken as a whole, or liquidate, wind up or dissolve, except
that (1) any Person engaged in the development and operation of class
A suburban Office Properties may merge or consolidate with and into
the REIT, the Borrower or any other Consolidated Entity, provided (A)
no Event of Default or event which, with the giving of notice or the
passage of time or both, could become an Event of Default, then exists
or would result therefrom, (B) the REIT, Borrower or such Consolidated
Entity, as the case may be, is the surviving entity, (C) Requisite
Lenders reasonably determine that such merger or consolidation will
not have a Material Adverse Effect on the Borrower or the REIT and (D)
the Borrower delivers to the Agent, prior to the REIT, the Borrower or
such Consolidated Entity becoming obligated (conditionally or
otherwise) to proceed with such transaction, a certificate, in form
and substance and in such detail as the Agent may reasonably require,
of the REIT's chief financial officer, chief executive officer or
chief operating officer demonstrating compliance with this Agreement
on a proforma basis giving effect to such transaction, and (2)
Borrower and the REIT may acquire interests in the CMBS Entities and
Borrower may contribute assets to such CMBS Entities;

<PAGE>

(ii) Change its Fiscal Year; or

(iii) Engage in any line of business other than as expressly
permitted under SECTION 6.1(h).

(b) ERISA. Permit any ERISA Affiliates to do any of the following
to the extent that such act or failure to act would result in the aggregate,
after taking into account any other such acts or failure to act, in a Material
Adverse Effect on Borrower or the REIT:

(i) Engage, or knowingly permit an ERISA Affiliate to engage,
in any prohibited transaction described in Section 406 of ERISA or
Section 4975 of the Code which is not exempt under Section 407 or 408 of
ERISA or Section 4975(d) of the Code for which a class exemption is not
available or a private exemption has not been previously obtained from
the DOL;

(ii) Permit to exist any accumulated funding deficiency (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or
not waived;

(iii) Fail, or permit an ERISA Affiliate to fail, to pay
timely required contributions or annual installments due with respect to
any waived funding deficiency to any Plan if such failure could result in
the imposition of a Lien or otherwise would have a Material Adverse
Effect on Borrower or the REIT;

(iv) Terminate, or permit an ERISA Affiliate to terminate, any
Benefit Plan which would result in any liability of Borrower or an ERISA
Affiliate under Title IV of ERISA or the REIT; or

(v) Fail, or permit any ERISA Affiliate to fail, to pay any
required installment under section (m) of Section 412 of the Code or any
other payment required under Section 412 of the Code on or before the due
date for such installment or other payment, if such failure could result
in the imposition of a Lien or otherwise

<PAGE>

would have a Material Adverse Effect on Borrower or the REIT.

(i) Subject to Section 8.9, below, Debt which is secured by
Real Property;

(ii) the City National Bank Loan;

(iii) Guaranty Obligations which do not, in the aggregate,
exceed Five Hundred Thousand Dollars ($500,000);

(iv) publicly-issued indebtedness or privately-placed
unsecured fixed rate term Debt;

(v) the Contribution Agreement;

(vi) the WFB Swap Agreement;

(vii) the demand promissory note of the REIT to Arden Realty
Finance, Inc., in the principal amount of $28,709,393; or

(viii) Debt of the REIT permitted under SECTION 7.7(b).

7.2 AMENDMENT OF CONSTITUENT DOCUMENTS. The Borrower shall not
materially amend its partnership agreement or certificate of limited partnership
without the prior written consent of Requisite Lenders, except as may be
required by applicable law or to comply with SECTION 6.2(d). The REIT shall not
materially amend its articles of incorporation or by-laws without the prior
written consent of Requisite Lenders, except (i) as required by applicable law
or (ii) as may be required to comply with SECTION 6.2(d).

7.3 MINIMUM OWNERSHIP INTEREST OF RICHARD ZIMAN. Richard Ziman shall at
all times retain directly or indirectly ownership (the "Ownership Interest"), in
the aggregate, of no

<PAGE>

less than sixty-five percent (65%) of the Capital Stock of the REIT and
Partnership Units of Borrower owned, directly or indirectly, by Richard Ziman
upon completion of the offering of the REIT's common stock as set forth in the
S-11; provided, however, that Partnership Units may be exchanged for Capital
Stock of the REIT; and provided further, however, that Richard Ziman may
transfer some or all of his Capital Stock of the REIT and Partnership Units of
Borrower to an inter vivos trust over which he holds the power of revocation or
to his wife or his children or a trust for the benefit of his wife or children;
and provided further, however, that neither any such trust, his wife nor any of
his children (collectively, together with Richard Ziman, the "Family") may
transfer any interest in such Capital Stock or Partnership Units to any Person
other than another Family member.

7.4 MANAGEMENT. Richard Ziman shall not cease to be active on a full-
time, continuing basis in the senior management of Borrower and the REIT;
provided, however, that, if due to death or incapacity, Richard Ziman is unable
to act in such capacity, Borrower shall have one hundred twenty (120) days to
obtain the approval of Requisite Lenders with respect to the new management. In
the event Borrower shall fail to obtain approval of Requisite Lenders within
such 120-day period, then Borrower shall, at the election and upon the demand of
Requisite Lenders pay in full all Obligations under the Loan Documents not later
than sixty (60) days after the end of such 120-day period, whereupon this
Agreement and the Commitment shall be terminated. No further Advances shall be
permitted until Borrower shall have obtained approval of Requisite Lenders under
this Section 7.4.

7.5 MARGIN REGULATIONS. No portion of the proceeds of any Advances
shall be used in any manner which might cause the extension of credit or the
application of such proceeds to violate Regulation G, T, U or X or any other
regulation of the Federal Reserve Board or to violate the Securities Exchange
Act or the Securities Act, in each case as in effect on the applicable Funding
Date.

7.6 ORGANIZATION OF BORROWER, ETC. Borrower shall remain a Maryland
limited partnership with the REIT as its sole

<PAGE>

general partner. At no time shall Borrower be taxed as an association under the
Internal Revenue Code.

7.7 WITH RESPECT TO THE REIT:

(a) The REIT shall not own any material assets or engage in any
line of business other than the ownership of the partnership interests described
in SECTION 4.2(o) and as otherwise permitted under SECTION 7.1(a) and
SECTION 8.8.

(b) The REIT shall not directly or indirectly create, incur, assume
or otherwise become or remain directly or indirectly liable with respect to, any
Debt, except the obligations and other Indebtedness of Borrower, Indebtedness
constituting obligations of its Consolidated Entities or Unconsolidated Joint
Ventures, and obligations under the Guaranty.

(c) The REIT shall not directly or indirectly create, incur, assume
or permit to exist any Lien on or with respect to any of its Property or assets
except Liens in favor of Agent securing the Obligations.

(d) The REIT will not directly or indirectly convey, sell,
transfer, assign, pledge or otherwise encumber or dispose of any of its
partnership interests in Borrower held as of the Closing Date, except to secure
the Obligations.

ARTICLE 8

FINANCIAL COVENANTS

Borrower covenants and agrees that, on and after the date of this
Agreement and until payment in full of all the Obligations, the expiration of
the Commitment and the termination of this Agreement:

8.1 TANGIBLE NET WORTH. The Tangible Net Worth of the REIT and the
Consolidated Entities, as of the last day of each Fiscal Quarter, shall not be
less than the sum of (i) $294,988,000, plus (ii) 90% of the cumulative net cash

<PAGE>

proceeds received from and the value of assets acquired (net of the Indebtedness
incurred or assumed in connection therewith) through the issuance of Capital
Stock of the REIT and Partnership Units of the Borrower after the "Closing Date"
(as defined in the Original Credit Agreement), other than issuance of Capital
Stock in exchange for Partnership Units. For the purposes of clause (ii), "net"
means net of underwriters' discounts, commissions and other reasonable out-of-
pocket expenses of the transaction actually paid to any Person (other than
Borrower or any Affiliate of Borrower).

8.2 MAXIMUM TOTAL LIABILITIES TO GROSS ASSET VALUE. The ratio of Total
Liabilities to Gross Asset Value shall not exceed 50% at any time.

8.3 MINIMUM INTEREST COVERAGE RATIO. As of the last day of any Fiscal
Quarter, the Interest Coverage Ratio shall not be less than 2.00:1.

8.4 MINIMUM FIXED CHARGE COVERAGE RATIO. As of the last day of any
Fiscal Quarter, the Fixed Charge Coverage Ratio shall not be less than 1.75:1.

8.5 MINIMUM UNENCUMBERED POOL. The aggregate Unencumbered Asset Value
of the Unencumbered Pool shall not, at any time, be less than 200% of the
unsecured Total Liabilities of the REIT and the Consolidated Entities.

8.6 MINIMUM UNSECURED INTEREST EXPENSE COVERAGE. As of the last day of
any Fiscal Quarter, the Unsecured Interest Expense Coverage Ratio of the REIT
and the Consolidated Entities shall not be less than 1.80:1.

8.7 DISTRIBUTIONS.

(a) Subject to SUBSECTION (b) below, aggregate distributions to
shareholders of the REIT and all partners of Borrower shall not exceed, for any
four (4) consecutive Fiscal Quarters, ninety-five percent (95%) of Funds from
Operations; provided, however, that Borrower may make additional distributions
to the REIT in connection with the formation of Arden Realty Finance, Inc.,
provided that such distributions do

<PAGE>

not exceed, in the aggregate, $2,870,652 For purposes of this SECTION 8.7, the
term "distributions" shall mean all dividends and other distributions to, and
the repurchase of stock or limited partnership interests from, the holder of any
equity interests in Borrower or the REIT (other than the redemption of limited
partnership interests in Borrower in exchange for REIT stock).

(b) Aggregate distributions during the continuance of any Event of
Default shall not exceed the lesser of (i) the aggregate amount permitted to be
made during the continuance thereof under SUBSECTION (a) above, and (ii) the
minimum amount that the REIT must distribute to its shareholders in order to
avoid federal tax liability and to remain qualified as a real estate investment
trust as defined in Section 856 of the Code.

8.8 INVESTMENTS; ASSET MIX.

(a) The REIT shall not at any time make or own any Investment in
any Person, or purchase, lease or own any other asset or property, except (i)
any Investment in the Borrower, (ii) any Investment in the CMBS Entities, (iii)
any Capital Stock in the Consolidated Entities (other than the Borrower), and
(iv) any cash or other property that is being distributed to the shareholders of
the REIT substantially contemporaneously with the REIT's receipt of such cash or
other property.

(b) Except as permitted under SECTION 7.1(a), the Borrower shall
not at any time make or own any Investment in any Person, or purchase, lease or
own any Real Property or other asset, except that the Borrower may own or lease
the following, subject to the limitations set forth below:

<PAGE>

Asset Type Limitation on Value
---------- -------------------
for Each Asset Type
-------------------
at the Time of
--------------
Determination
-------------

1. Wholly-Owned Office Property Unlimited
and related Property

2. Wholly-Owned Land 5% of Gross Asset
Value

3. Wholly-Owned Real Property 10% of Gross Asset
(other than Office Properties Value
or Land referred to in
clause 2)

4. Wholly-owned Capital Stock of 10% of Gross Asset
corporations Value

5. Investment Mortgages 15% of Gross Asset
Value

6. Wholly-owned Capital Stock of 15% of Gross Asset
Joint Ventures (other than Value
corporations)

<PAGE>

7. Construction in Progress 12.5% of all Office
(exclusive of tenant Properties (based on
improvements) the total gross
leasable area,
measured in square
feet) (provided that
this category shall
not, with respect to
any construction in
progress (for any
Office Property) which
is not at least 70%
pre-leased and with
all Major Agreements
previously approved by
Agent, exceed 7% of
the total gross
leasable area,
measured in square
feet, of all Office
Properties)

Notwithstanding the foregoing, Investments and other assets in the
foregoing categories 2 through 6 may not, in the aggregate exceed, at any time,
25% of Gross Asset Value. All values of Investments and other assets shall be
the original cost of such Investments and assets, except as otherwise expressly
provided.

8.9 SECURED DEBT. The aggregate amount of all Debt of the REIT and the
Consolidated Entities secured by Real Property shall not, at any time, exceed
35% of Gross Asset Value.

ARTICLE 9

EVENTS OF DEFAULT; RIGHTS AND REMEDIES

9.1 EVENTS OF DEFAULT. Each of the following occurrences shall constitute
an Event of Default under this Agreement:

<PAGE>

(a) FAILURE TO MAKE PAYMENTS WHEN DUE. Borrower shall fail to pay
(i) any amount due on the Maturity Date, (ii) any principal when due, or
(iii) any interest on any Advance, or any fee or other amount payable under any
Loan Documents within three (3) days after the same becomes due.

(b) DISTRIBUTIONS. Borrower or the REIT shall breach any covenant
set forth in SECTION 6.2(d) or 8.7.

(c) BREACH OF FINANCIAL COVENANTS. Borrower shall (i) fail to
satisfy any financial covenant set forth in ARTICLE 8 other than the financial
covenants set forth in SECTIONS 8.3, 8.4 and 8.6, and such failure shall
continue for thirty (30) days, or (ii) fail to satisfy any of the financial
covenants set forth in SECTIONS 8.3, 8.4 or 8.6 (as to which there shall be no
cure period).

(d) OTHER DEFAULTS. The REIT or Borrower shall fail duly and
punctually to perform or observe any agreement, covenant or obligation binding
on Borrower or the REIT under this Agreement or under any of the other Loan
Documents (other than as described in any other provision of this SECTION 9.1),
and such failure shall continue for thirty (30) days after Borrower or the REIT
knew of such failure (or such lesser period of time as is mandated by applicable
Requirements of Law).

(e) BREACH OF REPRESENTATION OR WARRANTY. Any representation or
warranty made or deemed made by Borrower or the REIT to Agent or any Lender
herein or in any of the other Loan Documents or in any statement, certificate or
financial statements at any time given by Borrower pursuant to any of the Loan
Documents shall be false or misleading in any material respect on the date as of
which made.

(f) DEFAULT AS TO OTHER DEBT. Borrower or the REIT or any other
Consolidated Entity shall have defaulted (beyond any applicable grace period)
under any Debt of such party (other than the Obligations) if the aggregate
amount of such other Debt is One Million Dollars ($1,000,000) or more and such
default shall not have been cured or waived; PROVIDED, HOWEVER, that the
foregoing $1,000,000 limitation shall be increased to

<PAGE>

Ten Million Dollars ($10,000,000) in the case of Nonrecourse Debt.

(g) INVOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC.

(i) An involuntary case shall be commenced against the REIT or
Borrower or any other Consolidated Entity and the petition shall not be
dismissed within sixty (60) days after commencement of the case, or a court
having jurisdiction shall enter a decree or order for relief in respect of
any such Person in an involuntary case, under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect; or any other
similar relief shall be granted under any applicable federal, state or
foreign law; or

(ii) A decree or order of a court having jurisdiction for the
appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over the REIT or Borrower or any other
Consolidated Entity, or over all or a substantial part of the property of
any such Person, shall be entered; or an interim receiver, trustee or other
custodian of any such Person or of all or a substantial part of the
property of any such Person shall be appointed; or a warrant of attachment,
execution or similar process against any substantial part of the property
of any such Person shall be issued; and any such event shall not be stayed,
vacated, dismissed, bonded or discharged within sixty (60) days of entry,
appointment or issuance.

(h) VOLUNTARY BANKRUPTCY; APPOINTMENT OF RECEIVER, ETC. The REIT or
Borrower or any other Consolidated Entity shall have an order for relief entered
with respect to it, or commence a voluntary case under, any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or shall
consent to the entry of an order for relief in an involuntary case, or to the
conversion of an involuntary case to a voluntary case, under any such law, or
shall consent to the appointment of or taking of possession by a receiver,

<PAGE>

trustee or other custodian for all or a substantial part of its property; any
such Person shall make any assignment for the benefit of creditors or shall be
unable or fail, or admit in writing its inability, to pay its debts as such
debts become due; or the general partner of Borrower or any other Consolidated
Entity or the REIT's Board of Directors (or any committee thereof) adopts any
resolution or otherwise authorizes any action to approve any of the foregoing.

(i) JUDGMENTS AND ATTACHMENTS. (i) Any money judgment (other than a
money judgment covered by insurance but only if the insurer has admitted
liability with respect to such money judgment), writ or warrant of attachment,
or similar process involving in any case an amount in excess of
One Million Dollars ($1,000,000) shall be entered or filed against the REIT,
Borrower, any other Consolidated Entity or their respective assets and shall
remain undischarged, unvacated, unbonded or unstayed for a period of thirty (30)
days, or (ii) any judgment or order of any court or administrative agency
awarding material damages shall be entered against any such Person in any action
under the Federal securities laws seeking rescission of the purchase or sale of,
or for damages arising from the purchase or sale of, any Securities, such
judgment or order shall have become final after exhaustion of all available
appellate remedies and, in Agent's judgment, the payment of such judgment or
order would have a Material Adverse Effect on such Person.

(j) DISSOLUTION. Any order, judgment or decree shall be entered
against the REIT, Borrower or any other Consolidated Entity decreeing its
involuntary dissolution or split up and such order shall remain undischarged and
unstayed for a period in excess of thirty (30) days; or the REIT, Borrower or
any other Consolidated Entity shall otherwise dissolve or cease to exist.

(k) LOAN DOCUMENTS. If for any reason any Loan Document shall cease
to be in full force and effect and such condition or event shall continue for
fifteen (15) days after Borrower or the REIT knew of such condition or event.

<PAGE>

(l) ERISA LIABILITIES. Any Termination Event occurs which will or is
reasonably likely to subject Borrower or the REIT or any ERISA Affiliate of any
of them to a liability which Agent reasonably determines will have a Material
Adverse Effect on Borrower or the REIT, or the plan administrator of any Benefit
Plan applies for approval under Section 412(d) of the Internal Revenue Code for
a waiver of the minimum funding standards of Section 412(a) of the Internal
Revenue Code and Agent reasonably determines that the business hardship upon
which the Section 412(d) waiver was based will or would reasonably be
anticipated to subject Borrower or the REIT to a liability which Agent
determines will have a Material Adverse Effect on Borrower or the REIT.

(m) ENVIRONMENTAL LIABILITIES. Borrower or the REIT becomes subject
to any Liabilities and Costs which Agent reasonably deems to have a Material
Adverse Effect on such Person arising out of or related to (i) the Release or
threatened Release at any Property of any Contaminant into the environment, or
any Remedial Action in response thereto, or (ii) any violation of any
Environmental Laws.

(n) SOLVENCY. Borrower or the REIT shall cease to be Solvent.

(o) BREACH OF GUARANTY. The REIT shall fail to duly and punctually
perform or observe any agreement, covenant or obligation under its Guaranty.

(p) SOLE GENERAL PARTNER. The REIT shall cease to be the sole
general partner of Borrower or cease to own 51% or more of the Partnership Units
of Borrower.

An Event of Default shall be deemed "continuing" until cured or waived
in writing in accordance with SECTION 11.4.

9.2 RIGHTS AND REMEDIES.

(a) ACCELERATION, ETC. Upon the occurrence of any Event of Default
described in the foregoing SECTION 9.1(g) or

<PAGE>

9.1(h) with respect to the REIT or Borrower or any other Consolidated Entity,
the Commitment shall automatically and immediately terminate and the unpaid
principal amount of and any and all accrued interest on the Advances and all of
the other Obligations shall automatically become immediately due and payable,
with all additional interest, fees, costs and expenses from time to time accrued
thereon and/or payable hereunder, and without presentment, demand or protest or
other requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
or notice of acceleration), all of which are hereby expressly waived by
Borrower, and the obligations of Lenders to make any Advances hereunder shall
thereupon terminate; and upon the occurrence and during the continuance of any
other Event of Default, Agent shall, at the request, or may, with the consent of
Requisite Lenders, by written notice to Borrower, (i) declare that the
Commitment is terminated, whereupon the Commitment and the obligation of Lenders
to make any Advance hereunder shall immediately terminate, and/or (ii) declare
the unpaid principal amount of, any and all accrued and unpaid interest on the
Advances and all of the other Obligations to be, and the same shall thereupon
be, immediately due and payable with all additional interest from time to time
accrued thereon and without presentment, demand, or protest or other
requirements of any kind (including without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and of acceleration), all of which are hereby expressly waived by Borrower.
Without limiting Agent's authority hereunder, on or after the Maturity Date,
Agent shall, at the request, or may, with the consent, of Requisite Lenders
exercise any or all rights and remedies under the Loan Documents or applicable
law or in equity.

(b) ACCESS TO INFORMATION. If an Event of Default then exists, Agent
shall have, in addition to and not by way of a limitation on any other rights
and remedies contained in this Agreement or in the other Loan Documents, the
right within forty-eight (48) hours after notice to Borrower to obtain access to
Borrower's and the REIT's records (including computerized information, files and
supporting software) relating to the Uncumbered Assets, and its accounting
information relating to the Unencumbered Assets, and to use all

<PAGE>

of the foregoing and the information contained therein in any manner Agent deems
appropriate which is related to the collection of the Obligations. Borrower
hereby irrevocably authorizes any accountant or management agent employed by
Borrower to deliver such items and information to Agent. Notwithstanding
anything to the contrary contained in the Loan Documents, upon the occurrence of
and during the continuance of an Event of Default, Agent shall be entitled to
request and receive, by or through Borrower or appropriate legal process, any
and all information concerning the REIT, Borrower, or any Property of either of
them, which is reasonably available to or obtainable by Borrower. Agent shall
deliver to each Lender copies of any information which it obtains pursuant to
this SECTION 9.2(b).

(c) WAIVER OF DEMAND. Demand, presentment, protest and notice of
nonpayment are hereby waived by Borrower. Borrower also waives, to the extent
permitted by law, the benefit of all valuation, appraisal and exemption laws.

(d) WAIVERS, AMENDMENTS AND REMEDIES. No delay or omission of Agent
or Lenders to exercise any right under any Loan Document shall impair such right
or be construed to be a waiver of any Event of Default or an acquiescence
therein, and any single or partial exercise of any such right shall not preclude
other or further exercise thereof or the exercise of any other right, and no
waiver, amendment or other variation of the terms, conditions or provisions of
the Loan Documents whatsoever shall be valid unless in a writing signed by Agent
after obtaining written approval thereof or the signature thereon of those
Lenders required to approve such waiver, amendment or other variation, and then
only to the extent in such writing specifically set forth. All remedies
contained in the Loan Documents or by law afforded shall be cumulative and all
shall be available to Agent and Lenders until the Obligations have been paid in
full, the Commitment has expired or terminated and this Agreement has been
terminated.

9.3 RESCISSION. If, at any time after acceleration of the maturity of the
Advances, Borrower shall pay all arrears of interest and all payments on account
of principal of the Advances which shall have become due otherwise than by

<PAGE>

acceleration (with interest on principal and, to the extent permitted by law, on
overdue interest, at the rates specified in this Agreement) and all Events of
Default and Unmatured Events of Default (other than nonpayment of principal of
and accrued interest on the Advances due and payable solely by virtue of
acceleration) shall be remedied or waived pursuant to SECTION 11.4, then by
written notice to Borrower, Requisite Lenders may elect, in their sole
discretion, to rescind and annul the acceleration and its consequences; but such
action shall not affect any subsequent Event of Default or Unmatured Event of
Default or impair any right or remedy consequent thereon. The provisions of the
preceding sentence are intended merely to bind Lenders to a decision which may
be made at the election of Requisite Lenders; they are not intended to benefit
Borrower and do not give Borrower the right to require Lenders to rescind or
annul any acceleration hereunder, even if the conditions set forth herein are
met. Borrower shall have no right to enforce this Section 9.3, or to make any
claim hereunder, directly, or as a third party beneficiary, or otherwise.

ARTICLE 10

AGENCY PROVISIONS

10.1 APPOINTMENT.

(a) Each Lender hereby (i) designates and appoints Wells Fargo as
Agent of such Lender under this Agreement and the other Loan Documents,
(ii) authorizes and directs Agent to enter into the Loan Documents other than
this Agreement for the benefit of Lenders, and (iii) authorizes Agent to take
such action on its behalf under the provisions of this Agreement and the other
Loan Documents and to exercise such powers as are set forth herein or therein,
together with such other powers as are reasonably incidental thereto, subject to
the limitations referred to in SECTIONS 10.10(a) and 10.10(b) and the other
provisions of this Agreement requiring consent or approval of all Lenders or
Requisite Lenders. Agent agrees to act as such on the express conditions
contained in this ARTICLE 10.

<PAGE>

(b) The provisions of this ARTICLE 10 are solely for the benefit of
Agent and Lenders, and Borrower shall not have any right to rely on or enforce
any of the provisions hereof (provided that Borrower may rely on the provisions
of SECTION 10.4(b) and SECTION 10.9); PROVIDED, HOWEVER, the foregoing shall in
no way limit Borrower's obligations under this ARTICLE 10. In performing its
functions and duties under this Agreement, Agent shall act solely as Agent of
Lenders and does not assume and shall not be deemed to have assumed any
obligation toward or relationship of agency or trust with or for Borrower or any
other Person.

10.2 NATURE OF DUTIES. Agent shall not have any duties or
responsibilities except those expressly set forth in this Agreement or in the
other Loan Documents. The duties of Agent shall be administrative in nature.
Subject to the provisions of SECTIONS 10.5 and 10.7, Agent shall administer the
Advances in the same manner as it administers its own loans. Promptly following
the effectiveness of this Agreement, Agent shall send to each Lender its
originally executed Note and the executed original, to the extent the same are
available in sufficient numbers, of each other Loan Document other than the
Notes in favor of other Lenders and filed or recorded security documents or
instruments, with the latter to be held and retained by Agent for the benefit of
all Lenders. Agent shall not have by reason of this Agreement a fiduciary
relationship in respect of any Lender. Nothing in this Agreement or any of the
other Loan Documents, expressed or implied, is intended or shall be construed to
impose upon Agent any obligation in respect of this Agreement or any of the
other Loan Documents except as expressly set forth herein or therein. Each
Lender shall make its own independent investigation of the financial condition
and affairs of the REIT and Borrower in connection with the making and the
continuance of the Advances hereunder and shall make its own appraisal of the
creditworthiness of the REIT and Borrower, and, except as specifically provided
herein, Agent shall not have any duty or responsibility, either initially or on
a continuing basis, to provide any Lender with any credit or other information
with respect thereto, whether coming into its possession before the Closing Date
or at any time or times thereafter.

<PAGE>

10.3 DISBURSEMENTS OF ADVANCES.

(a) Promptly, but in any event not later than 5:00 p.m.
(San Francisco time) on the same Business Day on which Agent receives a Notice
of Borrowing, Agent shall send a copy thereof by facsimile to each other Lender
and shall otherwise notify each Lender of the proposed Advance and the Funding
Date. Each Lender shall make available to Agent (or the funding bank or entity
designated by Agent), the amount of such Lender's Pro Rata Share of such Advance
in immediately available funds not later than the times designated in
SECTION 10.3(b). Unless Agent shall have been notified by any Lender not later
than the close of business (San Francisco time) on the Business Day immediately
preceding the Funding Date in respect of any Advance that such Lender does not
intend to make available to Agent such Lender's Pro Rata Share of such Advance,
Agent may assume that such Lender shall make such amount available to Agent. If
any Lender does not notify Agent of its intention not to make available its Pro
Rata Share of such Advance as described above, but does not for any reason make
available to Agent such Lender's Pro Rata Share of such Advance, such Lender
shall pay to Agent forthwith on demand such amount, together with interest
thereon at the Federal Funds Rate. In any case where a Lender does not for any
reason make available to Agent such Lender's Pro Rata Share of such Advance,
Agent, in its sole discretion, may, but shall not be obligated to, fund to
Borrower such Lender's Pro Rata Share of such Advance. If Agent funds to
Borrower such Lender's Pro Rata Share of such Advance and if such Lender
subsequently pays to Agent such corresponding amount, such amount so paid shall
constitute such Lender's Pro Rata Share of such Advance. Nothing in this
SECTION 10.3(a) shall alter the respective rights and obligations of the parties
hereunder in respect of a Defaulting Lender or a Non-Pro Rata Advance.

(b) Requests by Agent for funding by Lenders of Advances will be made
by telecopy. Each Lender shall make the amount of its Advance available to
Agent in Dollars and in immediately available funds, to such bank and account,
in El Segundo, California as Agent may designate, not later than 9:00 A.M.
(San Francisco time) on the Funding Date designated in the Notice of Borrowing
with respect to such Advance, but in

<PAGE>

no event earlier than two (2) Business Days following such Lender's receipt of
the applicable Notice of Borrowing.

(c) Nothing in this SECTION 10.3 shall be deemed to relieve any
Lender of its obligation hereunder to make its Pro Rata Share of any Advance on
the applicable Funding Date, nor shall any Lender be responsible for the failure
of any other Lender to perform its obligations to make any Advance hereunder,
and the Pro Rata Share of any Lender shall not be increased or decreased as a
result of the failure by any other Lender to perform its obligation to make an
Advance.

10.4 DISTRIBUTION AND APPORTIONMENT OF PAYMENTS.

(a) Subject to SECTION 10.4(b), payments actually received by Agent
for the account of Lenders shall be paid to them promptly after receipt thereof
by Agent, but in any event within one (1) Business Day, PROVIDED that Agent
shall pay to Lenders interest thereon, at the Federal Funds Rate, from the
Business Day following receipt of such funds by Agent until such funds are paid
in immediately available funds to Lenders. Subject to SECTION 10.4(b), all
payments of principal and interest in respect of outstanding Advances, all
payments of the fees described in this Agreement, and all payments in respect of
any other Obligations shall be allocated among such Lenders as are entitled
thereto, in proportion to their respective Pro Rata Shares or otherwise as
provided herein. Agent shall promptly distribute, but in any event within one
(1) Business Day after it receives the same, to each Lender at its primary
address set forth on the appropriate signature page hereof or on the Assignment
and Assumption, or at such other address as a Lender may request in writing,
such funds as it may be entitled to receive; PROVIDED that Agent shall in any
event not be bound to inquire into or determine the validity, scope or priority
of any interest or entitlement of any Lender and may suspend all payments and
seek appropriate relief (including, without limitation, instructions from
Requisite Lenders or all Lenders, as applicable, or an action in the nature of
interpleader) in the event of any doubt or dispute as to any apportionment or
distribution contemplated hereby. The order of priority herein is set forth
solely to determine the rights and priorities of Lenders as among themselves and
may at

<PAGE>

any time or from time to time be changed by Lenders as they may elect, in
writing in accordance with SECTION 11.4, without necessity of notice to or
consent of or approval by Borrower or any other Person. All payments or other
sums received by Agent for the account of Lenders (including, without
limitation, principal and interest payments) shall not constitute property or
assets of the Agent and shall be held by Agent, solely in its capacity as agent
for itself and the other Lenders, subject to the Loan Documents.

(b) Notwithstanding any provision hereof to the contrary, until such
time as a Defaulting Lender has funded its Pro Rata Share of any Advance which
was previously a Non-Pro Rata Advance, or all other Lenders have received
payment in full (whether by repayment or prepayment) of the principal and
interest due in respect of such Non-Pro Rata Advance, all of the Obligations
owing to such Defaulting Lender hereunder shall be subordinated in right of
payment, as provided in the following sentence, to the prior payment in full of
all principal, interest and fees in respect of all Non-Pro Rata Advances in
which the Defaulting Lender has not funded its Pro Rata Share (such principal,
interest and fees being referred to as "Senior Loans"). All amounts paid by
Borrower and otherwise due to be applied to the Obligations owing to the
Defaulting Lender pursuant to the terms hereof shall be distributed by Agent to
the other Lenders in accordance with their respective Pro Rata Shares
(recalculated for purposes hereof to exclude the Defaulting Lender's Pro Rata
Share of the Commitment), until all Senior Loans have been paid in full. This
provision governs only the relationship among Agent, each Defaulting Lender and
the other Lenders; nothing hereunder shall limit the obligation of Borrower to
repay all Advances in accordance with the terms of this Agreement, nor create an
Event of Default if payments are not made to a Defaulting Lender. The
provisions of this Section shall apply and be effective regardless of whether an
Event of Default occurs and is then continuing, and notwithstanding (i) any
other provision of this Agreement to the contrary, (ii) any instruction of
Borrower as to its desired application of payments or (iii) the suspension of
such Defaulting Lender's right to vote on matters which are subject to the
consent or approval of Requisite Lenders or all Lenders. No Unused Facility Fee
shall accrue in favor of, or be payable

<PAGE>

to, such Defaulting Lender from the date of any failure to fund Advances or
reimburse Agent for any Liabilities and Costs as herein provided until such
failure has been cured, and Agent shall be entitled to (A) withhold or
setoff, and to apply to the payment of the defaulted amount and any related
interest, any amounts to be paid to such Defaulting Lender under this
Agreement, and (B) bring an action or suit against such Defaulting Lender in
a court of competent jurisdiction to recover the defaulted amount and any
related interest. In addition, the Defaulting Lender shall indemnify, defend
and hold Agent and each of the other Lenders harmless from and against any
and all Liabilities and Costs, plus interest thereon at the Default Rate,
which they may sustain or incur by reason of or as a direct consequence of
the Defaulting Lender's failure or refusal to abide by its obligations under
this Agreement.

10.5 RIGHTS, EXCULPATION, ETC. Neither Agent, any Affiliate of Agent,
nor any of their respective officers, directors, employees, agents, attorneys
or consultants, shall be liable to any Lender for any action taken or omitted
by them under this Agreement or under any of the other Loan Documents, or in
connection herewith or therewith, except that Agent shall be liable for its
gross negligence or willful misconduct. In the absence of gross negligence
or willful misconduct, Agent shall not be liable for any apportionment or
distribution of payments made by it in good faith pursuant to SECTION 10.4,
and if any such apportionment or distribution is subsequently determined to
have been made in error the sole recourse of any Person to whom payment was
due, but not made, shall be to recover from the recipients of such payments
any payment in excess of the amount to which they are determined to have been
entitled. Agent shall not be responsible to any Lender for any recitals,
statements, representations or warranties herein or for the execution,
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of this Agreement, or any of the other Loan Documents, or any of
the transactions contemplated hereby and thereby; or for the financial
condition of the REIT, Borrower or any of their Affiliates. Agent shall not
be required to make any inquiry concerning either the performance or
observance of any of the terms, provisions or conditions of this Agreement or
any of the

<PAGE>

other Loan Documents or the financial condition of the REIT, Borrower or any of
their Affiliates, or the existence or possible existence of any Unmatured Event
of Default or Event of Default.

10.6 RELIANCE. Agent shall be entitled to rely upon any written notices,
statements, certificates, orders or other documents, telecopies or any telephone
message believed by it in good faith to be genuine and correct and to have been
signed, sent or made by the proper Person, and with respect to all matters
pertaining to this Agreement or any of the other Loan Documents and its duties
hereunder or thereunder, upon advice of legal counsel (including counsel for
Borrower), independent public accountants and other experts selected by it.

10.7 INDEMNIFICATION. To the extent that Agent is not reimbursed and
indemnified by Borrower, Lenders will reimburse, within ten (10) Business
Days after notice from Agent, and indemnify and defend Agent from and against
any and all Liabilities and Costs which may be imposed on, incurred by, or
asserted against it in any way relating to or arising out of this Agreement,
or any of the other Loan Documents or any action taken or omitted by Agent
under this Agreement, or any of the other Loan Documents, in proportion to
each Lender's Pro Rata Share; PROVIDED that no Lender shall be liable for any
portion of such Liabilities and Costs resulting from Agent's gross negligence
or willful misconduct. The obligations of Lenders under this SECTION 10.7
shall survive the payment in full of all Obligations and the termination of
this Agreement. In the event that after payment and distribution of any
amount by Agent to Lenders, any Lender or third party, including Borrower,
any creditor of Borrower or a trustee in bankruptcy, recovers from Agent any
amount found to have been wrongfully paid to Agent or disbursed by Agent to
Lenders, then Lenders, in proportion to their respective Pro Rata Shares,
shall reimburse Agent for all such amounts. Notwithstanding the foregoing,
Agent shall not be obligated to advance Liabilities and Costs and may require
the deposit by each Lender of its Pro Rata Share of any material Liabilities
and Costs reasonably anticipated by Agent before they are incurred, made or
payable.

<PAGE>

10.8 AGENT INDIVIDUALLY. With respect to its Pro Rata Share of the
Commitment and the Advances made by it, Agent shall have and may exercise the
same rights and powers hereunder and is subject to the same obligations and
liabilities as and to the extent set forth herein for any other Lender. Agent
and any Lender and its Affiliates may accept deposits from, lend money to, and
generally engage in any kind of banking, trust or other business with the REIT,
Borrower or any of their respective Affiliates as if it were not acting as Agent
or Lender pursuant hereto.

10.9 SUCCESSOR AGENT; RESIGNATION OF AGENT; REMOVAL OF AGENT.

(a) Agent may resign from the performance of all its functions and
duties hereunder at any time by giving at least thirty (30) Business Days' prior
written notice to Lenders and Borrower, and shall automatically cease to be
Agent hereunder in the event a petition in bankruptcy shall be filed by or
against Agent or the Federal Deposit Insurance Corporation or any other
Governmental Authority shall assume control of Agent or Agent's interests under
this Agreement and the other Loan Documents. Further, Requisite Lenders (other
than Agent) may remove Agent at any time for good cause by giving at least
thirty (30) Business Days' prior written notice to Agent, Borrower and all other
Lenders. Such resignation or removal shall take effect upon the acceptance by a
successor Agent of appointment pursuant to CLAUSE (b) or (c).

(b) Upon any such notice of resignation by or removal of Agent,
Requisite Lenders shall appoint a successor Agent which appointment shall be
subject to Borrower's consent (other than upon the occurrence and during the
continuance of any Event of Default), which shall not be unreasonably withheld
or delayed. Any successor Agent must be a Lender (i) the senior debt
obligations of which (or such Lender's parent's senior unsecured debt
obligations) are rated not less than Baa-2 by Moody's Investors Service, Inc. or
a comparable rating by a rating agency acceptable to Requisite Lenders and
(ii) which has total assets in excess of Ten Billion Dollars ($10,000,000,000).
Such successor Agent shall separately

<PAGE>

confirm in writing with Borrower the fee to be paid to such Agent pursuant to
SECTION 2.5(c).

(c) If a successor Agent shall not have been so appointed within said
thirty (30) Business Day period, the retiring or removed Agent, with the consent
of Borrower (other than upon the occurrence and during the continuance of any
Event of Default)(which may not be unreasonably withheld or delayed), shall then
appoint a successor Agent who shall meet the requirements described in
SUBSECTION (b) above and who shall serve as Agent until such time, if any, as
Requisite Lenders, with the consent of Borrower (other than upon the occurrence
and during the continuance of any Event of Default), appoint a successor Agent
as provided above.

10.10 CONSENT AND APPROVALS.

(a) In addition to any other term or provision of this Agreement
which requires the consent or approval of, or other action by, Requisite
Lenders, each consent, approval, amendment, modification or waiver specifically
enumerated in this SECTION 10.10(a) shall require the consent of Requisite
Lenders:

(i) Approval of any material amendment of organizational
documents (SECTION 7.2);

(ii) Approval of certain changes in the senior management
(SECTION 7.4);

(iii) Acceleration following an Event of Default (SECTION 9.2(a))
or rescission of such acceleration (SECTION 9.3);

(iv) Approval of the exercise of rights and remedies under the
Loan Documents following an Event of Default (SECTION 9.2(a));

(v) Approval of a change in the method of calculation of any
financial covenants, standards or terms as a result of a change in GAAP
(SECTION 11.3); and

<PAGE>

(vi) Except as referred to in SUBSECTION (b) below, approval of
any amendment, modification or termination of this Agreement, or waiver of
any provision herein.

(b) Each consent, approval, amendment, modification or waiver
specifically enumerated in SECTION 11.4 shall require the consent of all
Lenders.

(c) In addition to the required consents or approvals referred to in
SUBSECTION (a) above, Agent may at any time request instructions from Requisite
Lenders with respect to any actions or approvals which, by the terms of this
Agreement or of any of the Loan Documents, Agent is permitted or required to
take or to grant without instructions from any Lenders and if such instructions
are promptly requested, Agent shall be absolutely entitled to refrain from
taking any action or to withhold any approval and shall not be under any
liability whatsoever to any Person for refraining from taking any action or
withholding any approval under any of the Loan Documents until it shall have
received such instructions from Requisite Lenders. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against Agent as
a result of Agent acting or refraining from acting under this Agreement, or any
of the other Loan Documents in accordance with the instructions of Requisite
Lenders or, where applicable, all Lenders. Agent shall promptly notify each
Lender at any time that the Requisite Lenders have instructed Agent to act or
refrain from acting pursuant hereto.

(d) Each Lender agrees that any action taken by Agent at the
direction or with the consent of Requisite Lenders in accordance with the
provisions of this Agreement or any Loan Document, and the exercise by Agent at
the direction or with the consent of Requisite Lenders of the powers set forth
herein or therein, together with such other powers as are reasonably incidental
thereto, shall be authorized and binding upon all Lenders, except for actions
specifically requiring the approval of all Lenders. All communications from
Agent to Lenders requesting Lenders' determination, consent, approval or
disapproval (i) shall be given in the form of a written notice to each Lender,
(ii) shall be accompanied by a description of

<PAGE>

the matter or thing as to which such determination, approval, consent or
disapproval is requested, or shall advise each Lender where such matter or thing
may be inspected, or shall otherwise describe the matter or issue to be
resolved, (iii) shall include, if reasonably requested by a Lender and to the
extent not previously provided to such Lender, written materials and a summary
of all oral information provided to Agent by Borrower in respect of the matter
or issue to be resolved, and (iv) shall include Agent's recommended course of
action or determination in respect thereof. Each Lender shall reply promptly,
but in any event within ten (10) Business Days (the "Lender Reply Period").
Unless a Lender shall give written notice to Agent that it objects to the
recommendation or determination of Agent (together with a written explanation of
the reasons behind such objection) within the Lender Reply Period, such Lender
shall be deemed to have approved of or consented to such recommendation or
determination and Borrower and each other Lender may rely on such approval as if
given. With respect to decisions requiring the approval of Requisite Lenders or
all Lenders, Agent shall submit its recommendation or determination for approval
of or consent to such recommendation or determination to all Lenders and upon
receiving the required approval or consent shall follow the course of action or
determination recommended to Lenders by Agent or such other course of action
recommended by Requisite Lenders, and each non-responding Lender shall be deemed
to have concurred with such recommended course of action.

10.11 CERTAIN AGENCY PROVISIONS RELATING TO ENFORCEMENT. Should Agent
(i) employ counsel for advice or other representation (whether or not any suit
has been or shall be filed) with respect to any of the Loan Documents, or
(ii) commence any proceeding or in any way seek to enforce its rights or
remedies under the Loan Documents, each Lender, upon demand therefor from time
to time, shall contribute its share (based on its Pro Rata Share) of the
reasonable costs and/or expenses of any such advice or other representation or
enforcement, including, but not limited to, court costs, title company charges,
filing and recording fees, appraisers' fees and fees and expenses of attorneys
to the extent not otherwise reimbursed by Borrower; PROVIDED that Agent shall
not be entitled to reimbursement of its attorneys' fees and expenses

<PAGE>

incurred in connection with the resolution of disputes between Agent and other
Lenders unless Agent shall be the prevailing party in any such dispute. Any
loss of principal and/or interest resulting from any Event of Default shall be
shared by Lenders in accordance with their respective Pro Rata Shares. It is
understood and agreed that in the event Agent determines it is necessary to
engage counsel for Lenders from and after the occurrence of an Event of Default,
said counsel shall be selected by Agent.

10.12 RATABLE SHARING. Subject to SECTIONS 10.3 and 10.4, Lenders agree
among themselves that (i) with respect to all amounts received by them which are
applicable to the payment of the Obligations, equitable adjustment will be made
so that, in effect, all such amounts will be shared among them ratably in
accordance with their Pro Rata Shares, whether received by voluntary payment, by
counterclaim or cross action or by the enforcement of any or all of the
Obligations, (ii) if any of them shall by voluntary payment or by the exercise
of any right of counterclaim or otherwise, receive payment of a proportion of
the aggregate amount of the Obligations held by it which is greater than its Pro
Rata Share of the payments on account of the Obligations, the one receiving such
excess payment shall purchase, without recourse or warranty, an undivided
interest and participation (which it shall be deemed to have done simultaneously
upon the receipt of such payment) in such Obligations owed to the others so that
all such recoveries with respect to such Obligations shall be applied ratably in
accordance with their Pro Rata Shares; PROVIDED, that if all or part of such
excess payment received by the purchasing party is thereafter recovered from it,
those purchases shall be rescinded and the purchase prices paid for such
participations shall be returned to that party to the extent necessary to adjust
for such recovery, but without interest except to the extent the purchasing
party is required to pay interest in connection with such recovery. Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this SECTION 10.12 may, to the fullest extent permitted by law,
exercise all its rights of payment with respect to such participation as fully
as if such Lender were the direct creditor of Borrower in the amount of such
participation. No Lender shall exercise any setoff,

<PAGE>

banker's lien or other similar right in respect to any Obligations without the
prior written approval by Agent.

10.13 DELIVERY OF DOCUMENTS. Agent shall, as soon as reasonably
practicable, distribute to each Lender at its primary address set forth on the
appropriate counterpart signature page hereof, or at such other address as a
Lender may request in writing, (i) copies of all documents to which such Lender
is a party or of which such Lender is a beneficiary, (ii) all documents of which
Agent receives copies from Borrower pursuant to SECTIONS 5.1 and 11.6, (iii) all
other documents or information which Agent is required to send to Lenders
pursuant to the terms of this Agreement, (iv) all other information or documents
received by Agent at the request of any Lender, and (v) all notices received by
Agent pursuant to SECTION 5.2. In addition, within fifteen (15) Business Days
after receipt of a request in writing from a Lender for written information or
documents provided by or prepared by Borrower, the REIT or any Consolidated
Entity, Agent shall deliver such written information or documents to such
requesting Lender if Agent has possession of such written information or
documents in its capacity as Agent or as a Lender.

10.14 NOTICE OF EVENTS OF DEFAULT. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Unmatured Event of Default or Event
of Default (other than nonpayment of principal of or interest on the Advances)
unless Agent has received notice in writing from a Lender or Borrower
describing such event or condition and expressly stating that such notice is a
notice of an Unmatured Event of Default or Event of Default. Should Agent
receive such notice of the occurrence of an Unmatured Event of Default or Event
of Default, or should Agent send Borrower a notice of Unmatured Event of Default
or Event of Default, Agent shall promptly give notice thereof to each Lender.
If any individual employed by any Lender who is responsible for managing, or
otherwise involved in, the relationship between such Lender and the Borrower in
connection with this Agreement or such Lender and the Agent in connection with
this Agreement, has or acquires actual knowledge of an Unmatured Event of
Default or Event of Default, such Lender shall promptly give written notice
thereof to Agent.

<PAGE>

ARTICLE 11

MISCELLANEOUS

11.1 EXPENSES.

(a) GENERALLY. Borrower agrees to pay, or reimburse Agent for,
within seven (7) days after receipt of written demand, all of Agent's external
audit, legal, appraisal, valuation and investigation expenses and for all other
reasonable costs and expenses of every type and nature (including, without
limitation, the fees and charges of outside appraisers and reasonable fees,
expenses and disbursements of Agent's internal appraisers, environmental
advisors or legal counsel) incurred by Agent at any time (whether prior to, on
or after the date of this Agreement) in connection with (i) its own audit and
investigation of Borrower and the REIT; (ii) the negotiation, preparation and
execution of this Agreement (including, without limitation, the satisfaction or
attempted satisfaction of any of the conditions set forth in ARTICLE 3), and the
other Loan Documents and the making of the Advances; (iii) review and
investigation of Real Property which is proposed for inclusion within the
Unencumbered Pool and Unencumbered Assets within the Unencumbered Pool;
(iv) administration of this Agreement, the other Loan Documents and the
Advances, including, without limitation, consultation with attorneys in
connection therewith; (v) syndication of, assignments of and participations in
this Agreement and the other Loan Documents; and (vi) the protection, collection
or enforcement of any of the Obligations.

(b) AFTER EVENT OF DEFAULT. Borrower further agrees to pay, or
reimburse Agent and Lenders, for all reasonable out-of-pocket costs and
expenses, including, without limitation, the reasonable attorneys' fees and
disbursements of one law firm incurred by Agent or Lenders after the occurrence
and during the continuance of an Event of Default (i) in enforcing any
Obligation or exercising or enforcing any other right or remedy available by
reason of such Event of Default; (ii) in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature

<PAGE>

of a "work-out" or in any insolvency or bankruptcy proceeding; (iii) in
commencing, defending or intervening in any litigation or in filing a petition,
complaint, answer, motion or other pleadings in any legal proceeding relating to
Borrower or the REIT and related to or arising out of the transactions
contemplated hereby; or (iv) in taking any other action in or with respect to
any suit or proceeding (whether in bankruptcy or otherwise).

11.2 INDEMNITY. Borrower further agrees to defend, protect, indemnify and
hold harmless Agent, each and all of the Lenders, each of their respective
Affiliates and each of the respective officers, directors, employees, agents,
attorneys and consultants (including, without limitation, those retained in
connection with the satisfaction or attempted satisfaction of any of the
conditions set forth in ARTICLE 3) of each of the foregoing (collectively called
the "Indemnitees") from and against any and all Liabilities and Costs imposed
on, incurred by, or asserted against such Indemnitees (whether based on any
federal or state laws or other statutory regulations, including, without
limitation, securities and commercial laws and regulations, under common law or
in equity, and based upon contract or otherwise, including any liability and
costs arising as a result of a "prohibited transaction" under ERISA to the
extent arising from or in connection with the past, present or future operations
of the REIT or Borrower or their respective predecessors in interest) in any
manner relating to or arising out of this Agreement or the other Loan Documents,
or any act, event or transaction related or attendant thereto, the making of and
participation in the Advances and the management of the Advances, or the use or
intended use of the proceeds of the Advances (collectively, the "Indemnified
Matters"); PROVIDED, HOWEVER, that Borrower shall have no obligation to an
Indemnitee hereunder with respect to (a) matters for which such Indemnitee has
been compensated pursuant to or for which an exemption is provided in
SECTION 2.4(g) or any other provision of this Agreement, and (b) Indemnified
Matters to the extent caused by or resulting from the willful misconduct or
gross negligence of that Indemnitee, as determined by a court of competent
jurisdiction. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it

<PAGE>

is violative of any law or public policy, Borrower shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable law to the
payment and satisfaction of all Indemnified Matters incurred by the Indemnitees.

11.3 CHANGE IN ACCOUNTING PRINCIPLES AND "FUNDS FROM OPERATIONS"
DEFINITION. Except as otherwise provided herein, if any changes in accounting
principles from those used in the preparation of the most recent financial
statements delivered to Agent pursuant to the terms hereof are hereafter
required or permitted by the rules, regulations, pronouncements and opinions of
the Financial Accounting Standards Board or the American Institute of Certified
Public Accountants (or successors thereto or agencies with similar functions)
and are adopted by the REIT or Borrower with the agreement of its Accountants
and such changes result in a change in the method of calculation of any of the
financial covenants, standards or terms found herein, the parties hereto agree
to enter into negotiations in order to amend such provisions so as to equitably
reflect such changes with the desired result that the criteria for evaluating
the financial condition of the REIT and the Consolidated Entities shall be the
same after such changes as if such changes had not been made; PROVIDED, HOWEVER,
that no change in GAAP that would affect the method of calculation of any of the
financial covenants, standards or terms shall be given effect in such
calculations until such provisions are amended, in a manner satisfactory to
Requisite Lenders, to so reflect such change in accounting principles. The
definition of "Funds from Operations" set forth in Article 1 is based upon the
definition of "Funds From Operations" promulgated by the National Association of
Real Estate Investment Trusts and effective as of January 1, 1996 (the "NAREIT
Definition"). If the NAREIT Definition is modified after the date of this
Agreement, the parties hereto agree to enter into negotiations if any party so
requests in order to amend the definition of "Funds from Operations" set forth
in this Agreement to make it consistent with the modified NAREIT Definition;
PROVIDED, HOWEVER, that no change in such definition of "Funds from Operations"
shall be given effect until such definition is amended, in a manner satisfactory
to Requisite Lenders, to so reflect such modification in the NAREIT Definition
of "Funds From Operations"; and PROVIDED FURTHER, HOWEVER, that if the

<PAGE>

effect of such change in the definition of "Funds from Operations" is to
restrict the amount of distributions permitted under this Agreement to amounts
less than what are required to maintain the REIT's status as a real estate
investment trust under the Code, then Borrower shall be permitted to make the
minimum distribution necessary to maintain the REIT's status as a real estate
investment trust under the Code so long as such distribution would have been
permitted under the "Funds from Operations" definition in effect as of the
Closing Date.

11.4 AMENDMENTS AND WAIVERS. (a) No amendment or modification of any
provision of this Agreement shall be effective without the written agreement of
Requisite Lenders (after notice to all Lenders) and Borrower (except for
amendments to SECTION 10.4(a) which do not require the consent of Borrower), and
(b) no termination or waiver of any provision of this Agreement, or consent to
any departure by Borrower therefrom (except as expressly provided in
SECTION 2.4(e) with respect to waivers of late fees), shall in any event be
effective without the written concurrence of Requisite Lenders (after notice to
all Lenders), which Requisite Lenders shall have the right to grant or withhold
at their sole discretion, EXCEPT THAT the following amendments, modifications or
waivers shall require the consent of all Lenders:

(i) increasing the Commitment and/or any Lender's Pro Rata Share
of the Commitment;

(ii) changing the principal amount or final maturity of the
Advances or otherwise changing the Maturity Date;

(iii) reducing the interest rates applicable to the Advances;

(iv) reducing the rates on which fees payable pursuant hereto are
determined;

(v) forgiving or delaying any amount payable or receivable under
ARTICLE 2 (other than late fees in accordance with SECTION 2.4(e));

<PAGE>

(vi) changing the definition of "Requisite Lenders" or "Pro Rata
Shares";

(vii) changing any provision contained in this SECTION 11.4;

(viii) releasing any obligor under any Loan Document, unless such
release is otherwise required or permitted by the terms of this Agreement;

(ix) amending or otherwise modifying the Guaranty; or

(x) consenting to assignment by Borrower of all of its duties
and Obligations hereunder pursuant to SECTION 11.14.

No amendment, modification, termination or waiver of any provision of ARTICLE 10
or any other provision referring to Agent shall be effective without the written
concurrence of Agent, but only if such amendment, modification, termination or
waiver alters the obligations or rights of Agent. Any waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which it was given. No notice to or demand on Borrower in any case shall
entitle Borrower to any other further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this SECTION 11.4 shall be binding on each assignee,
transferee or recipient of Agent's or any Lender's Pro Rata Share of the
Commitment under this Agreement or the Advances at the time outstanding.
Borrower shall be entitled to rely on any amendment or waiver executed by the
Agent on behalf of the Lenders provided that Agent certifies to Borrower that
Agent obtained the approvals or consents required under this Agreement of
Requisite Lender or all Lenders, as the case may be.

11.5 INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not

<PAGE>

avoid the occurrence of an Event of Default or Unmatured Event of Default if
such action is taken or condition exists, and if a particular action or
condition is expressly permitted under any covenant, unless expressly limited to
such covenant, the fact that it would not be permitted under the general
provisions of another covenant shall not constitute an Event of Default or
Unmatured Event of Default if such action is taken or condition exists.

11.6 NOTICES AND DELIVERY. Unless otherwise specifically provided herein,
any consent, notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telecopied or sent by
courier service or United States mail and shall be deemed to have been given
when delivered in person or by courier service, upon receipt of a telecopy (or
on the next Business Day if such telecopy is received on a non-Business Day or
after 5:00 p.m. on a Business Day) or four (4) Business Days after deposit in
the United States mail (registered or certified, with postage prepaid and
properly addressed). Notices to Agent pursuant to ARTICLE 2 shall not be
effective until received by Agent. For the purposes hereof, the addresses of
the parties hereto (until notice of a change thereof is delivered as provided in
this SECTION 11.6) shall be as set forth below each party's name on the
signature pages hereof, or, as to each party, at such other address as may be
designated by such party in a written notice to all of the other parties. All
deliveries to be made to Agent for distribution to the Lenders shall be made to
Agent at the address specified for notice on the signature page hereto and in
addition, a sufficient number of copies of each such delivery shall be delivered
to Agent for delivery to each Lender at the address specified for deliveries on
the signature page hereto or such other address as may be designated by Agent in
a written notice.

11.7 SURVIVAL OF WARRANTIES, INDEMNITIES AND AGREEMENTS. All agreements,
representations, warranties and indemnities made or given herein shall survive
the execution and delivery of this Agreement and the other Loan Documents and
the making and repayment of the Advances hereunder and such indemnities shall
survive termination hereof.

<PAGE>

11.8 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or
delay on the part of Agent or any Lender in the exercise of any power, right or
privilege under any of the Loan Documents shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or of any other right, power or
privilege. All rights and remedies existing under the Loan Documents are
cumulative to and not exclusive of any rights or remedies otherwise available.

11.9 PAYMENTS SET ASIDE. To the extent that Borrower makes a payment or
payments to Agent or the Lenders, or Agent or the Lenders exercise their rights
of setoff, and such payment or payments or the proceeds of such setoff or any
part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside and/or required to be repaid to a trustee, receiver or
any other party under any bankruptcy law, state or federal law, common law or
equitable cause, then to the extent of such recovery, the Obligation or part
thereof originally intended to be satisfied, and all rights and remedies
therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such setoff had not occurred.

11.10 SEVERABILITY. In case any provision in or obligation under this
Agreement or the other Loan Documents shall be invalid, illegal or unenforceable
in any jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby, PROVIDED,
HOWEVER, that if the rates of interest or any other amount payable hereunder, or
the collectibility thereof, are declared to be or become invalid, illegal or
unenforceable, Lenders' obligations to make Advances shall not be enforceable.

11.11 HEADINGS. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.

<PAGE>

11.12 GOVERNING LAW; WAIVER. THIS AGREEMENT SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA.

11.13 LIMITATION OF LIABILITY. To the extent permitted by applicable law,
no claim may be made by Borrower, any Lender or any other Person against Agent
or any Lender, or the affiliates, directors, officers, employees, attorneys or
agents of any of them, for any special, indirect, consequential or punitive
damages in respect of any claim for breach of contract or any other theory of
liability arising out of or related to the transactions contemplated by this
Agreement, or any act, omission or event occurring in connection therewith; and
Borrower and each Lender hereby waive, release and agree not to sue upon any
claim for any such damages, whether or not accrued and whether or not known or
suspected to exist in its favor.

11.14 SUCCESSORS AND ASSIGNS. This Agreement and the other Loan Documents
shall be binding upon the parties hereto and their respective successors and
assigns and shall inure to the benefit of the parties hereto and the successors
and permitted assigns of Agent and Lenders. The terms and provisions of this
Agreement shall inure to the benefit of any permitted assignee or transferee of
the Advances and the Pro Rata Shares of the Commitment of the Lenders under this
Agreement, and in the event of such transfer or assignment, the rights and
privileges herein conferred upon Agent and Lenders shall automatically extend to
and be vested in such transferee or assignee, all subject to the terms and
conditions hereof. Borrower's rights and interests hereunder and under the
other Loan Documents, and Borrower's duties and Obligations hereunder and under
the other Loan Documents, shall not be assigned or otherwise transferred without
the consent of all Lenders.

11.15 CONSENT TO JURISDICTION AND SERVICE OF PROCESS; WAIVER OF JURY
TRIAL. ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST BORROWER WITH RESPECT TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT MAY BE, AND ALL JUDICIAL PROCEEDINGS
BROUGHT BY BORROWER WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
SHALL BE, BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION HAVING
SITUS WITHIN THE BOUNDARIES OF THE FEDERAL COURT DISTRICT OF THE SOUTHERN
DISTRICT OF

<PAGE>

CALIFORNIA, AND BY EXECUTION AND DELIVERY OF THIS AGREEMENT, BORROWER ACCEPTS,
FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY,
THE JURISDICTION OF THE AFORESAID COURTS, AND IRREVOCABLY AGREES TO BE BOUND BY
ANY FINAL JUDGMENT RENDERED THEREBY FROM WHICH NO APPEAL HAS BEEN TAKEN OR IS
AVAILABLE. BORROWER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OF ANY OF
THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, TO ITS NOTICE
ADDRESS SPECIFIED ON THE SIGNATURE PAGES HEREOF. BORROWER, AGENT AND LENDERS
IRREVOCABLY WAIVE (A) TRIAL BY JURY IN ANY ACTION OR PROCEEDING WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, AND (B) ANY OBJECTION (INCLUDING
WITHOUT LIMITATION, ANY OBJECTION OF THE LAYING OF VENUE OR BASED ON THE GROUNDS
OF FORUM NON CONVENIENS) WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF
ANY SUCH ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT IN ANY JURISDICTION SET FORTH ABOVE. NOTHING HEREIN SHALL AFFECT THE
RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT OF AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST BORROWER IN THE COURTS
OF ANY OTHER JURISDICTION.

11.16 COUNTERPARTS; EFFECTIVENESS; INCONSISTENCIES. This Agreement and
any amendments, waivers, consents or supplements hereto may be executed in
counterparts, each of which when so executed and delivered shall be deemed an
original, but all of which, taken together, shall constitute but one and the
same instrument. This Agreement shall become effective when (i) Borrower, the
initial Lenders and Agent have duly executed and delivered signature pages of
this Agreement to each other (delivery by Borrower to Lenders and by any Lender
to Borrower and any other Lender being deemed to have been made by delivery to
Agent) and (ii) Agent has received all fees due under its separate agreement
with Borrower. Agent shall send written confirmation of the Closing Date to
Borrower and each other Lender promptly following the occurrence thereof. This
Agreement and each of the other Loan Documents shall be construed to the extent
reasonable to be consistent one with the other, but to the extent that the terms
and conditions of this Agreement are actually and directly inconsistent with the

<PAGE>

terms and conditions of any other Loan Document, this Agreement shall govern.

11.17 PERFORMANCE OF OBLIGATIONS. Borrower agrees that Agent may, but
shall have no obligation to, make any payment or perform any act required of
Borrower under any Loan Document which Borrower has failed to make or do.

11.18 CONSTRUCTION. The parties to this Agreement acknowledge that each
party and its counsel have reviewed and revised this Agreement and that the
normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Agreement or any amendments or exhibits hereto.

11.19 ENTIRE AGREEMENT. This Agreement, taken together with all of the
other Loan Documents and all certificates and other documents delivered by
Borrower to Agent, embodies the entire agreement and supersede all prior
agreements, written and oral, relating to the subject matter hereof.

11.20 ASSIGNMENTS AND PARTICIPATIONS.

(a) After first obtaining the approval of Agent and Borrower (other
than upon the occurrence and during the continuance of any Event of Default),
which approval shall not be unreasonably withheld, each Lender may assign to one
or more banks or financial institutions, all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Pro Rata Share of the Commitment and the Advances owing to it)
and the other Loan Documents; PROVIDED, HOWEVER, that (i) each such assignment
shall be of a constant, and not a varying, percentage of the assigning Lender's
rights and obligations under this Agreement and the other Loan Documents, and
such percentage of the assigning Lender's rights and obligations shall be the
same percentage with respect to both such Lender's Pro Rata Share of the
Commitment and Advances, (ii) the aggregate amount of the Pro Rata Share of the
Commitment of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Assumption with
respect to such assignment) shall in no event be less than Ten Million Dollars

<PAGE>

($10,000,000) and shall be an integral multiple of One Million Dollars
($1,000,000), (iii) the parties to each such assignment shall execute and
deliver to Agent, for its approval and acceptance, an Assignment and Assumption,
and (iv) Agent shall receive from the assignor a processing fee of Three
Thousand Dollars ($3,000). Without restricting the right of Borrower or Agent
to reasonably object to any bank or financial institution becoming an assignee
of an interest of a Lender hereunder, each proposed assignee must be an existing
Lender or a bank or financial institution which (A) has (or, in the case of a
bank which is a subsidiary, such bank's parent has) a rating of its senior
unsecured debt obligations of not less than Baa-2 by Moody's Investors Service,
Inc. or a comparable rating by a rating agency acceptable to Agent and (B) has
total assets in excess of Ten Billion Dollars ($10,000,000,000). Unless Agent
or Borrower gives written notice to the assigning Lender that it objects to the
proposed assignment (together with a written explanation of the reasons behind
such objection) within ten (10) Business Days following receipt of the assigning
Lender's written request for approval of the proposed assignment, Agent or
Borrower, as the case may be, shall be deemed to have approved such assignment.
Upon such execution, delivery, approval and acceptance, and upon the effective
date specified in the applicable Assignment and Assumption, (X) the assignee
thereunder shall be a party hereto and, to the extent that rights and
obligations hereunder have been assigned to it pursuant to such Assignment and
Assumption, have the rights and obligations of a Lender hereunder, and (Y) the
assigning Lender thereunder shall, to the extent that rights and obligations
hereunder have been assigned by it pursuant to such Assignment and Assumption,
relinquish its rights and be released from its obligations under this Agreement.

(b) By executing and delivering an Assignment and Assumption, the
assigning Lender thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Assumption, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document or the execution, legality, validity,
enforceability,

<PAGE>

genuineness, sufficiency or value of this Agreement or any other Loan Document
or any other instrument or document furnished pursuant hereto; (ii) such
assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the REIT or Borrower
or the performance or observance by the REIT or Borrower of any of their
respective obligations under any Loan Document or any other instrument or
document furnished pursuant hereto; (iii) such assignee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in ARTICLE 4 or delivered pursuant to ARTICLE 5 to the
date of such assignment and such other Loan Documents and other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Assumption; (iv) such assignee will,
independently and without reliance upon Agent, such assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee appoints and
authorizes Agent to take such action as Agent on its behalf and to exercise such
powers under this Agreement and the other Loan Documents as are delegated to
Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.

(c) Agent shall maintain, at its address referred to on the
counterpart signature pages hereof, a copy of each Assignment and Assumption
delivered to and accepted by it and shall record in the Loan Account the names
and addresses of each Lender and the Pro Rata Share of the Commitment of, and
principal amount of the Advances owing to, such Lender from time to time.
Borrower, Agent and Lenders may treat each Person whose name is recorded in the
Loan Account as a Lender hereunder for all purposes of this Agreement.

(d) Upon its receipt of an Assignment and Assumption executed by an
assigning Lender and an assignee approved by Agent and Borrower as provided in
SECTION 11.20(a), Agent

<PAGE>

shall, if such Assignment and Assumption has been properly completed and is in
substantially the form of EXHIBIT A, (i) accept such Assignment and Assumption,
(ii) record the information contained therein in the Loan Account, and
(iii) give prompt notice thereof to Borrower. Upon request, Borrower will
execute and deliver to Agent an appropriate replacement promissory note or
replacement promissory notes in favor of each assignee (and assignor, if such
assignor is retaining a portion of its Pro Rata Share of the Commitment and
Advances) reflecting such assignee's (and assignor's) Pro Rata Share of the
Commitment. Upon execution and delivery of such replacement promissory note(s)
the original promissory note or notes evidencing all or a portion of the
Pro Rata Share of the Commitment and Advances being assigned shall be canceled
and returned to Borrower.

(e) Each Lender may sell participations to one or more banks or other
financial institutions in or to all or a portion of its rights and obligations
under this Agreement without the consent of any other party to this Agreement
(including, without limitation, all or a portion of its Pro Rata Share of the
Commitment and the Advances owing to it) and the other Loan Documents; PROVIDED,
HOWEVER, that (i) such Lender's obligations under this Agreement (including,
without limitation, its obligation to fund its Pro Rata Share of the Commitment
to Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) the participating banks or other financial institutions shall
not be a Lender hereunder for any purpose, (iv) Borrower, Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement and
with regard to any and all payments to be made under this Agreement, (v) the
participation interest shall be expressed as a percentage of the granting
Lender's Pro Rata Share of the Commitment as it then exists and shall not
restrict an increase in the Commitment, or in the granting Lender's Pro Rata
Share of the Commitment, so long as the amount of the participation interest is
not affected thereby and (vi) the consent of the holder of such participation
interest shall not be required for amendments or waivers of provisions of the
Loan Documents and

<PAGE>

the holder of any such participation shall not be entitled to voting rights
under their participation agreement except for voting rights with respect to
(A) extensions of the Maturity Date; or (B) decreases in the interest rates or
fees described in this Agreement.

(f) Borrower will use reasonable efforts to cooperate with Agent and
Lenders in connection with the assignment of interests under this Agreement or
the sale of participations herein.

(g) Anything in this Agreement to the contrary notwithstanding, and
without the need to comply with any of the formal or procedural requirements of
this Agreement, including SECTION 11.20, any Lender may at any time and from
time to time pledge and assign all or any portion of its rights under all or any
of the Loan Documents to a Federal Reserve Bank; PROVIDED that no such pledge or
assignment shall release such Lender from its obligations thereunder. To
facilitate any such pledge or assignment, Agent shall, at the request of such
Lender, enter into a letter agreement with the Federal Reserve Bank in
substantially the form of the exhibit to Appendix C to the Federal Reserve Bank
of New York Operating Circular No. 12.

(h) Anything in this Agreement to the contrary notwithstanding, any
Lender may assign all or any portion of its rights and obligations under this
Agreement to another branch or Affiliate of such Lender without first obtaining
the approval of Agent and Borrower, PROVIDED that (i) at the time of such
assignment such Lender is not a Defaulting Lender, (ii) such Lender gives Agent
and Borrower at least fifteen (15) days' prior written notice of any such
assignment, (iii) the parties to each such assignment execute and deliver to
Agent an Assignment and Assumption, and (iv) Agent receives from assignor a
processing fee of Three Thousand Dollars ($3,000).

(i) No assignee of any rights and obligations under this Agreement
shall be permitted to subassign such rights and obligations.

<PAGE>

(j) No Lender shall be permitted to assign or sell all or any portion
of its rights and obligations under this Agreement to Borrower or any Affiliate
of Borrower.

(k) The dissemination or disclosure by any Lender to any prospective
assignee or participant of any confidential information obtained by Agent or the
Lenders pursuant to this Agreement or in connection with the Advances is subject
to the terms of SECTION 5.3.

(l) Wells Fargo agrees that, so long as Wells Fargo is the Agent
under this Agreement, it will not assign all or any portion of its rights and
obligations under this Agreement if, after giving effect to such assignment or
sale, Wells

<PAGE>

Fargo's Pro Rata Share of the Commitment would be less than that of
any other Lender.

IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date set forth above.

BORROWER: ARDEN REALTY LIMITED
PARTNERSHIP, a Maryland limited
partnership

By: ARDEN REALTY, INC.,
a Maryland corporation,
Its sole general partner

By ______________________
Diana Laing
Its Chief Financial Officer

ADDRESS FOR NOTICE AND DELIVERY:

Arden Realty Limited Partnership
9100 Wilshire Boulevard, Suite 700
Beverly Hills, CA 90212
Attention: Ms. Diana Laing

Tel: (310) 271-8600
Fax: (310) 274-6218

<PAGE>

AGENT: WELLS FARGO BANK, NATIONAL ASSOCIATION,
as Agent

By _____________________________
Andrew Downs
Its Vice President

ADDRESS FOR NOTICE AND DELIVERY:

Wells Fargo Bank, N.A.
Real Estate Group
MAC 2064-129
333 South Grand Avenue, 12th Floor
Los Angeles, California 90071
Attention: Mr. Andrew Downs

Tel: (213) 253-7344
Fax: (213) 620-1460

<PAGE>

LENDERS: WELLS FARGO BANK, NATIONAL ASSOCIATION,
as a Lender

By _____________________________
Andrew Downs
Its Vice President

ADDRESS FOR NOTICE AND DELIVERY:

Wells Fargo Bank, N.A.
Real Estate Group
MAC 2064-129
333 South Grand Avenue, 12th Floor
Los Angeles, California 90071
Attention: Mr. Andrew Downs

Tel: (213) 253-7344
Fax: (213) 620-1460

LIBOR OFFICE:

Real Estate Group Disbursement Center
2120 East Park Place, Suite 100
El Segundo, California 90245
Attention: Ms. Ann Colvin

Tel: (310) 335-9458
Fax: (310) 615-1014

<PAGE>

COMMERZBANK AG,
LOS ANGELES BRANCH

By _____________________________

Its _________________________

By _____________________________

Its _________________________

ADDRESS FOR NOTICE AND DELIVERY:

633 West Fifth Street, Suite 6600
Los Angeles, CA 90071
Attention: Steven F. Larsen

Tel: (213) 623-8223
Fax: (213) 623-0039

LIBOR OFFICE:

633 West Fifth Street, Suite 6600
Los Angeles, CA 90071
Attention: Steven F. Larsen

Tel: (213) 623-8223
Fax: (213) 623-0039

<PAGE>

DRESDNER BANK AG,
New York Branch and
Grand Cayman Branch

By _____________________________

Its _________________________

By _____________________________

Its _________________________

ADDRESS FOR NOTICE AND DELIVERY:

Dresdner Bank AG
333 South Grand Avenue, Suite 1700
Los Angeles, CA 90071
Attention: Mr. Vitol Wiacek

Tel: (213) 473-5422
Fax: (213) 473-5450

LIBOR OFFICE:

75 Wall Street
New York, NY 10005
Attention: Mr. Robert Reddington

Tel: (212) 429-2269
Fax: (212) 429-2130

<PAGE>

KEYBANK NATIONAL ASSOCIATION

By _____________________________

Its _________________________

ADDRESS FOR NOTICE AND DELIVERY:

KeyBank National Association
127 Public Square, 6th Floor
Cleveland, OH 44112-1306
Attention: Mr. Michael D. Mitro

Tel: (216) 689-4845
Fax: (216) 689-3566

LIBOR OFFICE:

127 Public Square
Cleveland, OH 44112-1306
Attention: Ms. Joyce Fields

Tel: (216) 689-4429
Fax: (216) 689-3566

<PAGE>

MANUFACTURERS BANK

By _____________________________

Its _________________________

ADDRESS FOR NOTICE AND DELIVERY:

Manufacturers Bank
515 South Figueroa Street
Suite 1230
Los Angeles, CA 90071
Attention: Mr. Dana L. Morken

Tel: (213) 489-8841
Fax: (213) 489-6244

LIBOR OFFICE:

515 South Figueroa Street, Suite 1230
Los Angeles, CA 90071
Attention: Ms. Maureen Chin-Lau

Tel: (213) 489-8837
Fax: (213) 489-6244

<PAGE>

THE FIRST NATIONAL BANK OF CHICAGO

By _____________________________

Its _________________________

ADDRESS FOR NOTICE AND DELIVERY:

The First National Bank of Chicago
One First National Plaza
Suite 0151
Chicago, IL 60670-0151
Attention: Mr. Kevin L. Gillen

Tel: (312) 732-1486
Fax: (312) 732-1117

LIBOR OFFICE:

One First National Plaza, Suite 0318
Chicago, IL 60670
Attention: Ms. Maria Torres
Mr. Bob Rodzon

Tel: (312) 732-7825 or 732-5097
Fax: (312) 732-1582

<PAGE>

PNC BANK, NATIONAL ASSOCIATION

By _____________________________

Its _________________________

ADDRESS FOR NOTICE AND DELIVERY:

PNC Bank, National Association
Real Estate Banking, 19th Floor
PI-POPP-19-2
One PNC Plaza
249 Fifth Avenue
Pittsburgh, PA 15222-2707
Attention: Mr. David C. Martens

Tel: (412) 762-8597
Fax: (412) 762-6500

LIBOR OFFICE:

249 Fifth Avenue, PI-POPP-19-2
Pittsburgh, PA 15222
Attention: Ms. Jan Dotchin

Tel: (412) 762-3986
Fax: (412) 762-6500

<PAGE>

CHASE MANHATTAN BANK,
a New York banking corporation,
as a Lender and as a Co-Agent

By _____________________________

Its _________________________

By _____________________________

Its _________________________

ADDRESS FOR NOTICE AND DELIVERY:

Chase Manhattan Bank
c/o Chase National Corporate
Services Inc.
200 South Grand Avenue
4th Floor
Los Angeles, CA 90071
Attention: Mr. Paul M. LeBeau

Tel: (213) 621-8204
Fax: (213) 621-8207

LIBOR OFFICE:

Chase Manhattan Bank
380 Madison Avenue, 10th Floor
New York, NY 10017
Attention: Ms. Elena Gillcrist

Tel: (212) 622-3319
Fax: (212) 622-3395

<PAGE>

LEHMAN BROTHERS REALTY CORPORATION,
a Delaware corporation,
as a Lender and as a Co-Agent

By _____________________________

Its _________________________

ADDRESS FOR NOTICE AND DELIVERY:

Lehman Brothers Realty Corporation
3 World Financial Center
200 Vesey Street, 12th Floor
New York, NY 10285
Attention: Ms. Allyson Bailey

Tel: (212) 526-5849
Fax: (212) 526-5484

LIBOR OFFICE:

Lehman Brothers Realty Corporation
101 Hudson Street, 30th Floor
Jersey City, NJ 07302

Tel: (201) 524-4494
Fax: (201) 524-4439

<PAGE>

SIGNET BANK, a Virginia corporation

By _____________________________

Its _________________________

By _____________________________

Its _________________________

ADDRESS FOR NOTICE AND DELIVERY:

Signet Bank
7799 Leesburg Pike
Falls Church, VA 22043
Attention: Mr. Theron Smith

Tel: (703) 714-5142
Fax: (703) 506-0284

LIBOR OFFICE:

Signet Bank
7799 Lessburg Pike
Falls Church, VA 22043
Attention: Ms. Nancy Richards

Tel: (703) 714-5201
Fax: (703) 506-0284

<PAGE>

BANKERS TRUST COMPANY,
a New York banking corporation

By _____________________________

Its _________________________

By _____________________________

Its _________________________

ADDRESS FOR NOTICE AND DELIVERY:

Bankers Trust Company
130 Liberty Street
25th Floor
New York, NY 10006
Attention: Ms. Kathleen McCabe

Tel: (212) 250-4241
Fax: (212) 669-0790

LIBOR OFFICE:

Bankers Trust Company
130 Liberty Street
14th Floor
New York, NY 10006
Attention: Ms. Aileen Mosier

Tel: (212) 250-6968
Fax: (212) 250-7351

<PAGE>

FLEET NATIONAL BANK

By _____________________________

Its _________________________

ADDRESS FOR NOTICE AND DELIVERY:

Fleet National Bank
111 Westminster Street
Suite 800 - RIM0215
Providence, RI 02903
Attention: Mr. Randy Myrick

Tel: (401) 278-3745
Fax: (401) 278-5166

LIBOR OFFICE:

111 Westminster Street, Suite 800
Providence, RI 02906
Attention: Ms. Carol Rooney

Tel: (401) 278-3949
Fax: (401) 278-5166

<PAGE>

LOAN AGREEMENT

by and between

ARDEN REALTY FINANCE PARTNERSHIP, L.P.,

AS BORROWER,

and

LEHMAN BROTHERS REALTY CORPORATION

AS LENDER

Dated as of June 11, 1997

$175,000,000

<PAGE>

TABLE OF CONTENTS

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1. DEFINITIONS AND REFERENCES. . . . . . . . . . . . . . . . . . . . . . 1
1.1. Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Definitions Incorporated by Reference . . . . . . . . . . . . . .20
1.3. Other Definitional Provisions . . . . . . . . . . . . . . . . . .20
2. THE LOAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
2.1. Making the Loan . . . . . . . . . . . . . . . . . . . . . . . . .20
2.2. Mortgage Note . . . . . . . . . . . . . . . . . . . . . . . . . .20
2.3. Use of Loan Proceeds. . . . . . . . . . . . . . . . . . . . . . .21
2.4. Payment of Principal and Interest . . . . . . . . . . . . . . . .21
2.5. Defeasance. . . . . . . . . . . . . . . . . . . . . . . . . . . .24
2.6. Release of Property . . . . . . . . . . . . . . . . . . . . . . .26
2.7. Partial Release in Connection with a Casualty or
Taking before Defeasance Period . . . . . . . . . . . . . . . . .26
2.8. Release of All the Properties during Defeasance Period. . . . . .27
2.9. Release of Individual Mortgaged Properties During the
Defeasance Period . . . . . . . . . . . . . . . . . . . . . . . .27
2.10. Partial Release after Defeasance Period. . . . . . . . . . . . .28
2.11. Yield Maintenance. . . . . . . . . . . . . . . . . . . . . . . .29
2.11.1. . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
2.11.2. . . . . . . . . . . . . . . . . . . . . . . . . . . . .29
2.12. Successor Borrower . . . . . . . . . . . . . . . . . . . . . . .30
3. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . .30
3.1. Organization and Power of Borrower and General Partner. . . . . .30
3.2. Due Authorization and Execution . . . . . . . . . . . . . . . . .31
3.3. No Consents Required; No Contravention. . . . . . . . . . . . . .31
3.4. Title to Properties . . . . . . . . . . . . . . . . . . . . . . .32
3.5. Management Agreement. . . . . . . . . . . . . . . . . . . . . . .32
3.6. Leases. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
3.7. Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
3.8. No Violations . . . . . . . . . . . . . . . . . . . . . . . . . .33
3.9. Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . .33
3.10. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . .34
3.11. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . .34
3.12. Regulation U . . . . . . . . . . . . . . . . . . . . . . . . . .34
3.13. Investment Company Act . . . . . . . . . . . . . . . . . . . . .34
3.14. Transactions with Affiliates . . . . . . . . . . . . . . . . . .34
3.15. Business Purpose; Non-Subordination. . . . . . . . . . . . . . .35
3.16. Permits and Licenses . . . . . . . . . . . . . . . . . . . . . .35
3.17. Patents and Trademarks . . . . . . . . . . . . . . . . . . . . .35
3.18. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . .35
3.19. ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
3.20. No Notice of Non-Compliance. . . . . . . . . . . . . . . . . . .36

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3.21. Compliance With Laws . . . . . . . . . . . . . . . . . . . . . .36
3.22. Compliance with Environmental Laws . . . . . . . . . . . . . . .36
3.23. Concerning Mortgaged Properties; Financial Statements. . . . . .36
3.24. Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
3.25. No Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
3.26. Accuracy of Information. . . . . . . . . . . . . . . . . . . . .37
3.27. Mortgage and Security Interests. . . . . . . . . . . . . . . . .38
3.28. Assignment of Leases and Rents . . . . . . . . . . . . . . . . .38
3.29. Foreign Person . . . . . . . . . . . . . . . . . . . . . . . . .38
3.30. No Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . .38
3.31. No Fraudulent Conveyance . . . . . . . . . . . . . . . . . . . .38
4. CLOSING; CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . .39
4.1. Representations, Warranties and Covenants . . . . . . . . . . . .39
4.2. Borrower's Actions. . . . . . . . . . . . . . . . . . . . . . . .39
4.3. Delivery of Documents . . . . . . . . . . . . . . . . . . . . . .39
4.3.1. 40
4.3.2. 40
4.3.3. 41
4.3.4. 41
4.3.5. 41
4.3.6. 41
4.3.7. 41
4.3.8. 42
4.3.9. 42
4.3.10. . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
4.3.11. . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
4.3.12. . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
4.3.13. . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
4.3.14. . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
4.3.15. . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
4.3.16. . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
4.3.17. . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
4.3.18. . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
4.3.19. . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
4.3.20. . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
4.3.21. . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
4.4. Evidence of Authorization; Related Documents. . . . . . . . . . .44
4.4.1. 44
4.4.2. 45
4.4.3. 45
4.5. Closing Certificate . . . . . . . . . . . . . . . . . . . . . . .45
4.6. Management Agreement. . . . . . . . . . . . . . . . . . . . . . .45
4.7. Existing Debt . . . . . . . . . . . . . . . . . . . . . . . . . .45
4.8. Payment of Lender Costs and Origination Fee . . . . . . . . . . .45
4.9. Independent Directors . . . . . . . . . . . . . . . . . . . . . .45

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4.10. Reserve Requirement. . . . . . . . . . . . . . . . . . . . . . .46
5. AFFIRMATIVE COVENANTS . . . . . . . . . . . . . . . . . . . . . . . .46
5.1. Timely Payment of Amounts Due . . . . . . . . . . . . . . . . . .46
5.2. Proceeds of the Loan. . . . . . . . . . . . . . . . . . . . . . .46
5.3. Management Agreement; Ground Leases . . . . . . . . . . . . . . .46
5.3.1. 46
5.3.2. Substitute Manager. . . . . . . . . . . . . . . . . . . .48
5.4. Financial and Other Information . . . . . . . . . . . . . . . . .49
5.4.1. Quarterly Financial Statements. . . . . . . . . . . . . .49
5.4.2. Borrower's Annual Financial Statements. . . . . . . . . .49
5.4.3. Budgets . . . . . . . . . . . . . . . . . . . . . . . . .50
5.4.4. Property Operating Statistics . . . . . . . . . . . . . .50
5.4.5. Certificates Regarding Defaults . . . . . . . . . . . . .50
5.4.6. Proposed Amendments to Partnership Agreement. . . . . . .50
5.4.7. Environmental Conditions. . . . . . . . . . . . . . . . .51
5.4.8. Evidence of Tax Payments. . . . . . . . . . . . . . . . .51
5.5. Maintenance of Existence, Etc.. . . . . . . . . . . . . . . . . .51
5.6. Compliance with Applicable Laws . . . . . . . . . . . . . . . . .51
5.7. Maintenance of Books; Inspection of Properties and Books. . . . .52
5.8. Notice of Litigation; Disputes. . . . . . . . . . . . . . . . . .52
5.9. Mortgaged Property Operations; Maintenance. . . . . . . . . . . .52
5.10. Separate Existence . . . . . . . . . . . . . . . . . . . . . . .53
5.11. Cash Management. . . . . . . . . . . . . . . . . . . . . . . . .53
5.12. Independent Director . . . . . . . . . . . . . . . . . . . . . .53
5.13. Reserve Requirement. . . . . . . . . . . . . . . . . . . . . . .54
6. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . .54
6.1. Limitation on Indebtedness. . . . . . . . . . . . . . . . . . . .54
6.2. Limitation on Liens . . . . . . . . . . . . . . . . . . . . . . .54
6.3. Merger or Consolidation; Permitted Reorganization . . . . . . . .54
6.4. Single Purpose. . . . . . . . . . . . . . . . . . . . . . . . . .55
6.5. Amendments to Agreements. . . . . . . . . . . . . . . . . . . . .55
6.5.1. 55
6.5.2. 56
6.6. Distributions . . . . . . . . . . . . . . . . . . . . . . . . . .56
6.7. Permitted Transfers . . . . . . . . . . . . . . . . . . . . . . .56
7. EVENTS OF DEFAULT . . . . . . . . . . . . . . . . . . . . . . . . . .56
7.1. Default; an Event of Default. . . . . . . . . . . . . . . . . . .56
7.1.1. 56
7.1.2. 56
7.1.3. 56
7.1.4. 57
7.1.5. 57
7.1.6. 57
7.1.7. 57
7.1.8. 58

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7.1.9. 58
7.1.10. . . . . . . . . . . . . . . . . . . . . . . . . . . . .58
7.1.11. . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
7.1.12. . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
7.1.13. . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
7.1.14. . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
7.1.15. . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
7.2. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . .59
7.2.1. 59
7.2.2. 60
7.2.3. 60
7.2.4. 60
7.3. Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . .60
7.4. Default Interest. . . . . . . . . . . . . . . . . . . . . . . . .61
7.5. Default Indemnity . . . . . . . . . . . . . . . . . . . . . . . .61
8. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
8.1. Maintenance of Insurance. . . . . . . . . . . . . . . . . . . . .61
8.2. Payment and Application of Insurance Proceeds . . . . . . . . . .61
8.3. Earthquake Insurance. . . . . . . . . . . . . . . . . . . . . . .62
9. SECURITIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . .62
9.1. Securitization. . . . . . . . . . . . . . . . . . . . . . . . . .62
9.2. No Assignment by Borrower . . . . . . . . . . . . . . . . . . . .63
9.3. Method of Payment . . . . . . . . . . . . . . . . . . . . . . . .63
10. ASSIGNMENT AND PARTICIPATION . . . . . . . . . . . . . . . . . . . .63
11. SUBSTITUTION OF PROPERTIES . . . . . . . . . . . . . . . . . . . . .64
12. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . .71
12.1. Limitation on Liability. . . . . . . . . . . . . . . . . . . . .71
12.2. Entire Agreement, Amendments . . . . . . . . . . . . . . . . . .72
12.3. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . .72
12.4. No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . .72
12.5. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . .73
12.6. Governing Law; Consent to Jurisdiction . . . . . . . . . . . . .73
12.7. Payment of Expenses. . . . . . . . . . . . . . . . . . . . . . .73
12.7.1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .73
12.7.2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74
12.8. Severability . . . . . . . . . . . . . . . . . . . . . . . . . .74
12.9. Gender, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . .74
12.10. Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . .74
12.11. Counterparts; Facsimiles. . . . . . . . . . . . . . . . . . . .74
12.12. No Third Party Beneficiary. . . . . . . . . . . . . . . . . . .74
12.13. No Liability of Lender. . . . . . . . . . . . . . . . . . . . .75
12.14. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . .75

<PAGE>

LIST OF SCHEDULES

Schedule A Allocated Loan Amounts
Schedule B Ground Lease
Schedule C Description of the Land
Schedule D Engineering Surveys
Schedule 3.6 Lease Defaults
Schedule 3.22 Environmental Reports
Schedule 3.23 Equipment Leases
Schedule 3.25 Liens
Schedule 4.3.2 Mortgaged Properties
Schedule 5.11 Cash Management Procedures

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LIST OF EXHIBITS

Exhibit A Form of Mortgage Note
Exhibit B Form of Mortgage
Exhibit C Ground Lessor Estoppel Certificate
Exhibit D Tenant Estoppel Certificate
Exhibit E Subordination, Non-Disturbance and
Attornment Agreement

<PAGE>

LOAN AGREEMENT

THIS LOAN AGREEMENT (this "AGREEMENT") is entered into as of June 11,
1997, by and between ARDEN REALTY FINANCE PARTNERSHIP, L.P., a California
limited partnership having its principal office at 9100 Wilshire Boulevard,
Beverly Hills, California 90212 ("BORROWER"), and LEHMAN BROTHERS REALTY
CORPORATION, a Delaware corporation, having an office at Three World Financial
Center, 200 Vesey Street, 20th Floor, New York, New York 10285 ("LENDER").

WHEREAS, Borrower has requested Lender to make a loan (the "LOAN") to
Borrower, and Lender has agreed to make the Loan to Borrower, for the purposes
and on the terms and conditions described herein;

WHEREAS, the Loan is evidenced by that certain Mortgage Note dated as
of the date hereof by Borrower to the order of Lender and its successors and
assigns in the principal amount of One Hundred Seventy-Five Million and No/100
Dollars ($175,000,000), which is to be secured by, among other things,
first-priority liens on Borrower's assets, consisting primarily of seventeen
office properties and related assets;

WHEREAS, the parties hereto desire to set forth their agreement
regarding the making of the Loan and the terms and conditions upon which the
Loan shall be made and repaid;

WHEREAS, without limiting any other rights that Lender has to assign
the Mortgage Note and the other Loan Documents (as hereinafter defined), Lender
may assign the Mortgage Note and the other Loan Documents, together with
mortgage loans made to other borrowers, to, among others, a Trustee (as
hereinafter defined) for the benefit of the Holders (as hereinafter defined),
who may appoint a Servicer (as hereinafter defined) and, following such
assignment, all rights of Lender hereunder will inure to the benefit of the
Trustee, for the benefit of the Holders, and to the Servicer, on behalf of the
Trustee, and the term "Lender" as used herein, shall, following such assignment,
include the Trustee and the Servicer, on behalf of the Trustee; and

WHEREAS, unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to them in SECTION 1.1 hereof;

NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

1. DEFINITIONS AND REFERENCES

1.1. DEFINED TERMS

Unless the context otherwise requires, capitalized terms used herein
shall have the respective meanings specified in this SECTION 1.1 (such
definitions to be equally applicable to both the singular and plural forms of
the terms defined).

1
<PAGE>

"ACCOUNT" means the Lockbox Account, the Cash Collateral Account, the
Reserve Account, the Tax and Insurance Escrow Account or any subaccount of any
of them or any other account or subaccount thereof created pursuant to the
Cash Management Procedures.

"ACCOUNTING PERIOD" shall mean each calendar month.

"ACCOUNTING QUARTER" shall mean each of the fiscal quarters in a
calendar or a conventional 365-day fiscal year (I.E., there shall be four
consecutive Accounting Quarters of three months each).

"ACCRUED INTEREST" has the meaning ascribed to it in SECTION 2.4.4(c)
hereof.

"ADJUSTED INTEREST RATE" means the rate per annum determined on the
Anticipated Repayment Date as the greater of (i) 9.52% and (ii) the sum of (A)
three percentage points (3%) and (B) the average, calculated by linear
interpolation (rounded to three decimal places), of the yields of the United
States Treasury Constant Maturities with the terms (one longer and one shorter)
most nearly approximating those of U.S. Obligations having maturities as close
as possible to the seventh (7th) anniversary of the Anticipated Repayment Date,
as determined by Lender on the basis of Federal Reserve Statistical Release
H.15-Selected Interest rates under the heading U.S. Governmental
Security/Treasury Constant Maturities, or such other recognized source of
financial market information as may reasonably be selected by Lender, in each
case on the last Business Day of the week immediately prior to the Anticipated
Repayment Date.

"AFFILIATE" means, as to any Person, (a) any Person directly or
indirectly owning, controlling, or holding power to vote ten percent (10%) or
more of the outstanding equity securities as to the Person in question; (b) any
Person ten percent (10%) or more of whose outstanding voting securities are
directly or indirectly owned, controlled, or held with power to vote by the
Person in question; (c) any Person directly or indirectly controlling,
controlled by, or under common control with the Person in question; (d) if the
Person in question is a corporation or limited liability company, any executive
officer, director, member or manager of the Person in question or of any
corporation or limited liability company directly or indirectly controlling,
controlled by, or under common control with the Person in question; and (e) if
the Person in question is a partnership, any general partner of such
partnership. As used in this definition of "AFFILIATE," the term "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management or policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.

"AGREEMENT" means this Loan Agreement, as it may be amended,
supplemented or modified from time to time.

"ALLOCATED LOAN AMOUNT" means, for any Mortgaged Property, the portion
of the Loan that is allocated to a particular Mortgaged Property, as set forth
on SCHEDULE A hereof, or if a Mortgaged Property is a Substitute Property, the
amount allocated thereto pursuant to SECTION 11 hereof.

"ANNUAL APPROVED BUDGET" shall have the meaning ascribed to such term
in SECTION 5.4.3 hereof.

2
<PAGE>

"ANNUAL BUDGET" shall mean the operating budget, including all planned
capital expenditures, for the Mortgaged Properties prepared by Borrower for the
applicable Fiscal Year or portion thereof.

"ANTICIPATED REPAYMENT DATE" means June 10, 2004.

"ARDEN FINANCE CORP." means Arden Realty Finance, Inc., a California
corporation that is a wholly owned subsidiary of Arden REIT and is the General
Partner.

"ARDEN OP" means Arden Realty Limited Partnership, a Maryland limited
partnership, the sole limited partner of Borrower.

"ARDEN REIT" means Arden Realty, Inc., a Maryland corporation that is
the general partner of Arden OP.

"ASSIGNMENT OF LEASES AND RENTS" means that certain Assignment of
Leases and Rents dated as of the date hereof made by Borrower to the Lender with
respect to the Mortgaged Properties.

"AUTHORIZED ACCOUNTING OFFICER" means the officer of the General
Partner who has primary responsibility for accounting matters, or one of his or
her duly authorized representatives who, as set forth in a written notice of
such officer to the Lender, is duly authorized to act on behalf of such officer
in connection with this Agreement and the other Loan Documents.

"AWARD" has the meaning ascribed to it in the Mortgage.

"BANKRUPTCY LAW" means title 11, United States Code, or any similar
federal, state or foreign law for the relief of creditors.

"BASE RATE" means 7.52% per annum.

"BORROWER" has the meaning ascribed to it in the preamble hereto.

"BORROWER DOCUMENTS" has the meaning ascribed to it in SECTION 3.26
hereof.

"BUILDING EQUIPMENT" means all machinery, equipment, fixtures
(including, but not limited to, all heating, air conditioning, plumbing,
lighting, communications and elevator fixtures) and other property of every kind
and nature whatsoever owned by Borrower, or in which Borrower has or shall have
an interest, now or hereafter located upon the Land and the Improvements, or
appurtenant thereto, and usable in connection with the present or future
operation and occupancy of the Land and the Improvements.

"BUSINESS DAY" means a day other than (i) a Saturday or a Sunday or
(ii) a day on which federally insured depository institutions in the states of
New York and Illinois and the Commonwealth of Pennsylvania are required or
authorized by law, governmental decree or executive order to be closed.

"CASH COLLATERAL ACCOUNT" has the meaning specified in SCHEDULE 5.11
hereto.

"CASH EXPENSES" shall mean, for any period after the Anticipated
Repayment Date, the Operating Expenses for the operation of the Mortgaged
Properties as set forth in an Approved Annual

3
<PAGE>

Budget to the extent that such expenses are actually incurred by Borrower minus
payments into the Tax and Insurance Escrow Account and the Reserve Account.

"CASH MANAGEMENT PROCEDURES" shall mean the provisions of SCHEDULE
5.11 hereto.

"CASUALTY" has the meaning ascribed to it in the Mortgage.

"CERTIFICATES" has the meaning ascribed to it in SECTION 9.1 hereof.

"CLOSING" has the meaning ascribed to it in the first paragraph of
SECTION 4 hereof.

"CLOSING DATE" has the meaning ascribed to is in the first paragraph
of SECTION 4 hereof.

"CODE" means the Internal Revenue Code of 1986, as the same may be
amended from time to time, and any successor statute of similar import, and the
regulations thereunder, in each case as in effect from time to time. References
to sections of the Code shall be construed also to refer to any successor
sections and all related regulations.

"COLLATERAL" means the "PROPERTY" (as defined in the Mortgage, whether
individually or taken as a group, as the context may require), together with
such other collateral or property as may be pledged, liened or encumbered from
time to time as security for the Loan under any other Security Documents.

"COLLATERAL ASSIGNMENT OF MANAGEMENT AGREEMENT" means that certain
Collateral Assignment of Management Agreement and Subordination Agreement, dated
as of the Closing Date, by and among Borrower, Manager, and Lender in favor of
Lender.

"CONTRIBUTION AGREEMENT" means that certain Contribution Agreement
dated as of the Closing Date by and among Arden OP, Arden Finance Corp. and
Borrower, pursuant to which Arden OP agrees to contribute to Borrower, and
Borrower agrees to accept from Arden OP, the Mortgaged Properties and all
operating assets related thereto, and assume the liabilities associated with
such Mortgaged Properties, and Arden Finance Corp. agrees to contribute certain
cash amounts.

"COOPERATION AGREEMENT" means that certain Cooperation Letter
Agreement dated as of the Closing Date, by and among Borrower, Arden OP, Arden
REIT and Lender.

"DEBT" means the obligations of the Borrower under the Loan Documents,
together with all interest thereon, and all other sums, including, without
limitation, fees, expenses, commissions, premiums and indemnities, which may or
shall become due under any of the Loan Documents, including the costs and
expenses of enforcing any provision of the Loan Documents that may be
reimbursable hereunder.

"DEBT SERVICE" shall mean, with respect to any particular period of
time, scheduled interest payments under the Mortgage Note.

"DEBT SERVICE COVERAGE RATIO" shall mean a ratio for the applicable
period in which:

(a) the numerator is the Net Operating Income (excluding
interest on credit accounts) for such period; and

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<PAGE>

(b) the denominator is the aggregate amount of interest due and
payable on the Mortgage Note or, in the event a Defeasance
Event has occurred, the Undefeased Note, for such period.

"DEBT SERVICE PERIOD" means the period commencing on (and including)
the tenth (10th) day of each calendar month (or with respect to the first Debt
Service Period, the period commencing on (and including) the Closing Date) and
ending on (and excluding) the tenth (10th) day of the next succeeding calendar
month.

"DEFAULT" has the meaning ascribed to it in SECTION 7.1 hereof.

"DEFAULT INTEREST" means (i) interest accruing on any overdue
principal amount of the Mortgage Note at a rate per annum equal to the
difference between the Default Interest Rate minus the Interest Rate, and (ii)
interest accruing on any overdue interest and any other overdue payments under
any Loan Documents at the Default Interest Rate.

"DEFAULT INTEREST RATE" has the meaning ascribed to it in SECTION 7.4
hereof.

"DEFEASANCE DATE" has the meaning ascribed to it in SECTION 2.5(a)(i).

"DEFEASANCE DEPOSIT" means an amount equal to the amount necessary to
purchase U.S. Obligations necessary to meet the Scheduled Defeasance Payments,
any costs and expenses incurred or to be incurred in the purchase of such U.S.
Obligations and any revenue, documentary stamp or intangible taxes or any other
tax or charge due in connection with the transfer of the Mortgage Note or the
Defeased Note, as applicable, the creation of the Defeased Note, if applicable,
or otherwise required to accomplish the agreements of SECTION 2.5, SECTION 2.8,
and SECTION 2.9.

"DEFEASANCE EVENT" has the meaning ascribed to it in SECTION
2.5(a)(i).

"DEFEASANCE PERIOD" has the meaning ascribed to it in SECTION 2.5(a)
hereof.

"DEFEASANCE SECURITY AGREEMENT" has the meaning ascribed to it in
SECTION 2.5(a)(vi) hereof.

"DEFEASED NOTE" has the meaning ascribed to it in SECTION 2.5(a)(v)
hereof.

"DEPOSIT SECURITY AGREEMENT" means that certain Deposit Account
Security Agreement dated as of even date even date herewith between Borrower and
Lender.

"DUE DATE" means the tenth (10th) day of each calendar month, or, if
in any calendar month the tenth (10th) day is not a Business Day, the Business
Day immediately preceding the tenth (10th) day.

"ERISA" means the Employee Retirement Income Security Act of 1974
(together with all rules and regulations promulgated thereunder), as amended,
supplemented, or modified from time to time.

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<PAGE>

"ERISA AFFILIATE" means any trade or business under common control (as
it is defined in SECTION 414(b) or 414(c) of the Code or SECTION 4001(b)(1) of
ERISA) with Borrower.

"ELIGIBLE ACCOUNT" means either (i) an account maintained with a
federal or state chartered depository institution or trust company, the
long-term unsecured debt obligations of which (or, in the case of a depository
institution or trust company that is the principal subsidiary of a holding
company, the long-term unsecured debt obligations of the holding company of
which) are rated by each Rating Agency in one of its two highest rating
categories (or such other ratings as will not result in the rating of any of the
Certificates being reduced below their respective ratings on the Closing Date
and as to which the Rating Agencies may otherwise agree) or the short-term
unsecured debt obligations of such depository institution or trust company or
holding company, as the case may be, are rated not lower than A-1+ by the
applicable Rating Agencies, or (ii) a segregated trust account maintained with
the trust department of a federal or state chartered depository institution or
trust company acting in its fiduciary capacity provided that such account is
subject to fiduciary funds on deposit regulations (or internal guidelines)
substantially similar to 12 C.F.R. SECTION 9.10(b), or (iii) an account in any
other insured depository institution reasonably acceptable to Lender, so long as
prior to the establishment of an account in any such other depository
institution each of the Rating Agencies shall have delivered a Rating Comfort
Letter with respect thereto.

"ENGINEERING SURVEYS" means those reports of recent date prior to the
Closing Date prepared by those companies listed on SCHEDULE D concerning the
physical condition of the Mortgaged Properties.

"ENVIRONMENTAL INDEMNITY AGREEMENT" means the Environmental Indemnity
Agreement, dated as of the date hereof among Borrower, the General Partner and
Lender.

"ENVIRONMENTAL LAWS" has the meaning ascribed to it in the definition
of "Hazardous Materials" herein.

"EVENT OF DEFAULT" has the meaning ascribed to it in SECTION 7.1
hereof.

"EXCESS CASH FLOW" means, for any Accounting Period, the difference
between (i) Net Operating Income and (ii) the sum of (A) the Monthly Debt
Service Payments, (B) other Debt then due and payable to the Lender pursuant to
this Agreement or any of the other Loan Documents (other than Default Interest,
Accrued Interest, Late Payment Fees and payments required under SECTION 2.4.4(c)
hereof), and (C) in the event a Lockbox Event has occurred, to the extent not
duplicative of the foregoing, withdrawals from the Cash Collateral Account
applied pursuant to clauses (E) through (J) of SECTION 4.4 of the Cash
Management Procedures.

"EXISTING DEBT" means indebtedness in the amount of $175,000,000 owed
to an Affiliate of Lender and secured by one or more of the Mortgaged
Properties, the obligation to repay such indebtedness having been assumed by
Borrower pursuant to the Contribution Agreement.

"EXTRAORDINARY EXPENSE" shall have the meaning ascribed to such term
in SECTION 5.4.3(b) hereof.

"FINAL MATURITY DATE" means June 10, 2012.

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<PAGE>

"FINANCIAL STATEMENTS" means the financial statements of the Borrower
furnished to the Lender from time to time pursuant to SECTIONS 5.4.1 and 5.4.2
hereof.

"FISCAL YEAR" means the period beginning January 1 of each year
through and including December 31 of such year.

"FORCE MAJEURE" means acts of God, acts of war, civil disturbance, or
governmental action, excluding any casualty customarily covered by insurance.

"GAAP" means generally accepted accounting principles in the United
States of America (as such principles may change from time to time) applied on a
consistent basis (except for changes in application as to which Borrower's
independent certified public accountants concur), both as to classification of
items and amounts, within any applicable period and as to prior periods.

"GP CERTIFICATE" means the Restated Articles of Incorporation of Arden
Finance Corp., as filed in the office of the Secretary of State of the State of
California on June 9, 1997.

"GENERAL PARTNER" means Arden Finance Corp., in its capacity as
general partner of Borrower.

"GOVERNMENTAL AUTHORITY" means any nation, government, state, or
political subdivision of any thereof, including any court or any other entity
exercising executive, legislative, regulatory, judicial, or administrative
functions of, or pertaining to, government.

"GROUND LEASE" means the lease of Land on which a portion of one (1)
of the Mortgaged Properties is located, which ground lease is more fully
described on SCHEDULE B attached hereto and incorporated herein, as the same may
be amended or extended from time to time in accordance with the terms hereof.

"GROUND LESSOR" means the ground lessor under the Ground Lease.

"GROSS INCOME FROM OPERATIONS" shall mean all income of Borrower,
computed in accordance with GAAP, derived from the ownership and operation of
the Mortgaged Properties from whatever source, including, but not limited to,
Rents, utility charges, escalations, forfeited security deposits, interest on
credit accounts, service fees or charges, license fees, parking fees, rent
concessions or credits, and other required pass-throughs but excluding sales,
use and occupancy or other taxes on receipts required to be accounted for by
Borrower to any government or governmental agency, refunds and uncollectible
accounts, sales of furniture, fixtures and equipment, proceeds of casualty
insurance and condemnation awards (other than business interruption or other
loss of income insurance), and any disbursements to the Borrower from the Tax
and Insurance Escrow Account, the Reserve Account or any other escrow fund
established by the Loan Documents.

"HAZARDOUS MATERIALS" means any substances, materials, or wastes,
whether solids, liquids or gases, that are defined as "hazardous wastes,"
"hazardous substances," "toxic substances," "radioactive materials," or other
substantially similar designations in, or otherwise subject to regulation under,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, ("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act
of 1986 ("SARA"), 42 U.S.C. SECTION 9601 ET SEQ.; the Toxic Substance Control
Act ("TSCA"), 15 U.S.C. SECTION 2601 ET SEQ.; the Hazardous Materials
Transportation Act, 49 U.S.C. SECTION 1802 ET SEQ.; the Resource Conservation
and

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<PAGE>

Recovery Act ("RCRA"), 42 U.S.C. SECTION 9601 ET SEQ.; the Clean Water Act
("CWA"), 33 U.S.C. SECTION 1251 ET SEQ.; the Safe Drinking Water Act, 42 U.S.C.
SECTION 300f ET SEQ.; the Clean Air Act ("CAA"), 42 U.S.C. SECTION 7401 ET
SEQ.; or other applicable Laws pertaining to the regulation of hazardous, toxic
or dangerous materials or wastes or the protection of the environment, including
any plans, rules, regulations, orders or ordinances adopted, or other criteria
and guidelines promulgated, pursuant to such laws, whether now or hereafter in
effect (collectively referred to herein as "ENVIRONMENTAL LAWS"). Hazardous
Materials includes, but is not limited to, polychlorinated biphenyls (PCBs),
petroleum and petroleum products and byproducts, and asbestos.

"HOLDERS" means the holders of record from time to time of the
Certificates.

"IMPROVEMENTS" means all buildings, structures, paving, sidewalks,
parking garages and other parking areas, curbing, landscaping, signage,
lighting, utilities and other improvements from time to time located on all or
any part of the Land (including, without limitation, the office buildings that
are located on the Land and any parking structures and other parking facilities
located on any of the Land), and any modifications, additions, restorations or
replacements of the whole or any part thereof.

"IMPOSITIONS" has the meaning ascribed to it in the Mortgages.

"INDEBTEDNESS" of any Person means (a) any liabilities and obligations
of such Person, contingent or otherwise, (i) in respect of borrowed money
(whether or not the recourse of the lender is to the whole of the assets of such
Person or only to a portion thereof), (ii) evidenced by bonds, notes,
debentures, or similar instruments, (iii) representing the balance deferred and
unpaid of the purchase price of any property or services, except those incurred
in the ordinary course of such Person's business that would constitute
ordinarily a trade payable to trade creditors, (iv) evidenced by bankers'
acceptances, (v) for the payment of money relating to a capitalized lease
obligation or sale/leaseback obligation (but excluding any obligations under any
Ground Lease in existence on the Closing Date that may be a capitalized lease
obligation), or (vi) evidenced by a letter of credit or a reimbursement
obligation of such person with respect to any letter of credit or (b) any
liabilities and obligations of others of the kind described in the preceding
clause (a) that such Person has guaranteed or that are otherwise its legal
liability or which are secured by any assets or property of such Person,
including, without limitation, any obligations to purchase, redeem, or acquire
any capital stock or similar interests.

"INDEPENDENT DIRECTOR" means a person who is not, and has not within
the past two years been, (i) an officer, director, employee, partner, member,
stockholder or beneficial-interest holder of the General Partner or Borrower;
(ii) an officer, director, employee, partner, member, beneficial-interest holder
or stockholder of any "Affiliate" (as defined below) of the General Partner or
Borrower; (iii) a customer or supplier of Borrower or any Affiliate thereof; or
(iv) a spouse, parent, sibling, or child of any person described in (i), (ii),
or (iii); PROVIDED, HOWEVER, that a person shall not be deemed to be a director
of an Affiliate solely by reason of such person being a director of a
single-purpose entity that would otherwise be deemed to be an Affiliate because
they are under common control. For the purpose of this definition alone,
"Affiliate" means any person or entity (i) which owns beneficially, directly or
indirectly, more than 10% of the outstanding shares of common stock of the
General Partner or which is otherwise in control of the General Partner, (ii) of
which more than 10% of the outstanding voting securities are owned beneficially,
directly or indirectly, by any person or entity described in clause (i) above,
or (iii) which is controlled by, or under common control with, any person or
entity described in clause (i) above; the terms "control" and "controlled by"
shall have the meanings assigned to them in Rule 405 under the Securities Act of
1933.

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<PAGE>

"INFORMATION" has the meaning ascribed to it in SECTION 5.4 hereof.

"INSURANCE PROCEEDS" has the meaning ascribed to it in any applicable
Mortgage.

"INTEREST RATE" means (i) prior to the Anticipated Repayment Date, the
Base Rate and (ii) from and after the Anticipated Repayment Date, the Adjusted
Interest Rate.

"LAND" means the parcels of land on which the Mortgaged Properties are
located, as more fully described on SCHEDULE C attached hereto.

"LAWS" means any statute or law, or any rules, regulations, orders or
determinations made by any applicable Governmental Authority, including as to
real property, but without limitation, any applicable Environmental Laws and any
zoning, building, subdivision or land use laws, rules, or ordinances.

"LEASE" means any lease or other agreement (other than a Ground lease)
affecting the use, enjoyment or occupancy of the Land or the Improvements.

"LENDER" initially means Lehman Brothers Realty Corporation, together
with its successors and assigns, including, without limitation, following the
assignment and transfer contemplated by SECTION 9.1 hereof, (a) the Trustee, on
behalf of the Trust, or any of its successors and assigns, and (b) the Servicer,
on behalf of the Trustee.

"LENDER COSTS" means all of the costs and expenses of the Lender of
the kind described in SECTION 12.7.1 hereof.

"LIEN" means any mortgage, deed of trust, deed to secure debt, lien,
claim, option, security interest, pledge, preference, priority, hypothecation,
installment sale agreement, repurchase agreement or other encumbrance or
security arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or title retention arrangement, and any
assignment, deposit arrangement, lease or other arrangement intended as, or
having the effect, of security.

"LOAN" means the loan made by Lender to Borrower pursuant to SECTION
2.1 hereof.

"LOAN AMOUNT" means One Hundred Seventy-Five Million and No/100
Dollars ($175,000,000).

"LOAN DOCUMENTS" means this Agreement, the Mortgage Note, the
Environmental Indemnity Agreement, the Collateral Assignment of Management
Agreement, the Security Agreement, the Mortgage, the Assignment of Leases and
Rents, the Deposit Security Agreement and all of the other Security Documents,
and any and all other documents, agreements, certificates, notes or other
instruments delivered pursuant to, or in connection with, the Loan.

"LOCKBOX ACCOUNT" has the meaning specified in SECTION 1.1 of SCHEDULE
5.11 of this Loan Agreement.

"LOCKBOX EVENT" has the meaning ascribed to such term in SCHEDULE 5.11
of this Loan Agreement.

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<PAGE>

"MANAGEMENT AGREEMENT" means that certain Management Agreement dated
as of the Closing Date by and between Borrower and Arden OP, as "Manager" or any
management agreement entered into between Borrower and a substitute manager in
accordance with SECTION 5.3 hereof.

"MANAGER" has the meaning ascribed to it in the definition of
"Management Agreement" herein, or any successor thereto, or any other Person who
becomes the manager of one or more of the Mortgaged Properties in compliance
with this Agreement.

"MONTHLY DEBT SERVICE PAYMENT" has the meaning ascribed to it in
SECTION 2.4.4 hereof.

"MORTGAGE" means the Deed of Trust, Assignment of Rents and Leases,
Security Agreement and Fixture Filing executed by Borrower and delivered to
Lender or certain trustees for the benefit of Lender with respect to the
Mortgaged Properties, which is to be recorded in the land records of each
jurisdiction in which one or more of the Mortgaged Properties are located, as
security for the Loan.

"MORTGAGE NOTE" means the promissory note described in SECTION 2.2
hereof; PROVIDED, HOWEVER, that if the principal amount of such promissory note
shall be divided at any time into one or more Defeased Notes and one or more
Undefeased Notes pursuant to SECTION 2.5(a)(v) hereof, "MORTGAGE NOTE" shall
mean, collectively, all such Undefeased Note(s) and Defeased Note(s).

"MORTGAGED PROPERTIES" means the seventeen office properties
transferred by Arden OP to Borrower, as of the Closing Date, pursuant to the
Contribution Agreement, including, without limitation, Borrower's fee or
leasehold interest in the land associated with said office properties and
Borrower's ownership interest in all Improvements, which Mortgaged Properties
are identified on SCHEDULE 4.3.2 attached hereto.

"NET OPERATING INCOME" means, for any period the amount obtained by
subtracting Operating Expenses from Gross Income from Operations.

"NET SALES PROCEEDS" means the aggregate amount of cash received by
Borrower in respect of the sale of any Mortgaged Property and related assets
less (i) the sum of all reasonable and customary out-of-pocket payments, fees,
commissions and expenses, plus interest thereon, if applicable (including,
without limitation, fees, commissions and expenses of legal counsel and
investment bankers) paid or payable to third parties and incurred in connection
with such sale, including, without limitation, the Lender, the Trustee (if any),
and the Servicer (if any), and (ii) the amount (estimated reasonably and in good
faith by Borrower) of income, franchise, sales and other applicable taxes
required to be paid by Borrower in connection with such sale.

"NEW NOTE" has the meaning ascribed to it in SECTION 2.2 hereof.

"OFFICER'S CERTIFICATE" means a certificate delivered to Lender by
Borrower which is signed by an authorized senior officer of the General Partner.

"OPERATING EXPENSES" means the total of expenses, computed in
accordance with GAAP, of whatever kind relating to the operation, maintenance
and management of the Mortgaged Properties that are incurred on a regular
monthly or other periodic basis, including without limitation, utilities,
ordinary repairs and maintenance, insurance, license fees, property taxes and
assessments, advertising expenses, management fees, payroll and related taxes,
computer processing charges,

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<PAGE>

operational equipment or other lease payments as approved by Lender, and other
similar costs, but excluding depreciation, Debt Service, capital expenditures
and contributions to the Reserve Fund, the Tax and Insurance Escrow Account and
any other reserves required under the Loan Documents.

"ORIGINATION FEE" means a fee equal to One Million Two Hundred
Thirty Thousand and No/100 Dollars ($1,230,000) to be paid by Borrower to Lender
on the Closing Date.

"PARTNERS" means Arden OP and Arden Finance Corp., in their
capacities as partners of Borrower.

"PARTNERSHIP AGREEMENT" means the agreement of limited
partnership of Borrower dated as of June 5, 1997 between Arden OP and Arden
Finance Corp.

"PAYMENT DIFFERENTIAL" has the meaning ascribed to it in SECTION
2.11.1 hereof.

"PERMITTED DEBT" means, as to Borrower:

(i) if no Default or Event of Default has occurred and is
continuing, purchase money Indebtedness and capitalized lease
obligations up to an aggregate amount not in excess of $3,000,000
outstanding at any one time, in each case, for the purchase or lease
of Building Equipment in the ordinary course of business (and not
inconsistent with customary industry practices), which Indebtedness
may be secured by a first priority lien on the goods and equipment
that have been so purchased or leased, provided, no such Indebtedness
shall be evidenced by a promissory note;

(ii) if no Event of Default has occurred and is continuing, (a)
unsecured Indebtedness payable or reimbursable to a tenant under a
Lease, payable or reimbursable to such tenant on account of work
performed or costs incurred (including tenant improvements) by such
tenant in connection with its occupancy of space at a Mortgaged
Property, provided such Lease is consistent with, or has been approved
by Lender if required by, SECTION 1.20.11.3 of the Mortgage, which
Indebtedness may not be evidenced by any form of promissory note and
the aggregate outstanding amount of which Indebtedness at any one time
may not exceed $5,000,000; and (b) Indebtedness solely in respect of
surety and appeal bonds, performance bonds and other obligations of a
like nature (to the extent that such incurrence does not result in the
incurrence of any obligation to repay any obligation relating to
borrowed money of others), all in the ordinary course of business in
accordance with customary industry practices and, if not in the
ordinary course, in an individual amount not to exceed $1,000,000; and

(iii) if no Event of Default has occurred and is continuing,
Indebtedness incurred to finance capital improvements, tenant
improvements, or leasing costs associated with the Mortgaged
Properties, which Indebtedness may not be secured and which
Indebtedness shall be subject to the following conditions:

(a) the aggregate of all Indebtedness incurred and outstanding
pursuant to this clause (iii) shall not exceed, at any time,
five percent (5%) of the outstanding principal amount of the
Mortgage Note;

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<PAGE>

(b) the maturity date of any such Indebtedness shall be no
earlier than June 10, 2013;

(c) any such Indebtedness shall be subject and subordinate to
the Loan and Lender and the lender under the subordinated
indebtedness shall enter into a standstill and subordination
agreement acceptable to Lender in its sole discretion, which
shall provide, among other things, that (i) the subordinate
lender may not exercise any of its remedies so long as the
Loan is outstanding, (ii) in the event a case is commenced
by or against Borrower under any Bankruptcy Law, Lender
shall have the right to vote on behalf of the subordinate
lender in any such proceeding, (iii) the subordinate loan
may not be refinanced without the consent of Lender and (iv)
the documents evidencing or securing the subordinate loan
may not be amended without the consent of Lender; and

(d) the aggregate of the outstanding principal amount of the
Loan and the outstanding principal amounts of all such
subordinate loans shall not exceed sixty-eight percent (68%)
of the appraised value of the Mortgaged Properties
determined by "desktop appraisal" or other summary appraisal
having an effective date no earlier than thirty (30) days
prior to the funding of a subordinate loan.

"PERMITTED DEBT" means, as to the General Partner, any liability of the General
Partner in its capacity as General Partner of Borrower for Permitted Debt of
Borrower.

"PERMITTED INVESTMENTS" means any one or more of the following
obligations or securities which are payable on demand or available for
withdrawal, in each case without penalty, or which have a scheduled maturity on
or prior to the Business Day preceding the following Due Date, and having at all
times the required ratings, if any, provided for in this definition, unless each
Rating Agency shall have confirmed in writing to the Lender that a lower rating
would not result in the withdrawal, downgrading or qualification of the ratings
then assigned to the Certificates (and investments will not be disqualified as
"Permitted Investments" solely because they are issued by Lender or an Affiliate
of Lender):

(i) direct obligations of, or obligations guaranteed as to full
and timely payment of principal and interest by, the United States or
any agency or instrumentality thereof, provided that such obligations
are backed by the full faith and credit of the United States of
America, PROVIDED, HOWEVER, that the investments described in this
clause must (A) have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (B) if rated by S&P, must not
have an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest rate must
be tied to a single interest rate index plus a fixed spread (if any)
and must move proportionately with that index, and (D) such
investments must not be subject to liquidation prior to their
maturity;

(ii) direct obligations of, or obligations guaranteed as to
timely payment of principal and interest by, FHLMC, FNMA or the
Federal Farm Credit System, provided that any such obligation is
qualified by each Rating Agency as an investment of funds backing
securities having a long-term unsecured debt rating of "AAA",
PROVIDED,

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<PAGE>

HOWEVER, that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot
vary or change, (B) if rated by S&P, must not have an "r" highlighter
affixed to their rating, (C) if such investments have a variable rate
of interest, such interest rate must be tied to a single interest rate
index plus a fixed spread (if any) and must move proportionately with
that index, and (D) such investments must not be subject to
liquidation prior to their maturity;

(iii) demand and time deposits in, or demand notes of, or
certificates of deposit of, or bankers' acceptances having maturities
of not more than 365 days issued by, any bank or trust company,
savings and loan association or savings bank, provided that the
commercial paper or long-term unsecured debt obligations of such
depository institution or trust company (or in the case of the
principal depository institution in a holding company system, the
commercial paper or long-term unsecured debt obligations of such
holding company) are then rated not lower than the highest rating
category of each Rating Agency, in the case of commercial paper, or in
the highest category in the case of long-term debt obligations, or
such lower categories as will not result (as evidenced in writing by
each Rating Agency) in the withdrawal, downgrading or qualification of
the rating then assigned (or, prior to the Securitization, proposed
to be assigned) to the Certificates by each Rating Agency, or, in the
case of short-term debt obligations which have maturities of 30 days
or less, a rating of "A-1," PROVIDED, HOWEVER, that the investments
described in this clause must (A) have a predetermined fixed dollar of
principal due at maturity that cannot vary or change, (B) if rated by
S&P, must not have an "r" highlighter affixed to their rating, (C) if
such investments have a variable rate of interest, such interest rate
must be tied to a single interest rate index plus a fixed spread (if
any) and must move proportionately with that index, and (D) such
investments must not be subject to liquidation prior to their
maturity;

(iv) general obligations of, or obligations guaranteed by, any
state of the United States or the District of Columbia receiving
long-term debt ratings by each Rating Agency equal to the highest
rating then assigned (or, prior to the Securitization, proposed to be
assigned) to any Class of Certificates by such Rating Agency or such
lower category as will not result in the withdrawal, downgrading, or
qualification of the rating then assigned (or, prior to the
Securitization, proposed to be assigned) to the Certificates by each
Rating Agency (as evidenced in writing by each Rating Agency),
PROVIDED, HOWEVER, that the investments described in this clause must
(A) have a predetermined fixed dollar of principal due at maturity
that cannot vary or change, (B) if rated by S&P, must not have an "r"
highlighter affixed to their rating, (C) if such investments have a
variable rate of interest, such interest rate must be tied to a single
interest rate index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments must not be
subject to liquidation prior to their maturity;

(v) commercial or finance company paper (including both
non-interest-bearing discount obligations and interest-bearing
obligations payable on demand or on a specified date not more than one
year after the date of issuance thereof) that is rated by each Rating
Agency in its highest short-term unsecured rating category, and is
issued by a corporation the outstanding senior debt obligations of
which are then rated by each Rating Agency in its highest short-term
unsecured rating category or its highest long-term unsecured rating
category, as applicable, PROVIDED, HOWEVER, that the investments
described in this clause must (A) have a predetermined fixed dollar of
principal due at

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<PAGE>

maturity that cannot vary or change, (B) if rated by S&P, must not
have an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest rate must
be tied to a single interest rate index plus a fixed spread (if any)
and must move proportionately with that index, and (D) such
investments must not be subject to liquidation prior to their
maturity;

(vi) guaranteed reinvestment agreements maturing in 365 days or
less from the date of investment issued by any bank, insurance
company, or other corporation rated in the highest rating category by
each Rating Agency provided that any such agreement must by its terms
provide that it is terminable by the purchaser without penalty in the
event any such rating is at any time lower than such level, PROVIDED,
HOWEVER, that the investments described in this clause must (A) have a
predetermined fixed dollar of principal due at maturity that cannot
vary or change, (B) if rated by S&P, must not have an "r" highlighter
affixed to their rating, (C) if such investments have a variable rate
of interest, such interest rate must be tied to a single interest rate
index plus a fixed spread (if any) and must move proportionately with
that index, and (D) such investments must not be subject to
liquidation prior to their maturity;

(vii) repurchase obligations maturing in 365 days or less
from the date of investment with respect to any security described in
clause (i) or (ii) above entered into with a depository institution or
trust company (acting as principal) meeting the rating standards
described in (iii) above, PROVIDED, HOWEVER, that the investments
described in this clause must (A) have a predetermined fixed dollar of
principal due at maturity that cannot vary or change, (B) if rated by
S&P, must not have an "r" highlighter affixed to their rating, (C) if
such investments have a variable rate of interest, such interest rate
must be tied to a single interest rate index plus a fixed spread (if
any) and must move proportionately with that index, and (D) such
investments must not be subject to liquidation prior to their
maturity, PROVIDED, HOWEVER, that the investments described in this
clause must (A) have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (B) if rated by S&P, must not
have an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest rate must
be tied to a single interest rate index plus a fixed spread (if any)
and must move proportionately with that index, and (D) such investments
must not be subject to liquidation prior to their maturity;

(viii) debt securities (other than stripped bonds or stripped
coupons) maturing in 365 days or less from the date of investment
bearing interest or sold at a discount that are issued by any
corporation incorporated under the laws of the United States of
America or any state thereof and rated by each Rating Agency in its
highest long-term unsecured rating category; PROVIDED, HOWEVER, that
securities issued by any such corporation will not be Permitted
Investments to the extent that investment therein would cause the
outstanding principal amount of securities issued by such corporation
that are then held as part of any Account, to exceed 20% of the
aggregate principle amount of all Permitted Investments then held in
the Accounts, PROVIDED, FURTHER, that the investments described in
this clause must (A) have a predetermined fixed dollar of principal
due at maturity that cannot vary or change, (B) if rated by S&P, must
not have an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest rate must
be tied to a single interest rate index plus a fixed spread (if any)

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<PAGE>

and must move proportionately with that index, and (D) such
investments must not be subject to liquidation prior to their
maturity;

(ix) any money market funds rated "AAAm" or "AAAm-G" (or
equivalent), PROVIDED, HOWEVER, that the investments described in this
clause must (A) have a predetermined fixed dollar of principal due at
maturity that cannot vary or change, (B) if rated by S&P, must not
have an "r" highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such interest rate must
be tied to a single interest rate index plus a fixed spread (if any)
and must move proportionately with that index, and (D) such
investments must not be subject to liquidation prior to their
maturity; and

(x) such other obligations as are acceptable as Permitted
Investments to each Rating Agency, as evidenced by the delivery by
each Rating Agency of a Rating Comfort Letter;

PROVIDED, HOWEVER, that each such instrument continues to qualify as a "cash
flow investment" pursuant to Code SECTION 860G(a)(6) earning a passive return in
the nature of interest and that no instrument or security shall be a Permitted
Investment if (i) such instrument or security evidences a right to receive only
interest payments or (ii) the right to receive principal and interest payments
derived from the underlying investment provides a yield to maturity in excess of
120% of the yield to maturity at par of such underlying investment; and
PROVIDED, FURTHER, that (a) variable interest on any such investment shall be
based on a single index and vary proportionally with such index, and no such
instrument or investment shall have a rating by the Rating Agencies with the "r"
symbol (or equivalent symbol) attached.

"PERMITTED LIENS" means any of the following:

(i) the Liens of the Mortgages and other Security Documents;

(ii) Liens for taxes, assessments and other governmental charges
not yet due and payable or due and payable, but not yet delinquent, or
that are being contested in good faith by appropriate proceedings and
as to which adequate deposits have been made with Lender as required
by SECTION 6.2;

(iii) deposits or pledges to secure the payment of workmen's
compensation, unemployment insurance or other social security benefits
or obligations, or to secure the performance of trade contracts,
leases, public or statutory obligations, surety or appeal bonds or
other obligations of a like general nature incurred in the ordinary
course of business;

(iv) landlords', mechanics', materialmen's, warehousemen's,
carriers', or other like Liens arising in the ordinary course of
business securing obligations which are not overdue for a period
longer than 30 days, or which are being contested in good faith by
appropriate proceedings which are being diligently pursued (with
deposits having been made with Lender as required by SECTION 6.2) or
as to which the Liens are bonded to the satisfaction of Lender;

(v) easements, rights of way, zoning, similar restrictions, and
other similar encumbrances or title defects that, singly or in the
aggregate, do not in any case

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<PAGE>

materially detract from the value of the property subject thereto (as
such property is used by Borrower);

(vi) Liens arising by operation of law in connection with
judgments, only to the extent, for an amount, and for a period not
resulting in an Event of Default with respect thereto;

(vii) Liens securing capitalized lease obligations insofar as
such Liens cover assets acquired pursuant to such capitalized lease
obligations and such capitalized lease obligations constitute
Permitted Debt; and

(viii) Liens securing assets acquired pursuant to purchase money
Indebtedness, which Indebtedness constitutes Permitted Debt.

"PERSON" means an individual, a partnership, a corporation, a
trust, an unincorporated organization, a joint venture or other business
entity, a limited liability company, or a government or any department, agency
or political subdivision thereof.

"PLAN" means any plan, program or arrangement, whether or not
written, that is or was an "employee benefit plan" as it is defined in ERISA and
(a) that was or is established or maintained by Borrower or any ERISA Affiliate;
(b) under which Borrower or any ERISA Affiliate has contributed or has been
obligated to contribute or to fund or provide benefits, or under which Borrower
or any ERISA Affiliate has any liability; or (c) that provides or promises
benefits to any person who performs or has performed services for Borrower or
any ERISA Affiliate who, because of such services, is or was a participant
therein or entitled to benefits thereunder.

"POOLING AND SERVICING AGREEMENT" has the meaning ascribed to it
in SECTION 9.1 hereof.

"PREPAYMENT DATE" means the date on which any voluntary or
involuntary prepayment of principal is made or required to be made.

"PRIME RATE" means the rate that is published from time to time
as the "prime rate" in THE WALL STREET JOURNAL listing of "Money Rates" and
shall be the average of all such rates in effect at any one time if more than
one rate is quoted. If this index ceases to be published in THE WALL STREET
JOURNAL, an alternate index of similar nature will be selected by Lender in its
reasonable discretion.

"QUALIFIED INSURANCE COMPANIES" has the meaning ascribed to it in
SECTION 1.7.2 of the form of Mortgage attached hereto as EXHIBIT B hereof.

"QUALIFIED MANAGER" has the meaning ascribed to such term in
SECTION 5.3.2 hereof.

"REMIC" has the meaning ascribed to it in SECTION 2.5 hereof.

"RATING AGENCIES" shall mean (i) prior to the Securitization,
Standard & Poor's Ratings Services, a division of the McGraw-Hill Companies,
Inc., and Moody's Investors Services, Inc. (except that, where a particular
provision in any Loan Document specifies one or more Rating Agencies by name,
"RATING AGENCIES" shall mean the rating agency or rating agencies so specified)
and (ii) after the Securitization, such of the following as actually rate the
securities issued in connection with the

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Securitization: Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., Moody's Investors Service, Inc., Duff & Phelps
Credit Rating Co., Fitch Investors Service, L.P., or any other nationally
recognized statistical rating agency selected by Lender.

"RATING COMFORT LETTER" with respect to any event or proposed course
of action or inaction, means a written confirmation from the Rating Agencies
that no rating assigned by such Rating Agencies to any of the Certificates will
be downgraded, qualified or withdrawn, or placed on a credit watch with negative
implications, as a result of such event or proposed action or inaction; provided
that if the Securitization has not taken (or as certified by Lender, will not
take) the form of a transaction rated by the Rating Agencies, then "RATING
COMFORT LETTER" shall instead mean that the matter in question shall be subject
to the prior approval of Lender, which shall not be unreasonably withheld unless
expressly stated to be in Lender's sole and absolute discretion.

"REFERENCE PERIOD" means the twelve (12) full consecutive calendar
months ended immediately preceding the date as of which any determination with
respect to a Reference Period is made hereunder and for which internal financial
statements of Borrower are available. As used herein, the Reference Period
"applicable" to any sale of a Mortgaged Property, Release, or other event shall
mean the Reference Period immediately preceding such event for which internal
financial statements of the Borrower are available.

"REINVESTMENT YIELD" has the meaning ascribed to it in SECTION 2.11.2
hereof.

"RELEASE" means the release of one or more Mortgaged Properties from
the Lien of the Mortgage and the other Security Documents pursuant to the
provisions of SECTION 2.7, SECTION 2.8, SECTION 2.9 or SECTION 2.10 hereof.
"RELEASED" shall have a correlative meaning.

"RELEASE PRICE" means, with respect to a specified Mortgaged Property,
125% of the Allocated Loan Amount for such Mortgaged Property, PROVIDED,
HOWEVER, that in no event shall the Release Price for a Mortgaged Property be
greater than the then outstanding aggregate principal amount of the Loan.

"REMAINING MORTGAGED PROPERTIES" means the Mortgaged Properties that
will remain subject to the Lien of any Mortgage following a Release or several
Releases to be made on the same day.

"RENTS" means all rents, rent equivalents, moneys payable as damages
or in lieu of rent or rent equivalents, royalties (including, without
limitation, all oil and gas or other mineral royalties and bonuses, if any),
income, receivables, receipts, revenues, deposits (including, without
limitation, security, utility and other deposits), accounts, cash, issues,
profits, charges for services rendered, and other consideration of whatever form
or nature received by or paid to or for the account of or benefit of Borrower or
its agents or employees from any and all sources arising from or attributable to
the Mortgaged Properties, or any portion thereof, and proceeds, if any, from
business interruption or other loss of income insurance.

"RESERVE ACCOUNT" has the meaning ascribed to such term in SCHEDULE
5.11 of this Loan Agreement

"RESERVE REQUIREMENT" means Four Million Dollars ($4,000,000).

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<PAGE>

"RESTORATION" has the meaning ascribed to it in the form of Mortgage
attached hereto as EXHIBIT B.

"S&P" means Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc.

"SCHEDULED DEFEASANCE PAYMENTS" has the meaning ascribed to it in
SECTION 2.5(b) hereof.

"SEC" means the Securities and Exchange Commission of the United
States of America.

"SECURITIZATION" has the meaning ascribed to it in SECTION 9.1 hereof.

"SECURITY AGREEMENT" means that certain Security Agreement dated as of
even date herewith between Borrower and the Lender.

"SECURITY DOCUMENTS" means, collectively or individually, as the
context may require, the Mortgages, the Collateral Assignment of Management
Agreement, the Assignments of Leases and Rents, the Security Agreement, the
Deposit Security Agreement and such other documents as are executed and
delivered by any Person to grant additional security for the repayment of the
Loan.

"SERVICER" has the meaning ascribed to it in SECTION 9.1 hereof.

"SINGLE PURPOSE" means, with respect to a Person, that such Person,
(A) at all times since its formation, except as otherwise permitted in or
contemplated by the Loan Documents (i) has been a duly formed and existing
limited partnership, limited liability company, or corporation, as the case may
be; (ii) has observed all customary formalities regarding its partnership,
limited liability company or corporate existence; (iii) has maintained financial
statements, accounting records, and other partnership, limited liability
company, or corporate documents separate from those of any other Person
(PROVIDED that nothing shall prohibit such Person from being included in the
consolidated financial statements or tax group of another Person); (iv) has not
commingled its assets with those of any other Person; (v) has paid its own
liabilities out of its own funds, including funds contributed to its capital by
its respective equity holders, and all such capital contributions have been
reflected properly in its books and records; (vi) has allocated fairly and
reasonably any overhead for shared office expenses; (vii) has identified itself
in all dealings with the public, under its own name and as a separate and
distinct entity (PROVIDED that nothing shall prohibit such Person from engaging
a manager to represent such Person with respect to tenants, vendors, and other
parties, in accordance with standard industry practice); (viii) has not
identified itself as being a division or part of any other Person; (ix) has not
identified any other Person as being a division or part of such Person; (x) has
corrected any known misunderstanding regarding their separate identities; (xi)
has been adequately capitalized in light of the nature of its business; (xii)
has not assumed or guaranteed the obligations of any other Person (other than by
virtue of being a general partner of such other Person but only if such other
Person is Borrower and PROVIDED, that this clause shall not be deemed to be
violated by reason of joint and several liabilities arising as a matter of law);
and (xiii) has not engaged in any other business other than as permitted by the
Loan Documents, (B) such person has agreed to or is subject to covenants
substantially to the effect of SECTIONS 5.10, 5.12, 6.1, 6.3, 6.4 and 6.5 hereof
and (C) if such Person is an entity, such person's organizational documents
contain restrictions similar to those contained in Article II of the GP
Certificate as in effect on the date hereof.

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<PAGE>

"SUBSTANTIVE NON-CONSOLIDATION OPINION" means an opinion of counsel
substantially similar to the provisions of the opinion of Borrower's counsel
delivered on the Closing Date to the effect that the assets and liabilities of
Borrower or the General Partner will not be substantively consolidated with
those of Arden OP or Arden REIT in the event that Arden OP or Arden REIT were
to become the subject of bankruptcy or insolvency proceedings (with such
changes as are necessary to reflect the identity and operations of the parties
addressed in such Substantive Non-Consolidation Opinion).

"SUBSTITUTE PROPERTY" has the meaning ascribed to it in SECTION 11
hereof.

"SUBSTITUTED PROPERTY" has the meaning ascribed to it in SECTION 11
hereof.

"SUBSTITUTION CONDITIONS" has the meaning ascribed to it in SECTION 11
hereof.

"SUCCESSOR BORROWER" has the meaning ascribed to it in SECTION 2.12
hereof.

"TAKING" has the meaning ascribed to it in any applicable Mortgage.

"TAX AND INSURANCE ESCROW ACCOUNT" shall have the meaning ascribed to
such term in SECTION 5.11 hereof.

"TITLE COMPANY" has the meaning ascribed to it in SECTION 4.3.2
hereof.

"TITLE INSURANCE POLICY" and "TITLE INSURANCE POLICIES" have the
meanings ascribed to them in SECTION 4.3.2 hereof.

"TRANSACTION DOCUMENTS" means the Loan Documents, the Contribution
Agreement, and all documents to be delivered pursuant to the terms hereof and
thereof or that are executed and delivered by Borrower in connection with the
transactions contemplated hereby or thereby.

"TREASURY RATE" has the meaning ascribed to it in SECTION 2.11.2
hereof.

"TRUST FUND" has the meaning ascribed to it in SECTION 12.7.2 hereof.

"TRUSTEE" has the meaning ascribed to it in SECTION 9.1 hereof.

"U.C.C." or "UNIFORM COMMERCIAL CODE" means the Uniform Commercial
Code as in effect in the State of New York or, in the case of any particular
item of real or tangible personal property, in the State in which such
property is located.

"U.S. OBLIGATIONS" means direct, non-callable obligations of the
United States of America.

"UNDEFEASED NOTE" has the meaning ascribed to it in SECTION 2.5(a)(v)
hereof.

"YIELD MAINTENANCE PAYMENT" has the meaning ascribed to it in SECTION
2.11.1 hereof.

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1.2. DEFINITIONS INCORPORATED BY REFERENCE

Any term defined in SECTION 1.1 by reference to another agreement,
instrument or other document shall mean such agreement, instrument or document
as it may be amended, supplemented or modified from time to time, but only to
the extent such amendment, supplement or modification is permitted by the terms
hereof. If any such agreement, instrument or other document shall be replaced
or superseded in accordance with the terms hereof (for example, if the
Management Agreement is replaced by an agreement with another Qualified Manager,
the definition incorporated by reference in SECTION 1.1 to such agreement,
instrument or other document shall thereafter have the meaning established under
the replaced or superseded document, with any such changes as (a) shall be
necessary to conform to the replacement or superseding agreement, instrument or
document or (b) are otherwise agreed to by the Lender in writing.

1.3. OTHER DEFINITIONAL PROVISIONS

The terms defined in SECTION 1.1 hereof may not comprise all of the
defined terms contained in this Agreement. Capitalized terms not defined in
SECTION 1.1 hereof shall have the meanings ascribed to them elsewhere herein.
Accounting terms used in this Agreement but not defined herein shall have the
respective meanings given to them under GAAP. The words "hereof," "herein" and
"hereunder" and words of similar character when used in this Agreement shall
refer to this Agreement as a whole and shall not be limited to any particular
provision of this Agreement.

2. THE LOAN

2.1. MAKING THE LOAN

In reliance upon the representations, warranties, covenants and
agreements of Borrower contained herein and in the other Loan Documents, and
upon full satisfaction by Borrower of the terms and conditions precedent set
forth in ARTICLE 4 of this Agreement, Lender agrees to make a loan (the
"LOAN") to Borrower, which Loan shall be advanced to Borrower in a single
advance of immediately available funds equal to the Loan Amount. The Loan
Amount shall be used solely for the purposes described in SECTION 2.3 hereof.
The Loan will be secured by, among other things, a Mortgage encumbering the
Mortgaged Properties and other Improvements and granting a lien on and
security interest in certain other Property described in the Mortgage and by
other Security Documents effecting and granting a lien on and security
interest in such other Collateral, and shall bear interest at the rates per
annum specified in SECTION 2.4 hereof. Notwithstanding that Borrower will
receive an advance only of the Net Loan Proceeds, Borrower shall be required
to repay the full Loan Amount in the manner described herein.

2.2. MORTGAGE NOTE

The obligation of Borrower to repay the full Loan Amount, together
with interest thereon, and Yield Maintenance Payments, Defeasance Deposits and
other charges, if any, related thereto, shall be evidenced by that certain
Mortgage Note made by Borrower as of the Closing Date to the order of Lender
(the "MORTGAGE NOTE"), substantially in the form of EXHIBIT A attached hereto
and

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<PAGE>

incorporated herein, in the original principal amount of One Hundred
Seventy-Five Million and No/100 Dollars ($175,000,000).

The Borrower hereby irrevocably appoints the Lender and its successors
and assigns, with full power of substitution, as its attorney-in-fact, solely
for the purpose, from time to time in connection with a foreclosure on any
Mortgaged Property following an Event of Default and/or acceleration of the
maturity of the Loan, of executing two or more promissory notes (each, a "NEW
NOTE") substantially in the form of EXHIBIT A, with an aggregate face
principal balance equal to the principal amount then outstanding under the
Mortgage Note (with a notation on each such New Note as to the outstanding
principal amount of the Loan allocated to each such New Note) and marking each
promissory note that is to be replaced with such New Notes (whether the original
Mortgage Note or any Defeased Note or Undefeased Note) "SUBSTITUTED." Such
power of attorney is a limited power of attorney coupled with an interest.

2.3. USE OF LOAN PROCEEDS

Borrower agrees that the proceeds of the Loan shall be used solely for
the purpose of repaying or causing repayment of a portion of the Existing Debt
(the obligation to repay such indebtedness having been assumed by Borrower
pursuant to the Contribution Agreement), including the payment of fees and
expenses associated therewith and for the purpose of the funding of the Reserve
Account.

2.4. PAYMENT OF PRINCIPAL AND INTEREST

SECTION 2.4.1. PAYMENTS ON THE MORTGAGE NOTE.

All payments made on the Mortgage Note shall be made in the manner,
and subject to the conditions, provided in this Agreement and the Mortgage Note.
The Mortgage Note shall not be prepayable except as expressly provided for in
this SECTION 2.4.1, and in SECTION 2.5, SECTION 2.7, SECTION 2.8, SECTION
2.9 and SECTION 2.10 hereof. On any Due Date occurring on or after the date
that is three (3) months prior to the Anticipated Repayment Date, the Mortgage
Note may be prepaid, at the option of the Borrower, in full or in part, without
penalty or premium. To the extent not previously paid, the entire Debt shall be
due and payable on the Final Maturity Date.

SECTION 2.4.2. INTEREST.

(a) Except as set forth in SECTIONS 2.4.4(b) with respect to
interest accruing at the Default Interest Rate, the Debt shall bear interest for
each Debt Service Period at the applicable Interest Rate then in effect and
shall be payable as provided herein.

(b) Calculations of interest shall be made on the basis of a
360-day year and the actual number of days elapsed during each Debt Service
Period.

SECTION 2.4.3. PAYMENTS WITHOUT DEDUCTION, ETC.

All payments of the Debt to Lender shall be absolute and
unconditional, shall be paid strictly in accordance with the terms of the Loan
Documents without being subject to any claim, set-off, defense or other right
which Borrower may have against Lender or any other Person, whether in

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connection with this Agreement, the transactions contemplated herein or any
other circumstance or happening whatsoever. Borrower shall pay such payments to
the Lender free and clear of, and without deduction for, any and all present or
future taxes, levies, imposts, deductions, charges, penalties or withholdings,
and any liabilities with respect thereto, by whomever imposed, other than
present or future taxes on the income of Lender or franchise taxes imposed on
Lender as a result of its conducting business in specific jurisdictions.
Borrower shall pay and indemnify and hold Lender harmless from and against, any
present or future claim or liability for United States, state or local taxes or
assessments on the ownership by Lender of the debt obligations of Borrower
evidenced by the Mortgage Note, or on the principal, interest, fees or other
amounts payable under any Loan Documents or otherwise in respect of the Debt
(other than income or franchise taxes imposed on the Lender or its Affiliates by
any jurisdiction). The obligations of the Borrower hereunder shall survive
repayment of the Debt and termination of the Loan Documents.

SECTION 2.4.4. PERIODIC PAYMENTS.

(a) On July 10, 1997, Borrower shall pay to Lender interest on the
Mortgage Note of the Base Rate for the period commencing on the Closing Date and
ending on July 9, 1997.

(b) On August 10, 1997 and on each Due Date thereafter, the Borrower
shall pay interest on the outstanding principal of the Mortgage Note at the Base
Rate for the prior Debt Service Period (the "MONTHLY DEBT SERVICE PAYMENT").

At any time while an Event of Default has occurred and is continuing,
the Borrower shall, in addition to the Monthly Debt Service Payment and other
amounts due hereunder, be liable for the payment of interest at the Default
Interest Rate (rather than the Interest Rate) (which interest is payable both
before and after Lender has obtained a judgment with respect to the Loan);
PROVIDED, HOWEVER, that for the purposes of this sentence, an Event of Default
shall be considered to have occurred and be continuing only until such Event of
Default has been cured, including, without limitation, pursuant to the
provisions of SECTION 7.1.3 hereof, if applicable. Following the occurrence of
a Lockbox Event, the priority of payment of Default Interest shall be as set
forth in the Cash Management Procedures attached as Schedule 5.11 hereto).
Payment or acceptance of the increased rates provided for in this SECTION
2.4.4(b) is not a permitted alternative to timely payment or full performance
by the Borrower and shall not constitute a waiver of any Default or Event of
Default or an amendment to this Agreement or any other Loan Document and shall
not otherwise prejudice or limit any rights or remedies of Lender.

(c) From and after the Anticipated Repayment Date, interest shall
accrue on the outstanding principal balance of the Mortgage Note at the Adjusted
Interest Rate. On each Due Date after the Anticipated Repayment Date, Borrower
shall continue to pay to Lender the Monthly Debt Service Payment computed at the
Base Rate. Payment of all interest accruing in respect of the Mortgage Note
after the Anticipated Repayment Date in the amount equal to the difference
between the amount that accrues at the Adjusted Interest Rate and the amount
that is paid at the Base Rate ("ACCRUED INTEREST") shall (a) be deferred, and
(b) to the extent permitted by applicable law, accrue interest at the Adjusted
Interest Rate. If not sooner paid, all Accrued Interest together with interest
thereon (to the extent permitted by applicable law) shall be due and payable in
full on the Final Maturity Date. From and after the Anticipated Repayment Date,
Borrower shall pay to Lender on each Due Date (without duplication), until the
entire Debt is repaid in full, Excess Cash Flow for the Debt Service Period
relating to such Due Date; each monthly payment of Excess Cash Flow made by
Borrower under the Mortgage Note after the Anticipated Repayment Date shall be
applied first to the reduction of the outstanding

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<PAGE>

principal balance of the Mortgage Note and after the principal balance of the
Mortgage Note has been paid in full to the reduction of the outstanding amount
of Accrued Interest (together with any interest thereon).

(d) In addition to Default Interest, in the event Borrower fails to
make any Monthly Debt Service Payment, Yield Maintenance Payment or other
payment hereunder when due, Borrower shall be liable for the payment of a late
charge equal to five percent (5%) of the amount of the payment (the "LATE
PAYMENT FEE"); provided, however, prior to a Securitization, Borrower shall not
be liable to pay a Late Payment Fee the first time Borrower fails to make a
Monthly Debt Service Payment when due. Following the occurrence of a Lockbox
Event, the priority of payment of a Late Payment Fee shall be as set forth in
the Cash Management Procedures. Payment or acceptance of a Late Payment Fee
under this SECTION 2.4.4(d) is not a permitted alternative to timely payment or
full performance by Borrower and shall not constitute a waiver of any Default or
Event of Default or an amendment to this Agreement or any other Loan Document
and shall not otherwise prejudice or limit any rights or remedies of Lender.
Borrower acknowledges that its obligation to pay a Late Payment Fee may be
separated from the other obligations of Borrower hereunder, and may be held or
transferred separately from the other obligations of Borrower hereunder.

2.4.5. INSUFFICIENT PAYMENTS

In the event that Borrower fails to pay all amounts due and payable on
the Mortgage Note on any Due Date, unless otherwise determined by Lender, all
cash paid by the Borrower on such date and all proceeds realized on the sale of
Collateral pursuant to any of the Loan Documents shall be applied in the
following order of priority to the extent of the cash so paid or proceeds
realized:

FIRST: to pay (a) all amounts that are due and unpaid under SECTION
12.7.1 hereof and under SECTION 7.5 hereof, if applicable (b) all costs,
if any, incurred by Lender in acting on behalf of Borrower as provided in
the Loan Documents and (c), if applicable, all costs and expenses incurred
by the Lender in enforcing this Loan Agreement and any of the other Loan
Documents, including all costs and expenses of the foreclosure and/or sale
of the Collateral or any part thereof or any interest therein, and all
costs and expenses of entering upon, taking possession of, removing,
holding, constructing improvements on, and operating and managing the
Collateral or any part thereof, and all costs and expenses of repairs,
renewals, replacements, additions, betterments, and improvements to the
Collateral, in each case in accordance with the Loan Documents, and all
reasonable attorneys' and accountants' fees and disbursements, including
any appraisals that may reasonably be required by Lender, incurred in
connection with any of the foregoing, together with any compensation
payable under SECTION 4.3 of any Mortgage;

SECOND: to pay interest at the Base Rate then due and payable on the
Mortgage Note;

THIRD: to pay all amounts of principal due and payable on the
Mortgage Note (whether at maturity, on a date fixed for any payment or
prepayment thereof, upon acceleration, or otherwise), until the principal
balance has been reduced to zero;

FOURTH: to pay any Yield Maintenance Payments then due and payable;

FIFTH: to pay any Default Interest and Late Payment Fees then due and
payable; and

SIXTH: to pay Accrued Interest, if any (plus interest thereon at the
Adjusted Rate).

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All proceeds realized upon the sale of Collateral pursuant to any of the Loan
Documents shall be applied in accordance with the foregoing as of the Due Date
next occurring following any such sale.

2.5. DEFEASANCE

(a) At any time during the period commencing on (i) the first
Business Day after the date that is the earlier of (A) two years after the
"startup day," within the meaning of Section 860G(a)(9) of the Code, of a "real
estate mortgage investment conduit," within the meaning of Section 860d of the
Code (a "REMIC"), that holds the Mortgage Note and (B) three years after the
Closing Date, and ending on (ii) the date that is three (3) months prior to the
Anticipated Repayment Date (such period being sometimes referred to herein as
the "DEFEASANCE PERIOD"), and provided no Event of Default has occurred and is
continuing (other than on Event of Default that will be cured by the release of
a Mortgaged Property or Mortgaged Properties from the Lien of the Security
Documents pursuant to the provisions of Section 7.1.3 hereof), Borrower may
voluntarily defease all or any portion of the Loan by providing Lender with the
Defeasance Deposit (hereinafter, a "DEFEASANCE EVENT"). Each Defeasance Event
by the Borrower shall be subject to the satisfaction of the following conditions
precedent:

(i) Borrower shall provide not less than twenty (20) days prior
written notice to Lender specifying a regularly scheduled payment date (the
"DEFEASANCE DATE") on which the Defeasance Event is to occur. Such notice
shall indicate the principal amount of the Mortgage Note to be defeased;

(ii) Borrower shall pay to Lender all accrued and unpaid interest on
the principal balance of the Mortgage Note to but not including the
Defeasance Date. If for any reason the Defeasance Date is not a regularly
scheduled payment date, the Borrower shall also pay interest that would
have accrued on the Mortgage Note through the next regularly scheduled
payment date;

(iii) Borrower shall pay to Lender all other sums, not including
scheduled interest or principal payments, due under the Mortgage Note, this
Agreement, the Mortgage, and the other Loan Documents;

(iv) Borrower shall pay to Lender the required Defeasance Deposit for
the Defeasance Event;

(v) In the event only a portion of the Loan is the subject of the
Defeasance Event, Borrower shall prepare all necessary documents to amend
and restate the Note and issue two substitute notes, one note having a
principal balance equal to the defeased portion of the original Note (the
"DEFEASED NOTE") and the other note having a principal balance equal to
the undefeased portion of the Note (the "UNDEFEASED NOTE"). The Defeased
Note and Undefeased Note shall have identical terms as the Note except for
the principal balance. A Defeased Note cannot be the subject of any
further Defeasance Event;

(vi) Borrower shall execute and deliver a security agreement, in form
and substance satisfactory to Lender, creating a first priority lien on the
Defeasance Deposit and the U.S. Obligations purchased with the Defeasance
Deposit in accordance with this provision of this SECTION 2.5 (THE
"DEFEASANCE SECURITY AGREEMENT");

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(vii) Borrower shall deliver an opinion of counsel for Borrower in
form satisfactory to Lender in its sole discretion stating, among other
things, that Borrower has legally and validly transferred and assigned the
U.S. Obligations and all obligations, rights and duties under and to the
Mortgage Note or Defeased Note (as applicable) to the Successor Borrower,
that Lender has a perfected first priority security interest in the
Defeasance Deposit and the U.S. Obligations delivered by Borrower, that
such Defeasance will not adversely affect the status of the entity holding
the interest in the Mortgage Note as a REMIC (assuming for such purpose
that such entity otherwise qualifies as a REMIC) and that such Defeasance
will not result in a deemed exchange of the Certificates pursuant to
SECTION 1001 of the Code;

(viii) Borrower shall deliver a Rating Comfort Letter from the
Rating Agencies in connection with the Defeasance Event. If required by
the applicable Rating Agencies, the Borrower shall also deliver or cause to
be delivered a Substantive Non-Consolidation Opinion with respect to the
Successor Borrower in form and substance satisfactory to Lender and the
applicable Rating Agencies;

(ix) Borrower shall deliver an Officer's Certificate certifying that
the requirements set forth in this SECTION 2.5(a) have been satisfied;

(x) Borrower shall deliver to Lender a certificate of Borrower's
independent certified public accountant certifying that the U.S.
Obligations purchased with the Defeasance Deposit will generate monthly
amounts equal to or greater than the required Scheduled Defeasance
Payments;

(xi) Borrower shall deliver such other certificates, documents or
instruments as Lender may reasonably request; and

(xii) Borrower shall pay all costs and expenses of Lender incurred
in connection with the Defeasance Event, including any costs and expenses
associated with a release of the Lien of the Mortgage as provided in
SECTION 2.8 hereof or SECTION 2.9 hereof, as applicable, as well as
reasonable attorneys' fees and expenses.

(b) In connection with each Defeasance Event, Borrower hereby
appoints Lender as its agent and attorney-in-fact for the purpose of using the
Defeasance Deposit to purchase U.S. Obligations which provide payments on or
prior to, but as close as possible to, all successive Due Dates after the
Defeasance Date upon which interest payments are required under the Mortgage
Note, in the case of a Defeasance Event for the entire outstanding principal
balance of the Loan, or the Defeased Note, in the case of a Defeasance Event for
only a portion of the outstanding principal balance of the Loan, as applicable,
and in amounts equal to the scheduled payments due on such Due Dates under the
Mortgage Note or the Defeased Note, as applicable, and assuming such Mortgage
Note or Defeased Note is paid in full on the Anticipated Repayment Date (the
"SCHEDULED DEFEASANCE PAYMENTS"). Borrower, pursuant to the Defeasance
Security Agreement or other appropriate document, shall authorize and direct
that the payments received from the U.S. Obligations may be made directly to the
Cash Collateral Account (unless otherwise directed by Lender) and applied to
satisfy the obligations of Borrower under the Mortgage Note or the Defeased
Note, as applicable.

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2.6. RELEASE OF PROPERTY

Except as set forth in SECTION 2.7, SECTION 2.8, SECTION 2.9 or
SECTION 2.10, no repayment, prepayment or defeasance of all or any portion of
the Mortgage Note shall cause, give rise to a right to require, or otherwise
result in, the release of the Lien of the Mortgage on any of the Mortgaged
Properties.

2.7. PARTIAL RELEASE IN CONNECTION WITH A CASUALTY OR TAKING BEFORE
DEFEASANCE PERIOD

In the event that, prior to (a) the first day of the Defeasance
Period, a Mortgaged Property has suffered a total or substantial Taking or
Casualty (in each case, as to which Restoration is not required or permitted
under the Mortgage) or (b) a Securitization, a Default of the type described in
SECTION 7.1.3 occurs that can be cured by a Release of a Mortgaged Property
from the lien of the Security Documents, Borrower shall cause the Release of
such Mortgaged Property from the Lien of the Security Documents upon the
satisfaction of the following conditions:

(a) Borrower shall provide not less than 30 days' notice to Lender
specifying a Due Date on which the amount set forth in clause (c) below is to be
provided to Lender, which notice shall be accompanied by a certificate of the
Borrower and the General Partner, signed by a duly authorized officer of the
General Partner, to the effect that no Default or Event of Default has occurred
and is continuing (or, in the case of a Default or Event of Default that shall
be cured or avoided by the Release of the affected Mortgaged Property,
describing the nature of such Default or Event of Default, and certifying that
such Default or Event of Default shall be cured by such Release) and that such
Release will comply with all applicable requirements of this SECTION 2.7;

(b) Borrower shall pay to Lender all interest that is accrued and
unpaid on the principal balance of the Mortgage Note and all other sums due
under the Loan Documents, through and including such Due Date, including,
without limitation, all reasonable costs and expenses of Lender incurred in
connection with the Release, including any costs and expenses associated with a
release of the Lien of the Security Documents and reasonable attorneys' fees and
expenses;

(c) Borrower shall pay to Lender, to be applied to prepayment of the
outstanding principal balance of the Loan, an amount equal to (1) in the case of
a prepayment pursuant to clause (b) of the first paragraph of this SECTION 2.6,
the Release Price and the Yield Maintenance Payment for such Mortgaged Property
or (2) in the case of a Release pursuant to clause (a) of the first paragraph of
this SECTION 2.6, an amount equal to the greater of (a) and (b), in which (a)
is the Allocated Loan Amount for such Mortgaged Property and (b) is the lesser
of (x) the Release Price for such Mortgaged Property and (y) the sum of the Net
Sales Proceeds received by Borrower from the sale of the Mortgaged Property or
the part thereof that remains following the Taking or Casualty, plus the
remaining Award or Insurance Proceeds not previously applied to repayment of the
Loan or Restoration;

(d) Borrower shall deliver to Lender, for execution, forms of release
of such Mortgaged Property from the Lien of the Security Documents appropriate
for the jurisdiction in which such Mortgaged Property is located;

(e) if the Release is being requested in order to avoid an Event of
Default pursuant to SECTION 7.1.3 hereof, Borrower shall deliver to Lender
evidence reasonably satisfactory to Lender, that after giving effect to such
Release, the Debt Service Coverage Ratio for the Remaining Mortgaged Properties
shall be equal to the greater of (i) 2.052:1, and (ii) the Debt Service Coverage
Ratio for the

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Remaining Mortgaged Properties and the Mortgaged Properties to be released for
the twelve (12) full calendar months immediately preceding the release of the
Mortgaged Properties to be released;

(f) Borrower shall provide to Lender an opinion of counsel in form
and substance, and from a firm, acceptable to Lender in the exercise of its sole
discretion, that such Release would not adversely affect the status of the
entity holding the interest in the Mortgage Note as a REMIC (assuming for such
purpose that such entity otherwise qualifies as a REMIC) and that such Release
will not result in a deemed exchange of the Certificates pursuant to Section
1001 of the Code.

2.8. RELEASE OF ALL THE PROPERTIES DURING DEFEASANCE PERIOD

(a) At any time during the Defeasance Period, if Borrower has elected
to defease the entire outstanding principal balance of the Mortgage Note and the
requirements of SECTION 2.5 have been satisfied, all of the Mortgaged
Properties shall be released from the Lien of the Mortgage and the U.S.
Obligations, pledged pursuant to the Defeasance Security Agreement, shall be the
sole source of collateral securing the Note.

(b) In connection with the release of the Lien, Borrower shall submit
to Lender, not less than thirty (30) days prior to the Release Date, a release
of Lien (and related Loan Documents) for each Mortgaged Property for execution
by Lender. Such release shall be in a form appropriate in each jurisdiction in
which a Mortgaged Property is located and satisfactory to Lender in its sole
discretion. In addition, Borrower shall provide all other documentation Lender
reasonably requires to be delivered by Borrower in connection with such release,
together with an Officer's Certificate certifying that such documentation (i) is
in compliance with all Laws, and (ii) will effect such Releases in accordance
with the terms of this Agreement.

2.9. RELEASE OF INDIVIDUAL MORTGAGED PROPERTIES DURING THE DEFEASANCE
PERIOD

At any time during the Defeasance Period, in connection with any
Defeasance of less than the entire principal balance of the Mortgage Note,
Borrower may obtain (i) the Release of one or more Mortgaged Properties from the
Lien of the Mortgage thereon (and related Loan Documents) and (ii) the release
of Borrower's obligations under the Loan Documents with respect to such
Mortgaged Properties (other than those expressly stated to survive), upon
satisfaction of each of the following conditions:

(a) the principal balance of the Defeased Note issued in connection
with such Defeasance shall equal or exceed the aggregate Release Prices for the
Mortgaged Properties then being Released;

(b) the requirements of SECTION 2.5 have been satisfied;

(c) Borrower shall submit to Lender, not less than thirty (30) days
prior to the date of such Release, a release of Lien (and related Loan
Documents) for each such Mortgaged Property for execution by Lender. Such
release shall be in a form appropriate in the jurisdiction in which such
Mortgaged Property is located and satisfactory to Lender in its sole discretion.
In addition, Borrower shall provide all other documentation Lender reasonably
requires to be delivered by Borrower in connection with such release, together
with an Officer's Certificate certifying that such documentation (i) is in
compliance with all Laws, (ii) will effect such release in accordance with the
terms of this

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<PAGE>

Agreement, and (iii) will not impair or otherwise adversely affect the Liens,
security interests and other rights of Lender under the Loan Documents not being
released (or as to the parties to the Loan Documents and Mortgaged Properties
subject to the Loan Documents not being released); and

(d) After giving effect to such release, the Debt Service Coverage
Ratio for the Remaining Mortgaged Properties shall be equal to the greater of
(i) 2.052:1, and (ii) the Debt Service Coverage Ratio for the Remaining
Mortgaged Properties and the Mortgaged Properties to be released for the twelve
(12) full calendar months immediately preceding the release of the Mortgaged
Properties to be released.

2.10. PARTIAL RELEASE AFTER DEFEASANCE PERIOD

On any Due Date occurring on or after the last day of the Defeasance
Period, upon the sale of any Mortgaged Property to any Person, Borrower may
cause the Release of such Mortgaged Property from the Lien of the Security
Documents upon the satisfaction of the following conditions:

(a) Borrower shall provide not less than 30 days' notice to Lender
specifying a Due Date on which the amount set forth in clause (c) below is to be
provided to Lender, which notice shall be accompanied by a certificate of
Borrower and the General Partner, signed by a duly authorized officer of the
General Partner, to the effect that no Default or Event of Default has occurred
and is continuing (or, in the case of a Default or Event of Default that shall
be cured or avoided by the Release of the affected Mortgaged Property,
describing the nature of such Default or Event of Default, and certifying that
such Default or Event of Default shall be cured by such Release) and that such
Release will comply with all applicable requirements of this SECTION 2.10;

(c) Borrower shall pay to Lender, to be applied to the outstanding
principal balance of the Loan, an amount equal to the Release Price of such
Mortgaged Property; PROVIDED, HOWEVER, that (A) if a Mortgaged Property is
released pursuant to this SECTION 2.10 as a result of a Casualty or a Taking as
to which Restoration is not required or permitted under the applicable Mortgage,
such payment shall be an amount equal to the greater of (a) and (b), in which
(a) is the Allocated Loan Amount for such Mortgaged Property and (b) is the
lesser of (x) the Release Price for such Mortgaged Property and (y) the sum of
the Net Sales Proceeds received by Borrower from the sale of the Mortgaged
Property or the part thereof that remains following the Taking or Casualty plus
the remaining Award or Insurance Proceeds not previously applied to repayment of
the Loan or Restoration;

(e) unless the Release is being made in connection with a Casualty or
Taking (as to which Restoration is not required or permitted under the
applicable Mortgage), after giving effect to such Release, the Debt Service
Coverage Ratio for the Remaining Mortgaged Properties shall be at least equal to
the greater of (i) 2.052:1, and (ii) the Debt Service Coverage Ratio for the
Remaining Mortgaged

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Properties and the Mortgaged Property to be released for the twelve (12) full
calendar months immediately preceding the release of the Mortgaged Property to
be released; and

(f) Borrower shall provide to Lender an opinion of counsel in form
and substance, and from a firm, acceptable to Lender in the exercise of its sole
discretion, that such Release would not adversely affect the status of the
entity holding the interest in the Mortgage Note as a REMIC (assuming for such
purpose that such entity otherwise qualifies as a REMIC) and that such
Defeasance will not result in a deemed exchange of the Certificates pursuant to
Section 1001 of the Code.

Sales of personal property at a Mortgaged Property in the ordinary
course of business may be made pursuant to SECTION 1.23 of the applicable
Mortgage without regard to SECTION 2.7, SECTION 2.8, SECTION 2.9 or SECTION 2.10
hereof.

2.11. YIELD MAINTENANCE

2.11.1.

If all or any part of the principal amount of the Loan is prepaid
after the Closing Date but prior to the last day of the Defeasance Period as a
result of the acceleration of the maturity of the Mortgage Note after an Event
of Default (or if a Mortgaged Property is released for the purpose set forth in
SECTION 7.1.3 after the Closing Date but prior to the Securitization), Borrower
shall be required to pay a prepayment premium (the "YIELD MAINTENANCE PAYMENT")
on the Mortgage Note equal to the greater of (A) 1% of the amount of the
principal prepayment that is to be applied to the Mortgage Note and (B) the
present value as of the end of the applicable Debt Service Period, discounted at
the Reinvestment Yield, of a series of payments each equal to the Payment
Differential on each of the remaining Due Dates prior to and including the
Anticipated Repayment Date, after giving effect to the regularly scheduled
payment of principal that is to be made on the Prepayment Date. No Yield
Maintenance Payment shall be required in connection with prepayments made on or
after the last day of the Defeasance Period.

2.11.2.

Promptly following the acceleration of the Mortgage Note or following
the occurrence of any other event, the occurrence of which obligates Borrower to
make a Yield Maintenance Payment, Lender shall notify Borrower of the amount and
basis of determination of the applicable Yield Maintenance Payment promptly upon
determining the Treasury Rate, as contemplated below. Absent manifest error,
Borrower shall not dispute Lender's calculations hereunder.

For purposes of this SECTION 2.11, the following terms shall have the
meanings ascribed to them below:

"PAYMENT DIFFERENTIAL" means, an amount equal to (x) the Base Rate,
minus the Reinvestment Yield, divided by (y) 12, and multiplied by (z) the
amount of the principal prepayment.

"REINVESTMENT YIELD" is the Treasury Rate converted to a monthly
compounded nominal annual yield.

"TREASURY RATE" is equal to the lesser of (A) the annual yield on the
United States Treasury issue (primary issue) with a maturity date closest
to the Final Maturity Date and (B) the

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yield on the United States Treasury issue (primary issue) with a maturity
equal to the remaining average life of the Mortgage Note, with each such
yield being based on the bid price for such issue as published in THE WALL
STREET JOURNAL on the date that is 14 days prior to (x) the applicable
Prepayment Date set forth in the notice of prepayment provided by the
Borrower or (y) the date of acceleration by the Lender (or if such bid
price is not published on that date, the next preceding date on which
such bid price is so published).

2.12. SUCCESSOR BORROWER

In connection with any release of a Lien under SECTION 2.8 or SECTION
2.9, Lender shall establish or designate a successor entity (the "SUCCESSOR
BORROWER") which shall be a single purpose bankruptcy remote entity approved by
Lender, and Borrower shall transfer and assign all obligations, rights and
duties under and to the Mortgage Note (in the event of a Release pursuant to
SECTION 2.8) or the Defeased Note (in the event of a Release pursuant to
SECTION 2.9), as applicable, together with the pledged U.S. Obligations to such
Successor Borrower. Such Successor Borrower shall assume the obligations under
the Mortgage Note or the Defeased Note, as applicable, and the Security
Agreement and Borrower shall be relieved of its obligations under such
documents. The Borrower shall pay $1,000 to any such Successor Borrower as
consideration for assuming the obligations under the Mortgage Note or the
Defeased Note, as applicable, and the Security Agreement. Notwithstanding
anything in this Agreement to the contrary, no other assumption fee shall be
payable upon a transfer of the Mortgage Note in accordance with this SECTION
2.12, but Borrower shall pay all costs and expenses incurred by Lender,
including Lender's attorneys' fees and expenses, incurred in connection
therewith.

3. REPRESENTATIONS AND WARRANTIES

To induce Lender to enter into this Agreement and the other Loan
Documents and to make the Loan to Borrower, Borrower makes the following
representations and warranties. For purposes of this Article 3, references to
the knowledge of Borrower or to information known by Borrower, shall be deemed
to include the knowledge of, or information known by, Arden OP, Arden REIT and
the General Partner.

3.1. ORGANIZATION AND POWER OF BORROWER AND GENERAL PARTNER

Borrower (i) is duly organized and validly existing as a limited
partnership in good standing under the laws of the State of California, (ii) has
full power and authority to enter into, execute, deliver and perform this
Agreement, the Mortgage Note, and the other Loan Documents and Transaction
Documents and to consummate the transactions contemplated hereby and thereby,
(iii) has full power and authority to mortgage or assign all of its right, title
and interest in and to the Mortgaged Properties and the other Collateral, (iv)
has full power and authority to transact the business in which it is now
engaged, or proposes to engage, (v) has power and authority and is duly
qualified to transact such business as a foreign limited partnership under the
laws of all jurisdictions in which the Mortgaged Properties are located, and in
all jurisdictions where the nature of Borrower's business or the character of
properties owned, leased, operated or otherwise held by Borrower makes such
qualification necessary and (vi) is a special purpose entity established for the
sole purpose of owning and operating the Mortgaged Properties or causing the
Mortgaged Properties to be operated and entering into the transactions
contemplated by the Transaction Documents and performing activities incidental
and related to the operation of the Mortgaged Properties. All of the
partnership interests in Borrower have been duly and validly authorized

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<PAGE>

and issued and are owned as follows: Arden OP owns a 99% limited partner
interest and the General Partner owns a 1% general partner interest in
Borrower, in each case, free and clear of any liens, encumbrances, equities or
claims. The General Partner (i) is duly organized and validly existing as a
corporation in good standing under the laws of the State of California, (ii) has
full power and authority to execute, deliver, and perform this Agreement and the
other Loan Documents and Transaction Documents to which it is a party, whether
for itself or on behalf of Borrower, (iii) is duly qualified to transact
business as a foreign corporation in good standing under the laws of each
jurisdiction which requires such qualification, except when the failure to be so
qualified, considering all such failures in the aggregate, would not be
reasonably likely to have a material adverse effect on the financial condition,
business or results of operations of the General Partner or Borrower or on the
ownership, use or value of any of the Mortgaged Properties and (iv) is not
engaged in any business other than acting as the general partner of Borrower and
performing activities incidental and related to acting as general partner of
Borrower. Borrower has its principal place of business, principal office and
office where it keeps its records and other documents and instruments relating
to the Mortgaged Properties (except for certain records, documents and
instruments kept at the Mortgaged Properties) at its address set forth in
SECTION 12.3.

3.2. DUE AUTHORIZATION AND EXECUTION

The execution, delivery and performance by Borrower and the General
Partner of this Agreement and each of the other Loan Documents and Transaction
Documents have been duly authorized by all requisite actions by and on behalf of
Borrower and the General Partner and are within the partnership or corporate
power of Borrower and the General Partner, as the case may be, and this
Agreement and all other Loan Documents and Transaction Documents executed and
delivered by Borrower or the General Partner have been duly executed by Borrower
and the General Partner and constitute the valid and binding obligations of
Borrower and the General Partner, enforceable against Borrower and the General
Partner in accordance with their respective terms, subject to the effects of
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights
generally and general principles of equity (whether considered in a proceeding
in equity or at law).

3.3. NO CONSENTS REQUIRED; NO CONTRAVENTION

Except for consents and approvals that have already been obtained and
are in full force and effect, no consent, license, approval or authorization of,
or registration or declaration with, any Governmental Authority, commission,
bureau, agency or other Person is required in connection with the execution,
delivery and performance of this Agreement, the Mortgage Note, or any of the
other Loan Documents or Transaction Documents or the consummation of the
transactions contemplated hereby and thereby. Neither the execution and
delivery by Borrower or the General Partner of this Agreement nor of the other
Loan Documents or other Transaction Documents, the consummation of the
transactions contemplated hereby or thereby, nor the fulfillment by Borrower or
the General Partner of, or compliance by Borrower or the General Partner with,
the terms and conditions of this Agreement or the Loan Documents or other
Transaction Documents:

(a) will result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any Laws or any judgment, decree
or order binding on Borrower or the General Partner or their respective
properties or assets;

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<PAGE>

(b) will conflict with or result in any breach or violation of any of
the terms, conditions or provisions of the organizational documents of Borrower
or the General Partner; or

(c) will result in a breach or violation of or constitute a default
under any existing material agreement or instrument to which Borrower or the
General Partner or their respective assets are a party or by which Borrower or
the General Partner are bound.

3.4. TITLE TO PROPERTIES

Borrower has good and marketable title to the Mortgaged Properties,
including good and marketable fee simple or leasehold title, as applicable, in
and to the Land, and good and marketable title in and to the Improvements
located thereon, in each case free and clear of all Liens except for Permitted
Liens, and Borrower has good title in all other assets that serve as Collateral
for the Loan (which, in the case of assets leased by Borrower, shall mean a good
and valid leasehold interest in such assets), free and clear of all Liens except
Permitted Liens. The Permitted Liens do not and will not materially and
adversely affect (i) the ability of Borrower to pay in full the principal and
interest when due on the Mortgage Note or (ii) the use of the Mortgaged
Properties for the use currently being made thereof or the operation of the
Mortgaged Properties as they currently are being operated. Borrower has no
interest in real property other than the Mortgaged Properties, including the
Land and Improvements related thereto. Each Mortgaged Property constitutes one
or more separate tax lots that do not share tax liability with other real
property except property that is (a) owned in full by Borrower or a Ground
Lessor and (b) encumbered by a Lien in favor of the Lender securing the Loan.

3.5. MANAGEMENT AGREEMENT

The execution, delivery and performance by Borrower of the Management
Agreement has been duly authorized by all requisite actions by and on behalf of
Borrower and are within the partnership or corporate power of Borrower and the
Management Agreement has been duly executed by Borrower and the Manager and
constitute the valid and binding obligations of Borrower and the Manager,
enforceable against Borrower and the Manager in accordance with their terms,
subject to the effects of applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, and similar laws relating to or
affecting creditors' rights generally and general principles of equity (whether
considered in a proceeding in equity or at law).

3.6. LEASES

(a) Borrower is the sole owner of the entire lessor's interest in the
Leases; (b) the Leases are valid and enforceable subject to the effects of
applicable bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, and similar laws relating to or affecting creditors' rights
generally and general principles of equity (whether considered in a proceeding
in equity or at law); (c) the material economic terms of all alterations,
modifications and amendments to the Leases are reflected in the certified
occupancy statement delivered to and approved by Lender; (d) none of the rents
reserved in the Leases have been assigned or otherwise pledged or hypothecated
(other than to Lender); (e) except as may otherwise be permitted herein, none of
the Rents have been collected for more than one month in advance; (f) the
premises demised under the Leases have been completed and the tenants under the
Leases have been accepted the same and have taken possession of the same on a
rent-paying basis except as otherwise shown on Schedule 3.6 attached hereto;
(g) there currently exist no offsets or

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<PAGE>

defenses to the payment of any portion of the Rents, except as otherwise shown
on SCHEDULE 3.6 attached hereto; (h) no Lease contains an option to purchase,
right of first refusal to purchase, or any other similar provision; and (i) no
person or entity has any possessory interest in, or right to occupy, the
Property except under and pursuant to a Lease.

3.7. UTILITIES

(i) All utility services and facilities (including water, sanitary
sewer, storm sewer, gas and electrical services and facilities) necessary for
the present and proposed use of the Mortgaged Properties are available to the
Mortgaged Properties and, except as shown on the surveys or title reports for
the Mortgaged Properties, enter the Mortgaged Properties either through
adjoining public streets or through private lands pursuant to valid,
unsubordinated, perpetual, enforceable and recorded public or private easements;
(ii) all utility connections for the Mortgaged Properties have been completed,
installed and paid for; (iii) except as shown on the surveys or title reports
for the Mortgaged Properties and except for encroachments that would not
reasonably be expected to materially and adversely affect the operation of the
applicable Mortgaged Property, no Improvements on the Land are located upon any
public utility lines or upon any private utility lines serving property other
than the Mortgaged Properties, or encroach upon any property adjoining the
Mortgaged Properties or encroach upon any utility easements or rights-of-way;
and (iv) neither Borrower nor the General Partner has received any notice from
any utility that any utility services utilized by the Mortgaged Properties will
be revoked or otherwise terminated.

3.8. NO VIOLATIONS

No notices of any material violation of law or municipal ordinances or
of federal, state, county or municipal or other governmental agency regulations,
orders or requirements relating to the Collateral have been entered against or
received by Borrower, Arden OP or Arden REIT and none of Borrower, Arden OP or
Arden REIT has reason to believe that any such notice may or will be entered or
received.

3.9. OTHER AGREEMENTS

Neither Borrower, nor the General Partner is a party to any agreement,
instrument, indenture, or other contract or subject to any charter or other
restriction that could materially adversely affect, or threaten to materially
adversely affect, its business, operations, prospects, properties, assets or
condition (financial or otherwise). No material default by Arden OP, Arden
REIT, Borrower or the General Partner has occurred or is continuing (nor has
there occurred any continuing event which, with giving of notice or the passage
of time or both, would constitute such a default) under any material contracts,
material agreements or material orders to which Borrower, or the General
Partner, as the case may be, is a party or by which it is bound and, to the
knowledge of Borrower, no material default by a third party has occurred or is
continuing (nor has there occurred any continuing event which, with the giving
of notice or the passage of time, or both, would constitute such a default)
under any such contracts, agreements or orders. No holder of any indebtedness
of Borrower or the General Partner has given notice of any default thereunder,
and no liquidation or dissolution of Borrower, or the General Partner, and no
receivership, insolvency, bankruptcy, reorganization or other similar
proceedings relative to Borrower, or the General Partner or any of their
properties, is pending or, to the knowledge of Borrower or the General Partner,
threatened against them or their properties.

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3.10. PAYMENT OF TAXES

(i) Borrower and the General Partner have filed or have caused to be
filed all federal, state, local, and foreign income, excise, property and other
tax returns with respect to their operations, that are required to be filed,
(ii) all such returns are true and correct in all material respects, and (iii)
Borrower and the General Partner have paid or caused to be paid in full all
taxes as shown on such returns or on any assessment received by them, to the
extent that such taxes have become due. Except as so disclosed, the amounts
reserved as a liability for income and other taxes that may become payable are
sufficient for the payment of all such unpaid taxes of Borrower or the General
Partner, whether or not disputed, for which Borrower or the General Partner may
be liable in its own right or as a transferee of the assets of, or as successor
to, any other person or entity.

3.11. LITIGATION

There is no legal or governmental action, suit or proceeding
(including any condemnation proceeding) pending to which Borrower or the General
Partner is a party or of which any property of Borrower or the General Partner
is subject which, if determined adversely to Borrower or the General Partner, as
the case may be, would individually or in the aggregate have a material adverse
effect on the Mortgaged Properties, or on the financial position, business or
results of operations of Borrower or the General Partner or that might affect in
any material respect the transactions contemplated by this Agreement and, to the
knowledge of Borrower and the General Partner, no such proceedings are
threatened or contemplated by governmental authorities or threatened by others.

3.12. REGULATION U

Neither Borrower nor the General Partner is engaged principally, or as
one of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any "margin stock" within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System, as now and
from time to time hereafter in effect, and no proceeds of the Loan will be used
for any purpose (and neither Borrower nor the General Partner acting on its
behalf has taken or will take any action) which might cause this Agreement or
any Loan Document to violate said Regulation U or any other regulation of the
Board of Governors of the Federal Reserve System (in each case as in effect on
the date hereof or as the same may hereinafter be in effect).

3.13. INVESTMENT COMPANY ACT

Neither Borrower nor the General Partner is an "investment company"
or a company "controlled" by an "investment company," as such terms are defined
in the Investment Company Act of 1940, as amended and none is an open-ended
investment company, unit trust or face-amount certificate company that is or is
required to be registered under Section 8 of the Investment Company Act.

3.14. TRANSACTIONS WITH AFFILIATES

Excluding all transactions contemplated by the Loan Documents, no
officer of Borrower, and no other Affiliate of Borrower or of any such officer,
is currently a party to any transaction with Borrower, including any contract,
agreement or other arrangement providing for the employment of, furnishing of
advisory or other services by, purchase or lease of real or personal property
from, or

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otherwise requiring payments to, any such officer or Affiliate, except on terms
that are fair and reasonable and no less favorable to Borrower than would be
expected in arms-length transactions with third parties where neither party is
under duress or under any extraordinary compulsion to enter into such contract,
agreement or arrangement.

3.15. BUSINESS PURPOSE; NON-SUBORDINATION

The Loan is solely for the business purpose of Borrower, and is not
for personal, family, household or agricultural purposes. The obligations of
Borrower under this Agreement, the Mortgage Note, and each of the other Loan
Documents, and the indebtedness evidenced by the Mortgage Note, are not
subordinated in right of payment or otherwise to any other obligation of
Borrower or to any rights of others.

2.16. PERMITS AND LICENSES

Borrower and the General Partner have all material permits, licenses
and authorizations necessary to conduct their respective businesses in the same
manner as the business conducted by Arden OP and Arden REIT immediately prior to
the transfer of the Mortgaged Properties to Borrower. No proceedings are
pending or, to the best of Borrower's and the General Partner's knowledge,
threatened seeking the revocation or suspension of any permits, licenses or
approvals issued with respect to the Mortgaged Properties the revocation of
which might reasonably be expected to result in any material adverse change in
the business, operations, prospects, properties, assets or condition (financial
or otherwise) of Borrower or any of the Mortgaged Properties. No such permits,
licenses or approvals shall be altered or amended in any materially adverse
respect, nor shall Borrower or the General Partner make any attempt to alter or
amend the same, in any materially adverse respect, without the prior written
consent of Lender, which shall not be unreasonably withheld.

3.17. PATENTS AND TRADEMARKS

Borrower owns or possesses the right to use all patents, trademarks,
service marks, trade names, copyrights, licenses, franchises, permits and rights
with respect to the foregoing, necessary to own and operate its properties and
to carry on its business as presently conducted and presently planned to be
conducted without conflict with any rights of others.

3.18. INSURANCE

Borrower has obtained or caused to be obtained all insurance policies
required by SECTION 8.1 hereof and by each of the Mortgages, in each case with
Qualified Insurance Companies and all such policies are in full force and
effect.

3.19. ERISA

Neither Borrower nor the General Partner has any employees, and
neither Borrower nor the General Partner maintains or sponsors any Plan.
Neither Borrower nor the General Partner is obligated to make contributions on
behalf of the employees of any Person to any Plan.

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3.20. NO NOTICE OF NON-COMPLIANCE

Neither the Borrower nor the General Partner nor Arden OP nor Arden
REIT has received any notice from any insurance company which has issued a
policy with respect to the Mortgaged Properties or from any State Board of Fire
Underwriters (or any other body exercising similar functions) requiring the
performance of any repairs, alterations or other work, which repairs,
alterations or other work have not been completed at the Mortgaged Properties.
Neither Borrower nor the General Partner nor Arden OP nor Arden REIT has
received any notice of default or breach which has not been cured under any
covenant, condition, restriction, right-of-way, reciprocal easement agreement or
other easement or agreement affecting the Mortgaged Properties which is to be
performed or complied with by it.

3.21. COMPLIANCE WITH LAWS

Borrower and each Mortgaged Property is in compliance with all Laws,
except for such non-compliance as would not reasonably be expected, singly or in
the aggregate, to materially and adversely affect any Mortgaged Property or the
business, operations, prospects, assets, properties or condition (financial or
otherwise) of Borrower.

3.22. COMPLIANCE WITH ENVIRONMENTAL LAWS

To the best of Borrower's and the General Partner's knowledge, each of
the Mortgaged Properties is in compliance in all material respects with, all
applicable Environmental Laws, except for such matters as may be described in
the reports listed on SCHEDULE 3.22. There are not pending (and, to the best
of Borrower's knowledge, there are not threatened), any actions, suits, claims,
legal proceedings or any other proceedings claiming or involving the presence
on, at or under the Mortgaged Properties, or any part thereof, of any Hazardous
Materials (other than Hazardous Materials in quantities customary in operations
similar to the operation of the Mortgaged Properties that are contained, stored
and used in compliance in all material respects with applicable Environmental
Laws or claiming violation of Environmental Laws relating to the Mortgaged
Properties or any part thereof, and neither Borrower nor Arden OP nor Arden REIT
has received, directly or indirectly, formal or informal notice of any
complaint, order directive, citation, notice of responsibility, notice of
potential responsibility, or information request from any Governmental Authority
or any other person or entity relating to the foregoing.

3.23. CONCERNING MORTGAGED PROPERTIES; FINANCIAL STATEMENTS

(a) All certifications, permits, licenses and approvals required for
the legal use, occupancy and operation of each Mortgaged Property as used
immediately prior to the transfer of such Mortgaged Property to Borrower
including any applicable certificate of completion and occupancy permit, have
been obtained and are in full force and effect; (b) Engineering Surveys have
been performed by a surveyor or registered professional engineer duly licensed
in the jurisdictions in which the Mortgaged Properties are situated for each of
the Mortgaged Properties and, except as set forth in the Engineering Surveys,
the Mortgaged Properties and other Improvements are in sound condition and
repair and neither Borrower nor the General Partner has knowledge that any such
Engineering Survey contains any material inaccuracy or omission; (c) there are
no proceedings pending or, to the best of Borrower's or the General Partner's
knowledge, threatened for the total or partial condemnation of or

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affecting, any Mortgaged Property; (d) the Mortgaged Properties are not subject
to any leases, licenses or other use or occupancy agreements other than the
Leases, the Ground Lease and leases of Building Equipment described on Schedule
3.23; (e) other than the tenants pursuant to the Leases, no Person has any
possessory interest in any Mortgaged Property or right to occupy any portion
thereof except under and pursuant to the provisions of the Leases; (f) Borrower
does not have on the date hereof any contingent liabilities, liabilities for
taxes, unusual forward or long-term commitments or unrealized or anticipated
losses from any unfavorable commitments which in each case are known to Borrower
and which, in Borrower's opinion, are reasonably likely to result in a material
adverse effect on the Mortgaged Properties or the operation thereof, except as
referred to or reflected or provided for in the financial statements heretofore
furnished to Lender or as otherwise disclosed to Lender herein; (g) since the
last date of such financial statements, (i) Borrower has not entered into any
material transaction or incurred any material liability or obligation,
contingent or otherwise, other than in the ordinary course of business, except
as disclosed to Lender and (ii) there has not been any material adverse change
in the condition (financial or otherwise), business, net worth or results of
operations of Borrower or the condition (financial or otherwise) of the
Mortgaged Properties; and (h) no Mortgaged Property is located in a flood hazard
area as defined by the Federal Insurance Administration.

3.24. ACCESS

Each Mortgaged Property has access and is contiguous to publicly
dedicated streets, roads or highways, or if not so contiguous, access to and
from each Mortgaged Property and publicly dedicated streets, roads or highways
is available through private lands pursuant to valid, perpetual, enforceable and
recorded public or private easements or rights-of-way; and pedestrian and
vehicular access to and from each Mortgaged Property via the easements or
rights-of-way is not limited or restricted in any unreasonable manner (except
that with respect to any Mortgaged Property that is subject to a Ground Lease,
the duration of any such easements may not be perpetual but are at least
coterminous with the terms of the applicable Ground Lease, including all renewal
options whether or not presently exercised).

3.25. NO LIENS

There are no Liens of any type with respect to any of the Mortgaged
Properties, except the Liens created by the Loan Documents and the Permitted
Liens. There has been no construction or other activities at any of the
Mortgaged Properties within such periods of time as would permit the imposition
of any mechanics' or materialmen's Liens on any of the Mortgaged Properties
except as set forth on SCHEDULE 3.25.

3.26. ACCURACY OF INFORMATION

To the best knowledge of Borrower and the General Partner, neither the
Loan Documents nor any document, agreements, instrument, schedule, certificates,
statements, or cash flow schedules (collectively, the "BORROWER DOCUMENTS")
furnished by Borrower, Arden OP, Arden REIT or the General Partner to Lender
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein, in light of
the circumstances under which they were made, not misleading. Since the
furnishing of the Borrower Documents, there has been no change nor any
development or event involving a prospective change known to Borrower or the

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General Partner which would render any of the Borrower Documents untrue or
misleading in any material respect.

3.27. MORTGAGE AND SECURITY INTERESTS

When executed and delivered, and, if necessary under applicable laws,
recorded, the Mortgage will create valid mortgage, deed of trust, or similar
Liens upon the Mortgaged Properties, the Land underlying them (which, in the
case of Land leased under a Ground Lease, will be a Lien on Borrower's leasehold
interest in the Land, in all other cases, will be a Lien on Borrower's fee
simple interest in the Land), and the Improvements and valid security interests
in the fixtures located thereon, and the Mortgage and accompanying financing
statements (if any) will be recorded and filed in such places as may be required
and, where appropriate, applicable mortgage, transfer, recording and UCC taxes
and fees will be paid, such that the Mortgage will constitute valid first
priority mortgage, deed of trust, or similar Liens on the Land and Mortgaged
Properties and will create valid perfected first priority security interests of
record with respect to the respective Mortgaged Property and related Collateral
(except Collateral as to which a security interest cannot be created and
perfected by a Mortgage or the filing of a financing statement under the
U.C.C.), subject only to the Permitted Liens.

When executed and delivered, and, if necessary under applicable laws,
when appropriate filings of financing statements are made, the Security
Agreement by and between Borrower and Lender will create valid first priority
security interests with respect to the Collateral named therein, which security
interests shall be perfected to the extent that security interests in such
Collateral can be perfected by the filing of a financing statement under the
U.C.C.

3.28. ASSIGNMENT OF LEASES AND RENTS

When executed and delivered by Borrower and the other parties thereto,
the Assignment of Leases and Rents will create a valid assignment of the
Collateral described therein. The Assignment of Leases and Rents, and
accompanying financing statements (if any) will be recorded by the Title Company
and filed in such places as may be required so that all such documents will
create valid assignments of record with respect to the Collateral described
therein, subject only to the Permitted Liens.

3.29. FOREIGN PERSON

Borrower is not a "foreign person" as defined in SECTION 1445 of the
Internal Revenue Code of 1986 and any regulations promulgated thereunder
(including temporary or proposed regulations).

3.30. NO DEFAULTS

No Default or Event of Default exists hereunder or under the other
Loan Documents.

3.31. NO FRAUDULENT CONVEYANCE

Borrower (i) is entering into this Agreement and the other Loan Documents
and the transactions contemplated hereby and thereby in good faith and with no
actual intent to disturb, hinder, delay, or defraud any present or future
creditor of Borrower, the General Partner or any other Person, and

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(ii) has received reasonably equivalent value in exchange for its obligations
under the Loan Documents. After giving effect to the transactions contemplated
by the Loan Documents, the fair salable value of Borrower's assets exceeds and
will, immediately following the execution and delivery of the Loan Documents,
exceed Borrower's total liabilities, including subordinated, unliquidated,
disputed or contingent liabilities known to Borrower. The fair salable value of
Borrower's assets is and will, immediately following the execution and delivery
of the Loan Documents, be greater than Borrower's probable liabilities,
including the maximum amount of its contingent liabilities known to the Borrower
or its debts as such debts become absolute and matured. Borrower's assets do
not and, immediately following the execution and delivery of the Loan Documents
will not, constitute unreasonably small capital to carry out its business as
conducted or as proposed to be conducted. Borrower does not intend to, and does
not believe it will, incur debts and liabilities (including contingent
liabilities and other commitments) beyond its ability to pay such debts as they
mature (taking into account the timing and amounts to be payable on or in
respect of obligations of Borrower).

4. CLOSING; CONDITIONS PRECEDENT

The Loan shall be made at a closing (the "CLOSING") on a date (the
"CLOSING DATE") that coincides with the closing of the transactions
contemplated by the Contribution Agreement. Without limiting the foregoing, the
obligation of Lender to make the Loan to Borrower and to proceed with the
Closing is subject to the satisfaction on or before the Closing Date of each and
all of the following conditions (and the occurrence of the Closing shall be
conclusive evidence that all such conditions have been satisfied in full or
knowingly waived):

4.1. REPRESENTATIONS, WARRANTIES AND COVENANTS

The representations and warranties of Borrower and the General Partner
made in this Agreement or in any other Loan Document shall have been true and
correct in all material respects when made, and shall be true and correct in all
material respects on the Closing Date, with the same effect as if such
representations and warranties were made on the Closing Date. As of the Closing
Date, Borrower and the General Partner shall each have performed and complied in
all material respects with all covenants and agreements required by this
Agreement or by any other Loan Document to be performed or complied with by
Borrower and the General Partner as of such date.

4.2. BORROWER'S ACTIONS

Borrower shall have taken all actions under the laws of any state
having jurisdiction over Borrower necessary to effectuate the transactions
contemplated by this Agreement and by the other Loan Documents.

4.3. DELIVERY OF DOCUMENTS

The Borrower shall have delivered to the Lender the following
documents, instruments and agreements, each of which shall be in form and
substance reasonably satisfactory to the Lender:

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4.3.1.

All Loan Documents, fully executed by the Borrower and, as
applicable, the General Partner, including the following;

(i) This Agreement;

(ii) The Mortgage Note;

(iii) The Mortgage;

(iv) The Environmental Indemnity Agreement;

(v) The Collateral Assignment of Management Agreement (and the
Manager's consent to same);

(vi) The Security Agreement;

(vii) The Assignment of Leases and Rents;

(viii) The Cooperation Agreement; and

(ix) The Deposit Security Agreement.

4.3.2.

Mortgagee's forms of title insurance policies (each a "TITLE
INSURANCE POLICY " and, collectively, the "TITLE INSURANCE POLICIES"), or
marked-up commitments evidencing such policies, each in form and content
reasonably acceptable to the Lender, and each in an amount not less than the
Allocated Loan Amount applicable to the particular Mortgaged Property (as
specified in SCHEDULE A attached hereto), with premiums fully paid, insuring
that (i) each Mortgage constitutes a valid first priority mortgage or similar
lien on, and security interest in, the Land and the Improvements and all rights
appurtenant thereto described therein, in each case free and clear of all
defects and encumbrances other than as set forth in EXHIBIT B to the applicable
Mortgage, and containing, to the extent such coverage is available in the state
in which the particular Mortgaged Property is located, (A) full coverage (by
affirmative insurance) against liens of mechanics, materialmen, laborers, and
any other Persons who might claim statutory or other common law liens relating
to services performed prior to Closing; (B) no survey exceptions other than
those set forth in EXHIBIT B to each Mortgage; (C) such other endorsements as
the Lender may deem reasonably necessary to insure that any off-site easements
benefiting any of the Mortgaged Properties are valid and enforceable in
accordance with their terms; (D) a "tie-in" endorsement aggregating the
insurance amount indicated for the applicable Mortgaged Property with the
amounts indicated for other Mortgaged Properties; and (E) such other
endorsements as are required by Lender. Such Title Insurance Policies shall be
issued by First American Title Insurance Company or any other nationally
recognized title insurance company (the "TITLE COMPANY") reasonably
satisfactory to Lender.

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4.3.3.

Evidence reasonably satisfactory to the Lender that the requirements
set forth in SECTION 8.1 and SECTION 8.3 hereof have been complied with and
that all policies of insurance required by SECTION 8.1 and SECTION 8.3 are in
full force and effect;

4.3.4.

Evidence reasonably satisfactory to Lender that funds necessary to pay
all taxes related to the Mortgages and all other recording and filing fees and
other expenses necessary in connection with the recordation of the Mortgages and
the perfection of the security interests under all of the other Security
Documents have been paid to the Title Company, or to other Persons reasonably
satisfactory to the Lender, for payment to the applicable taxing authorities or
recording officials;

4.3.5.

A certificate of Borrower, dated as of the Closing Date (together with
copies of the documents referred to therein) certifying that: (i) attached
thereto is a true and complete copy of the Partnership Agreement, together with
all amendments thereto, (ii) the Partnership Agreement has not been amended
since the date of the last amendment attached to the certificate, and (iii) the
Partnership Agreement is in full force and effect;

4.3.6.

A certified copy of the GP Certificate, certified as of a date no more
than two weeks before the Closing Date by the California Secretary of State as
being a true and complete copy of such certificate, as on file in such State,
and a certificate of a duly authorized officer of the General Partner, dated as
of the Closing Date (together with copies of the documents referred to therein)
certifying that: (i) attached thereto is a true and complete copy of the GP
Certificate, together with all amendments, if any, thereto, (ii) attached
thereto is a true and complete copy of the General Partners' bylaws, together
with all amendments, if any, thereto, (iii) the GP Certificate and bylaws have
not been amended since the date of the last amendment attached to such officer's
certificate, (iv) the GP Certificate and bylaws are in full force and effect and
(v) attached thereto are currently effective resolutions of the General
Partner's board of directors authorizing the consummation of the transactions
contemplated hereby by the General Partner on its own behalf and as the sole
general partner of Borrower.

4.3.7.

A certified copy of the certificate of limited partnership of
Borrower, certified as of a date no more than two weeks prior to the Closing
Date by the California Secretary of State as being a true and complete copy of
such certificate as on file in such state, and a certificate of a duly
authorized officer of the General Partner, dated as of the Closing Date
(together with copies of the documents referred to therein) certifying that:
(i) attached thereto are true and complete copies of the Borrower's certificate
of limited partnership, together with all amendments thereto, (ii) the
certificate of limited partnership has not been amended since the date of the
last amendment attached to the certificate, and (iii) the certificate of limited
partnership is in full force and effect;

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4.3.8.

A certified copy of the articles of incorporation of Arden REIT,
certified as of a date no more than two weeks before the Closing Date by the
Maryland State Department of Assessments and Taxation as being a true and
complete copy of such articles as on file in such State, and a certificate of a
duly authorized officer of Arden REIT, dated as of the Closing Date (together
with copies of the documents referred to therein) certifying that: (i) attached
thereto is a true and complete copy of such company's articles of incorporation,
together with all amendments thereto, (ii) attached thereto is a true and
complete copy of such company's bylaws, together with all amendments thereto,
(iii) such organizational documents and bylaws have not been amended since the
date of the last amendment attached to the certificate, (iv) such organizational
documents and bylaws are in full force and effect, and (v) attached thereto are
currently effective resolutions of the board of directors of such company
authorizing the consummation of the transactions contemplated hereby by Arden
REIT on its own behalf and as the sole general partner of Arden OP;

4.3.9.

A certified copy of the certificate of limited partnership of Arden
OP, certified as of a date no more than two weeks prior to the Closing Date by
the Maryland State Department of Assessments and Taxation as being a true and
complete copy of such certificate as on file in such state, and a certificate of
a duly authorized office or Arden REIT, as sole general partner of Arden OP,
dated as of the Closing Date (together with copies of the documents referred to
therein) certifying that: (i) attached thereto are true and complete copies of
Arden OP's limited partnership agreement and certificate of limited partnership,
together with all amendments thereto, (ii) the limited partnership agreement
has not been amended since the date of the last amendment attached to the
certificate, and (iii) the limited partnership agreement is in full force and
effect.

4.3.10.

Original fictitious name certificates, certificates of existence and,
if available, certificates of good standing for the Borrower and the General
Partner from the Secretary of State's office (or equivalent) in California, each
dated as of a date recent to the Closing Date.

4.3.11.

Certificates of each of Borrower and Manager, each dated as of the
Closing Date (together with copies of the documents referred to therein)
certifying that: (i) attached thereto is a true and complete copy of the
Management Agreement, together with all amendments thereto, (ii) the Management
Agreement has not been amended since the date of the last amendment attached to
the certificate, (iii) the Management Agreement is in full force and effect,
(iv) no notice of default under the Management Agreement has been given or
received by such party, and neither such party nor, to the best knowledge of
such party, the other party is in default with respect to any obligation under
the Management Agreement, and (v) such party does not claim to have any defense,
counterclaim or right of offset with respect to any of its obligations under the
Management Agreement.

4.3.12.

As-built surveys for each Mortgaged Property that conform to the 1992
Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys and that
meet the accuracy

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standards of an Urban Land Survey, each such survey to be prepared by a surveyor
registered in California, and to contain a certificate from such surveyor to
Lender and the Title Company, dated within 90 days immediately preceding the
Closing Date, in form and content reasonably acceptable to Lender and the Title
Company. Each survey shall show (i) the boundaries of the applicable Land, (ii)
the location and dimension of all Improvements located on the Land, (iii) the
location and identity of all visible or recorded easements and rights-of-way
across or serving the Land, (iv) that the Improvements comply with all setback
requirements and zoning restrictions, except for violations that do not
materially adversely affect the Mortgaged Properties or as to which Lender is
affirmatively insured under the applicable Title Insurance Policy, (v) that the
Improvements do not encroach on adjoining property or on any easement or right
of way, except for encroachments that do not materially adversely affect the
Mortgaged Properties or as to which Lender is affirmatively insured under the
applicable Title Insurance Policy, (vi) that there are no encroachments on the
Land, except for encroachments that do not materially adversely affect the
Mortgaged Properties or as to which Lender is affirmatively insured under the
applicable Title Insurance Policy, (vii) that the Land is not located within any
flood plain area (unless flood insurance reasonably satisfactory to Lender is
provided), and (viii) any other matters that Lender may reasonably require;

4.3.13.

A report of the Title Company or a professional records-search firm
stating that a search of the public records in each state and county in which a
Mortgaged Property is located, disclosed no conditional sales contracts, chattel
mortgages, leases of personalty, financing statements or title retention
agreements, that affect any Mortgaged Property or Land or any other Collateral
assigned or pledged to Lender, except such matters as may be listed in such
report, and such matters must be reasonably acceptable to Lender;

4.3.14.

A copy of the certificate of occupancy for each Mortgaged Property and
the Improvements located on each parcel of Land, or evidence satisfactory to
Lender that no certificate of occupancy is required by applicable Laws, and a
copy of all licenses and permits required for the legal operation of each
Mortgaged Property and all other Improvements located on each parcel of Land, or
evidence satisfactory to Lender that no other licenses or permits are required
by applicable Laws or that the absence of particular licenses or permits will
not have a materially adverse effect on the business, properties, prospects,
assets or condition (financial or otherwise) of the Mortgaged Property;

4.3.15.

The Engineering Surveys for all of the Mortgaged Properties, which
shall show that no material defects or conditions affect any of the Mortgaged
Properties.

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4.3.16.

Seismic studies showing probable maximum loss with respect to each
Mortgaged Property;

4.3.17.

Current reports prepared by an environmental surveying firm reasonably
satisfactory to Lender and in form and scope reasonably satisfactory to Lender;

4.3.18.

An estoppel certificate from the Ground Lessor in form and content
substantially in accordance with the form attached hereto as EXHIBIT C;

4.3.19.

Estoppel certificates, in form and content substantially in accordance
with the form attached hereto as EXHIBIT D, from (i) each tenant of each
Mortgaged Property that accounted for more than 5% of the gross rents from such
Mortgaged Property during the most recently completed four full Accounting
Quarters and (ii) tenants of each Mortgaged Property that accounted, in the
aggregate, for at least 75% of the gross rents from such Mortgaged Property for
the most recently completed four full Accounting Quarters;

4.3.20.

Letters from the holders of the Existing Debt showing the amounts
necessary to pay such indebtedness in full as of the Closing Date, together with
evidence that the Title Company has received into escrow from such holders all
instruments of release, in recordable form, necessary to release any Liens
securing such debt immediately following the Closing;

4.3.21.

The Management Agreement duly executed by Borrower and Manager.

4.4. EVIDENCE OF AUTHORIZATION; RELATED DOCUMENTS

Lender shall also have received:

4.4.1.

A certificate of the corporate secretaries of Arden REIT, the Manager
and the General Partner certifying as to the incumbency and genuine signature of
each officer of such corporation executing any of the Loan Documents or other
statements, reports, certificates and documents called for by the terms of the
Loan Documents and who will otherwise act under the Loan Documents for and on
behalf of Borrower or any such corporation, including specimen signatures of
each individual that will be signing any of the Loan Documents on behalf of
Borrower or the General Partner, which specimen signatures shall be certified by
an appropriate officer to be a true specimen thereof (and the signature,
authority and incumbency of the certifying officer shall be similarly
certified).

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4.4.2.

One or more written opinions addressed to Lender, dated as of the
Closing Date, from Latham & Watkins, special counsel to Borrower and the General
Partner, in form and substance reasonably acceptable to Lender;

4.4.3.

One or more written opinions addressed to Lender, dated as of the
Closing Date, from Ballard, Spahr, Andrews & Ingersoll, special Maryland counsel
to Arden OP and Arden REIT, in form and substance acceptable to Lender.

4.5. CLOSING CERTIFICATE

The Lender shall have received a certificate of Borrower and the
General Partner signed by a duly authorized officer of the General Partner,
dated as of even date herewith, stating that:

(i) The representations and warranties of Borrower and the General
Partner contained in each of the Loan Documents to which Borrower or the General
Partner is a party, and in all certificates, documents and instruments delivered
by Borrower or the General Partner pursuant to the Loan Documents are true and
correct in all material respects on and as of the Closing Date; and

(ii) All conditions precedent to be performed by the Borrower or the
General Partner have been satisfied as of the Closing Date.

4.6. MANAGEMENT AGREEMENT

The Management Agreement shall be in full force and effect.

4.7. EXISTING DEBT

All actions necessary to repay the Existing Debt, and to release all
mortgages or other Liens relating thereto, shall have been taken, and Lender
shall have received evidence reasonably satisfactory to the Lender to that
effect.

4.8. PAYMENT OF LENDER COSTS AND ORIGINATION FEE

Borrower shall pay at the Closing, (i) the Origination Fee and (ii)
all Lender Costs, the amounts of which are known to the Lender at such time. In
the event that the amounts paid or withheld by Lender at the Closing are
insufficient to pay all such Lender Costs, Borrower shall promptly, upon demand,
provide additional funds to Lender to pay such Lender Costs.

4.9. INDEPENDENT DIRECTORS

There shall have been duly elected to the Board of Directors of the
General Partner one Independent Director.

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4.10. RESERVE REQUIREMENT

An amount at least equal to the Reserve Requirement shall have been
deposited in the Reserve Account.

5. AFFIRMATIVE COVENANTS

Borrower agrees that, so long as any amount of principal, interest,
Yield Maintenance Payment, or any other charges relating to the Loan shall be
outstanding, or so long as there exist any other charges owing on or under this
Agreement, the Mortgage Note, or any other Loan Document, Borrower shall comply
with all of the following:

5.1. TIMELY PAYMENT OF AMOUNTS DUE

Borrower shall duly pay or cause to be paid, when due, the principal
of, interest on, Yield Maintenance Payments, if any, and other amounts payable
under or in connection with this Agreement, the Mortgage Note and each other
Loan Document in accordance with the terms hereof and thereof, at the times and
places and in the manner provided herein or therein.

5.2. PROCEEDS OF THE LOAN

Borrower shall apply the Loan Amount solely for the purposes set forth
in SECTION 2.3 hereof.

5.3. MANAGEMENT AGREEMENT; GROUND LEASES

5.3.1.

Borrower shall duly and punctually pay all sums required to be paid by
Borrower under the Management Agreement and each Ground Lease and otherwise
perform in all material respects the obligations contemplated to be performed by
it under the Management Agreement and each Ground Lease, subject to the
provisions of the Collateral Assignment of Management Agreement, and will, with
due diligence and in a reasonable and prudent manner, enforce its rights under
the Management Agreement and each Ground Lease to the extent failure to perform
or protect its rights thereunder might materially and adversely affect the
business, operations, prospects, assets, properties or condition (financial or
otherwise) of Borrower. Without limiting the foregoing, Borrower agrees that:

(a) Borrower shall at all times promptly and faithfully keep, perform
and comply with, or cause to be kept, performed and complied with, prior to
the expiration of any applicable grace period, the provisions of the
Management Agreement and of each Ground Lease to be complied with by it.

(b) Borrower shall give Lender prompt notice of any notice of default
given to or received from the Manager under the Management Agreement or the
lessor under any Ground Lease, which notice shall include a copy of such
notice whether or not Lender may be entitled to such notice directly from
the Manager or such lessor. Borrower shall promptly furnish to Lender upon
Lender's reasonable request any and all information concerning the
performance by it of

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the provisions of the Management Agreement and of any Ground Lease and
shall permit Lender or its representative at all reasonable times to
make investigation or examination concerning the performance by it of
the provisions of the Management Agreement and of each Ground Lease.
Within ten (10) days after receipt by Borrower, Borrower shall deliver
to Lender a copy of any notice, communication, plan, specification or
other instrument or document received or given by it in any way relating
to or affecting the Management Agreement or any Ground Lease which may
materially concern or affect the rights of Borrower under the Management
Agreement or the rights or estate of the lessor or the lessee in or
under a Ground Lease or the Land leased thereby.

(c) If any legal action or proceeding shall be instituted to
terminate the Management Agreement or to evict Borrower under, or
terminate, any Ground Lease, or for any other purpose materially affecting
the Management Agreement or any Ground Lease, Borrower will, promptly upon
service thereof on or to it, deliver to Lender a copy of each petition,
summons, complaint, notice of motion, order to show cause and of all other
provisions, pleadings and papers, however designated, served in any such
action or proceeding. Borrower will consult with Lender before instituting
suit against the Manager or any lessor under a Ground Lease.

(d) Notwithstanding any other provision of this Agreement, of the
Management Agreement, or of any Ground Lease, if Borrower shall fail so to
do, Lender may (but shall not be obligated to) take any such action as
Lender reasonably deems required to prevent, mitigate or cure, in whole or
in part, any default by Borrower under the Management Agreement or any
Ground Lease, and upon the receipt by Lender from Borrower, the Manager, or
a lessor under a Ground Lease of any written notice of default by Borrower
under the Management Agreement or any Ground Lease, Lender may rely
thereon, and such notice shall constitute full authority and protection to
Lender for any action taken by the Lender or its agents in good faith
reliance thereon. All expenses, including reasonable attorneys' fees,
incurred by Lender to prevent, mitigate or cure any such default, or to
sustain the Lien of Lender on or security interest in the Management
Agreement or the applicable Mortgaged Property, or the priority thereof,
together with interest thereon at the Default Interest Rate, shall be
deemed secured by the Security Documents and shall be payable within
fifteen (15) days after demand. Nothing in this paragraph (d) shall limit
Borrower's right under the Management Agreement or any Ground Lease to
contest issues concerning requirements of law or other similar matters to
the extent permitted by the Management Agreement or any Ground Lease.
Without limiting the foregoing, Lender shall, upon ten (10) days' prior
written notice to Borrower (except in the case of an emergency) have the
absolute and immediate right (but shall not be obligated) to enter in and
upon the Mortgaged Properties or any part thereof to such extent and as
often as Lender, in its reasonable judgment, deems necessary or desirable
to prevent or cure any such default or condition reasonably believed by
Lender to constitute a material default by Borrower.

(e) Borrower shall give Lender prompt notice of the commencement of,
and consult with Lender in connection with the conduct of, any arbitration
or appraisal proceeding under and pursuant to the provisions of the
Management Agreement or any Ground Lease.

(f) Borrower shall do, or cause to be done, all things necessary to
preserve and keep unimpaired its rights under the Management Agreement and
its rights as lessee under each Ground Lease and will enforce the
obligations of the Manager under the Management Agreement and of each
lessor under a Ground Lease to the end that it may enjoy all of the rights
granted to it thereunder.

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(g) Borrower acknowledges that, pursuant to SECTION 365 of the
Bankruptcy Code, it is possible (although not intended hereby) that a
trustee in bankruptcy of the lessor under a Ground Lease (or the lessor
under a Ground Lease as a debtor-in-possession) could reject a Ground
Lease, in which case Borrower as lessee under such Ground Lease could have
the election described in SECTION 365(h) of the Bankruptcy Code (which
election, as it may be amended or revised from time to time, and together
with any comparable right under any other state or federal law relating to
bankruptcy, reorganization or other relief for debtors, whether now or
hereafter in effect, is called the "ELECTION") to treat such Ground Lease
as terminated by such rejection or, in the alternative, to remain in
possession for the balance of the term of such Ground Lease and any renewal
or extension thereof that is enforceable by the lessee under such Ground
Lease under applicable non-bankruptcy law. Borrower shall not terminate or
permit termination of a Ground Lease by exercise of the Election without
the prior written consent of Lender and any such Election (without the
prior written consent of Lender) shall be null and void. Because the
Ground Leases are a significant part of Lender's security for the Loan,
Lender does not anticipate that it would consent to termination of any
Ground Lease and shall not under any circumstances be obliged to give such
consent. Borrower acknowledges and agrees that the Election is in the
nature of a remedy and is not a property interest which can exist separate
from the Ground Lease. Therefore, it agrees that exercise of the Election
in favor of preserving the right to possession under any Ground Lease shall
not be deemed to constitute a taking or sale of the affected Mortgaged
Property or Mortgaged Properties by Lender and shall not entitle Borrower
to any credit against Lender.

5.3.2. SUBSTITUTE MANAGER

Notwithstanding the foregoing SECTION 5.3.1, Borrower may replace the
Manager and designate and retain a substitute manager for all (but not less than
all) of the Mortgaged Properties on the following terms and conditions:

(i) no Default or Event of Default shall have occurred and be
continuing;

(ii) the substitute manager shall either be (x) a manager that is an
Affiliate of Arden REIT and in which Arden REIT owns directly or
indirectly at least a 75% economic or beneficial interest or
(y) a third party manager of recognized standing and experience
in the management of office properties comparable to the
Mortgaged Properties that is acceptable to Lender;

(iii) Lender shall have approved the management agreement to be
entered into between Borrower and the substitute manager;

(iv) the fee payable to the substitute manager shall not exceed the
five percent (5%) of the Gross Income from Operations from the
Mortgaged Properties; and

(v) if the Securitization has occurred, each of the Rating Agencies
delivers to Lender a Rating Comfort Letter with respect thereto.

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5.4. FINANCIAL AND OTHER INFORMATION

Borrower shall furnish to Lender the Financial Statements, notices,
and other items described below in this SECTION 5.4 (the "INFORMATION") at the
times indicated. Whenever any Financial Statements, notice or other item shall
be stated to be due on a day other than a Business Day, such Financial
Statement, notice or other item shall be due on the next succeeding Business
Day. All Financial Statements relating to earnings and expenses shall set forth
separately, or otherwise identify all extraordinary and non-recurring items to
the extent required by GAAP.

5.4.1. QUARTERLY FINANCIAL STATEMENTS

Borrower shall furnish to Lender, as soon as practicable, and in any
event within 45 days after the end of each Accounting Quarter (other than the
last Accounting Quarter in any Fiscal Year), an unaudited consolidated balance
sheet of Borrower as at the end of such Accounting Quarter and unaudited
consolidated statement of income and expense of Borrower for each such
Accounting Quarter, and for that part of the Fiscal Year to date, and an
unaudited consolidated statement of cash flow of Borrower for that part of the
Fiscal Year to date, all in the form that would be required of Borrower if
Borrower were required to file quarterly reports with the SEC on Form 10-Q,
setting forth in each case, in comparative form, the corresponding figures for
the corresponding period(s) of the preceding Borrower Fiscal Year, which
statements shall, as a whole, fairly present the financial position of Borrower
as at the end of the periods indicated and the results of the operations of
Borrower for such periods and which shall be certified by an Authorized
Accounting Officer as having been prepared under his or her supervision in
accordance with GAAP, subject to year-end audit adjustments, and stating that
such Authorized Accounting Officer knows of no facts inconsistent with such
Financial Statements and that such Financial Statements, as a whole, fairly
present the financial position of Borrower as of the end of the periods
indicated and the results of the operations of Borrower for such periods. Any
financial statements furnished pursuant to this SECTION shall be accompanied by
a certificate of an Authorized Accounting Officer stating that, to his or her
knowledge, no Default or Event of Default has occurred and is continuing or, if
a Default or Event of Default has occurred and is continuing, a statement as to
the nature thereof, the period of its existence, and the action that Borrower
has taken or proposes to take with respect thereto.

5.4.2. BORROWER'S ANNUAL FINANCIAL STATEMENTS

Borrower shall furnish to Lender, as soon as practicable, and in any
event within 90 days after the end of each Fiscal Year of Borrower, a
consolidated balance sheet of Borrower as at the end of such Fiscal Year and a
consolidated statement of income, partners' capital or deficit and consolidated
cash flow of Borrower for such Fiscal Year, setting forth in each case, in
comparative form, the corresponding figures for the preceding Fiscal Year,
prepared in accordance with GAAP, and in the form that would be required of
Borrower if Borrower were required to file annual reports with the SEC on Form
10-K. Such Financial Statements shall be accompanied by (A) (1) an audit report
and opinion in respect of such Financial Statements of Ernst & Young or other
"Big Six" independent certified public accounting firm selected by Borrower and
reasonably acceptable to Lender, which report and opinion shall be unqualified
as to the scope of the audit and reasonably satisfactory to Lender, and (2) the
written statement of the accountants described in clause (1) that, in making the
examination necessary for their report and opinion on such Financial Statements,
they have obtained no knowledge of any condition, event or act that constitutes
a Default or Event of Default, or, if such accountants shall have obtained such
knowledge, a statement as to the nature and status thereof, and (B) a
certificate of an Authorized Accounting Officer, stating that (1) such Financial
Statements have been prepared under his or her supervision in accordance with
GAAP and that he or she knows of no facts inconsistent with such

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Financial Statements and (2) to his or her knowledge, no Default or Event of
Default has occurred is continuing or, if a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof, the period of
its existence, and the action that Borrower has taken or proposes to take with
respect thereto.

5.4.3. BUDGETS

(a) For the partial year period commencing on the Anticipated
Repayment Date, and for each Fiscal Year thereafter, Borrower shall submit to
Lender for Lender's written approval the Annual Budget not later than thirty
(30) days prior to the commencement of such period or Fiscal Year. Such Annual
Budget shall be in form and substance reasonably satisfactory to Lender setting
forth in reasonable detail budgeted monthly operating income and monthly
operating capital and monthly operating and other expenses for the Property,
including all planned capital expenditures in respect of the Property for such
period or Fiscal Year. Each such Annual Budget approved by Lender shall
hereinafter be referred to as an "APPROVED ANNUAL BUDGET ". Until such time
that Lender approves a proposed Annual Budget, the most recently Approved Annual
Budget shall apply; provided that, such Approved Annual Budget shall be adjusted
from time to time to reflect actual increases in real estate taxes, insurance
premiums and utilities expenses.

(b) In the event that, after the Anticipated Repayment Date, Borrower
must incur an extraordinary operating expense or capital expense not set forth
in the Annual Budget (each an "EXTRAORDINARY EXPENSE"), then the Borrower shall
promptly deliver to Lender a reasonably detailed explanation of such proposed
Extraordinary Expense for the Lender's approval.

5.4.4. PROPERTY OPERATING STATISTICS

Borrower shall furnish to Lender operating statements setting forth
the Net Operating Income and occupancy statements for each Mortgaged Property
for each calendar month together with rent rolls (which rent rolls shall contain
the same information as the rent rolls provided by Borrower to Lender in
connection with the Closing) within 15 days following the end of such calendar
month in each case certified as true and correct by an Authorized Accounting
Officer and accompanied by a calculation of the Debt Service Coverage Ratio as
of the end of such calendar month.

5.4.5. CERTIFICATES REGARDING DEFAULTS

Within five (5) Business Days after any officer of the General Partner
obtains knowledge of any Default or Event of Default, Borrower shall furnish to
Lender a statement of such officer specifying the nature of such Default or
Event of Default, the period of existence thereof, and the action that Borrower
has taken or proposes to take with respect thereto.

5.4.6. PROPOSED AMENDMENTS TO PARTNERSHIP AGREEMENT

Not less than ten (10) days prior to the execution thereof, Borrower
shall furnish to Lender a true and complete copy of any proposed amendment to
the Partnership Agreement, which proposed amendments shall be subject to the
provisions of SECTION 6.5.1 hereof.

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5.4.7. ENVIRONMENTAL CONDITIONS

Within five (5) Business Days after any officer of the General Partner
obtains knowledge of or discovers any occurrence or condition on any real
property adjoining or in the vicinity of any Mortgaged Property that might
reasonably be expected to cause such Mortgaged Property or the Land on which it
is located to be subject to any investigation or cleanup pursuant to any
Environmental Law which could reasonably be expected to lead or result in a
material adverse effect upon the business, operations, prospects, assets,
properties or condition (financial or otherwise) of Borrower or any Mortgaged
Property, Borrower shall furnish to Lender written notice thereof describing the
nature thereof and the actions, if any, that Borrower proposes to take to
address it.

5.4.8. EVIDENCE OF TAX PAYMENTS

Concurrently with the delivery of Financial Statements required by
SECTIONS 5.4.1 and 5.4.2, Borrower shall provide to the Lender evidence of the
payment of all real estate taxes that were due and payable on the Mortgaged
Properties during the preceding Accounting Quarter.

5.5. MAINTENANCE OF EXISTENCE, ETC.

At all times (a) maintain its principal place of business, principal
office, and office where it keeps its records and other documents and
instruments, relating to the Mortgaged Properties (except for certain records,
documents and instruments kept at the Mortgaged Properties) at its address set
forth in SECTION 11.3 hereof or such other address of which Lender may be given
written notice not less than thirty (30) days prior to the date on which a
change of location is to occur; (b) obtain and maintain in full force and effect
all authorizations, consents, approvals, licenses, exemptions and other actions
by, and all registrations, qualifications, designations, declarations and other
filings, if any, with, any governmental or administrative board, body,
commission, authority, bureau, or agency necessary (i) in connection with the
execution and delivery of this Agreement, the Mortgage Note, and the other Loan
Documents, the consummation of the transactions contemplated herein or therein,
and the performance of or compliance with the terms and conditions thereof, or
(ii) to ensure the legality, validity and enforceability hereof or thereof; and
(c) maintain in effect its existence pursuant to the Partnership Agreement and
cause the General Partner to (and by signing this Agreement on behalf of
Borrower the General Partner agrees to) (x) maintain its corporate, partnership
or other existence in effect and in good standing and (y) comply with all
requirements of Law material to the conduct of its business (including
continuing to be qualified to engage in business in each jurisdiction where such
qualification is required) and the performance of the obligations of Borrower or
the General Partner under the Loan Documents to which Borrower or the General
Partner is a party.

5.6. COMPLIANCE WITH APPLICABLE LAWS

Comply in all material respects with all requirements of Law applicable to
the conduct of its business (including continuing to be registered or qualified
to do business in each jurisdiction where such registration or qualification is
required), the operation of the Mortgaged Properties, and the performance of the
obligations of Borrower under the Loan Documents to which Borrower is a party,
including Environmental Laws, rules, regulations and orders of any governmental
authority.

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5.7. MAINTENANCE OF BOOKS; INSPECTION OF PROPERTIES AND BOOKS

Keep and maintain adequate and proper records and books of account, in
which complete entries are made in accordance with GAAP and in accordance with
all applicable laws and regulations, and permit authorized representatives of
Lender to discuss the business, operations, prospects, assets, properties and
condition (financial or otherwise) of Borrower with its officers and employees
and, at reasonable times and on reasonable notice (except during the existence
of an Event of Default, in which case no notice shall be required) to examine
its books of account and other records and make copies thereof or extracts
therefrom, all at such reasonable times as Lender may request.

5.8. NOTICE OF LITIGATION; DISPUTES

Give written notice to Lender within five (5) Business Days after
learning of:

(i) Any action, suit or proceeding instituted against Borrower
or any action, suit or proceeding instituted by Borrower in any federal or
state court or before any commission or other regulatory body (federal, state
or local, domestic or foreign), or any such proceedings threatened against
Borrower (including (i) any proceeding initiated by any party with respect to
the presence or release, or alleged presence or release, of any Hazardous
Materials at, on, under, from or about any Mortgaged Property or the Land on
which any Mortgaged Property is located and (ii) any claim made or threatened
by any third party against Borrower or any such Mortgaged Property or Land
relating to any loss or injury resulting from any Hazardous Materials) an
adverse determination of which could reasonably be expected to lead to or
result in a material adverse effect upon the business, operations, prospects,
assets, properties or condition (financial or otherwise) of Borrower or any
Mortgaged Property, in each case containing the details thereof;

(ii) The filing, recording or assessment of any Federal, state
or local tax lien against it, or any of its assets, an adverse determination
of which could reasonably be expected to lead to or result in a material
adverse effect upon the business, operations, prospects, assets, properties
or condition (financial or otherwise) of Borrower or any Mortgaged Property;

(iii) Any dispute between Borrower and any Governmental
Authority or other Person which, if adversely determined, could reasonably be
expected to materially interfere with the normal business operations of
Borrower or any Mortgaged Property.

Borrower shall permit Lender to join and participate as a party, if
Lender so elects, in any legal proceedings or actions initiated with respect to
any Mortgaged Property or the Land on which any Mortgaged Property is located in
connection with any Environmental Law or Hazardous Materials.

5.9. MORTGAGED PROPERTY OPERATIONS; MAINTENANCE

At all times, (a) conduct continuously and operate actively its
business at the Mortgaged Properties (subject to temporary cessation of, or
other limitations on, its activities due to strikes, lockouts, casualties,
events of Force Majeure, or other causes beyond the reasonable control of
Borrower, provided prompt written notice thereof is given to Lender); (b) keep
in full force and effect and existence all rights, licenses, permits and
franchises required for the use or operation of the Mortgaged Properties; (c)
maintain the Mortgaged Properties in good and clean order and condition such
that the utility and operation of the Mortgaged Properties will not be affected
in any material and adverse respect, subject to

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ordinary wear and tear and damage caused by fire or other casualty; (d) make or
cause to be made all necessary or appropriate repairs, replacements and renewals
to the Mortgaged Properties in the manner and within the periods required by the
Management Agreement and the applicable Mortgages; and (iii) not commit or
permit any waste to the Mortgaged Properties or any part thereof.

5.10. SEPARATE EXISTENCE

Borrower and the General Partner shall each (i) maintain their books
and records and bank accounts separate from any other person or entity (except
that, for accounting and reporting purposes, Borrower and the General Partner
may be included in the consolidated financial statements of Arden REIT in
accordance with generally accepted accounting principles); (ii) maintain an
arm's length relationship with their partners, Affiliates and any other party
furnishing services to either of them; (iii) maintain its books, records,
resolutions and agreements as official records; (iv) conduct their business in
their own name and through their own authorized officers and agents; (v) prepare
and maintain their financial statements, accounting records and other
corporation or partnership documents separate from those of any other Person
(except for inclusion of Borrower and the General Partner in consolidated
financial statements of Arden REIT); (vi) pay their own liabilities out of their
own funds and other assets; (vii) observe all partnership or corporate
formalities, as applicable, necessary to maintain their identities as entities
separate and distinct from one another and from Arden REIT, Arden OP and all
other Affiliates; (viii) participate in the fair and reasonable allocation of
any and all overhead expenses and other common expenses for facilities, goods or
services provided to multiple entities; (ix) use its own stationery, invoices
and checks (except when acting in a representative capacity); (x) hold and
identify itself as a separate and distinct entity under its own name and not as
a division or part of any other Person (except for inclusion of Borrower and the
General Partner in consolidated financial statements of Arden REIT); and (xi)
hold its assets in its own name. Borrower and the General Partner shall comply
with all of the assumptions set forth in the Substantive Non-Consolidation
Opinion delivered by Borrower's counsel at Closing.

5.11. CASH MANAGEMENT

Borrower will comply with, and will direct the Manager to comply with,
the provisions of SCHEDULE 5.11 hereto, which shall govern the collection and
application of Operating Income, Awards, and Insurance Proceeds and the
administration of the Reserve Account, the Cash Collateral Account, and the
Lockbox Account. Lender agrees that it shall administer the Cash Collateral
Account, the Reserve Account and the Lockbox Account in accordance with the
provisions of SCHEDULE 5.11 hereto).

5.12. INDEPENDENT DIRECTOR

Borrower shall ensure that the General Partner shall have an
Independent Director acceptable to Lender at all times, or if the Independent
Director has resigned, that the General Partner shall not take any action which
may not be taken pursuant to the organizational documents of the General Partner
without the consent of the Independent Director, until such new Independent
Director shall have been appointed.

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5.13. RESERVE REQUIREMENT

If, at any time, the amount on deposit in the Reserve Account is less
than the Reserve Requirement, the Excess Cash Flow for each Accounting Period
shall be deposited into the Reserve Account until the amount on deposit in the
Reserve Account equals the Reserve Requirement (provided, that following the
occurrence of a Lockbox Event, any deficiency in the Reserve Account shall be
paid pursuant to Section 4.4 of the Cash Management Procedures). Borrower shall
not make any distributions to its Partners at any time that the amount on
deposit in the Reserve Account is less than the Reserve Requirement.

6. NEGATIVE COVENANTS

Borrower agrees that, so long as this Agreement shall remain in
effect, or so long as there exists any principal, interest or Yield Maintenance
Payment due or outstanding under the Mortgage Note, or any other unpaid charges
or amounts under this Agreement or under any other Loan Document, then:

6.1. LIMITATION ON INDEBTEDNESS

Borrower and the General Partner shall not incur, create or assume any
Indebtedness of any kind, provided that Borrower or the General Partner may
incur, create or assume any Permitted Debt.

6.2. LIMITATION ON LIENS

Borrower shall not create, assume or suffer to exist, any Lien of any
kind, upon any of its properties, assets or Collateral, whether now owned or
hereafter acquired, except Permitted Liens.

In the event Borrower contests the payment of a tax, assessment or
other governmental charge or contests a landlords', mechanics', materialmen's,
warehousemen's, carriers', or other like Lien, Borrower, prior to the
commencement of such contest and prior to the date such payment would otherwise
be due and payable, shall deposit with Lender (or, following the assignment
contemplated by SECTION 9.1 hereof, deposit with the Servicer) an amount equal
to 125% of the amount of the contested payment, to be held in a segregated
subaccount of the Cash Collateral Account; provided, however, Borrower shall not
be required to make such a deposit so long as the aggregate of all such Liens
that Borrower is contesting without deposit is less than Fifty Thousand Dollars
($50,000). Upon the conclusion of such contest and upon written request by
Borrower accompanied by supporting documentation, Lender (or the Servicer) shall
disburse from the deposit made by Borrower with Lender (or the Servicer) any
amounts required to be paid by Borrower and shall remit the excess to Borrower.
Notwithstanding the foregoing, Lender (or the Servicer) may pay over to the
appropriate Person any or all of the funds on deposit with Lender (or the
Servicer) when, in Lender's (or the Servicer's) reasonable judgment, the
entitlement of such Person to such funds is firmly established or if necessary
to avoid the foreclosure of a Lien that secures the contested payment.

6.3. MERGER OR CONSOLIDATION; PERMITTED REORGANIZATION

Neither Borrower nor the General Partner shall be a party to any merger or
consolidation.

<PAGE>

6.4. SINGLE PURPOSE

Borrower shall not engage in any business or operate for any purpose
other than as set forth in the Partnership Agreement as in effect on the date
hereof and shall not have or create any subsidiaries. The General Partner shall
not engage in any business or operate for any purpose other than as a general
partner of Borrower and shall at all times be a Single Purpose entity. Neither
Borrower nor the General Partner will: (i) seek or consent to any dissolution,
winding up, liquidation, consolidation, merger or sale of all or substantially
all of its assets; (ii) fail to correct any known misunderstanding regarding its
separate identity; (iii) commingle its funds or other assets with those of any
other Person; (iv) assume or guarantee or become obligated for the debts of any
other Person or hold out its credit as being available to satisfy the
obligations of any other Person (other than as permitted by the Loan Documents);
(v) acquire obligations or securities of its partners or shareholders, as the
case may be; (vi) pledge any of its assets for the benefit of any other Person
other than Lender (except as permitted by the Loan Documents); (vii) make any
loans to any other Person; (viii) identify its partners or shareholders, as the
case may be, or any of its Affiliates as a division or part of it (except for
inclusion of the Borrower and the General Partner in consolidated financial
statements of Arden REIT); (ix) engage (either as transferor or transferee) in
any material transaction with any Affiliate other than for fair value and on
terms similar to those obtainable in arms-length transactions with unaffiliated
parties, or engage in any transaction with any Affiliate involving any intent to
hinder, delay or defraud any entity; (x) engage in any business activity or
operate for any purpose other than as stated in Section 1.3 of its Partnership
Agreement and Article II of the GP Certificate, as applicable, in each case as
in effect on the date hereof or (xi) without the consent of all its directors or
all the directors of its General Partner, as applicable, including the consent
of an Independent Director, file a bankruptcy or insolvency petition or
otherwise institute bankruptcy proceedings. Borrower will not acquire any
assets not related to the business and operation of the Mortgaged Properties.

6.5. AMENDMENTS TO AGREEMENTS

6.5.1.

Borrower shall not, without the consent of Lender, (i) amend, modify
or alter the terms of the Partnership Agreement, (ii) admit a General Partner,
(iii) cancel, release, terminate or surrender the Management Agreement or any
Ground Lease, or permit any cancellation, release, termination or surrender of
the Management Agreement or any Ground Lease or (iv) amend, modify or alter the
terms of the Management Agreement or any Ground Lease in any material respect;
PROVIDED THAT Borrower shall be entitled to cancel, release, terminate,
surrender, amend, modify or alter the Management Agreement in connection with
the replacement of the Manager if, before the date on which the Manager ceases
to be the Manager of any Mortgaged Property, (a) Borrower causes such Mortgaged
Property to come under management by a third party property manager in
accordance with the provisions of clauses (i), (ii)(y), (iii), (iv) and (v) of
SECTION 5.3.2 above, (b) each of the Rating Agencies delivers to the Lender a
Rating Comfort Letter with respect thereto; and PROVIDED FURTHER that Borrower
may cancel, release, terminate, surrender, amend, modify or alter any Ground
Lease (x) in connection with the sale of the Mortgaged Property situated on the
Land that is subject to such Ground Lease and (y) in compliance with the Loan
Documents.

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6.5.2.

Neither Borrower nor the General Partner shall enter into or consent
to any termination, amendment, waiver or supplement of any of the provisions of
the General Partner's organizational or governing documents without the consent
of Lender.

6.6. DISTRIBUTIONS

Borrower shall make no distributions of cash or other assets to the
Partners if an Event of Default has occurred and is continuing.

6.7. PERMITTED TRANSFERS

Borrower shall not transfer, pledge, hypothecate or assign any of the
Mortgaged Properties except (a) to Lender or (b) in connection with the
simultaneous Release of such Mortgaged Property pursuant to SECTION 2.7, SECTION
2.8, SECTION 2.9, SECTION 2.10 OR SECTION 11 hereof.

7. EVENTS OF DEFAULT

7.1. DEFAULT; AN EVENT OF DEFAULT

The occurrence of any of the following events beyond any applicable
notice and cure period set forth in this Section 7.1 shall be an "EVENT OF
DEFAULT" hereunder (and the occurrence of any of the following which, with the
giving of notice or the passage of time, or both, would become an Event of
Default shall, prior to the giving of such notice or the passage of such time,
be a "DEFAULT" hereunder).

7.1.1.

Borrower shall fail to pay, when due, any principal or interest on the
Mortgage Note or any Yield Maintenance Payment or Defeasance Deposit that may be
due.

7.1.2.

Borrower shall fail to pay, when due, any other amount due under or
pursuant to the Mortgage Note, this Agreement, or any of the other Loan
Documents (other than principal, interest, and any Yield Maintenance Payments or
Defeasance Deposits).

7.1.3.

Borrower shall fail to perform or observe in any material and adverse
respect any of the covenants and agreements of Borrower set forth in this
Agreement, or any representation and warranty made by Borrower in this Agreement
or in any of the other Loan Documents shall fail to have been true in any
material and adverse respect when made and, in either case, such failure shall
continue uncured for a period of more than (i) 10 days with respect to any
failure or breach of covenant relating to the payment of taxes or the
maintenance of insurance, or (ii) with respect to all other such failures or
breaches, 30 days following Borrower's receipt of written notice thereof from
Lender; PROVIDED THAT with respect to clause (ii) above, it shall not be an
Event of Default hereunder if (a) such failure is cureable but is not

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reasonably capable of being cured within such 30-day period and Borrower shall
have promptly commenced to cure such failure (including by consummation of a
sale of the affected Mortgaged Properties and the payment of the applicable
Release Price, Defeasance Deposit and Yield Maintenance Payment, if any) and
thereafter shall diligently pursue such cure to completion, but in no event
later than 90 days after the date on which Borrower received such written notice
from Lender.

7.1.4.

The Manager shall cease to be Manager of all of the Mortgaged
Properties or the Management Agreement shall terminate with respect to one or
more Mortgaged Properties, unless, before the date on which the Manager ceases
to be the Manager of any such Mortgaged Property, or the Management Agreement
terminates with respect to any such Mortgaged Property, (a) Borrower causes such
Mortgaged Property to come under management by a third party property manager in
accordance with clauses (i), (ii)(y), (iii), (iv) and (v) of SECTION 5.3.2,
hereof, and (b) if the Securitization has occurred, each of the Rating Agencies
delivers to Lender a Rating Comfort Letter with respect thereto.

7.1.5.

Borrower or the General Partner shall default in its payment of any
Indebtedness with an aggregate principal amount in excess of $2,000,000.

7.1.6.

If at any one time there shall be any final nonappealable judgment or
judgments rendered by any court or Governmental Authority not covered by
insurance aggregating in excess of $5,000,000 against Borrower or the General
Partner, which shall not have been satisfied, fully stayed or bonded within
60 days after the entry thereof.

7.1.7.

Either of the following shall occur with respect to Borrower or the
General Partner:

(a) a decree, judgment, or order by a court of competent
jurisdiction shall have been entered adjudicating Borrower or the
General Partner as bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization of Borrower or the General
Partner under any Bankruptcy Law, and such decree or order shall have
continued undischarged and unstayed for a period of 60 consecutive
days; or a decree, judgment or order of a court of competent
jurisdiction appointing a receiver, liquidator, trustee, or assignee
in bankruptcy or insolvency for Borrower or the General Partner, or
any substantial part of the property of Borrower or the General
Partner, or for the winding up or liquidation of the affairs of
Borrower or the General Partner, and such decree, judgment, or order
shall have remained in force undischarged and unstayed for a period of
60 days; or

(b) Borrower or the General Partner shall institute proceedings
to be adjudicated a voluntary bankrupt, or shall consent to the filing
of a bankruptcy proceeding against it, or shall file a petition or
answer or consent seeking reorganization under any Bankruptcy Law, or
shall consent to the filing of any such petition, or shall consent to
the appointment of a custodian, receiver, liquidator, trustee, or
assignee in

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bankruptcy or insolvency of it or any substantial part of its assets
or property, or shall make a general assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall, within the meaning of any
Bankruptcy Law, become insolvent, fail generally to pay its debts as
they become due, or shall, within the meaning of any Bankruptcy Law,
become insolvent, fail generally to pay its debts as they become due,
or take any corporate action in furtherance of or to facilitate,
conditionally or otherwise, any of the foregoing.

7.1.8.

Unless Borrower causes all of the Mortgaged Properties to come under
management by a third party manager in accordance with clauses (i), (ii)(y),
(iii), (iv) and (v) of SECTION 5.3.2 hereof, either of the following shall occur
with respect to the Manager:

(a) a decree, judgment, or order by a court of competent
jurisdiction shall have been entered adjudicating the Manager as
bankrupt or insolvent, or approving as properly filed a petition
seeking reorganization of the Manager under any Bankruptcy Law, and
such decree or order shall have continued undischarged and unstayed
for a period of 60 consecutive days; or a decree, judgment or order of
a court of competent jurisdiction appointing a receiver, liquidator,
trustee, or assignee in bankruptcy or insolvency for the Manager, or
any substantial part of the property of the Manager, or for the
winding up or liquidation of the affairs of the Manager shall have
been entered, and such decree, judgment, or order shall have remained
in force undischarged and unstayed for a period of 60 days; or

(b) the Manager shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent
seeking reorganization under any Bankruptcy Law, or shall consent to
the filing of any such petition, or shall consent to the appointment
of a custodian, receiver, liquidator, trustee, or assignee in
bankruptcy or insolvency of it or any substantial part of its assets
or property, or shall make a general assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts
generally as they become due, or shall, within the meaning of any
Bankruptcy Law, become insolvent, fail generally to pay its debts as
they become due, or take any corporate action in furtherance of or to
facilitate, conditionally or otherwise, any of the foregoing.

7.1.9.

An Event of Default shall occur under any other Loan Document.

7.1.10.

If a Securitization has not yet occurred, Borrower shall default in a
material respect under the Cooperation Agreement after the giving of any
required notice and/or the expiration of any required cure period.

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7.1.11.

The General Partner (i) shall cease to be the general partner of
Borrower, (ii) shall fail to have at least one director who is an Independent
Director, other than as a result of the resignation or removal of an Independent
Director, so long as the General Partner is then diligently searching for a new
Independent Director, (iii) shall terminate, liquidate or dissolve, or shall
cease to be controlled by Arden REIT, (iv) shall engage, directly or indirectly,
in any business or activity except serving as general partner of Borrower.

7.1.12.

Borrower acquires any assets not related to the business and operation
of the Mortgaged Properties (other than a direct or indirect interest in a
residual class certificate issued pursuant to the Securitization).

7.1.13.

The occurrence of an event of default under any Ground Lease.

7.1.14.

Following the occurrence of a Lockbox Event, the willful failure of
Borrower to instruct tenants of the Mortgaged Properties to make payments of
Rents into the Lockbox Account or the failure of Borrower or Manager to deposit
payments of Rents received by Borrower or Manager into the Lockbox Account
promptly upon receipt thereof.

7.1.15.

In the event Borrower or the General Partner shall fail to perform or
observe any of the covenants set forth in SECTION 5.10 or SECTION 6.4 hereof and
such failure shall continue for thirty (30) days following Borrower's receipt of
notice of such failure from Lender, provided that it shall not be an Event of
Default hereunder if such failure is cureable but is not reasonably capable of
being cured within such 30-day period and Borrower shall have promptly commenced
to cure such failure and thereafter shall diligently pursue such cure to
completion, but in no event later than 90 days after the date on which Borrower
received such written notice from Lender.

7.2. REMEDIES

If an Event of Default shall have occurred and be continuing, Lender
shall have the right, in its sole discretion, by written notice to Borrower
(except upon the occurrence of an Event of Default under SECTION 7.1.7 affecting
Borrower, in which case all principal and accrued interest thereon will be
immediately due and payable on the Mortgage Note without any declaration or
other act on the part of Lender) to take one or more of the following actions:

7.2.1.

To declare the principal of and all amounts accrued but unpaid under
the Mortgage Note, this Agreement and the other Loan Documents, together with a
Yield Maintenance Payment calculated in accordance with SECTION 2.11 hereof, to
be immediately due and payable, and such amounts shall

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thereupon become immediately due and payable, without presentment, demand,
protest or notice of any kind, other than any notice specifically required by
this SECTION 7.2, all of which are hereby expressly waived by Borrower.

7.2.2.

Pursue such rights and remedies against Borrower, or otherwise, as are
provided under and pursuant to this Agreement, the Mortgages or any of the other
Loan Documents and as may be available to the Lender at law or in equity.

7.2.3.

If the Event of Default involves Borrower's failure to pay any tax,
assessment, encumbrance or other imposition binding on Borrower or any of the
Collateral or to perform its obligation to furnish insurance hereunder, or to
perform or observe any other covenant, condition or term in any Loan Document or
in the Management Agreement or any Ground Lease, Lender may, at its option,
without waiving or affecting any of its other rights or remedies hereunder, pay,
perform or observe the same, and, in connection therewith, Lender shall be
entitled to rely on any representations and statements of the ground lessor
under any such Ground Lease or of the Manager under the Management Agreement in
regard to alleged breaches or violations thereof, and all payments made or costs
or expenses incurred by Lender in connection therewith shall be repaid by
Borrower to Lender within fifteen (15) days after demand therefor, together with
interest at the Default Interest Rate, and shall be added to and become a part
of the Indebtedness secured by the Mortgages and other Security Documents.
Lender is hereby empowered to enter and to authorize others to enter upon any
Land and all Improvements located on any Land for the purpose of performing or
observing any such defaulted covenant, condition or term, without thereby
becoming liable to Borrower or any Person in possession holding under Borrower.

7.2.4.

Appoint as a matter of right, without notice, to the fullest extent
permitted under applicable law, a receiver for Borrower or for all or any part
of the Collateral, whether such receivership be incidental to a proposed sale of
the Collateral or otherwise. All disbursements made by the receiver and the
expenses of receivership, shall be added to and be a part of the principal
amount of the obligations secured by the Security Documents, and, whether or not
said principal sum, including such disbursements and expenses, exceeds the
indebtedness originally intended to be secured thereby, the entire amount of
said sum, including such disbursements and expenses, shall bear interest at the
Default Interest Rate, be secured by the Security Documents and shall be due and
payable within fifteen (15) days after demand therefor.

7.3. REMEDIES CUMULATIVE

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7.4. DEFAULT INTEREST

In addition to the provisions of SECTION 2 hereof, if Borrower shall
fail to make payment when and as due of any amounts due hereunder (whether at
the stated date for payment, or earlier upon an acceleration hereunder),
Borrower shall pay, to the fullest extent permitted by applicable law, interest
to Lender on such past due amounts beginning on the date such payment becomes
past due at a per annum rate of interest (the "DEFAULT INTEREST RATE") equal to
the greater of (a) the Interest Rate in effect from time to time plus three
percentage points (3%) and (b) the Prime Rate plus two percentage points (2%).
Borrower acknowledges that its obligation to pay Default Interest may be
separated from the other obligations of Borrower hereunder, and may be held or
transferred separately from the other obligations of the Borrower hereunder.

7.5. DEFAULT INDEMNITY

Borrower hereby agrees to, and shall, indemnify and hold harmless
Lender against the reasonable out-of-pocket costs and expenses (including
reasonable attorneys' fees and expenses) which it may sustain or incur as a
consequence of any Default or Event of Default hereunder and in the enforcement
of Lender's rights and remedies in connection therewith. Lender shall provide
to Borrower a satisfactory statement, signed by an officer of Lender and
supported, where applicable, by documentary evidence, explaining the amount of
all such costs or expenses. Any amounts that Borrower must pay to Lender under
this SECTION 7.5 shall bear interest at the Default Interest Rate and shall be
due fifteen (15) days after demand therefor accompanied by documentation
sufficient to establish the amount of Borrower's liability, and shall be added
to and become a part of the Indebtedness secured by the Mortgages and other
Security Documents.

8. INSURANCE

8.1. MAINTENANCE OF INSURANCE

Borrower shall maintain at all times with Qualified Insurance
Companies all policies of insurance required under the Mortgage, which policies
shall name Lender, as an additional insured or loss payee, as applicable, as
their interests may appear. Each policy of insurance required hereunder shall
require the insurer to give not less than thirty (30) days' prior written notice
to Lender in the event of cancellation of such policy for any reason whatsoever
(ten (10) days in the case of non-payment of premium) and, with respect to
property insurance, shall provide that the interest of the additional insureds
or loss payees thereunder shall not be impaired or invalidated by any act or
neglect of Borrower or the owner of any of the insured property or by the
occupation of the premises wherein such property is located for purposes more
hazardous than are permitted by such policy. If Borrower fails to provide and
pay for such insurance, Lender may, at Borrower's expense, procure the same, but
shall not be required to do so, and any amounts reasonably expended by Lender to
do so, together with interest at the Default Interest Rate shall become part of
the debt secured by the Security Documents.

8.2. PAYMENT AND APPLICATION OF INSURANCE PROCEEDS

Insurance proceeds payable with respect to damage to or destruction of
any Mortgaged Property or the Improvements related thereto, including damage by
earthquake, if in effect, shall be

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applied in accordance with the terms of the applicable Mortgage. All other
insurance proceeds shall be payable in accordance with the provisions of the
applicable policy.

8.3. EARTHQUAKE INSURANCE

Borrower shall maintain at all times or cause to be maintained for its
benefit with a Qualified Insurance Company, a blanket policy of insurance
insuring all of the Mortgaged Properties against damage by earthquake in an
aggregate insured amount not less than $26,615,000 and having a deductible of
not more than five percent (5%) per unit of earthquake insurance subject to a
$100,000 minimum (a unit being defined as each individual building on each
Mortgaged Property). Such earthquake insurance shall otherwise comply with the
requirements of SECTION 1.7.3 of the Mortgage.

9. SECURITIZATION

9.1. SECURITIZATION

Borrower and the General Partner shall use commercially reasonable
best efforts to cooperate with Lender in its activities in connection with the
sale of the Loan as a whole loan or any securitization of the Loan (the
"SECURITIZATION"), including obtaining ratings by the Rating Agencies in
accordance with the terms hereof and in accordance with the Cooperation
Agreement. The Securitization will involve the issuance of rated single- or
multi-class securities secured by or evidencing ownership interests in the Loan
Documents (the "CERTIFICATES"). Borrower acknowledges and agrees that, in
connection with the Securitization, (a) this Agreement, the Mortgage Note, the
Security Documents and the other Loan Documents may be assigned, pursuant to the
assignment, to a trustee (the "TRUSTEE"), as trustee under a pooling and
servicing agreement (the "POOLING AND SERVICING AGREEMENT") in form
substantially similar to those commonly used in rated commercial mortgage-backed
securities offerings and (b) pursuant to the Pooling and Servicing Agreement, a
professional loan servicer of recognized standing (the "SERVICER") would be
appointed to service the Loan, this Agreement and the Loan Documents as provided
therein. The addresses of the Trustee and the Servicer will be provided to
Borrower and the Ground Lessor in writing before the Securitization is
consummated. Upon such assignment, the Trustee shall for all purposes be the
sole Lender hereunder and the sole mortgagee or beneficiary under the Mortgage
(and all references herein to the "Lender" shall be deemed to refer to the
Trustee) and shall, together with the Servicer, among other things, (i) have the
sole and exclusive benefit of and the right and power to exercise, or to direct
the exercise of, all the rights and remedies of Lender hereunder and under the
Security Documents, including the right to inspect the Collateral, to receive
notices and financial information, to grant or withhold consents or approvals,
to benefit from indemnities, to receive, hold and apply proceeds or any other
amount or property provided by Borrower hereunder, and, upon the occurrence and
during the continuation of an Event of Default, to take any action required or
permitted of Lender with respect thereto, all in the Trustee's own name, and to
exercise all other rights and remedies of Lender hereunder and under the
Security Documents, and (ii) be bound by all the terms hereof which apply to
Lender. Borrower hereby acknowledges the foregoing and agrees to be bound to
the Trustee, upon such assignment, recognizing the Trustee as Lender hereunder
as if the Trustee were named in this Agreement as Lender, recognizing that the
Servicer shall be entitled to act on behalf of the Trustee and the Holders under
and as provided in the Pooling and Servicing Agreement and shall be entitled to
and shall receive all notices, financial and other information, agreements and
other documents to be delivered to Lender or the Trustee hereunder or under any
of the other Loan Documents and accepting and agreeing to all of the terms
reasonably set forth in the Pooling

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and Servicing Agreement and the exhibits thereto, all of which shall be
secured under the Security Documents. Upon such assignment, Borrower's
obligations to Lender specified in this Agreement shall be satisfied by
Borrower's tendering full and timely payment or performance thereof to the
Trustee or, if directed by the Trustee, to the Servicer. With respect to the
delivery of documents and other written material, the Trustee and the
Servicer shall have only the obligations expressly required of Lender herein
or in the other Loan Documents or of the Trustee or the Servicer in the
Pooling and Servicing Agreement. All rights and remedies of the Trustee as
Lender hereunder, including all indemnities running to Lender, shall also
operate for the benefit of the Servicer and the Holders, as provided in the
Pooling and Servicing Agreement, and shall be exercised by the Trustee and
the Servicer in accordance with and subject to the terms and conditions set
forth in the Pooling and Servicing Agreement. Borrower acknowledges and
agrees that, until Borrower has received notice from the Trustee to the
contrary, and subject to the terms and conditions set forth in the Pooling
and Servicing Agreement to the contrary, all deliveries and notifications to
be made by Borrower to the Trustee, as Lender, pursuant to this Agreement or
any other Loan Document shall be made to the Servicer only and not to the
Trustee.

Borrower will cooperate with Lender to retain the Rating Agencies to
provide rating surveillance services on any Certificates issued in a
Securitization. Such rating surveillance shall be at the expense of Borrower.
Prior to the Securitization (or in the event the Securitization does not occur),
Lender may appoint a professional loan servicer of recognized standing to
service the Loan, this Agreement and the Loan Documents on terms and conditions
acceptable to Lender. The costs, fees and expenses of any such servicer shall
be paid by Lender.

9.2. NO ASSIGNMENT BY BORROWER

The rights and obligations of Borrower under this Agreement are
personal to Borrower and, accordingly, Borrower shall not assign this Agreement
or any other Loan Document or any other right, interest, or obligation of
Borrower hereunder or thereunder, either in whole or in part, to any Person
whatsoever.

9.3. METHOD OF PAYMENT

Following the assignment contemplated by SECTION 9.1 hereof, Borrower shall
make or cause to be made all payments under the Mortgage Note, and any other
payments required to be made by Borrower to or on behalf of Lender hereunder or
pursuant to any other Loan Document, to the Servicer by application of the
provisions of SCHEDULE 5.11 hereto or by wire transfer through the Federal
Reserve Bank of New York of immediately available funds in lawful tender of the
United States of America, in accordance with instructions provided by the
Servicer, which payments shall be held and applied by the Servicer in accordance
with the Pooling and Servicing Agreement.

10. ASSIGNMENT AND PARTICIPATION

Notwithstanding anything to the contrary set forth herein or in any
other Loan Document, Lender and any assignee of Lender shall have the right at
any time and from time to time to (a) assign (and thereafter, at any time and
from time to time, repurchase) all or any portion of its rights and obligations
with respect the Loan, including, without limitation, all or any portion of the
outstanding principal balance of the Loan and thereafter be released from its
rights and obligations as Lender in respect of such portion of the Loan (except
to the extent such portion of the Loan is repurchased by

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Lender or such assignee), and (b) sell participations in the Loan. If requested
by Lender, Borrower shall execute and deliver a written acknowledgment
acknowledging the assignment of all or a portion of the Loan to an assignee.

11. SUBSTITUTION OF PROPERTIES

Subject to the terms and conditions set forth in this Section, at any
time following the commencement of the Defeasance Period, Borrower may obtain a
release of the Lien of the Mortgage (and the related Loan Documents) to the
extent it encumbers one or more Mortgaged Properties (a "SUBSTITUTED PROPERTY")
by substituting therefor one or more office properties acquired by Borrower
(individually, a "SUBSTITUTE PROPERTY" and collectively, the "SUBSTITUTE
PROPERTIES"), provided that (a) the Substitution Conditions are satisfied with
respect to the Substitute Properties, (b) no such substitution may occur after
the Anticipated Repayment Date, (c) such substitution shall not be allowed more
than two (2) times during the term of the Loan and (d) not more than five (5)
Mortgaged Properties may be released from the Lien of the Mortgage (and the
related Loan Documents) during the term of the Loan pursuant to this SECTION 11.
Any such substitution shall be subject, in each case, to the satisfaction of the
following conditions precedent (collectively, the "SUBSTITUTION CONDITIONS"):

(i) Lender shall have received a copy of a deed or an assignment
and assumption of lessee's interest in the Ground Lease
(together with the ground lessor's consent thereto), as
applicable, conveying all of Borrower's right, title and
interest in and to the Substituted Property or Substituted
Properties then being Released to an entity other than Borrower
and a letter from Borrower countersigned by the Title Company
acknowledging receipt of such deed or assignment and
assumption, as applicable, and agreeing to record such deed or
assignment and assumption, as applicable, in the real estate
records for the county in which the Substituted Property is
located or in the counties in which the Substituted Properties
are located;

(ii) Lender shall have received an appraisal of the Substitute
Property or Substitute Properties, as applicable, dated no more
than sixty (60) days prior to the substitution by an appraiser
acceptable to the Rating Agencies, indicating an appraised value
of the Substitute Property or Substitute Properties, as
applicable, that is equal to or greater than the Release Price
of the Substituted Property or Substituted Properties, then
being Released, determined by Lender as of the Closing Date;

(iii) after giving effect to the substitution, the Debt Service
Coverage Ratio for the Mortgaged Properties (including the
Substitute Properties but excluding the Substituted Properties)
shall be at least equal to the greater of (i) 2.052:1 and
(ii) the Debt Service Coverage Ratio for the Loan for all of
the Mortgaged Properties immediately preceding the substitution;

(iv) the Net Operating Income for any Substitute Property does not
show a downward trend over the three (3) years immediately prior
to the date of substitution or, with respect to a Substitute
Property for which information regarding the Net Operating
Income of such Substitute Property for the three (3) years
immediately

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prior to the date of substitution cannot be obtained by Borrower
after Borrower's exercise of diligent efforts, the Net Operating
Income shall not show a downward trend for such period of time
immediately prior to the date of substitution as may be
determined from the information regarding such Net Operating
Income available (which period of time, in any event, shall not
be less than one (1) year);

The Net Operating Income for a Substitute Property shall be
deemed to show a downward trend, if the Net Operating Income for
the Substitute Property for each Determination Period (as
defined below) was less than the Net Operating Income for the
immediately preceding Determination Period, commencing with
the Determination Period that commenced on the date that is
three (3) years prior to the first day of the calendar month
in which the substitution is to occur. A "Determination
Period" is a twelve (12) month period that commences on a
prior anniversary of the first day of the calendar month in
which the substitution is to occur and ends on the last day
of the calendar month (or prior anniversary thereof)
immediately preceding the month in which the substitution
is to occur;

(v) the Net Operating Income and Debt Service Coverage Ratio (for
the twelve (12) month period immediately preceding the
substitution) for the Substitute Property or Substituted
Properties, as applicable, is greater than one hundred
twenty-five percent (125%) of the Net Operating Income and
Debt Service Coverage Ratio (for the twelve (12) month period
immediately preceding the substitution) for the Substituted
Property or Substituted Properties then being substituted.
For purposes of this clause (v), the Debt Service Coverage
Ratio with respect to a Substitute Property (or Substitute
Properties, as applicable) or a Substituted Property (or
Substituted Properties, as applicable) shall be calculated
using the Net Operating Income with respect to such Substitute
Property (or Substitute Properties, as applicable) or
Substituted Property, (or Substituted Properties, as
applicable) and the principal, if any, and interest due and
payable on the Mortgage Note allocable to the Release Price for
the Substitute Property or Substituted Property, as applicable
(or the aggregate Release Prices for the Substitute Properties
or Substituted Properties, as applicable);

(vi) Lender shall have received a Rating Comfort Letter from each
Rating Agency with respect to the substitution;

(vii) no Default or Event of Default shall have occurred and be
continuing and Borrower shall be in compliance with all
terms and conditions set forth in this Agreement and in each
Loan Document on Borrower's part to be observed or
performed. Lender shall have received a certificate from
Borrower confirming the foregoing, stating that the
representations and warranties of Borrower contained in this
Agreement and the other Loan Documents are true and correct
in all material respects on and as if made on the date of
the substitution with respect to Borrower, the Mortgaged
Properties and each Substitute Property and containing any
other representations and warranties with respect to
Borrower, the Mortgaged Properties, each Substitute Property
and the Loan as the Rating Agencies may require, such
certificate to be in form and substance satisfactory to the
Rating Agencies;

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(viii) Borrower shall have executed, acknowledged and delivered to
Lender (A) a Mortgage, an Assignment of Leases and Rents and
one or more UCC Financing Statements with respect to each
Substitute Property, together with a letter from Borrower
countersigned by the Title Company acknowledging receipt of
such Mortgage, Assignment of Leases and Rents and UCC-1
Financing Statements and agreeing to record or file, as
applicable, such Mortgage, Assignment of Leases and Rents
and, if applicable, one of the UCC-1 Financing Statements in
the real estate records for the county in which such
Substitute Property is located and agreeing to file one of
the UCC-1 Financing Statements in the office of the
Secretary of State of the State in which such Substitute
Property is located, so as to effectively create upon such
recording and filing valid and enforceable Liens upon such
Substitute Property, of the requisite priority, in favor of
Lender (or such other trustee as may be desired under local
law), subject only to Permitted Encumbrances and Permitted
Liens and (B) a Security Agreement and an Environmental
Indemnity Agreement with respect to such Substitute
Property. The Mortgage, Assignment of Leases and Rents,
UCC-1 Financing Statements, Security Agreement and
Environmental Indemnity Agreement shall be the same in form
and substance as the counterparts of such documents executed
and delivered on the Closing Date subject to modifications
reflecting such Substitute Property as a Mortgaged Property
that is the subject of such documents and such modifications
reflecting the laws of the state in which such Substitute
Property is located as shall be recommended by the counsel
admitted to practice in such state and delivering the
opinion as to the enforceability of such documents required
pursuant to clause (xv) below. Borrower shall also have
executed, acknowledged and delivered any amendments to the
Loan Documents required in connection with a substitution
and, where applicable, a letter from Borrower countersigned
by the Title Company agreeing to record such amendments in
the real estate records for each county where the Mortgage
was recorded. The Mortgage encumbering the Substitute
Property shall secure all amounts evidenced by the Mortgage
Note. The amount of the Loan allocated to the Substitute
Property or Substitute Properties (such amount being
hereinafter referred to as the "Substitute Release Amount")
shall equal the Allocated Loan Amount of the Substitute
Property or Substituted Properties then being Released (and,
if applicable, equitably allocated among the Substitute
Properties);

(ix) Lender shall have received (A) any "tie-in" or similar
endorsement to each Title Insurance Policy insuring the Lien
of the existing Mortgage as of the date of the substitution
available with respect to the Title Insurance Policy insuring
the Lien of the Mortgage with respect to each Substitute
Property and (B) a Title Insurance Policy (or a marked, signed
and redated commitment to issue such Title Insurance Policy)
insuring the Lien of the Mortgage encumbering each Substitute
Property, issued by the Title Company insuring the Lien of the
existing Mortgage and dated as of the date of the substitution,
with reinsurance and direct access agreements that replace such
agreements issued in connection with the Title Insurance Policy
insuring the Lien of the Mortgage encumbering the Substituted
Property. The Title Insurance Policy issued with respect to
each Substitute Property shall (1) provide coverage in the
amount of the Loan Amount of the "tie-in" or similar
endorsement described above, (2) insure Lender that the

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relevant Mortgage creates a valid first lien on the Substitute
Property encumbered thereby, free and clear of all exceptions
from coverage other than Permitted Encumbrances (as modified by
the terms of any endorsements), (3) contain such endorsements
and affirmative coverages as are contained in the Title
Insurance Policies insuring the Liens of the existing Mortgage,
and (4) name Lender as the insured. Lender also shall have
received copies of paid receipts showing that all premiums in
respect of such endorsements and Title Insurance Policies have
been paid;

(x) Lender shall have received a current title survey for each
Substitute Property, certified to the Title Company and Lender
and their successors and assigns, in the same form and having
the same content as the certification of the Survey of the
Substituted Property prepared by a professional land surveyor
licensed in the state in which the Substitute Property is
located and acceptable to the Rating Agencies in accordance
with the 1992 Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys. Such survey shall reflect the
same legal description contained in the Title Insurance Policy
relating to such Substitute Property and shall include, among
other things, a metes and bounds description of the real
property comprising part of such Substitute Property. The
surveyor's seal shall be affixed to each survey and each survey
shall certify that the surveyed property is not located in a
"one hundred year flood hazard area;"

(xi) Lender shall have received valid certificates of insurance
indicating that the requirements for the policies of insurance
required for an Mortgaged Property hereunder have been satisfied
with respect to the Substitute Property and evidence of the
payment of all premiums payable for the existing policy period;

(xii) Lender shall have received a Phase I environmental report
and, if recommended under the Phase I environmental report,
a Phase II environmental report (in each case prepared by an
environmental consultant acceptable to Lender), which
conclude that the Substitute Property does not contain any
Hazardous Materials (as defined in the Mortgage) and is not
subject to any risk of contamination from any off-site
Hazardous Materials;

(xiii) Borrower shall deliver or cause to be delivered to Lender
(A) updates certified by Borrower or the General Partner, as
applicable, of all organizational documentation related to
Borrower and the General Partner and/or the formation,
structure, existence, good standing and/or qualification to
do business delivered to Lender in connection with the
closing of the Loan; (B) good standing certificates,
certificates of qualification to do business in the
jurisdiction in which the Substitute Property is located (if
required in such jurisdiction) and (C) resolutions of the
General Partner authorizing the substitution and any actions
taken in connection with such substitution;

(xiv) Lender shall have received the following opinions of
Borrower's counsel: (A) an opinion or opinions of counsel
admitted to practice under the laws of the state in which
the Substitute Property is located stating that the Loan
Documents delivered with respect to the Substitute Property
pursuant to clause (viii) above are valid and enforceable in
accordance with their terms, subject to the laws

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applicable to creditors' rights and equitable principles, and
that Borrower is qualified to do business and in good standing
under the laws of the jurisdiction where the Substitute Property
is located; (B) an opinion of counsel acceptable to the Rating
Agencies stating that the Loan Documents delivered with respect
to the Substitute Property pursuant to clause (viii) above were
duly authorized, executed and delivered by Borrower and that the
execution and delivery of such Loan Documents and the
performance by Borrower of its obligations thereunder will not
cause a breach of, or a default under, any agreement, document
or instrument to which Borrower is a party or to which it or
its properties are bound; (C) an opinion of counsel acceptable
to the Rating Agencies stating that subjecting the Substitute
Property to the Lien of the related Mortgage and the execution
and delivery of the related Loan Documents does not and will
not affect or impair the ability of Lender to enforce its
remedies under all of the Loan Documents or to realize the
benefits of the cross-collateralization provided for thereunder;
(D) an update of the Substantive Non-Consolidation Opinion
indicating that the substitution does not affect the opinions
set forth therein; (E) an opinion of counsel acceptable to
the Rating Agencies stating that the substitution and the
related transactions do not constitute a fraudulent conveyance
under applicable bankruptcy and insolvency laws or other
evidence pertaining thereto acceptable to the Rating Agencies
and (F) an opinion of counsel acceptable to the Rating Agencies
stating that the substitution would not adversely affect the
status of the entity holding the interest in the Mortgage Note
as a REMIC (assuming for such purpose that such entity
otherwise qualifies as a REMIC) and that such substitution
will not result in a deemed exchange of the Certificates
pursuant to Section 1001 of the Code;

(xv) all real estate taxes due and payable with respect to the
Substitute Property shall have been paid and Borrower shall have
delivered evidence thereof to Lender;

(xvi) Borrower shall have paid or reimbursed Lender for all costs
and expenses incurred by Lender (including, without
limitation, reasonable attorneys fees and disbursements) in
connection with the substitution and Borrower shall have
paid all recording charges, filing fees, taxes or other
expenses (including, without limitation, mortgage and
intangible taxes and documentary stamp taxes) payable in
connection with the substitution. Borrower shall have paid
all costs and expenses of the Rating Agencies incurred in
connection with the substitution;

(xvii) Lender shall have received annual operating statements and
occupancy statements for each Substitute Property for the
most recently completed Fiscal year and an operating
statement for each Substituted Property for all Accounting
Periods and Accounting Quarters for which such statements
have been prepared, each certified to Lender as being true
and correct and certificate from Borrower certifying that
there has been no adverse change in the financial condition
of such Substitute Property since the date of such operating
statements;

(xviii)Borrower shall have delivered to Lender estoppel
certificates from (i) each tenant of each Substitute
Property that accounted more than 5% of the gross rents from
the Substitute Property during the most recently completed
four full Accounting Quarters ("Major Tenants"), and (ii)
tenants of the Substitute

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Property that accounted, in the aggregate, for at least
seventy-five percent (75%) of the gross rents from the
Substitute Property for the most recently completed for
full accounting quarters. All such estoppel certificates
shall be in the form attached hereto as Exhibit D and
shall indicate that (1) the subject lease is a valid and
binding obligation of the tenant thereunder, (2) there
are no defaults under such lease on the part of the
landlord or tenant thereunder, (3) the tenant thereunder
has no defense or offset to the payment of rent under
such leases, (4) no rent under such lease has been paid
more than one (1) month in advance, (5) the tenant
thereunder has no option or right of first refusal under
such lease to purchase all or any portion of the
Substitute Property and (6) all tenant improvement work
required under such lease has been completed and the
tenant under such lease is in actual occupancy of its
leased premises. If an estoppel certificate indicates
that all tenant improvement work required under the
subject lease has not yet been completed, Borrower shall,
if required by the Rating Agencies, deliver to Lender
financial statements indicating that Borrower has
adequate funds to pay all costs related to such tenant
improvement work as required under such lease;

(xix) Lender shall have receive copies of all tenant leases and
any ground leases affecting the Substitute Property
certified by Borrower as being true and correct. Lender
shall have received a current rent roll of the Substitute
Property certified by Borrower as being true and correct;

(xx) Lender shall have received subordination, nondisturbance and
attornment agreements in the form attached hereto as EXHIBIT E
with respect to each of the Material Leases affecting the
Substitute Property other than such Leases that are, by their
terms, subordinate to the Mortgage with respect to the
Substitute Property;

(xxi) Lender shall have received (A) an endorsement to the Title
Insurance Policy insuring the Lien of the Mortgage
encumbering the Substitute Property insuring that the
Substitute Property constitutes a separate tax lot or, if
such an endorsement is not available in the state in which
the Substitute Property is located, a letter from the Title
Company issuing such Title Insurance Policy stating that the
Substitute Policy constitutes a separate tax lot or (B) a
letter from the appropriate taxing authority stating that
the Substitute Property constitutes a separate tax lot;

(xxii) Lender shall have received a physical conditions report
(substantially similar in form and scope to the physical
conditions report delivered with respect to the Substituted
Property in connection with the Closing) with respect to the
Substitute Property stating that the Substitute Property and
its use comply in all material respects with all applicable
Laws (including, without limitation, zoning, subdivision and
building laws) and that the Substitute Property is in good
condition and repair and free of material damage or waste.
If compliance with Laws is not addressed by the physical
conditions report, such compliance shall be confirmed by
delivery to Lender of a certificate of an architect licensed
in the state in which the Substitute Property is located, a
letter from the municipality in which such Property is
located, a certificate of a surveyor that is licensed in the

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state in which the Substitute Property is located (with
respect to zoning and subdivision laws), an ALTA 3.1
zoning endorsement to the Title Insurance Policy
delivered pursuant to clause (ix) above (with respect to
zoning laws) or a subdivision endorsement to the Title
Insurance Policy delivered pursuant to clause (ix) above
(with respect to subdivision laws). If the physical
conditions report recommends that any repairs be made
with respect to the Substitute Property, such physical
conditions report shall include an estimate of the cost
of such recommended repairs and Borrower shall deposit
with Lender an amount equal to one hundred fifty percent
(150%) of such estimated cost, which deposit shall
constitute additional security for the Loan and shall be
released to Borrower upon the delivery to Lender of (A)
an update to such physical conditions report or a letter
from the engineer that prepared such physical conditions
report indicating that the recommended repairs were
completed in good and workmanlike manner and (B) paid
receipts indicating that the costs of all such repairs
have been paid;

(xxiii)Lender shall have received a certified copy of an amendment
to the Management Agreement reflecting the deletion of the
Substituted Property and the addition of the Substitute
Property as a property managed pursuant thereto and Manager
shall have executed and delivered to Lender an amendment to
the Collateral Assignment of Management Agreement reflecting
such amendment to the Management Agreement;

(xxiv) Lender shall have received such other and further approvals,
opinions, documents and information in connection with the
substitution as the Rating Agencies have requested;

(xxv) Lender shall have received copies of all contracts and
agreements relating to the leasing and operation of the
Substitute Property (other than the Management Agreement)
together with a certification of Borrower attached to each
such contract or agreement certifying that the attached
copy is a true and correct copy of such contract or
agreement and all amendments thereto;

(xxvi) Borrower shall submit to Lender, not less than thirty (30)
days prior to the date of such substitution, a release of
Lien (and related Loan Documents) for the Substituted
Property for execution by Lender. Such release shall be in
a form appropriate for the jurisdiction in which the
Substituted Property is located and satisfactory to Lender
in its sole discretion. Borrower shall deliver an Officer's
Certificate certifying that the requirements set forth in
this Section 11 have been satisfied.

Upon the satisfaction of the foregoing conditions precedent, Lender will release
its Lien from the Substituted Property or Substituted Properties, as applicable,
to be released and the Substitute Property or Substitute Properties, as
applicable, shall be deemed to be an Mortgaged Property for purposes of this
Agreement and the Allocated Loan Amount with respect to such Substituted
Property or Substituted Properties, as applicable, shall be deemed to be the
Allocated Loan Amount with respect to such Substitute Property(or the aggregate
Allocated Loan Amounts for such Substitute Properties, as applicable) for all
purposes hereunder (and, if there is more than one Substitute Properties, the
Allocated Loan Amounts for such Substitute Properties shall be equitably
determined).

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12. MISCELLANEOUS

12.1. LIMITATION ON LIABILITY

Notwithstanding any contrary provision in any of the Loan
Documents, it is hereby expressly agreed that, except as otherwise provided in
this SECTION 12.1 or in any Section of any Loan Document that is substantially
similar to this SECTION 12.1, there shall be no recourse to the assets of
Borrower or either of its Partners (other than against the Collateral and any
other property given as security for the payment of the Mortgage Note) for (i)
the payment of principal, interest, Defeasance Deposits, Yield Maintenance
Payments or other charges under this Agreement or the Mortgage Note or for any
other amount that is or may become due and owing to Lender by Borrower under
this Agreement or any of the other Loan Documents or (ii) the performance or
discharge of any covenant or undertaking hereunder or under the other Loan
Documents, and in the event of any Event of Default hereunder or thereunder,
Lender agrees to proceed solely against the Collateral and any other property
given as security for payment of the Mortgage Note, and Lender shall not seek or
claim recourse against Borrower or the General Partner (other than against the
Collateral and any other property given as security for payment of the Mortgage
Note) for any deficiency or for any personal judgment after a foreclosure of the
lien of the Mortgage or other Security Documents or for the performance or
discharge of any covenants or undertakings of Borrower hereunder or under any of
the other Loan Documents (except that Borrower may be made a party to a
proceeding to the extent legally necessary for the conduct of a foreclosure or
the exercise of other similar remedies under the Mortgages or other Security
Documents). Notwithstanding the foregoing, nothing contained in this
SECTION 12.1 shall relieve Borrower or the General Partner of any personal
liability for any loss, cost, expense, damage or liability arising or
resulting from (A) any breach of any representation or warranty made in this
Agreement that was materially incorrect when made and that was made with
fraudulent intent, (B) any amount paid or distributed to the General Partner,
Arden OP, the Manager or any Affiliate of any of them in violation of the
provisions of the Loan Documents, (C) fraud or breach of trust, including
misapplication of Loan proceeds or any Insurance Proceeds or Awards or other
sums that are part of the Collateral that may come into the possession or
control of Borrower or the General Partner or any Affiliate of any of them,
(D) liability of such Person under the Environmental Indemnity Agreement or
(E) following the occurrence of a Lockbox Event, the willful failure of
Borrower to instruct tenants of the Mortgaged Properties to make payments of
Rents into the Lockbox Account or the failure of Borrower or Manager to
deposit payments of Rents received by Borrower or Manager into the Lockbox
Account promptly upon receipt thereof. It is hereby expressly agreed that
neither the General Partner nor any director, officer, shareholder, partner
or employee of Borrower or the General Partner, nor the legal or personal
representative, successor or assign of any of the foregoing, nor any other
principal of Borrower or the General Partner, whether disclosed or undisclosed,
shall have any personal liability under this Agreement or any of the other
Loan Documents, except as personal liability may be specifically imposed upon
the General Partner in accordance with clauses (A), (B), (C), (D) and (E) of
this Section 12.1, and in no event shall any limited partner of Borrower have
any liability whatsoever with respect to the Loan or any monetary obligations
with respect thereto, or any of the matters described in clause (A), (B), (C),
(D) or (E) above. It is the intention of the parties hereto that this
SECTION 12.1 shall govern every other provision of the Loan Documents and that
the absence of explicit reference to this SECTION 12.1 in any provision of the
Loan Documents or the absence of any Section similar to this SECTION 12.1 in any
Loan Document shall not be construed to deny the application of this
SECTION 12.1 to such provision, notwithstanding the presence of explicit
reference to this SECTION 12.1 in other provisions of the Loan Documents.

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12.2. ENTIRE AGREEMENT, AMENDMENTS

This Agreement, including the Schedules and Exhibits hereto and
the other instruments and documents referred to herein or delivered pursuant
hereto, contains the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior oral or written agreements,
commitments or understandings with respect to such matters. No amendment,
modification or discharge of this Agreement shall be valid or binding unless set
forth in writing and duly executed by both parties.

12.3. NOTICES

All notices, requests and demands to or upon the respective
parties hereto shall be in writing (except as is otherwise specifically provided
in this Agreement) and shall be deemed to have been duly given or made when
received (or when delivery thereof is refused by the intended recipient) if
mailed by first-class registered or certified mail, return receipt requested,
postage prepaid, or sent by facsimile transmission, with confirmation of receipt
or delivery, or sent by nationally recognized overnight courier, delivery
charges prepaid or delivered by hand, in each case addressed or directed as
follows (or to such other address or facsimile transmission number as may be
hereafter designated in writing by the respective parties hereto):

IF TO BORROWER: Arden Realty Finance Partnership, L.P.
9100 Wilshire Boulevard
East Tower, Suite 700-B
Beverly Hills, California 90212
Attention: Diana M. Laing
Fax: (310) 246-2942

IF TO LENDER: Lehman Brothers Realty Corporation
Three World Financial Center
200 Vesey Street
New York, New York 10285
Attention: Commercial Mortgage Loan
Surveillance
Fax: (212) 528-6659

12.4. NO WAIVER; CUMULATIVE REMEDIES

No delay or failure on the part of any party hereto in exercising
any right, power or privilege under this Agreement or under any other instrument
or document given in connection with or pursuant to this Agreement shall impair
any such right, power or privilege or be construed as a waiver of any default or
any acquiescence therein. No single or partial exercise of any such right,
power or privilege shall preclude the further exercise of such right, power or
privilege, or the exercise of any other right, power or privilege. No waiver
shall be valid against any party hereto unless made in writing and signed by the
party against whom enforcement of such waiver is sought and then only to the
extent expressly specified therein. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.

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12.5. WAIVER OF JURY TRIAL

Each of the parties hereto (i) covenants and agrees not to elect
trial by jury of any issue triable of right by a jury and (ii) waives any rights
to trial by jury to the full extent that any such right shall now or hereafter
exist. This waiver of right to trial by jury is separately given, knowingly and
voluntarily, by each party hereto, and this waiver is intended to encompass
individually each instance and each issue as to which the right to a jury trial
would otherwise accrue. The parties are hereby authorized to submit this
Agreement to any court having jurisdiction over the subject matter so as to
serve as conclusive evidence of the other party's herein contained waiver of the
right to jury trial. Further, each party hereto certifies that no
representative of the other party (including such other party's counsel) has
represented, expressly or otherwise, to that party, that the other party will
not seek to enforce this waiver by the such certifying party of the right to a
jury trial.

12.6. GOVERNING LAW; CONSENT TO JURISDICTION

This Agreement shall be governed by and construed in accordance
with the laws of the State of New York (but not including the choice of law
rules thereof). In the event of any litigation arising out of this Loan
Agreement, Borrower agrees that the substantive law of the State of New York
shall apply. Borrower hereby consents to jurisdiction within the State of New
York for purposes of such litigation and agrees that service of process may be
made, and personal jurisdiction over Borrower obtained, by serving a copy of the
summons and complaint upon Borrower, at the notice address set forth herein, in
accordance with the applicable laws of the State of New York. Nothing herein
contained, however, shall prevent any owner or holder of the Mortgage Note from
bringing any action or exercising any right against any security or against
Borrower, personally, or against any property of Borrower, within any other
jurisdiction or state. Initiating such proceeding or taking such action in any
other jurisdiction or state shall not, however, constitute a waiver of the
agreement contained herein that the laws of the State of New York shall govern
the rights and obligations of the parties hereunder.

12.7. PAYMENT OF EXPENSES

12.7.1.

Borrower shall pay all expenses incurred by Lender in connection
with this Agreement and in the preparation for, and consummation of, the
transactions provided for herein and in connection with the enforcement hereof,
and Borrower shall pay all costs of conveyances, initial Servicer fee and
Trustee fee, initial rating fees and ongoing activity of any special Servicer
incurred as a result of an Event of Default, bank charges relating to the
operation of the Operating Account, the Lockbox Account, the Cash Collateral
Account and any other Account, after the Securitization has occurred, its
proportionate share of initial and annual surveillance fees, if any, of the
Rating Agencies, any processing fees, reasonable attorney's fees and
disbursements, auditor's fees, costs of appraisals, environmental reports, and
engineering reports, all title insurance premiums, all notary fees, all filing
and application fees to any federal, state or local agencies, all sales, stamp,
documentary, transfer, and other taxes and fees applicable to the transactions
contemplated by this Agreement and the instruments and documents called for
hereunder and all other costs and charges incurred by the parties in connection
with such transactions. In addition, the Borrower shall reimburse Lender for
any expenses incurred by the Lender to the extent provided in SECTION 4.8
hereof.

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12.7.2.

Except as provided in SECTION 12.7.1, if the Securitization occurs,
the Servicer Fee (as defined in the Pooling and Servicing Agreement) and the
Trustee Fee (as defined in the Pooling and Servicing Agreement) and any other
amounts required to be paid to the Servicer or the Trustee under the Pooling and
Servicing Agreement in reimbursement of expenses of the Servicer or the Trustee
shall be paid by Lender or the Trust Fund (the "TRUST FUND") created under the
Pooling and Servicing Agreement.

12.8. Severability

In the event that any term or provision of this Agreement or of
any other Loan Document or the application thereof to any Person or circumstance
shall, to any extent, be held to be invalid or unenforceable, the remainder of
such term or provision or the application thereof to Persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term and provision of this Agreement shall be valid
and shall be enforced to the fullest extent permitted by law.

12.9. Gender, Etc.

Whenever used herein and where the context so requires, the
singular shall include the plural, the plural shall include the singular, and
the use of the masculine, feminine or neuter gender shall include all genders;
and the word "including" shall mean "including, without limitation."

12.10. Headings

The Article, Section and Subsection headings of this Agreement
are for convenience of reference only, and shall not limit or otherwise affect
any of the terms hereof.

12.11. Counterparts; Facsimiles

This Agreement may be executed in separate counterparts, none of which need
contain the signatures of all parties, each of which shall be deemed to be an
original, and all of which taken together shall constitute one and the same
instrument. It shall not be necessary in making proof of this Agreement to
produce or account for more than the number of counterparts containing the
respective signatures of, or on behalf of, all of the parties hereto. In the
event the parties hereto exchange signature pages of this Agreement by
facsimile, they agree to send the original executed counterparts of this
Agreement to one another by overnight delivery service, but the facsimile
signatures shall in any event be binding.

12.12. No Third Party Beneficiary

The parties do not intend the benefits of this Agreement to inure
to any third party other than the Trust (and the Servicer and Trustee on behalf
of the Trust), upon assignment hereof by Lender to the Trustee, on behalf of the
Trust, as contemplated by SECTION 9.1 hereof. Notwithstanding anything
contained herein or in the Mortgage Note or any other Loan Document to the
contrary, or any conduct or course of conduct by any or all of the parties
hereto, before or after signing this Agreement or any of the

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other Loan Documents, nothing herein shall be construed as creating any right,
claim or cause of action against Lender, or any of Lender's officers, directors,
agents or employees, in favor of any materialman, supplier, contractor,
subcontractor, purchaser or lessee of any property owned by Borrower any other
person or entity other than Borrower.

12.13. No Liability of Lender

The relationship between Borrower and Lender is, and shall at all
times remain, solely that of borrower and lender, and Lender will not undertake
or assume any responsibility or duty to Borrower to review, inspect, supervise,
pass judgment upon, or inform Borrower of any matter in connection with any
phase of Borrower's business, operations, or condition, financial or otherwise.
Borrower shall rely entirely upon its own judgment with respect to such matters,
and any review, inspection, supervision, exercise of judgment, or information
supplied to Borrower by Lender in connection with any such matter is for the
protection of Lender, and neither Borrower nor any third party is entitled to
rely thereon.

12.14. Confidentiality

Lender agrees that it shall maintain confidentiality with regard
to nonpublic information concerning Borrower obtained from Borrower pursuant to
this Agreement that is identified by Borrower as nonpublic, provided that Lender
shall not be precluded from making disclosure regarding such information: (i)
to Lender's counsel, accountants and other professional advisors (who are, in
each case, subject to this confidentiality agreement), (ii) to officers,
directors, employees, agents and partners of Lender who typically would be
provided with such information (who are, in each case, subject to this
confidentiality agreement), (iii) in response to a subpoena or order of a court
or governmental agency, (iv) in connection with the Securitization, to the
Rating Agencies, the Trustee and the Servicer, provided, Lender shall require
that any such entity be subject to this SECTION 12.14, however, Lender shall
have no duty to monitor any such entity and shall have no liability in the event
that any such entity violates this SECTION 12.14, (v) as required by law, GAAP
or applicable regulation, or (vi) following the public disclosure of such
information (other than by Lender). In connection with enforcing its rights
pursuant to this SECTION 12.14, Borrower shall be entitled to the equitable
remedies of specific performance and injunctive relief against Lender or other
entity subject to this Section 12.14 which shall breach the confidentiality
provisions of this Section 12.14.

[SIGNATURE PAGE TO FOLLOW]

75
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
have caused this Agreement to be executed on their behalf as of the day and year
first above written.

BORROWER:

ARDEN REALTY FINANCE PARTNERSHIP, L.P.

By: Arden Realty Finance, Inc.
General Partner

By: /s/ Diana M. Laing
--------------------------
Its: Chief Financial Officer
-------------------------

LENDER:

LEHMAN BROTHERS REALTY CORPORATION

By: /s/ [ILLEGIBLE]
-------------------------------
Its: Authorized Signatory
------------------------------

<PAGE>

JOINDER BY GENERAL PARTNER
IN SEPARATENESS COVENANTS

As an inducement to the Lender named in the foregoing Loan Agreement
to make the loan contemplated therein Arden Realty Finance, Inc., a California
corporation and the general partner of Arden Realty Finance Partnership L.P.,
hereby agrees to comply with the requirements of SECTIONS 5.10, 5.12, 6.1, 6.3,
6.4, and 6.5 of the Loan Agreement and agrees, following the assignment of the
Loan Agreement by the Lender named therein to the Trustee named therein, such
Trustee will be entitled to enforce the obligations of the undersigned under
such SECTIONS 5.10, 5.12, 6.1, 6.3, 6.4, and 6.5 of the Loan Agreement.

IN WITNESS WHEREOF, the undersigned has caused this instrument to be
executed by its duly authorized officer.

Dated: June 11, 1997 ARDEN REALTY FINANCE, INC.

By: /s/ Diana M. Laing
----------------------
Name: Diana M. Laing
Title: Chief Financial Officer

<PAGE>

Schedule A to
Loan Agreement

Allocated Loan Amounts
----------------------

1. 100 West Broadway,
Long Beach CA $15,120,231

2. 10350 Santa Monica Boulevard,
Los Angeles, CA $2,280,398

3. 303 Glenoaks Boulevard,
Burbank, CA $13,103,726

4. 400 Corporate Pointe
400 Slauson Avenue
Culver City, CA $15,582,711

5. 425 West Broadway,
Glendale, CA $4,733,575

6. 5832 Bolsa Avenue,
Huntington Beach, CA $2,674,631

7. 6100 Wilshire (the New Wilshire),
Los Angeles, CA $11,566,547

8. 70 South Lake Avenue,
Pasadena, CA $6,676,585

9. Beverly Atrium,
350 S. Beverly Drive
Beverly Hills, CA $5,267,874

10. Bristol Plaza,
6167 Bristol Parkway
Culver City, CA $4,082,066

11. Burbank Executive Plaza
(333 Glen Oaks Boulevard and
300 Magnolia Boulevard),
Burbank, CA $8,375,844

12. L.A. Corporate Center
(900, 1000, 1200 and
1255 Corporate Center Drive),
Monterey Park, CA $21,042,910

13. 12501 East Imperial Highway,
Norwalk, CA $7,186,370

14. Skyview Center,
6033 W. Century Boulevard,
6053 W. 98th Street,
parking lot
Los Angeles, CA $27,603,591

15. 5601 Lindero Canyon Boulevard,
Westlake Village, CA $6,255,312

<PAGE>

16. Woodland Hills Financial Center
(21021 and 21031 Ventura Boulevard)
Woodland Hills, CA $14,563,963

17. 222 South Harbor Boulevard,
Anaheim, CA $8,913,666
------------
$175,000,000

<PAGE>

SCHEDULE B

A LEASEHOLD ESTATE CREATED BY THAT CERTAIN UNRECORDED LEASE DATED FEBRUARY 21,
1992, EXECUTED BY ANAHEIM REDEVELOPMENT AGENCY, A PUBLIC BODY, CORPORATE AND
POLITIC, AS LESSOR, AND FIRST INTERSTATE MORTGAGE COMPANY, A CALIFORNIA
CORPORATION, AS LESSEE, FOR THE TERM, AND UPON THE TERMS, COVENANTS AND
CONDITIONS PROVIDED THEREIN, AS DISCLOSED BY A MEMORANDUM OF LEASE RECORDED
NOVEMBER 22, 1994 AS INSTRUMENT NO. 94-0675687 OF OFFICIAL RECORDS, AS TO PARCEL
B.

SAID LEASE WAS AMENDED BY FIRST AMENDMENT DATED NOVEMBER 15, 1994, AS
DISCLOSED BY SAID MEMORANDUM OF LEASE.

THE LESSEE'S INTEREST UNDER SAID LEASE HAS BEEN ASSIGNED TO 222 HARBOR
ASSOCIATES, LLC., A NEVADA LIMITED LIABILITY COMPANY BY ASSIGNMENT WHICH
RECORDED NOVEMBER 22, 1994 AS INSTRUMENT NO. 94-675689 OF OFFICIAL RECORDS,
REFERENCE BEING HEREBY MADE TO THE RECORD THEREOF FOR FULL PARTICULARS.

THE INTEREST OF 222 HARBOR ASSOCIATES, LLC., A NEVADA LIMITED LIABILITY
COMPANY HAS SINCE PASSED TO ARDEN REALTY LIMITED PARTNERSHIP, A MARYLAND LIMITED
PARTNERSHIP BY ARTICLES OF MERGER WHICH RECORDED OCTOBER 11, 1996 AS INSTRUMENT
NO. 19960520238.

THE INTEREST OF LESSEE UNDER SAID LEASE HAS BEEN FURTHER ASSIGNED TO ARDEN
REALTY FINANCE PARTNERSHIP, L.P., A CALIFORNIA LIMITED PARTNERSHIP, BY THAT
CERTAIN ASSIGNMENT AND ASSUMPTION OF LEASE RECORDED ON OR ABOUT JUNE 12, 1997.

Anaheim City Centre, Anaheim PAGE 29 OF 30

<PAGE>

SCHEDULE C TO LOAN AGREEMENT

DESCRIPTION OF LAND

See C-1 through C-17
attached hereto

<PAGE>

EXHIBIT C-1

LEGAL DESCRIPTION

PARCEL 1:

PARCELS 1 AND 2 OF PARCEL MAP NO. 16945, IN THE CITY OF LONG BEACH, AS PER MAP
FILED IN BOOK 181 PAGES 58 AND 59 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY.

EXCEPT ALL OIL, HYDROCARBON SUBSTANCES AND MINERALS OF EVERY KIND AND CHARACTER
LYING MORE THAN 500 FEET BELOW THE SURFACE OF SAID LAND, TOGETHER WITH THE RIGHT
TO DRILL INTO, THROUGH AND TO USE AND OCCUPY ALL PARTS OF SAID LAND LYING MORE
THAN 500 FEET BELOW THE SURFACE THEREOF FOR ANY AND ALL PURPOSES INCIDENTAL TO
THE EXPLORATION FOR AND PRODUCTION OF OIL, GAS, HYDROCARBON SUBSTANCES OR
MINERALS FROM SAID LANDS, BUT WITHOUT, HOWEVER, THE RIGHT TO USE EITHER THE
SURFACE OF SAID LAND OR ANY PORTION OF SAID LAND WITHIN 500 FEET OF THE SURFACE
FOR ANY PURPOSE OR PURPOSES WHATSOEVER, AS PROVIDED IN DEED RECORDED OCTOBER 7,
1985 AS INSTRUMENT NO. 85-1173816, AND IN DEED RECORDED OCTOBER 23, 1985 AS
INSTRUMENT NO. 85-1254645.

PARCEL 2:

PARCEL 3 OF PARCEL MAP NO. 16945, IN THE CITY OF LONG BEACH, AS PER MAP FILED IN
BOOK 181 PAGES 58 AND 59 OF PARCELS MAPS, IN THE OFFICE OF THE COUNTY RECORDER
OF SAID COUNTY.

EXCEPT ALL CRUDE OIL, PETROLEUM, GAS, ASPHALTUM, AND ALL KINDRED SUBSTANCES AND
OTHER MINERALS UNDER AND IN SAID LAND A DEPTH BELOW 200 FEET FROM THE SURFACE OF
SAID LAND, PROVIDED GRANTORS SHALL HAVE NO RIGHT OF ENTRY UPON

100 West Broadway, Long Beach PAGE 1 OF 30

<PAGE>
THE SURFACE OF SAID LAND OR IN, OR TO SAID LAND TO A DEPTH OF 200 FEET FROM THE
SURFACE THEREOF, AS RESERVED BY JULIAN M. SIEROTY AND JEAN SIEROTY, HUSBAND AND
WIFE, AND RICHARD O. SUKMAN AND CAROLE J. SUKMAN, HUSBAND AND WIFE, IN DEED
RECORDED MAY 23, 1974 AS DOCUMENT NO. 216 IN BOOK D6281 PAGE 820, OFFICIAL
RECORDS.

ALSO EXCEPT ALL MINERALS, GAS, OIL, PETROLEUM, NAPHTHA AND OTHER HYDROCARBON
SUBSTANCES IN AND UNDER SAID LAND, WITHOUT THE RIGHT OF SURFACE ENTRY, AS
EXCEPTED AND RESERVED BY DOROTHY PAWSON, WIDOW, IN DEED RECORDED AUGUST 22, 1949
AS INSTRUMENT NO. 308 IN BOOK D4474 PAGE 618, OFFICIAL RECORDS.

ALSO EXCEPT ALL MINERALS, GAS, OIL, PETROLEUM, NAPHTHA AND OTHER HYDROCARBON
SUBSTANCES IN AND UNDER SAID LAND, WITHOUT THE RIGHT OF SURFACE ENTRY, AS
EXCEPTED AND RESERVED BY HELEN D. WOOD, IN DEED RECORDED NOVEMBER 10, 1969 AS
INSTRUMENT NO. 24 IN BOOK D4550 PAGE 244, OFFICIAL RECORDS.

ALSO EXCEPT ALL OIL, GAS AND OTHER HYDROCARBON SUBSTANCES IN AND UNDER OR THAT
MAY BE PRODUCED FROM A DEPTH BELOW 200 FEET OF THE SURFACE OF SAID LAND, BUT
WITHOUT RIGHT OF ENTRY UPON THE SURFACE OF SAID LAND, FOR THE PURPOSE OF MINING,
DRILLING, EXPLORING, OR EXTRACTING SUCH OIL, GAS, MINERALS AND OTHER HYDROCARBON
SUBSTANCES, AS RESERVED BY FRANCES J. BOARDMAN, A MARRIED WOMAN, WHO ACQUIRED
TITLE AS FRANCES J. MALONEY, IN DEED RECORDED NOVEMBER 12, 1969 AS INSTRUMENT
NO. 249 IN BOOK D4551 PAGE 553, OFFICIAL RECORDS.

ALSO EXCEPT ALL OIL, GAS AND OTHER HYDROCARBON SUBSTANCES IN AND THAT MAY BE
PRODUCED FROM A DEPTH BELOW 200 FEET OF THE SURFACE OF SAID LAND, BUT WITHOUT
RIGHT OF ENTRY UPON THE SURFACE OF SAID LAND, FOR THE PURPOSE OF MINING,
DRILLING, EXPLORING, OR EXTRACTING SUCH OIL, GAS, MINERALS AND OTHER
HYDROCARBON SUBSTANCES, AS EXCEPTED BY BUFFUMS', A CORPORATION, IN DEED
RECORDED NOVEMBER 12, 1969 AS INSTRUMENT NO. 251 IN BOOK D4551 PAGE 555,
OFFICIAL RECORDS.

ALSO EXCEPT ALL OIL, GAS, AND OTHER HYDROCARBON SUBSTANCES IN AND UNDER OR THAT
MAY BE PRODUCED FROM A DEPTH BELOW 200 FEET OF THE SURFACE, BUT WITHOUT RIGHT OF
SURFACE ENTRY, FOR THE PURPOSE OF MINING, DRILLING, EXPLORING, OR EXTRACTING
SUCH OIL, GAS, MINERALS AND OTHER HYDROCARBON SUBSTANCES, AS RESERVED BY JOY
MILDRED CLARK, IN DEED RECORDED DECEMBER 18, 1969 AS INSTRUMENT NO. 62 IN BOOK
D4585 PAGE 279, OFFICIAL RECORDS.

ALSO EXCEPT ALL OIL, GAS AND OTHER HYDROCARBON SUBSTANCES IN AND UNDER OR THAT
MAY BE PRODUCED FROM A DEPTH BELOW 200 FEET OF THE SURFACE, BUT WITHOUT RIGHT OF
SURFACE ENTRY, FOR THE PURPOSE OF MINING, DRILLING, EXPLORING, OR EXTRACTING
SUCH OIL, GAS, MINERALS AND OTHER HYDROCARBON SUBSTANCES, AS RESERVED BY
MARJORIE DUNHAM, ALSO KNOWN AS MARJORIE BLEINE COONS, IN DEED RECORDED DECEMBER
18, 1969 AS INSTRUMENT NO. 53 IN BOOK D4585 PAGE 280, OFFICIAL RECORDS.

100 West Broadway, Long Beach

PAGE 2 OF 30

<PAGE>

ALSO EXCEPT ALL OIL, GAS AND OTHER HYDROCARBON SUBSTANCES IN AND UNDER OR THAT
MAY BE PRODUCED FROM A DEPTH BELOW 200 FEET OF THE SURFACE OF SAID LAND, BUT
WITHOUT RIGHT OF ENTRY UPON THE SURFACE OF SAID LAND, FOR THE PURPOSE OF MINING,
DRILLING, EXPLORING, OR EXTRACTING SUCH OIL, GAS, MINERALS AND OTHER HYDROCARBON
SUBSTANCES, AS RESERVED BY GEORGE P. BUNDY AND HELEN R. BUNDY, HUSBAND AND WIFE,
IN DEED RECORDED NOVEMBER 12, 1969 AS INSTRUMENT NO. 250 IN BOOK D4551 PAGE 554,
OFFICIAL RECORDS.

100 West Broadway, Long Beach

PAGE 3 OF 30

<PAGE>

EXHIBIT C-2

LEGAL DESCRIPTION

LOTS 8 TO 11 INCLUSIVE IN BLOCK 33 OF TRACT 7260, IN THE CITY OF LOS ANGELES, AS
PER MAP RECORDED IN BOOK 79 PAGES 98 AND 99 OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY.

PAGE 4 OF 30

<PAGE>

EXHIBIT C-3

LEGAL DESCRIPTION

LOTS 1 TO 3 INCLUSIVE OF TRACT 42784, IN THE CITY OF BURBANK, AS PER MAP
RECORDED IN BOOK 1029 PAGES 49 TO 51 INCLUSIVE OF MAPS, BEING A SUBDIVISION OF A
PORTION OF LOT 1 AND ALL OF LOTS 3, 5, 7, 9, 11, 13 AND 15, BLOCK 48, TOWN OF
BURBANK, AS SHOWN ON MAP RECORDED IN BOOK 17 PAGES 19 TO 22 INCLUSIVE OF
MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

EXCEPT FROM THAT PORTION OF SAID LAND, INCLUDED WITHIN THE LINES OF LOT 5, BLOCK
48, AS SHOWN ON THE MAP OF THE TOWN OF BURBANK, RECORDED IN BOOK 17 PAGE 19 OF
MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, ALL
MINERALS, OILS, GAS, WATER, CARBONS AND HYDROCARBONS IN AND UNDER SAID LAND
LYING BELOW A DEPTH OF 500 FEET FROM THE SURFACE OF SAID LAND, AS RESERVED BY
DEE PETERSON, A WIDOWER, IN DEED RECORDED SEPTEMBER 22, 1964 AS INSTRUMENT NO.
792, IN BOOK D2635 PAGE 492, OFFICIAL RECORDS.

303 Glenoaks, Burbank

PAGE 5 OF 30

<PAGE>

EXHIBIT C-4

LEGAL DESCRIPTION

PARCEL 1:

LOTS 10 AND 11 OF TRACT 33152, IN THE CITY OF CULVER CITY, AS PER MAP RECORDED
IN BOOK 1020 PAGES 31 TO 35 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY.

EXCEPT ALL OIL, OIL RIGHTS, MINERALS, MINERAL RIGHTS, NATURAL GAS, NATURAL
GAS RIGHTS, AND OTHER HYDROCARBONS BY WHATSOEVER NAME KNOWN THAT MAY BE
WITHIN OR UNDER SAID LAND, TOGETHER WITH THE PERPETUAL RIGHT OF DRILLING,
MINING, EXPLORING AND OPERATING THEREFOR AND REMOVING THE SAME FROM SAID LAND
OR ANY OTHER LAND, INCLUDING THE RIGHT TO WHIPSTOCK OR DIRECTIONALLY DRILL
AND MINE FROM LANDS OTHER THAN SAID LAND, OIL OR GAS WELLS, TUNNELS AND
SHAFTS INTO, THROUGH OR ACROSS THE SUBSURFACE OF SAID LAND, AND TO BOTTOM
SUCH WHIPSTOCKED OR DIRECTIONALLY DRILLED WELLS, TUNNELS AND SHAFTS UNDER AND
BENEATH OR BEYOND THE EXTERIOR LIMITS THEREOF, AND TO REDRILL, RETUNNEL,
EQUIP, MAINTAIN, REPAIR, DEEPEN AND OPERATE ANY SUCH WELLS OR MINES, WITHOUT,
HOWEVER, THE RIGHT TO DRILL, MINE, EXPLORE AND OPERATE THROUGH THE SURFACE OR
THE UPPER 100 FEET OF THE SUBSURFACE OF SAID LAND OR OTHERWISE IN SUCH MANNER
AS TO ENDANGER THE SAFETY OF ANY HIGHWAY THAT MAY BE CONSTRUCTED ON SAID
LANDS, AS EXCEPTED BY HOME SAVINGS AND LOAN ASSOCIATION, IN DEED RECORDED JULY
15, 1971 AS INSTRUMENT NO. 3551, IN BOOK D5125 PAGE 491, OFFICIAL RECORDS.

400 Corporate Pointe, Culver City

PAGE 6 OF 30

<PAGE>

ALSO EXCEPT ALL OIL, GAS, HYDROCARBON SUBSTANCES AND MINERALS OF EVERY KIND
AND CHARACTER LYING MORE THAN 500 FEET BELOW THE SURFACE OF SAID LAND,
TOGETHER WITH THE RIGHT TO DRILL INTO, THROUGH, AND TO USE AND OCCUPY ALL
PARTS OF SAID LAND LYING MORE THAN 500 FEET BELOW THE SURFACE THEREOF FOR ANY
AND ALL PURPOSES INCIDENTAL TO THE EXPLORATION FOR THE PRODUCTION OF OIL, GAS,
HYDROCARBON SUBSTANCES, OR MINERALS FROM SAID LAND OR OTHER LAND, BUT
WITHOUT, HOWEVER, ANY RIGHT TO USE EITHER THE SURFACE OF SAID LAND OR ANY
PORTION OF SAID LAND WITHIN 500 FEET OF THE SURFACE FOR ANY PURPOSE OR
PURPOSES WHATSOEVER, AS RESERVED BY THE CULVER CITY REDEVELOPMENT AGENCY, A
PUBLIC BODY CORPORATE AND POLITIC, IN DEED RECORDED DECEMBER 23, 1981 AS
INSTRUMENT NO. 81-1255468.

ALSO EXCEPT ALL OIL, GAS, HYDROCARBON SUBSTANCES AND MINERALS OF EVERY KIND AND
CHARACTER, LYING MORE THAN 500 FEET BELOW THE SURFACE OF SAID LAND, TOGETHER
WITH THE RIGHT TO DRILL INTO, THROUGH AND TO USE AND OCCUPY ALL PARTS OF SAID
LAND LYING MORE THAN 500 FEET BELOW THE SURFACE THEREOF FOR ANY AND ALL PURPOSES
INCIDENTAL TO EXPLORATION FOR THE PRODUCTION OF OIL, GAS, HYDROCARBON SUBSTANCES
OR MINERALS FROM SAID LAND OR OTHER LANDS, BUT WITHOUT, HOWEVER, ANY RIGHT TO
USE THE SURFACE OF SAID LAND OR ANY PORTION OF SAID LAND WITHIN 500 FEET OF THE
SURFACE FOR ANY PURPOSES WHATSOEVER, AS EXCEPTED BY THE CITY OF CULVER CITY, A
MUNICIPAL CORPORATION, IN DEED RECORDED MAY 16, 1983 AS INSTRUMENT NO.
83-542812, AND BY CULVER CITY REDEVELOPMENT AGENCY, A PUBLIC BODY CORPORATE AND
POLITIC IN DEED RECORDED MAY 16, 1983 AS INSTRUMENT NO. 83-542813.

PARCEL 2:

A NON-EXCLUSIVE EASEMENT IN, OVER, UNDER AND ACROSS ALL LOTS 8 AND 9 OF TRACT
33152, IN THE CITY OF CULVER CITY, AS PER MAP RECORDED IN BOOK 1020 PAGES 31 TO
35 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, FOR
PEDESTRIAN AND VEHICULAR INGRESS AND EGRESS BETWEEN HANNUM AVENUE AND LOT 11 OF
SAID TRACT 33152; AS SUCH EASEMENT IS DESCRIBED IN THAT CERTAIN DECLARATION OF
COVENANTS, CONDITIONS AND RESTRICTIONS AND CREATION OF EASEMENTS RECORDED ON
AUGUST 15, 1986 AS INSTRUMENT NO. 86-1056940, AS AMENDED BY THAT CERTAIN
FIRST AMENDMENT TO DECLARATION OF COVENANTS, CONDITIONS AND RESTRICTIONS AND
CREATION OF EASEMENTS RECORDED SEPTEMBER 19, 1988 AS INSTRUMENT NO. 88-1503368,
AND AS TO SAID LOT 9, AS FURTHER AMENDED BY THAT CERTAIN AGREEMENT OF
CLARIFICATION OF LOCATION OF DRIVEWAY EASEMENT RECORDED FEBRUARY 14, 1996 AS
INSTRUMENT NO. 96-259845.

PARCEL 3:

A NON-EXCLUSIVE EASEMENT, IN, OVER AND ACROSS THAT PORTION OF A DRIVEWAY LOCATED
WITHIN LOT 13 OF SAID TRACT 33152 FOR THE PURPOSE OF VEHICULAR AND PEDESTRIAN
INGRESS TO AND EGRESS FROM LOTS 10 AND 11 OF SAID TRACT 33152, TOGETHER WITH AN
EASEMENT IN, OVER, UNDER ACROSS AND THROUGH SAID PORTION OF SAID DRIVEWAY FOR
THE PURPOSE OF THE INSTALLATION, MAINTENANCE, USE AND REPAIR OF CERTAIN
UTILITIES SERVICING SAID DRIVEWAY AND THE IMPROVEMENTS THEREON, AS EACH SUCH
EASEMENT IS DESCRIBED IN INSTRUMENT NO. 83-1543118, RECORDED DECEMBER 29, 1983.

425 West Broadway, Glendale

PAGE 7 OF 30

<PAGE>

EXHIBIT C-5
LEGAL DESCRIPTION

LOTS 24 TO 29 INCLUSIVE OF TRACT 752, IN THE CITY OF GLENDALE, AS PER MAP
RECORDED IN BOOK 16 PAGE 84 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF
SAID COUNTY.

425 West Broadway, Glendale

PAGE 8 OF 30

<PAGE>

EXHIBIT C-6
LEGAL DESCRIPTION

PARCEL A:

PARCEL 1, AS SHOWN ON EXHIBIT "B" OF THAT CERTAIN "APPLICATION FOR LOT LINE
ADJUSTMENT NO. 86-1" RECORDED JUNE 2, 1986 AS INSTRUMENT NO. 86-227750 OF
OFFICIAL RECORDS OF ORANGE COUNTY, CALIFORNIA.

EXCEPT FROM THAT PORTION OF SAID LAND INCLUDED WITHIN THE EASTERLY 450.00 FEET,
MEASURED ALONG THE NORTHERLY LINE OF SECTION 16, TOWNSHIP 5 SOUTH, RANGE 11
WEST, IN THE RANCHO LA BOLSA CHICA, AND AT A RIGHT ANGLE THERETO, AN UNDIVIDED
ONE-HALF INTEREST IN ALL OIL, GAS AND OTHER MINERALS, WITH NO RIGHT OF SURFACE
ENTRY, AS RESERVED BY BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS
TRUSTEE, AND OTHERS, IN DEED RECORDED IN BOOK 10179, PAGE 164 OF OFFICIAL
RECORDS.

ALSO EXCEPTING THE REMAINING INTEREST IN ALL OIL, GAS AND OTHER MINERALS, WITH
NO RIGHT OF SURFACE ENTRY, IN THAT PORTION OF SAID LAND INCLUDED WITHIN THE
EASTERLY 450.00 FEET, MEASURED ALONG THE NORTHERLY LINE OF SAID SECTION 16 AND
AT A RIGHT ANGLE THERETO, AS RESERVED IN THE DEED FROM BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION, AS SOLE SURVIVOR TRUSTEE OF THE CARRIE A. PECK
TRUST; BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, AS SUCCESSOR
TRUSTEE UNDER THE WILL OF ALDRICH R. PECK, DECEASED; DOROTHY T. PECK FLYNN,
INDIVIDUALLY; AND HUNTINGTON BEACH INDUSTRIAL PARK, A LIMITED PARTNERSHIP,
RECORDED IN BOOK 11661, PAGE 1800 OF OFFICIAL RECORDS.

ALSO EXCEPTING ALL REMAINING INTEREST IN ALL OIL, GAS AND OTHER MINERALS,
WITH NO RIGHT OF SURFACE ENTRY, AS RESERVED IN THE DEED FROM BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION, AS SOLE SURVIVOR TRUSTEE OF THE
CARRIE A. PECK TRUST; BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION,
AS SUCCESSOR TRUSTEE UNDER THE WILL OF ALDRICH R. PECK, DECEASED; DOROTHY T.
PECK FLYNN, INDIVIDUALLY; AND HUNTINGTON BEACH INDUSTRIAL PARK, A LIMITED
PARTNERSHIP, RECORDED IN BOOK 11661, PAGE 1800 OF OFFICIAL RECORDS.

PARCEL B:

A NON-EXCLUSIVE EASEMENT FOR BOTH VEHICULAR AND PEDESTRIAN INGRESS AND EGRESS
AND OTHER PURPOSES, OVER THE LAND, AS DESCRIBED IN AND CREATED BY THAT CERTAIN
NON-EXCLUSIVE EASEMENT DATED JUNE 4, 1984 AND RECORDED JUNE 13, 1984 AS
INSTRUMENT NO. 84-244918 OF OFFICIAL RECORDS.

5832
Bolsa, Huntington Beach PAGE 9 OF 30

<PAGE>

EXHIBIT C-7

LEGAL DESCRIPTION

LOTS 1, 2, 81 AND 82 OF TRACT 5542, IN THE CITY OF LOS ANGELES, AS PER MAP
RECORDED IN BOOK 59 PAGES 53 TO 57 INCLUSIVE OF MAPS, IN THE OFFICE OF THE
COUNTY RECORDER OF SAID COUNTY.

EXCEPT ALL GAS, OIL AND OTHER MINERAL RIGHTS LYING BELOW A DEPTH OF 500 FEET
FROM THE SURFACE OF SAID LAND, WITHOUT ANY SURFACE OR ENTRY RIGHTS WHATSOEVER,
AS RESERVED BY WILLIAM STANTON WRIGHT AND MARY ELLA WRIGHT, HUSBAND AND WIFE,
AND WALTER R. ENGDALL AND SALLY WRIGHT ENGDALL, TRUSTEES UNDER AGREEMENT DATED
NOVEMBER 20, 1975 BY WALTER ENGDALL AND SALLY WRIGHT ENGDALL, IN THE DEED
RECORDED JUNE 1, 1977 AS INSTRUMENT NO. 77-573626.

6100 Wilshire, Los Angeles PAGE 10 OF 30

<PAGE>

EXHIBIT C-8

LEGAL DESCRIPTION

PARCEL 1:

LOT 1 AND THE NORTHERLY 50 FEET OF LOT 2 OF PARKER FARRIS SUBDIVISION, IN THE
CITY OF PASADENA, AS PER MAP RECORDED IN BOOK 10 PAGE 86 OF MISCELLANEOUS
RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

EXCEPT THEREFROM THE WESTERLY 6 FEET FOR LAKE AVENUE.

ALSO EXCEPT THEREFROM THAT PORTION OF LOT 2 OF PARKER AND FARRIS SUBDIVISION
INCLUDED IN GREEN STREET, AS SAME PRESENTLY EXISTS.

PARCEL 2:

THE SOUTH 34 FEET OF LOT 1 OF THOMAS AND FARRIS SUBDIVISION, IN THE CITY OF
PASADENA, AS PER MAP RECORDED IN BOOK 10 PAGE 100 OF MISCELLANEOUS RECORDS, IN
THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

EXCEPT THEREFROM THE WEST 6 FEET THEREOF, CONVEYED TO IN THE CITY OF PASADENA
FOR STREET PURPOSES, BY DEED RECORDED IN BOOK 1164 PAGE 317 OF DEEDS.

PARCEL 3:

THE NORTH 38 FEET OF LOT 1 AND THE SOUTH 27 FEET OF LOT 2 OF THE THOMAS AND
FARRIS SUBDIVISION, IN THE CITY OF PASADENA, AS PER MAP RECORDED IN BOOK 10 PAGE
100 OF MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY.

EXCEPT THEREFROM THE WEST 6 FEET THEREOF, CONVEYED TO THE CITY OF PASADENA, FOR
STREET PURPOSES, BY DEED RECORDED IN BOOK 1164 PAGE 317 OF DEEDS.

PAGE 11 OF 30

<PAGE>

EXHIBIT C-9

LEGAL DESCRIPTION

LOTS 2010, 2011, 2012, 2013 AND 2014 OF TRACT 6380, IN THE CITY OF BEVERLY
HILLS, AS PER MAP RECORDED IN BOOK 69 PAGES 11 THROUGH 20 INCLUSIVE OF MAPS, IN
THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

EXCEPT THEREFROM ALL MINERALS, OIL, GAS, PETROLEUM, OTHER HYDROCARBON SUBSTANCES
AND ALL UNDERGROUND WATER IN OR UNDER OR WHICH MAY BE PRODUCED FROM THE LAND
DESCRIBED BELOW WHICH UNDERLIES A PLANE PARALLEL TO AND 500 FEET BELOW THE
PRESENT SURFACE OF SAID LAND FOR THE PURPOSE OF PROSPECTING FOR, OR THE
EXPLORATION, DEVELOPMENT, PRODUCTION, EXTRACTION AND TAKING OF SAID MINERALS,
OIL, GAS, PETROLEUM, OTHER HYDROCARBON SUBSTANCES AND WATER FROM SAID LAND BY
MEANS OF MINES, WELLS, DERRICKS, AND/OR OTHER EQUIPMENT FROM SURFACE LOCATIONS
ON ADJOINING OR NEIGHBORING LAND OR LYING OUTSIDE OF THE ABOVE DESCRIBED LAND,
IT BEING UNDERSTOOD THAT THE OWNER OF SUCH MINERALS, OIL, GAS, PETROLEUM, OTHER
HYDROCARBON SUBSTANCES AND WATER, AS SET FORTH ABOVE, SHALL HAVE NO RIGHT TO
ENTER UPON THE SURFACE OF THE ABOVE DESCRIBED LAND NOR TO USE ANY OF THE SAID
LAND OR ANY OF THE SAID LAND OR ANY PORTION THEREOF ABOVE SAID PLANE PARALLEL
TO AND 500 FEET BELOW THE PRESENT SURFACE OF THE SAID LAND FOR ANY PURPOSES
WHATSOEVER, AS GRANTED TO JOSEPH DABBY, AS CUSTODIAN FOR SHARON DABBY, LISA
DABBY AND NADINE DABBY UNDER THE UNIFORM TRANSFERS TO MINORS ACT, AS TO AN
UNDIVIDED 50% INTEREST, AND TO ALAN GINDI, AS CUSTODIAN FOR RACHAEL GINDI AND
ARIELA GINDI UNDER THE UNIFORM TRANSFERS TO MINORS ACT, AS TO AN UNDIVIDED 50%
INTEREST; TOGETHER AS TENANTS IN COMMON, BY DEED RECORDED JANUARY 2, 1990 AS
INSTRUMENT NO. 90-4904.

Beverly Atrium, Beverly Hills

PAGE 12 OF 30

<PAGE>

EXHIBIT C-10

LEGAL DESCRIPTION

LOT 3 OF TRACT 22864, IN THE CITY OF CULVER CITY, AS PER MAP RECORDED IN BOOK
880 PAGES 49 TO 55 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF
SAID COUNTY.

EXCEPT ALL METALS AND MINERALS AND ALL OIL, NATURAL GAS, ASPHALTUM AND OTHER
HYDROCARBONS, WITHOUT RIGHT OF SURFACE ENTRY, TOGETHER WITH THE RIGHT TO
EXPLORE AND TO DRILL FOR AND TO PRODUCE, EXTRACT AND TAKE METALS AND
MINERALS, OIL, NATURAL GAS, ASPHALTUM AND OTHER HYDROCARBONS, TOGETHER WITH
ALL RIGHTS NECESSARY AND CONVENIENT THERETO FOR ANY OR ALL OF THE ABOVE
PURPOSES, INCLUDING WITHOUT LIMITING THE GENERALITY HEREOF, SUBSURFACE RIGHTS
OF WAY FOR DRILLING, REPAIRING, REDRILLING DEEPENING, MAINTAINING,
OPERATING, ABANDONING, REWORKING AND REMOVING WELLS INTO AND THROUGH SAID
LAND, BELOW A PLANE OF 500 FEET BELOW THE SURFACE THEREOF AND EXCEPTING AND
RESERVING THE RIGHT TO MAINTAIN PIPES AND TO TRANSPORT ANY OF SUCH SUBSTANCES
AND TO CROSS AND TRAVERSE FROM OTHER LANDS BELOW A DEPTH OF 500 FEET, AS
RESERVED BY HOME SAVINGS AND LOAN ASSOCIATION, A CALIFORNIA CORPORATION, IN
DEED RECORDED DECEMBER 30, 1969 AS INSTRUMENT NO. 261, IN BOOK D4595 PAGE 72,
OFFICIAL RECORDS.

Bristol Plaza, Culver City

PAGE 13 OF 30

<PAGE>

EXHIBIT C-11

LEGAL DESCRIPTION

LOTS 2, 4, 6, 8, 10, 12, 14, 16, 18 AND 20 IN BLOCK 48, OF THE TOWN OF
BURBANK, IN THE CITY OF BURBANK, AS PER MAP RECORDED IN BOOK 17 PAGES 19 TO
22 INCLUSIVE OF MISCELLANEOUS RECORDS, IN THE OFFICE OF THE COUNTY RECORDER
OF SAID COUNTY.

EXCEPT FROM SAID LOT 2 THAT PORTION THEREOF LYING NORTHERLY AND NORTHEASTERLY
OF A LINE DESCRIBED AS FOLLOWS:

BEGINNING AT THE INTERSECTION OF THE SOUTHEASTERLY LINE OF SAID LOT 2 WITH
THE SOUTHWESTERLY LINE OF THE NORTHEASTERLY 20 FEET OF SAID LOT; THENCE
NORTHWESTERLY ALONG SAID SOUTHWESTERLY LINE 140 FEET, MORE OR LESS, TO THE
BEGINNING OF A TANGENT CURVE CONCAVE SOUTHERLY HAVING A RADIUS OF 15 FEET
WHICH IS ALSO TANGENT TO THE NORTHEASTERLY LINE OF SAID LOT, THENCE
NORTHWESTERLY AND SOUTHERLY ALONG SAID CURVE TO SAID NORTHWESTERLY LINE.

Burbank Executive Plaza, Burbank

PAGE 14 OF 30

<PAGE>

EXHIBIT C-12

LEGAL DESCRIPTION

PARCEL A:

THOSE PORTIONS OF LOTS 1 AND 2 OF TRACT 42611, IN THE CITY OF MONTEREY PARK,
AS PER MAP RECORDED IN BOOK 1012 PAGES 21 TO 27 INCLUSIVE OF MAPS, IN THE
OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS A WHOLE AS FOLLOWS:

BEGINNING AT THE EASTERLY COMMON CORNER OF SAID LOTS 1 AND 2; THENCE WESTERLY
ALONG THE COMMON LOT LINE OF SAID LOTS, SOUTH 89 DEG. 39' 21" WEST 565.23
FEET; THENCE NORTHERLY, LEAVING SAID COMMON LOT LINE, NORTH 7 DEG. 56' 42"
WEST 25.17 FEET; THENCE NORTH 5 DEG. 04' 53" WEST 20.18 FEET; THENCE NORTH 6
DEG. 29' 18" EAST 21.00 FEET; THENCE NORTH 12 DEG. 05' 48" EAST 57.46 FEET;
THENCE NORTH 15 DEG. 03' 32" EAST 64.94 FEET; THENCE NORTH 18 DEG. 27' 48"
EAST 39.37 FEET; THENCE NORTH 12 DEG. 00' 31" EAST 194.35 FEET; THENCE SOUTH
89 DEG. 39' 21" WEST 267.98 FEET TO A POINT IN THE EASTERLY RIGHT-OF-WAY OF
CORPORATE CENTER DRIVE, VARIABLE WIDTH, AS SHOWN ON SAID MAP, SAID POINT LIES
ON A CURVE CONCAVE EASTERLY HAVING A RADIUS OF 442.00 FEET, A RADIAL LINE TO
SAID POINT BEARS NORTH 83 DEG. 07' 50" EAST; THENCE SOUTHERLY ALONG SAID
RIGHT-OF-WAY AND CURVE THROUGH A CENTRAL ANGLE OF 7 DEG. 00' 10", AN ARC
LENGTH OF 54.02 FEET; THENCE TANGENT TO SAID CURVE, SOUTH 0 DEG. 08' 00" WEST
170.26 FEET TO A TANGENT CURVE CONCAVE NORTHEASTERLY HAVING A RADIUS OF
358.00 FEET; THENCE SOUTHERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 31
DEG. 31' 00" AN ARC DISTANCE OF 196.92 FEET; THENCE SOUTHERLY, TANGENT TO
SAID CURVE, SOUTH 31 DEG. 23' 00" EAST 370.00 FEET TO A TANGENT CURVE CONCAVE
SOUTHWESTERLY HAVING

L.A. Corporate Center, Monterey Park

PAGE 15 OF 30

<PAGE>

A RADIUS OF 492.00 FEET; THENCE SOUTHERLY ALONG SAID CURVE THROUGH A CENTRAL
ANGLE OF 17 DEG. 38' 28" AN ARC DISTANCE OF 151.48 FEET TO THE COMMON LOT
CORNER OF LOTS 2 AND 3 OF SAID MAP, A RADIAL LINE TO SAID CORNER BEARS NORTH
76 DEG. 15' 28" EAST; THENCE LEAVING SAID CURVE AND SAID RIGHT-OF-WAY,
EASTERLY ALONG THE COMMON LINE OF SAID LOTS 2 AND 3, NORTH 76 DEG. 15' 28"
EAST 461.67 FEET TO THE EASTERLY LINE OF LOT 2; THENCE NORTHERLY ALONG SAID
EASTERLY LINE NORTH 0 DEG. 01' 03" WEST 349.69 FEET TO THE POINT OF BEGINNING.

EXCEPT THEREFROM ALL GAS, OIL, AND OTHER HYDROCARBON SUBSTANCES AND ALL OTHER
MINERALS IN AND FROM THE LAND DESCRIBED IN DEED MENTIONED HEREAFTER,
PROVIDED, HOWEVER, NO RIGHT IS RESERVED TO ENTER ON OR FROM THE SURFACE OF
SAID LAND, THE RIGHT TO ENTER THE SUBSURFACE OF SAID PROPERTY, WHICH IS ALSO
RESERVED SHALL BE AT ANY POINT BELOW A DEPTH OF 500 FEET FROM THE SURFACE
THEREOF (MEASURED VERTICALLY FROM THE SURFACE THEREOF) IN ORDER TO TAKE FROM
SAID LAND AND REDUCE TO POSSESSION ANY OIL, GAS AND OTHER HYDROCARBON
SUBSTANCES AND ALL OTHER MINERALS, AS EXCEPTED AND RESERVED BY CLARA HELLMAN
HELLER, A WIDOW, ET AL., IN DEED TO BOBWILL BUILDING CO., A CORPORATION
RECORDED SEPTEMBER 13, 1955 AS INSTRUMENT NO. 2398 IN BOOK 48924 PAGE 346
OFFICIAL RECORDS.

PARCEL A-1:

A NON-EXCLUSIVE EASEMENT FOR PARKING FACILITY, VEHICULAR AND PEDESTRIAN
INGRESS AND EGRESS TO AND FROM SAID PARKING FACILITY, AND UTILITIES ATTENDANT
TO THE OPERATION AND MAINTENANCE THEREOF, AS CONTAINED IN THAT CERTAIN
AGREEMENT OF PARKING EASEMENT, DATED APRIL 9, 1990, BY AND BETWEEN LOS
ANGELES CORPORATE CENTER VENTURE, A CALIFORNIA GENERAL PARTNERSHIP, AND THE
REDEVELOPMENT AGENCY OF MONTEREY PARK AND THE CITY OF MONTEREY PARK, RECORDED
APRIL 9, 1990 AS INSTRUMENT NO. 90-668740, OVER THAT PORTION OF LOT 1 OF
TRACT MAP NO. 42611, IN THE CITY OF MONTEREY PARK, AS PER MAP RECORDED IN
BOOK 1012 PAGES 21 TO 27 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, DESCRIBED AS A WHOLE AS FOLLOWS:

BEGINNING AT THE MOST EASTERLY COMMON CORNER OF SAID LOT 1 AND LOT 2 AS SHOWN
ON SAID MAP; THENCE WESTERLY ALONG THE COMMON LOT LINE OF SAID LOTS 1 AND 2,
SOUTH 89 DEG. 39' 21" WEST 25.00 FEET TO THE TRUE POINT OF BEGINNING; THENCE
CONTINUING ALONG SAID COMMON LOT LINE, SOUTH 89 DEG. 39' 21" WEST 240.00
FEET; THENCE NORTHERLY LEAVING SAID COMMON LOT LINE, NORTH 0 DEG. 20' 39"
WEST 87.00 FEET; THENCE EASTERLY, PARALLEL TO SAID COMMON LOT LINE, NORTH 89
DEG. 39' 21" EAST 240.00 FEET; THENCE SOUTHERLY SOUTH 0 DEG. 20' 39" EAST
87.00 FEET TO THE TRUE POINT OF BEGINNING.

PARCEL B:

LOT 4 OF TRACT 42611, IN THE CITY OF MONTEREY PARK, AS PER MAP RECORDED IN
BOOK 1012 PAGES 21 TO 27 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, EXCEPT THEREFROM THAT PORTION OF SAID LOT 4
DESCRIBED AS FOLLOWS:

BEGINNING AT THE MOST EASTERLY CORNER OF SAID LOT 4; THENCE ALONG THE
NORTHEASTERLY LINE OF SAID LOT 4, NORTH 64 DEG. 05' 00" WEST 336.04 FEET;
THENCE SOUTH 7 DEG. 46' 24" EAST 36.06 FEET TO A LINE THAT IS PARALLEL WITH
AND DISTANT SOUTHWESTERLY 30.00 FEET, MEASURED AT RIGHT ANGLES, FROM SAID
NORTHEASTERLY LINE OF LOT 4; THENCE SOUTHEASTERLY ALONG SAID PARALLEL LINE
SOUTH 64 DEG. 05' 00" EAST 306.32 FEET TO THE SOUTHEASTERLY LINE OF SAID LOT
4; THENCE

L.A. Corporate Center, Monterey Park

PAGE 16 OF 30

<PAGE>

ALONG SAID SOUTHEASTERLY LINE OF LOT 4, NORTH 43 DEG. 51' 17"
EAST 31.53 FEET TO THE POINT OF BEGINNING.

ALSO THAT CERTAIN PORTION OF LOT 5 OF SAID TRACT 42611 DESCRIBED IN A
DOCUMENT RECORDED OCTOBER 25, 1984 AS INSTRUMENT NO. 64-1275473, AS FOLLOWS:

A STRIP OF LAND 10 FEET IN WIDTH, THE NORTHEASTERLY LINE OF SAID STRIP BEING
THAT CERTAIN COURSE IN THE NORTHEASTERLY BOUNDARY OF SAID LOT 5 HAVING A
BEARING AND DISTANCE OF NORTH 42 DEG. 02' 01" WEST 389.65 FEET.

EXCEPT THEREFROM ALL GAS, OIL, AND OTHER HYDROCARBON SUBSTANCES AND ALL
OTHER MINERALS IN AND FROM THE LAND DESCRIBED IN DEED MENTIONED HEREAFTER,
PROVIDED, HOWEVER, NO RIGHT IS RESERVED TO ENTER IN OR FROM THE SURFACE OF
SAID LAND, THE RIGHT TO ENTER THE SUBSURFACE OF SAID PROPERTY, WHICH IS ALSO
RESERVED SHALL BE AT ANY POINT BELOW A DEPTH OF 500 FEET FROM THE SURFACE
THEREOF (MEASURED VERTICALLY FROM THE SURFACE THEREOF) IN ORDER TO TAKE FROM
SAID LAND AND REDUCE TO POSSESSION ANY OIL, GAS AND OTHER HYDROCARBON
SUBSTANCES AND ALL OTHER MINERALS, AS EXCEPTED AND RESERVED BY CLARA HELLMAN
HELLER, A WIDOW, ET AL., IN DEED TO BOBWILL BUILDING CO., A CORPORATION
RECORDED SEPTEMBER 13, 1955 AS INSTRUMENT NO. 2398 IN BOOK 48924 PAGE 346
OFFICIAL RECORDS.

PARCEL B-1:

AN EASEMENT FOR PARKING AND INGRESS AND EGRESS AS GRANTED IN THAT CERTAIN
AGREEMENT OF PARKING EASEMENT AND MAINTENANCE AGREEMENT BY AND BETWEEN LOS
ANGELES CORPORATE CENTER VENTURE, A CALIFORNIA GENERAL PARTNERSHIP, AND LOS
ANGELES CORPORATE CENTER VENTURE II, A CALIFORNIA GENERAL PARTNERSHIP,
RECORDED JULY 23, 1986 AS INSTRUMENT NO. 86-931242 OVER THAT PORTION OF LOTS 3
AND LOT 4 IN TRACT 42611, IN THE CITY OF MONTEREY PARK, AS PER MAP RECORDED
IN BOOK 1012 PAGES 21 TO 27 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS:

BEGINNING AT THE NORTHWESTERLY CORNER OF SAID LOT 3, SAID CORNER BEING A
POINT IN THE NORTHEASTERLY LINE OF CORPORATE CENTER DRIVE, 64.00 FEET WIDE,
AS SHOWN ON THE MAP OF SAID TRACT 42611; THENCE ALONG THE NORTHERLY AND
NORTHEASTERLY BOUNDARY OF SAID LOT 3, NORTH 76 DEG. 15' 28" EAST 461.87 FEET;
THENCE SOUTH 0 DEG. 01' 03" EAST 109.63 FEET; THENCE SOUTH 46 DEG. 08' 45"
EAST 121.91 FEET; THENCE LEAVING SAID NORTHEASTERLY BOUNDARY OF LOT 3, SOUTH
22 DEG. 21' 07" WEST 83.00 FEET; THENCE SOUTH 36 DEG. 13' 46" WEST 46.00
FEET; THENCE SOUTH 45 DEG. 50' 48" WEST 105.46 FEET; THENCE SOUTH 27 DEG. 08'
18" WEST 231.27 FEET TO A LINE PARALLEL TO AND DISTANT SOUTHWESTERLY 30.00
FEET, MEASURED AT RIGHT ANGLES, FROM THE SOUTHWESTERLY LINE OF SAID LOT 3;
THENCE NORTHWESTERLY ALONG SAID PARALLEL LINE NORTH 64 DEG. 05' 00" WEST
193.41 FEET; THENCE NORTH 25 DEG. 55' 00" EAST 30.00 FEET TO SAID
SOUTHWESTERLY LINE OF LOT 3; THENCE NORTHWESTERLY ALONG SAID SOUTHWESTERLY
LINE NORTH 64 DEG. 05' 00" WEST 18.00 FEET; THENCE NORTH 25 DEG. 55' 00" EAST
276.15 FEET; THENCE NORTH 64 DEG. 05' 00" WEST 189.44 FEET; THENCE SOUTH 76
DEG. 15' 28" WEST 63.39 FEET TO A POINT IN SAID NORTHEASTERLY LINE OF
CORPORATE CENTER DRIVE, SAID POINT BEING A POINT IN A CURVE CONCAVE TO THE
WEST HAVING A RADIUS OF 492.00 FEET; TO WHICH A RADIAL LINE BEARS NORTH 81
DEG. 16' 19" EAST; THENCE NORTHERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE
OF 5 DEG. 00' 51", AN ARC DISTANCE OF 43.06 FEET TO THE POINT OF BEGINNING.

L.A. Corporate Center, Monterey Park

PAGE 17 OF 30

<PAGE>

PARCEL C:

LOT 18 OF TRACT 42611, IN THE CITY OF MONTEREY PARK, AS PER MAP RECORDED IN
BOOK 1012 PAGES 21 TO 27 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY.

EXCEPT A STRIP OF LAND 10 FEET IN WIDTH, THE NORTHWESTERLY LINE OF SAID STRIP
BEING THAT CERTAIN COURSE IN THE NORTHEASTERLY BOUNDARY OF SAID LOT 18 HAVING
A BEARING AND DISTANCE OF NORTH 65 DEG. 04' 00" WEST 438.07 FEET, AS
DESCRIBED IN A DOCUMENT RECORDED OCTOBER 25, 1984 AS INSTRUMENT NO.
84-1275478.

ALSO EXCEPT ALL OIL, ASPHALTUM, PETROLEUM, AND NATURAL GAS, TAR OR OTHER
HYDROCARBON SUBSTANCES AND PRODUCTS, FROM UNDER OR UPON THE SAID LANDS, WITH
THE RIGHT TO REMOVE AND STORE AND SELL SUCH SUBSTANCES AND PRODUCTS
THEREFROM, TOGETHER WITH ALL RIGHTS FOR THE PURPOSE OF MINING, EXCAVATING,
BORING, DRILLING, SINKING OR OTHERWISE COLLECTING AND DEVELOPING SAID MINERAL
SUBSTANCES AND THE RIGHT TO DEVELOP, STORE AND USE WATER FOR SUCH OPERATIONS
AND DEVELOPMENT, AS RESERVED IN DEED FROM HUNTINGTON LAND AND IMPROVEMENT
COMPANY, A CALIFORNIA CORPORATION, RECORDED OCTOBER 25, 1918 IN BOOK 6707
PAGE 300 OF DEEDS, ALL OF WHICH RIGHTS WERE LIMITED TO THAT PORTION LYING
BELOW A DEPTH OF 500 FEET, MEASURED FROM THE SURFACE OF SAID LAND, BY DEED
EXECUTED BY SECURITY PACIFIC NATIONAL BANK, A NATIONAL BANKING ASSOCIATION,
SUCCESSOR BY MERGER TO SECURITY FIRST NATIONAL BANK OF LOS ANGELES, AS TRUSTEE
UNDER THE WILL OF HENRY E. HUNTINGTON, DECEASED, (TRUST NO. 2-018442-0)
RECORDED DECEMBER 17, 1960 AS INSTRUMENT NO. 60-1264035, FROM UNDER OR UPON
THAT PORTION OF SAID LAND LYING WITHIN A PORTION OF THE NORTHWEST QUARTER OF
SECTION 32, TOWNSHIP 1 SOUTH, RANGE 12 WEST, SAN BERNARDINO MERIDIAN,
DESCRIBED AS FOLLOWS:

BEGINNING AT A POINT IN THE NORTHERLY LINE OF SAID SECTION 32, SAID POINT
BEING 466.52 FEET EASTERLY OF THE NORTHWEST CORNER OF SAID SECTION 32; THENCE
SOUTHERLY ALONG A LINE PARALLEL WITH THE WESTERLY LINE OF SAID SECTION 32,
500 FEET TO A POINT; THENCE EASTERLY ALONG A LINE PARALLEL WITH THE NORTHERLY
LINE OF SAID SECTION 32 TO ITS INTERSECTION WITH THE EASTERLY LINE OF SAID
NORTHWEST QUARTER OF THE NORTHWEST QUARTER OF SAID SECTION 32; THENCE
NORTHERLY ALONG SAID EASTERLY LINE OF THE NORTHWEST QUARTER OF THE NORTHWEST
QUARTER OF SAID SECTION 32, 500 FEET TO THE NORTHERLY LINE OF SAID SECTION;
THENCE WESTERLY ALONG THE NORTHERLY LINE OF SAID SECTION TO THE POINT OF
BEGINNING.

ALSO EXCEPT THEREFROM ALL GAS, OIL AND OTHER HYDROCARBON SUBSTANCES AND ALL
OTHER MINERALS IN AND FROM THE LAND DESCRIBED IN DEED MENTIONED HEREAFTER,
PROVIDED, HOWEVER, NO RIGHT IS RESERVED TO ENTER ON OR FROM THE SURFACE OF
SAID LAND, THE RIGHT TO ENTER THE SUBSURFACE OF SAID PROPERTY, WHICH IS ALSO
RESERVED SHALL BE AT ANY POINT BELOW A DEPTH OF 500 FEET FROM THE SURFACE
THEREOF. (MEASURED VERTICALLY FROM THE SURFACE THEREOF) IN ORDER TO TAKE FROM
SAID LAND AND REDUCE TO POSSESSION ANY OIL, GAS AND OTHER HYDROCARBON
SUBSTANCES AND ALL OTHER MINERALS, AS EXCEPTED AND RESERVED BY CLARA HELLMAN
HELLER, A WIDOW, ET AL. IN DEED TO BOBWILL BUILDING CO., A CORPORATION,
RECORDED SEPTEMBER 13, 1955 AS INSTRUMENT NO. 2398 IN BOOK 48924 PAGE 346,
OFFICIAL RECORDS.

L.A. Corporate Center, Monterey Park

PAGE 18 OF 30
<PAGE>

PARCEL D:

LOT 3 OF TRACT 42611, IN THE CITY OF MONTEREY PARK, AS PER MAP RECORDED IN
BOOK 1012 PAGES 21 TO 27 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY, ALSO THAT CERTAIN PORTION OF LOT 4 OF SAID TRACT
42611, DESCRIBED AS FOLLOWS:

EXCEPT THEREFROM ALL GAS, OIL, AND OTHER HYDROCARBON SUBSTANCES AND ALL OTHER
MINERALS IN AND FROM THE LAND DESCRIBED IN DEED MENTIONED HEREAFTER,
PROVIDED, HOWEVER, NO RIGHT IS RESERVED TO ENTER ON OR FROM THE SURFACE OF
SAID LAND, THE RIGHT TO ENTER THE SUBSURFACE OF SAID PROPERTY, WHICH IS ALSO
RESERVED SHALL BE AT ANY POINT BELOW A DEPTH OF 500 FEET FROM THE SURFACE
THEREOF (MEASURED VERTICALLY FROM THE SURFACE THEREOF) IN ORDER TO TAKE FROM
SAID LAND AND REDUCE TO POSSESSION ANY OIL, GAS AND OTHER HYDROCARBON
SUBSTANCES AND ALL OTHER MINERALS, AS EXCEPTED AND RESERVED BY CLARA HELLMAN
HELLER, A WIDOW, ET AL., IN DEED TO BOBWILL BUILDING CO., A CORPORATION,
RECORDED SEPTEMBER 13, 1955 AS INSTRUMENT NO. 2398 IN BOOK 48924 PAGE 346,
OFFICIAL RECORDS.

PARCEL D-1:

AN EASEMENT FOR PARKING AND INGRESS AND EGRESS AS GRANTED IN THAT CERTAIN
AGREEMENT OF PARKING EASEMENT AND MAINTENANCE AGREEMENT BY AND BETWEEN LOS
ANGELES CORPORATE CENTER VENTURE, A CALIFORNIA GENERAL PARTNERSHIP, AND LOS
ANGELES CORPORATE CENTER VENTURE II, A CALIFORNIA GENERAL PARTNERSHIP,
RECORDED JULY 23, 1986 AS INSTRUMENT NO. 86-931242 OVER THAT PORTION OF LOT 4
OF TRACT 42611, IN THE CITY OF MONTEREY PARK, AS PER MAP RECORDED IN BOOK
1012 PAGES 21 TO 27 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER
OF SAID COUNTY, DESCRIBED AS A WHOLE AS FOLLOWS:

BEGINNING AT A POINT IN THE NORTHEASTERLY LINE OF SAID LOT 4, DISTANT THEREON
SOUTH 64 DEG. 05' 00" EAST 170.97 FEET FROM THE MOST NORTHERLY CORNER OF SAID
LOT 4; THENCE SOUTH 25 DEG. 55' 00" WEST 30.00 FEET TO THE TRUE POINT OF
BEGINNING; THENCE SOUTH 25 DEG. 55' 00" WEST 203.50 FEET TO THE BEGINNING OF
A TANGENT CURVE CONCAVE TO THE NORTHWEST HAVING A RADIUS OF 24.50 FEET;
THENCE SOUTHWESTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 90 DEG. 00'
00" AN ARC DISTANCE 38.46 FEET; THENCE NORTH 64 DEG. 05' 00" WEST 145.40 FEET
TO A POINT IN THE EASTERLY LINE OF CORPORATE CENTER DRIVE, 84.00 FEET WIDE,
AS SHOWN ON THE MAP OF SAID TRACT 42611, SAID EASTERLY LINE BEING A CURVE
CONCAVE TO THE NORTHWEST HAVING A RADIUS OF 642.00 FEET, A RADIAL LINE TO
SAID POINT BEARS SOUTH 61 DEG. 25' 43" EAST; THENCE SOUTHERLY ALONG SAID
CURVE THROUGH A CENTRAL ANGLE OF 2 DEG. 06' 50" AN ARC DISTANCE OF 31.07
FEET; THENCE SOUTH 64 DEG. 05' 00" EAST 7.91 FEET, THENCE SOUTH 25 DEG. 55'
00" WEST 263.84 FEET; THENCE SOUTH 64 DEG. 05' 00" EAST 183.00 FEET; THENCE
NORTH 25 DEG. 55' 00" EAST 263.84 FEET; THENCE SOUTH 64 DEG. 05' 00" EAST
42.19 FEET; THENCE NORTH 65 DEG. 00' 01" EAST 61.13 FEET; THENCE NORTH 35
DEG. 03' 37" EAST 46.86 FEET; THENCE NORTH 46 DEG. 37' 10" EAST 71.29 FEET;
THENCE NORTH 42 DEG. 46' 12"

L.A. Corporate Center, Monterey Park

PAGE 19 OF 30
<PAGE>

EAST 103.03 FEET TO A LINE PARALLEL TO AND DISTANT SOUTHWESTERLY 30.00 FEET,
MEASURED AT RIGHT ANGLES, FROM THE NORTHEASTERLY LINE OF SAID LOT 4; THENCE
NORTHWESTERLY ALONG SAID PARALLEL LINE NORTH 64 DEG. 05' 00" WEST 162.24 FEET
TO THE TRUE POINT OF BEGINNING.

PARCEL E:

LOT 8 AND PORTION OF LOTS 7 AND 9 OF TRACT 42611, IN THE CITY OF MONTEREY
PARK, AS PER MAP RECORDED IN BOOK 1012 PAGES 21 TO 27 INCLUSIVE OF MAPS, IN
THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, DESCRIBED AS FOLLOWS:

BEGINNING AT THE NORTHWEST CORNER OF PARCEL 1 OF PARCEL MAP NO. 16386, IN
SAID CITY, COUNTY AND STATE, AS PER MAP FILED IN BOOK 175 PAGES 36 TO 40
INCLUSIVE OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY, SAID POINT ALSO BEING THE BEGINNING OF A NON-TANGENT CURVE CONCAVE
NORTHWESTERLY HAVING A RADIUS OF 1,012 FEET, TO WHICH A RADIAL THROUGH SAID
POINT BEARS SOUTH 54 DEG. 50' 33" EAST; THENCE NORTHEASTERLY ALONG SAID CURVE
THROUGH A CENTRAL ANGLE OF 10 DEG. 13' 27" AN ARC DISTANCE 180.59 FEET;
THENCE NORTH 24 DEG. 56' 00" EAST 241.00 FEET TO THE BEGINNING OF A CURVE
CONCAVE SOUTHEASTERLY HAVING A RADIUS OF 25.00 FEET; THENCE NORTHEASTERLY,
EASTERLY AND SOUTHEASTERLY ALONG SAID CURVE THROUGH A CENTRAL ANGLE OF 90
DEG. 00' 00", AN ARC DISTANCE OF 39.27 FEET; THENCE SOUGH 65 DEG. 04' 00"
EAST 63.39 FEET TO THE BEGINNING OF A CURVE CONCAVE NORTHEASTERLY HAVING A
RADIUS OF 507.00 FEET; THENCE SOUTHEASTERLY ALONG SAID CURVE THROUGH A
CENTRAL ANGLE OF 24 DEG. 39' 00", AN ARC DISTANCE OF 218.12 FEET; THENCE
SOUTH 89 DEG. 43' 00" EAST 240.48 FEET TO THE BEGINNING OF CURVE CONCAVE
SOUTHWESTERLY HAVING A RADIUS OF 833.00 FEET; THENCE EASTERLY ALONG SAID
CURVE THROUGH A CENTRAL ANGLE OF 4 DEG. 04' 23" AN ARC DISTANCE OF 45.00 FEET
TO A POINT ON A NON-TANGENT LINE, TO WHICH A RADIAL THROUGH SAID POINT BEARS
NORTH 4 DEG. 21' 23" EAST; THENCE ALONG SAID NON-TANGENT LINE SOUTH 30 DEG.
57' 00" WEST 152.00 FEET; THENCE SOUTH 0 DEG. 02' 40" EAST 20.00 FEET TO THE
NORTHERLY TERMINUS OF A LINE OF SAID LOT 7 THAT BEARS NORTH 0 DEG. 02' 40"
WEST 154.89 FEET; THENCE CONTINUING SOUTH ALONG THE EASTERLY LINE OF
SAID LOT 7, SOUTH 0 DEG. 02' 40" EAST 154.89 FEET TO AN ANGLE POINT IN THE
EASTERLY LINE OF SAID LOT 9; THENCE CONTINUING SOUTH ALONG THE EASTERLY LINE
OF SAID LOT 9, SOUTH 0 DEG. 20' 17" EAST 0.11 FEET TO THE NORTHERLY LINE OF
SAID PARCEL MAP NO. 16386; THENCE WESTERLY ALONG SAID NORTHERLY LINE SOUTH 89
DEG. 38' 12" WEST 701.23 FEET TO THE POINT OF BEGINNING.

EXCEPT THEREFROM ALL GAS, OIL, AND OTHER HYDROCARBON SUBSTANCES AND ALL OTHER
MINERALS IN AND FROM THE LAND DESCRIBED IN DEED MENTIONED HEREAFTER,
PROVIDED, HOWEVER, NO RIGHT IS RESERVED TO ENTER ON OR FROM THE SURFACE OF
SAID LAND, THE RIGHT TO ENTER THE SUBSURFACE OF SAID PROPERTY, WHICH IS ALSO
RESERVED SHALL BE AT ANY POINT BELOW A DEPTH OF 500 FEET FROM THE SURFACE
THEREOF (MEASURED VERTICALLY FROM THE SURFACE THEREOF) IN ORDER TO TAKE FROM
SAID LAND AND REDUCE TO POSSESSION ANY OIL, GAS AND OTHER HYDROCARBON
SUBSTANCES AND ALL OTHER MINERALS, AS EXCEPTED AND RESERVED BY CLARA HELLMAN
HELLER, A WIDOW, ET AL., IN DEED TO BOBWILL BUILDING CO., A CORPORATION,
RECORDED SEPTEMBER 13, 1955 AS INSTRUMENT NO. 2398 IN BOOK 48924 PAGE 346,
OFFICIAL RECORDS.

ALSO EXCEPT FROM A PORTION THEREOF ALL OIL, GAS, MINERALS AND OTHER
HYDROCARBON SUBSTANCES LYING IN AND UNDER SAID LAND BELOW A DEPTH OF 500 FEET
FROM THE SURFACE THEREOF, WITHOUT THE RIGHT OF SURFACE ENTRY, AS RESERVED BY
JOAN D. COGEN, AS TRUSTEE, UNDER DECLARATION OF TRUST, DATED JULY 21, 1953
ESTABLISHED BY NATHAN DAVIDSON, TRUSTOR, IN THE DEED RECORDED

L.A. Corporate Center, Monterey Park

PAGE 20 OF 30
<PAGE>

ON MAY 8, 1981 AS INSTRUMENT NO. 81-461705.

PARCEL F:

EASEMENTS AND OTHER RIGHTS CREATED BY THE (1) COVENANTS, CONDITIONS AND
RESTRICTIONS, RECORDED OCTOBER 12, 1963 AS INSTRUMENT NO. 83-1198632, AS
AMENDED BY DOCUMENT RECORDED MAY 14, 1987 AS INSTRUMENT NO. 87-754911,
DOCUMENT RECORDED MAY 14, 1967 AS INSTRUMENT NO. 87-754913 AND DOCUMENT
RECORDED NOVEMBER 30, 1989 AS INSTRUMENT NO. 89-1926876; (2) RESOLUTION
RECORDED JANUARY 29, 1990 AS INSTRUMENT NO. 90-155862; AND (3) COVENANTS,
CONDITIONS AND RESTRICTIONS RECORDED APRIL 9, 1990 AS INSTRUMENT NO.
90-668739.

L.A. Corporate Center, Monterey Park

PAGE 21 OF 30
<PAGE>

EXHIBIT C-13

LEGAL DESCRIPTION

PARCEL 1 OF PARCEL MAP 12439, IN THE CITY OF NORWALK, AS PER MAP FILED IN
BOOK 120 PAGE 44 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY.

EXCEPT THAT PORTION LYING SOUTH AND EAST OF THE FOLLOWING DESCRIBED LINE:

BEGINNING AT THE NORTHEAST CORNER OF SAID PARCEL 1; THENCE ALONG THE EASTERLY
LINE OF SAID PARCEL 1, 39.50 FEET TO THE TRUE POINT OF BEGINNING; THENCE
LEAVING SAID EASTERLY LINE SOUTH 89 DEG. 46' 55" WEST, A DISTANCE OF 396.00
FEET; THENCE SOUTH 44 DEG. 47' 45" WEST, A DISTANCE OF 14.15 FEET; THENCE
SOUTH 00 DEG. 11' 25" EAST, A DISTANCE OF 557.50 FEET TO A POINT IN THE
SOUTHERLY LINE OF SAID PARCEL 1.

SUCH PARCEL IS ALSO KNOW AS PARCEL 1 SHOWN ON EXHIBIT C TO LOT LINE
ADJUSTMENT NO. 25 RECORDED AUGUST 3, 1993 AS INSTRUMENT NO. 93-1496503.

NORWALK, Norwalk

PAGE 22 OF 30

<PAGE>

EXHIBIT C-14

LEGAL DESCRIPTION

PARCEL 1:

PARCELS "B" AND "C" OF PARCEL MAP L.A. NO. 4316, IN THE CITY OF LOS ANGELES,
AS PER MAP FILED IN BOOK 121 PAGE 46 OF PARCEL MAPS, IN THE OFFICE OF THE
COUNTY RECORDER OF SAID COUNTY.

PARCEL 2:

THE FOLLOWING DESCRIPTION EASEMENT AS CREATED BY THAT CERTAIN DOCUMENT
ENTITLED "RECIPROCAL GRANT OF EASEMENTS AND MAINTENANCE AGREEMENT
(DRIVEWAY)" DATED DECEMBER 5, 1980 AND RECORDED DECEMBER 5, 1980 AS
INSTRUMENT NO. 80-1224234:

A NON-EXCLUSIVE AND PERPETUAL EASEMENT, APPURTENANT TO PARCEL 1 ABOVE, FOR
THE PURPOSE OF PEDESTRIAN AND VEHICULAR INGRESS, EGRESS, AND ACCESS;
MAINTENANCE, REPAIR AND REPLACEMENT OF DRIVEWAYS, UNDERGROUND UTILITIES,
SEWERS, STORM DRAINS AND SIMILAR FACILITIES, CURBS, GUTTERS, TRAFFIC ISLANDS,
LIGHTING FACILITIES, PLANTS AND LANDSCAPING, PLANTERS, SPRINKLERS, AND
VALVES, AND INCIDENTAL PURPOSES; OVER, UNDER, ACROSS AND THROUGH THE EASTERLY
MOST 20 FEET OF PARTIAL "A" OF PARCEL MAP L.A. NO. 4318 (REFERRED TO IN
PARCEL 1 ABOVE).

Skyview Center, Los Angeles PAGE 23 OF 30

<PAGE>

PARCEL 3:

LOTS 13, 14, 15, 16 AND 17 (EXCEPT THE WEST 125 FEET OF SAID LOT 17) OF TRACT
13375, IN THE CITY OF LOS ANGELES, AS PER MAP RECORDED IN BOOK 267 PAGES 43
AND 44 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

PARCEL 4:

LOTS 85, 86, 87, 88, 89, 90, 91, 92, 93, 108, 109, 110, 111, 112, 113, 114,
115 AND 116 OF TRACT 13403, IN THE CITY OF LOS ANGELES, AS PER MAP RECORDED
IN BOOK 288 PAGES 1 TO 3, INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY.

ALSO EXCEPTING AS TO LOTS 91 AND 110, ALL OIL, GAS, MINERALS AND OTHER
HYDROCARBON SUBSTANCES LYING WITHIN THAT PORTION OF THE LAND HEREIN CONVEYED
WHICH LIES BELOW A DEPTH OF 500 FEET FROM THE PRESENT SURFACE THEREOF,
WITHOUT ANY RIGHT TO ENTER UPON OR INTO THE SURFACE OR TOP 500 FEET OF THE
SUBSURFACE OF SAID LAND, AS EXCEPTED IN DEED RECORDED JULY 18, 1978 AS
INSTRUMENT NO. 78-777109.

PARCEL 5:

LOTS 158, 159, 160, 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 171,
172, 173, 174, 190, 191,

Skyview Center, Los Angeles PAGE 24 OF 30

<PAGE>

192, 193, 194, 195, 196, 197, 198, 199, 200, 201, 202, 203, 204, 205, 206 OF
TRACT 13711, IN THE CITY OF LOS ANGELES, AS PER MAP RECORDED IN BOOK 276
PAGES 48 TO 50, INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF
SAID COUNTY.

EXCEPT THEREFROM ALL OIL, GAS OR OTHER HYDROCARBON SUBSTANCES LYING IN, UNDER
AND WHICH MAY BE PRODUCED FROM A DEPTH BELOW 500 FEET BELOW THE SURFACE OF
SAID REAL PROPERTY (MEASURED VERTICALLY FROM THE SURFACE THEREOF), PROVIDED,
HOWEVER, NO RIGHT IS RESERVED TO THE GRANTOR, IS SUCCESSORS AND ASSIGNS, BY
REASON OF THIS EXCEPTION OR RESERVATION TO ENTER ON OR FROM THE SURFACE OF
SAID PROPERTY, AS RESERVED BY LUDWIG TO ERZEN, A MARRIED MAN, WHO ACQUIRED
TITLE AS A SINGLE MAN, DATED AUGUST 21, 1970, RECORDED SEPTEMBER 4, 1970 IN
BOOK D4823 PAGE 319, OFFICIAL RECORDS, AS TO LOTS 158 AND 190; AND AS
RESERVED BY PAUL H. JENSEN AND EDITH E. JENSEN, HUSBAND AND WIFE, BY DEED
DATED DECEMBER 22, 1969, RECORDED FEBRUARY 2, 1970 IN BOOK D4622, PAGE 83,
OFFICIAL RECORDS, AS TO LOTS 159 AND 191; AND AS RESERVED BY DONALD M. HARVEY
AND FLORENCE HARVEY, HUSBAND AND WIFE, BY DEED DATED MAY 14, 1970; RECORDED
MAY 27, 1970 IN BOOK D4723 PAGE 922, OFFICIAL RECORDS, AS TO LOTS 160 AND
192; AND AS RESERVED BY HELEN GAINER, A MARRIED WOMAN, BY DEED DATED MARCH
31, 1970 AND RECORDED APRIL 20, 1970 IN BOOK D4689 PAGE 599, OFFICIAL
RECORDS, AS TO LOTS 161 AND 193; AND AS RESERVED BY LEONARD R. DOLING AND
ELSIE R. DOLING, HUSBAND AND WIFE, BY DEED RECORDED FEBRUARY 2, 1970 IN BOOK
D4622 PAGE 112, OFFICIAL RECORDS, AS TO LOTS 162 AND 194; AND AS RESERVED BY
CHARLES D. LASLEY, AND MARCIELLETTE L. LASLEY, HUSBAND AND WIFE, BY DEED
DATED DECEMBER 19, 1969, RECORDED FEBRUARY 2, 1970 IN BOOK D4622 PAGE 113,
OFFICIAL RECORDS, AS TO LOTS 163 AND 195; AND AS RESERVED BY HAROLD G.
HEAHLKE AND VIRGINIA B. HEAHLKE, HUSBAND AND WIFE, IN DEED RECORDED FEBRUARY
28, 1969 IN BOOK D4292 PAGE 209, OFFICIAL RECORDS, AS TO LOTS 164 AND 196;
AND AS RESERVED BY STANLEY M. WEAVER, A WIDOWER, BY DEED DATED DECEMBER 23,
1969, RECORDED FEBRUARY 2, 1970 IN BOOK D4622 PAGE 92, OFFICIAL RECORDS, AS
TO LOTS 165 AND 197; AND AS RESERVED BY FRANK M. NESBIT AND ALMA E. NESBIT,
HUSBAND AND WIFE, BY DEED DATED MARCH 16, 1970, RECORDED MARCH 30, 1970 IN
BOOK D4670 PAGE 345, OFFICIAL RECORDS, AS TO LOTS 166 AND 198; AND AS
RESERVED BY JAMES H. ALBRECHT AND RICHARD L. ALBRECHT, BY DEED DATED MARCH
20, 1970, RECORDED APRIL 16, 1970 IN BOOK D4687 PAGE 111, OFFICIAL RECORDS,
AS TO LOTS 167 AND 99; AND AS RESERVED BY RALPH L. STARKS AND FLORENCE L.
STARKS, HUSBAND AND WIFE, BY DEED DATED DECEMBER 22, 1969, RECORDED FEBRUARY
2, 1970 IN BOOK D4622 PAGE 87, OFFICIAL RECORDS, AS TO LOTS 168 AND 200; AND
AS RESERVED BY FRANCES MOORHOUSE, AN UNMARRIED WOMAN, BY DEED DATED DECEMBER
22, 1969, RECORDED FEBRUARY 2, 1970 IN BOOK D4622 PAGE 89, OFFICIAL RECORDS,
AS TO LOTS 169 AND 202; AND AS RESERVED BY EUGENE F. MOLNAR AND SHIRLEY A.
MOLNAR, HUSBAND AND WIFE, BY DEED DATED MARCH 9, 1971, RECORDED APRIL 9, 1971
IN BOOK D5021 PAGE 510, OFFICIAL RECORDS, AS TO LOT 170; AND AS RESERVED BY
MONTE LEON HANDLEY AND SHIRLEY I. HANDLEY, HUSBAND AND WIFE, BY DEED DATED
MARCH 9, 1971, RECORDED APRIL 9, 1971 IN BOOK D5021 PAGE 511, OFFICIAL
RECORDS, AS TO LOT 202; AND AS RESERVED BY SIDNEY KAPLAN AND SALLY JOYCE
KAPLAN, HUSBAND AND WIFE, BY DEED DATED DECEMBER 22, 1969, RECORDED FEBRUARY
2, 1970 IN BOOK D4622 PAGE 88, OFFICIAL RECORDS, AS TO LOTS 171 AND 203; AND
AS RESERVED BY SIDNEY SELMAR HEHN AND DOREEN MAXINE HEHN, HUSBAND AND WIFE,
BY DEED DATED MARCH 30, 1971, RECORDED APRIL 26, 1971 IN BOOK D5036 PAGE 999,
OFFICIAL RECORDS, AS TO LOTS 172 AND 204.

ALSO EXCEPTING FROM LOTS 173, 174, 205 AND 206, ALL OIL, GAS, OR OTHER
HYDROCARBON SUBSTANCES LYING IN, UNDER AND WHICH MAY BE PRODUCED FROM A DEPTH
BELOW 500 FEET BELOW THE SURFACE OF SAID REAL PROPERTY (MEASURED VERTICALLY
FROM THE SURFACE THEREOF), PROVIDED, HOWEVER, NO RIGHT IS

Skyview Center, Los Angeles PAGE 25 OF 30

<PAGE>

RESERVED TO THE GRANTOR, ITS SUCCESSORS AND ASSIGNS, BY REASON OF THIS
EXCEPTION OR RESERVATION, TO ENTER ON OR FROM THE SURFACE OF SAID PROPERTY, AS
RESERVED BY SIDNEY SELMAR HEHN AND DOREEN MACINE HEHN, HUSBAND AND WIFE, IN
DEED RECORDED SEPTEMBER 10, 1970 AS INSTRUMENT NO. 80, OFFICIAL RECORDS.

PARCEL 6:

THE FOLLOWING DESCRIBED EASEMENT AS RESERVED IN THE DEED TO PLAZA LA REINA
HOTEL VENTURE, A CALIFORNIA GENERAL PARTNERSHIP, DATED DECEMBER 5, 1980 AND
RECORDED DECEMBER 5, 1980 AS INSTRUMENT NO. 80-1224231; AND AS GRANTED IN THE
DEED TO PLAZA LA REINA OFFICE VENTURE, A CALIFORNIA GENERAL PARTNERSHIP,
DATED DECEMBER 5, 1980 AS INSTRUMENT NO. 80-1224233.

A NON-EXCLUSIVE EASEMENT AND RIGHT OF WAY TO CONSTRUCT AND MAINTAIN AND
OPERATE A PRIVATE SEWER WITH APPURTENANT STRUCTURES AND EQUIPMENT FOR THE
BENEFIT OF AND APPURTENANT TO AND TO SERVE PARCELS "B" AND "C" OF PARCEL MAP
L.A. NO. 4316, FILED IN BOOK 121 PAGE 46 OF PARCELS MAPS, LOS ANGELES COUNTY,
CALIFORNIA, OVER THE WESTERLY 20 FEET OF THE EASTERLY 165 FEET OF THE
NORTHERLY 70 FEET OF PARCEL "A" OF SAID PARCEL MAP; THE SOUTHERLY 20 FEET OF
THE NORTHERLY 70 FEET OF THE EASTERLY 165 FEET OF SAID PARCEL "A"; AND THE
SOUTHERLY 315 FEET OF THE NORTHERLY 365 FEET OF THE EASTERLY 20 FEET OF SAID
PARCEL "A"; TOGETHER WITH ALL NECESSARY OR CONVENIENT MEANS OF INGRESS AND
EGRESS FROM SAID LANDS AND PROPERTY FOR THE PURPOSE OF EXERCISING THE RIGHTS
HEREIN GRANTED.

Skyview Center, Los Angeles PAGE 26 OF 30

<PAGE>

EXHIBIT C-15

LEGAL DESCRIPTION

PARCEL A:

PARCEL 2, IN THE CITY OF WESTLAKE VILLAGE, AS SHOWN ON PARCEL MAP NO. 140B1,
AS PER MAP FILED IN BOOK 153 PAGES 19 AND 20 OF MAPS, IN THE OFFICE OF THE
COUNTY RECORDER OF SAID COUNTY.

EXCEPT ALL THE OIL, GAS, AND OTHER HYDROCARBON SUBSTANCES LYING BELOW A DEPTH
OF 500 FEET, MEASURED VERTICALLY, FROM THE SURFACE OF SAID LAND, WITHOUT,
HOWEVER, ANY RIGHT TO ENTER UPON THE SURFACE OF SAID LAND NOR INTO THAT
PORTION OF THE SURFACE THEREOF LYING ABOVE A DEPTH OF 500 FEET; MEASURED
VERTICALLY FROM SAID SURFACE, AS GRANTED TO AMERICAN-HAWAIIAN STEAMSHIP
COMPANY, BY DEED RECORDED APRIL 5, 1966 IN BOOK D3261 PAGE 937, OFFICIAL
RECORDS.

ALSO EXCEPT ANY AND ALL WATER, WATER RIGHTS AND PRIVILEGES, RIPARIAN RIGHTS
AND WATER EASEMENTS AND PROFITS BELONGING, OR IN ANY WAY APPURTENANT TO THE
DESCRIBED REAL PROPERTY.

PARCEL B:

A NON-EXCLUSIVE EASEMENT FOR PARKING, INGRESS AND EGRESS, PUBLIC UTILITIES,
PEDESTRIAN TRAFFIC AND OTHER PURPOSES OVER THAT PORTION OF PARCEL 1 OF PARCEL
MAP 14081, AS PER MAP FILED IN BOOK 153 PAGES 19 AND 20 OF PARCEL MAPS, AS
CREATED AND GRANTED PURSUANT TO THAT CERTAIN DOCUMENT ENTITLED "DECLARATION
REGARDING EASEMENTS AND COVENANTS" RECORDED DECEMBER 28, 1984 AS INSTRUMENT
NO. 84-1515684, SUBJECT UPON THE TERMS AND CONDITIONS CONTAINED THEREIN.

Westlake, Westlake Village PAGE 27 OF 30

<PAGE>

EXHIBIT C-16

LEGAL DESCRIPTION

LOTS 14 TO 17 INCLUSIVE OF TRACT 29776, IN THE CITY OF LOS ANGELES, AS PER MAP
RECORDED IN BOOK 737 PAGES 33 TO 35 INCLUSIVE OF MAPS IN THE OFFICE OF THE
COUNTY RECORDER OF SAID COUNTY.

Woodland Hills Financial Center, Woodland Hills

PAGE 28 OF 30

<PAGE>

EXHIBIT C-17

LEGAL DESCRIPTION

A FEE, AS TO PARCEL A; AND

SAID LEASE WAS AMENDED BY FIRST AMENDMENT DATED NOVEMBER 15, 1994,
AS DISCLOSED BY SAID MEMORANDUM OF LEASE.

THE LESSEE'S INTEREST UNDER SAID LEASE HAS BEEN ASSIGNED TO 222
HARBOR ASSOCIATES, LLC., A NEVADA LIMITED LIABILITY COMPANY BY ASSIGNMENT WHICH
RECORDED NOVEMBER 22, 1994 AS INSTRUMENT NO. 94-675689 OF OFFICIAL RECORDS,
REFERENCE BEING HEREBY MADE TO THE RECORD THEREOF FOR FULL PARTICULARS.

: THE INTEREST OF 222 HARBOR ASSOCIATES, LLC., A NEVADA LIMITED
LIABILITY COMPANY HAS SINCE PASSED TO ARDEN REALTY LIMITED PARTNERSHIP, A
MARYLAND LIMITED PARTNERSHIP BY ARTICLES OF MERGER WHICH RECORDED OCTOBER 11,
1996 AS INSTRUMENT NO. 19960520238.

THE INTEREST OF LESSEE UNDER SAID LEASE HAS BEEN FURTHER ASSIGNED TO
ARDEN REALTY FINANCE PARTNERSHIP, L.P., A CALIFORNIA LIMITED PARTNERSHIP, BY
THAT CERTAIN ASSIGNMENT AND ASSUMPTION OF LEASE RECORDED ON OR ABOUT JUNE 12,
1997.

Anaheim City Centre, Anaheim

PAGE 29 OF 30

<PAGE>

PARCEL A:

PARCEL 1 OF PARCEL MAP NO. 84-229, AS SHOWN ON A MAP FILED IN BOOK 194, PAGES
22 AND 23 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

EXCEPT ALL OIL, GAS AND MINERAL SUBSTANCES, TOGETHER WITH THE RIGHT TO EXPLORE
FOR AND EXTRACT SUCH SUBSTANCES, PROVIDED THAT THE SURFACE OPENING OF ANY
WELL, HOLE, SHAFT OR OTHER MEANS OF EXPLORING FOR, REACHING, OR EXTRACTING
SUCH SUBSTANCES SHALL NOT BE LOCATED WITHIN THE CITY OF ANAHEIM REDEVELOPMENT
PROJECT ALPHA, AS RECORDED IN BOOK 10812, PAGE 27 OF ORANGE COUNTY RECORDS,
STATE OF CALIFORNIA, AND SHALL NOT PENETRATE ANY PART OR PORTION OF SAID
PROJECT AREA WITHIN 500 FEET OF THE SURFACE THEREOF, BY INSTRUMENT NO.
86-530706, OFFICIAL RECORDS.

PARCEL B:

PARCEL 1 OF PARCEL MAP NO. 86-142, AS SHOWN ON A MAP FILED IN BOOK 232, PAGES
15 THROUGH 19 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY.

EXCEPTING AND RESERVING TO THE OWNERS THEREOF ALL OIL, GAS AND MINERAL
SUBSTANCES, TOGETHER WITH THE RIGHT TO EXPLORE FOR AND EXTRACT SUCH
SUBSTANCES, PROVIDED THAT THE SURFACE OPENING OF ANY WELL, HOLE, SHAFT, OR
OTHER MEANS OF EXPLORING FOR, REACHING OR EXTRACTING SUCH SUBSTANCES SHALL NOT
BE LOCATED WITHIN THE CITY OF ANAHEIM REDEVELOPMENT PROJECT ALPHA AS RECORDED
IN BOOK 10812, PAGE 27 OF ORANGE COUNTY RECORDS, STATE OF CALIFORNIA AND SHALL
NOT PENETRATE ANY PART OR PORTION OF SAID PROJECT AREA WITHIN 500 FEET OF THE
SURFACE THEREOF.

Anaheim City Centre, Anaheim

PAGE 30 OF 30

<PAGE>

SCHEDULE D

ENGINEERING SURVEYS

Freeman Group, Inc. - All properties except 10350 Santa Monica
HNTB Corporation - 10350 Santa Monica

<PAGE>

SCHEDULE 3.6

LEASE DEFAULTS

See certified rent rolls dated 06-09-97.

<PAGE>

SCHEDULE 3.22
ENVIRONMENTAL REPORTS

To be attached.

<PAGE>

SCHEDULE 3.23
EQUIPMENT LEASES

None.

<PAGE>

SCHEDULE 3.25
LIENS

None.

<PAGE>

Schedule 4.3.2 to
Loan Agreement

Mortgaged Properties
--------------------

1. 100 West Broadway,
Long Beach CA

2. 10350 Santa Monica Boulevard
Los Angeles, CA

3. 303 Glenoaks Boulevard,
Burbank, CA

4. 400 Corporate Pointe
400 Slauson Avenue
Culver City, CA

5. 425 West Broadway,
Glendale, CA

6. 5832 Bolsa Avenue,
Huntington Beach, CA

7. 6100 Wilshire (the New Wilshire),
Los Angeles, CA

8. 70 South Lake Avenue,
Pasadena, CA

9. Beverly Atrium,
350 S. Beverly Drive
Beverly Hills, CA

10. Bristol Plaza,
6167 Bristol Parkway
Culver City, CA

11. Burbank Executive Plaza
(333 Glen Oaks Boulevard and
300 Magnolia Boulevard),
Burbank, CA

12. L.A. Corporate Center
(900, 1000, 1200 and
1255 Corporate Center Drive),
Monterey Park, CA

13. 12501 East Imperial Highway,
Norwalk, CA

14. Skyview Center,
6033 W. Century Boulevard,
6053 W. 98th Street,
parking lot
Los Angeles, CA

15. 5601 Lindero Canyon Boulevard,
Westlake Village, CA

<PAGE>

16. Woodland Hills Financial Center
(21021 and 21031 Ventura Boulevard)
Woodland Hills, CA

17. 222 South Harbor Boulevard,
Anaheim, CA

<PAGE>

SCHEDULE 5.11

See attached.

<PAGE>

CASH MANAGEMENT PROCEDURES

Certain capitalized terms used in this SCHEDULE 5.11 are defined in
SECTION 9 hereof. Other capitalized terms not defined herein shall have the
meanings ascribed to them in the Loan Agreement. References to Sections refer
to Sections of this SCHEDULE 5.11, unless otherwise specified.

1. DEPOSIT OF OPERATING RECEIPTS INTO LOCKBOX ACCOUNT

1.1 Upon the occurrence of a Lockbox Event, Lender will establish
the on account, one or more segregated deposit accounts (collectively, the
"LOCKBOX ACCOUNT") as an Eligible Account in the name of Lender (or, if the
Securitization has occurred, the Servicer will establish the Lockbox Account in
its name on behalf of the Trustee), at a financial institution (the "LOCKBOX
BANK") selected by Lender (or the Servicer, as applicable) into which all
Operating Receipts from the Mortgaged Properties shall be deposited. The
Lockbox Account shall be under the sole dominion and control of Lender (or the
Servicer, as applicable).

1.2 Upon the occurrence of a Lockbox Event, Borrower, or Manager
on behalf of Borrower, will notify tenants under Leases and any other Persons
from whom Borrower has accounts receivable, in their billing statements or
otherwise, that all payments owing to Borrower should be sent to the Lockbox
Account. Borrower and Manager will cause all Operating Receipts received
directly by Borrower, or by Manager or any other Person on behalf of Borrower,
notwithstanding such instructions, to be deposited within one Business Day after
receipt thereof and identification as belonging to Borrower, into the Lockbox
Account. Any Operating Receipts received directly by Borrower, or Manager or
any other Person on behalf of Borrower, and not yet deposited into the Lockbox
Account, shall irrevocably be deemed to be held in trust for the benefit of
Lender (or, if the Securitization has occurred, the Trustee) and shall,
immediately upon receipt and identification as belonging to Borrower (and in no
event later than one full Business Day after receipt and identification as
belonging to Borrower), be deposited by Borrower, Manager, or such other Person,
as applicable, into the Lockbox Account.

2. DISBURSEMENTS FROM LOCKBOX ACCOUNT

All funds received into the Lockbox Account shall be disbursed to
Lender (or, if the Securitization has occurred, the Servicer), within one
Business Day after deposit into the Lockbox Account, and deposited into the Cash
Collateral Account. Lender (or, if the Securitization has occurred, the
Servicer) shall disburse and apply such funds in accordance with the provisions
of SECTION 4.4 or SECTION 4.5, as applicable.

<PAGE>

3. TAX AND INSURANCE ESCROWS

3.1 On or prior to the date of the Securitization, Borrower will
be required to establish and maintain with Lender, as a subaccount of the Cash
Collateral Account, an escrow account (the "TAX AND INSURANCE ESCROW ACCOUNT")
for payment of the next succeeding payments of all insurance premiums (including
property, liability, and other insurance, but not including workers compensation
insurance) and real estate taxes coming due for each Mortgaged Property, which
account shall be controlled by Lender. The Tax and Insurance Escrow Account
will be funded (i) prior to the occurrence of a Lockbox Event, by Borrower
paying to Lender on each Due Date (in addition to the payment of Monthly Debt
Service and any other amounts due on such Due Date) an amount such that the
aggregate balance in the Tax and Insurance Escrow Account is equal, with respect
to each tax payment and insurance premium next coming due with respect to each
Mortgaged Property, to the product of (x) the amount of the tax payment or
insurance premium next coming due (or the most recent tax payment or insurance
premium, if the amount of the next tax payment or insurance premium is unknown)
times (y) a fraction, the numerator of which is the number of whole Accounting
Periods since the date of the last payment of the applicable tax payment or
insurance premium and the denominator of which is the number of whole Accounting
Periods from the date of the last payment of the applicable tax payment or
insurance premium to the date the next payment of such tax payment or insurance
premium is due and (ii) thereafter, from cash on deposit in the Cash Collateral
Account on any Due Date in accordance with the provisions of SECTION 4.4(A)
hereof, such that the aggregate balance in the Tax and Insurance Escrow Account
is equal, with respect to each tax payment or insurance premium next coming due
with respect to each Mortgaged Property, to the product of (x) the amount of the
tax payment or insurance premium next coming due (or the most recent tax payment
or insurance premium, if the amount of the next tax payment or insurance premium
is unknown) times (y) a fraction, the numerator of which is the number of whole
Accounting Periods since the date of the last payment of the applicable tax
payment or insurance premium and the denominator of which is the number of whole
Accounting Periods from the date of the last payment of the applicable tax
payment or insurance premium to the date the next payment of such tax payment or
insurance premium is due.

3.2 Provided that the necessary invoices or bills have been
provided to Lender by the Manager or Borrower, Lender will pay directly all real
estate taxes and insurance premiums from amounts on deposit in the Tax and
Insurance Escrow Account (or, if such amounts are insufficient, from other
amounts available in the Cash Collateral Account which would otherwise have been
distributed to Borrower pursuant to SECTION 4.4 or from additional funds
deposited by Borrower into the Cash Collateral Account for such purpose), and
Borrower will be relieved of any such obligation.

3.3 Upon acceleration of the maturity of the Mortgage Note
following an Event of Default, the Lender shall be entitled to apply the funds
held in such escrows to payment of the Mortgage Note.

<PAGE>

4. CASH COLLATERAL ACCOUNT

4.1 On or before the date of the Securitization, Lender shall
establish and maintain one or more segregated deposit accounts in the name of
Lender (or, if the Securitization has occurred, the Servicer will establish and
maintain one or more segregated accounts in its name on behalf of the Trustee),
which must be Eligible Accounts (collectively, the "CASH COLLATERAL ACCOUNT"),
into which all amounts received by Lender from the Lockbox Account and all other
funds of Borrower (other than funds held in the Reserve Account) that are to be
held as security for the Loan shall be deposited. The Cash Collateral Account
shall be under the sole dominion and control of Lender (or, if the
Securitization has occurred, the Servicer) and shall be entitled " Arden Realty
Finance Partnership, L.P. (or such similar designation), as Borrower, and Lehman
Brothers Realty Corporation, as Lender (or, if the Securitization has occurred,
________________, as Servicer) pursuant to Loan Agreement dated as of June 11,
1997 - Cash Collateral Account" (or similar appropriate designation).

4.2 From time to time, Lender may establish one or more segregated
subaccounts of the Cash Collateral Account into which (a) Insurance Proceeds
held by Lender in accordance with the Mortgage shall be deposited, (b) certain
payments of Awards held by Lender pursuant to the Mortgage shall be deposited,
(c) funds of Borrower held pending completion of capital improvements in
accordance with the Mortgage shall be deposited, and (d) payments into the Tax
and Insurance Escrow Account required by SECTION 3 of this SCHEDULE 5.11 shall
be made. All Awards and Insurance Proceeds (except Awards and Insurance
Proceeds that Borrower is permitted to retain under the terms of the applicable
Mortgage) will be deposited into the appropriate subaccount to be disbursed by
Lender in the manner contemplated by the Mortgage.

4.3 Lender shall withdraw from the Cash Collateral Account the
amounts described elsewhere in this SCHEDULE 5.11, the Loan Agreement, or any
other Loan Document and apply such amounts as provided in such documents.

4.4 So long as no Event of Default has occurred, all funds on
deposit in the Cash Collateral Account shall be applied on each Due Date (or, in
the event such Due Date is not a Business Day, on the immediately preceding
Business Day) in the following order of priority, and to the extent of available
funds:

(A) to fund any deficiency in the Tax and Insurance Escrow
Account;

(B) to pay on such Due Date (i) the Monthly Debt Service
Payment due and payable on such Due Date, (ii) reimbursements of
expenses (including, without limitation, of the Trustee and the
Servicer) that Borrower is required to pay pursuant to SECTION 12.7.1
of the Loan Agreement and (iii) all other Debt (including without
limitation, Yield Maintenance Payments and Defeasance Deposits) then
due and payable under the Loan Agreement (other than amounts to be
applied pursuant to items (C)-(J) below);

<PAGE>

(D) prior to Anticipated Repayment Date, to pay Default
Interest, if any, and Late Payment Fees, if any, then due and owing;

(E) on or after the Anticipated Repayment Date, payments for
monthly Cash Expenses incurred in accordance with the related Approved
Annual Budget pursuant to a written request for payment submitted by
Borrower to Lender specifying the individual Cash Expenses in a form
acceptable to Lender;

(F) on or after the Anticipated Repayment Date, payments for
Extraordinary Expenses approved by Lender, if any;

(G) prior to the Anticipated Repayment Date, payment of any
excess amounts to Borrower.

(H) on or after the Anticipated Repayment Date, payments to
Lender in reduction of the outstanding principal balance of the
Mortgage Note (which application shall constitute application of
Excess Cash Flow pursuant to SECTION 2.4.4(C) of the Loan Agreement)
until the outstanding principal balance of the Mortgage Note has been
reduced to zero ($0);

(I) on or after the Anticipated Repayment Date and after the
outstanding principal balance of the Mortgage Note has been reduced to
zero ($0), payments to Lender in reduction of the outstanding amount
of Accrued Interest (and interest thereon) (which application shall
constitute application of Excess Cash Flow pursuant to
SECTION 2.4.4(c) of the Loan Agreement); and

(J) on or after the Anticipated Repayment Date, to pay
Default Interest, if any, and Late Payment Fees, if any, then due and
owing.

The insufficiency of funds on deposit in the Cash Collateral Account
shall not absolve Borrower of the obligation to make any payments, as and when
due pursuant to this Agreement and the other Loan Documents, and such
obligations shall be separate and independent, and not conditioned on any event
or circumstance whatsoever.

4.5 Upon the occurrence, and during the continuation, of an Event of
Default, Lender shall be entitled to apply all funds then held in the Cash
Collateral Account and all funds thereafter deposited into the Lockbox Account
and transferred to the Cash Collateral Account to the payment of the amounts
then owing under the Loan Documents, in such order and priority as is required
or permitted by the Loan Agreement, the Mortgage Note, the Security Documents,
and the other Loan Documents and applicable law. Notwithstanding the foregoing,
Lender may elect to pay Operating Expenses pursuant to procedures established by
Lender in its sole discretion at such time.

<PAGE>

5. RESERVE ACCOUNT

5.1 On or before the Closing Date, Lender will establish and
maintain a segregated deposit account, which shall be an Eligible Account in the
name of Borrower (or if the Securitization has occurred, the Servicer will
establish a segregated account in its name on behalf of the Trustee) at a bank
selected by Lender (the "RESERVE ACCOUNT"), into which Borrower shall deposit
the funds required by SECTION 4.10 of the Loan Agreement.

5.2 So long as no Event of Default has occurred and is
continuing, Borrower, or Manager on behalf of Borrower, shall be permitted to
request disbursements from the Reserve Account from time to time to pay for
(i) leasing commissions or tenant improvements under Leases approved by
Lender under SECTION 1.20.11.3 of the Mortgage or (ii) to pay for capital
expenditures approved by Lender (collectively, "APPROVED RESERVE
EXPENDITURES") upon the submission to Lender of (a) a certificate of Borrower
stating that (i) the amounts requested are necessary for Approved Reserve
Expenditures, (ii) all funds that it previously has withdrawn from the
Reserve Account pursuant to this SECTION 5.2 have been used to pay Approved
Reserve Expenditures, (iii) that, there are no accounts payable of the
Mortgaged Properties for Approved Reserve Expenditures with an unpaid balance
of more than $25,000 individually, or more than $100,000 in the aggregate,
that are more than 60 days past due (unless payment is being contested in
good faith in accordance with the applicable procedures in the Loan
Agreement), and (iv) Borrower has insufficient funds to pay such Approved
Reserve Expenditures (or has been unable to obtain Permitted Debt to pay for
Approved Reserve Expenditures and (b) a schedule setting forth the names of
the payees and amounts to be paid out of the proceeds of such disbursement.
Notwithstanding the foregoing, at any time, and from time to time and
provided that no Event of Default has occurred and is continuing, Borrower
shall have the right to withdraw any amounts above the Reserve Requirement on
deposit in the Reserve Account, and provided, further, if an Event of Default
has occurred and is continuing, Borrower shall have the right to withdraw any
amounts above the Reserve Requirement which relate to, or have accrued during
the time period commencing prior to the occurrence of the Event of Default,
in either case, provided that after such disbursement, the balance of the
Reserve Account shall not be less than the Reserve Requirement.

5.3 Upon the receipt of a request from Borrower or Manager for a
disbursement from the Reserve Account in accordance with SECTION 5.2 of this
SCHEDULE 5.11, Lender shall disburse the requested amount by automated
clearinghouse funds or by Federal wire no later than the next Business Day.

5.4 In the event any payment of Monthly Debt Service is not paid
when due, Lender may make withdrawals from the Reserve Account to pay such
Monthly Debt Service payment. Payment of Monthly Debt Service pursuant to this
SECTION 5.4 is not a permitted alternative to timely payment or full performance
by Borrower and shall not constitute a waiver of any Default or Event of Default
or an amendment to this SCHEDULE 5.11, the Loan Agreement or any other Loan
Document and shall not otherwise prejudice or limit any rights or remedies of
Lender.

<PAGE>

6. SECURITY FOR MORTGAGE LOAN

The funds on deposit in the Lockbox Account, the Reserve Account,
and the Cash Collateral Account and each subaccount thereof, and all Permitted
Investments thereof, are pledged to Lender as further security for the Loan
pursuant to the Security Agreement.

7. INVESTMENT OF FUNDS IN ACCOUNTS

Borrower shall have the right to instruct Lender to invest funds,
if any, in the Cash Collateral Account and the Reserve Account, at the risk of
and for the benefit of Borrower, in Permitted Investments.

8. GENERAL

8.1 Lender shall cause Manager and Borrower to have access to
information each Business Day regarding activity and balances in the Cash
Collateral Account, the Reserve Account, and the Lockbox Account.

8.2 Unless the context specifies otherwise, transfers of funds
held in any Account that are required by this Agreement shall require only the
transfer of available funds.

8.3 Nothing in this SCHEDULE 5.11 shall relieve Borrower of its
obligations to make all payments due under the Mortgage Note and the other Loan
Documents when due and payable.

9. CERTAIN DEFINITIONS

As used in this SCHEDULE 5.11, the following terms have the meanings
set forth below:

"APPROVED RESERVE EXPENDITURES" has the meaning specified in SECTION
5.2 of this SCHEDULE 5.11.

"CASH COLLATERAL ACCOUNT" has the meaning specified in SECTION 4.1
of this SCHEDULE 5.11.

"CASH EXPENSES" has the meaning ascribed to such term in the Loan
Agreement.

"DEBT SERVICE COVERAGE RATIO" has the meaning ascribed to such term
in the Loan Agreement.

"EXTRAORDINARY EXPENSES" has the meaning ascribed to such term in
the Loan Agreement.

<PAGE>

"LOCKBOX ACCOUNT" has the meaning specified in SECTION 1.1 of
this SCHEDULE 5.11.

"LOCKBOX BANK" has the meaning specified in SECTION 1.1 of this
SCHEDULE 5.11.

"LOCKBOX EVENT" means the occurrence of any one or more of the
following: (i) the Debt Service Coverage Ratio for any four consecutive
Accounting Quarters falls below 1.5 to 1.00; (i) Borrower shall fail to deliver
to Lender a written commitment for the refinancing of the Loan from a Qualified
Institutional Lender on or before the date that is three months prior to the
Anticipated Repayment Date; (iii) Borrower shall fail to repay the Loan on or
before the Anticipated Repayment Date; or (iv) the occurrence of an Event of
Default under the Loan Agreement.

"OPERATING RECEIPTS" means Gross Income from Operations from
operation of the Mortgaged Properties received by or on behalf of Borrower in
the form of cash.

"QUALIFIED INSTITUTIONAL LENDER" means a financial institution or
other lender with a long-term unsecured debt rating that is not lower than [BBB]
by S&P and an equivalent rating from each of the other Rating Agencies if rated
by such Rating Agencies.

"TAX AND INSURANCE ESCROW ACCOUNT" has the meaning specified in
SECTION 3.1 of this SCHEDULE 5.11.

<PAGE>

EXHIBIT A

<PAGE>

MORTGAGE NOTE

$175,000,000.00 June 11, 1997

FOR VALUE RECEIVED, the undersigned, ARDEN REALTY FINANCE
PARTNERSHIP, L.P., a California limited partnership ("MAKER"), promises to pay
to the order of LEHMAN BROTHERS REALTY CORPORATION, a Delaware corporation, its
successors and assigns ("HOLDER"), at such place as Holder may from time to time
designate in writing, the principal sum of ONE HUNDRED SEVENTY-FIVE MILLION AND
NO/100 DOLLARS ($175,000,000.00) in lawful money of the United States of
America, together with interest thereon, to be computed and paid as specified in
SECTION 1 below.

Except as otherwise defined or limited herein, capitalized terms
used herein shall have the meanings ascribed to them in that certain Loan
Agreement (the "LOAN AGREEMENT") dated as of the date hereof by and between
Maker and Holder. This is the Mortgage Note referred to in the Loan Agreement.

1. PAYMENTS OF PRINCIPAL AND INTEREST.

1.1 INTEREST ; MATURITY DATE

The outstanding principal balance hereof from time to time
shall bear interest (a) prior to June 11, 2004 (the "ANTICIPATED REPAYMENT
DATE"), at a rate per annum equal to seven and 52/100 percent (7.52%) (the
"BASE RATE") and (b) from and after June 11, 2004, at a rate per annum (the
"ADJUSTED INTEREST RATE") equal to the greater of (i) seven and 52/100
percent (7.52%) plus two percentage points (2%) and (ii) the sum of (A) three
percentage points (3%) and (B) the average, calculated by linear
interpolation (rounded to three decimal places), of the yields of the United
States Treasury Constant Maturities with the terms (one longer and one
shorter) most nearly approximating those of U.S. Obligations having
maturities as close as possible to the seventh anniversary of the Anticipated
Repayment Date, as determined by the Holder on the basis of Federal Reserve
Statistical Release H.15-Selected Interest rates under the heading
U.S. Governmental Security/Treasury Constant Maturities, or such other
recognized source of financial market information as may reasonably be
selected by the Holder, in each case on the last Business Day of the week
immediately prior to the Anticipated Repayment Date. Interest accrued from
the date hereof to (but excluding) July 10, 1997 shall be due and payable on
July 10, 1997. Thereafter, payments of interest and other amounts to be paid
hereunder shall be made, in arrears, on the tenth (10th) day of each calendar
month, or, if in any calendar month the tenth (10th) day is not a Business
Day, the Business Day preceding the tenth (10th) day, commencing August 10,
1997 (each, a "DUE DATE") for the period (the "DEBT SERVICE PERIOD") beginning
on (and including) the tenth (10th) day of the calendar month immediately
preceding the month in which such Due Date occurs, through (but excluding)
the Due Date. Interest shall be computed on the basis of a 360 day year and
the actual number of days elapsed in each Debt Service Period.

<PAGE>

On each Due Date after the Anticipated Repayment Date, Maker
shall continue to pay interest for the applicable Debt Service Period computed
at the Base Rate. Payment of all interest accruing in respect of this Mortgage
Note after the Anticipated Repayment Date in the amount equal to the difference
between the amount that accrues at the Adjusted Interest Rate and the amount
that is paid at the Base Rate ("ACCRUED INTEREST") shall be (a) deferred, and
(b) to the extent permitted by applicable law, accrue interest at the Adjusted
Interest Rate. If not sooner paid, all Accrued Interest together with interest
thereon (to the extent permitted by applicable law) shall be due and payable in
full on the Final Maturity Date (as defined below).

From and after the Anticipated Repayment Date and in accordance
with the Cash Management Procedures, Maker shall pay to Holder on each Due Date
(without duplication), until the entire Debt is repaid in full, Excess Cash Flow
for the Debt Service Period relating to such Due Date. Each monthly payment of
Excess Cash Flow made by Borrower under this Mortgage Note shall be applied
first to the reduction of the outstanding principal balance of this Mortgage
Note and after the principal balance of this Mortgage Note has been paid in
full, to the reduction of the outstanding amount of Accrued Interest (together
with any interest thereon).

The principal amount hereof shall be payable in a single balloon payment on June
10, 2012 (the "FINAL MATURITY DATE") equal to the outstanding principal balance
of this Mortgage Note, together with accrued and unpaid interest thereon through
June 10, 2012 (including any unpaid Accrued Interest and interest thereon).

1.2 PREPAYMENT RESTRICTIONS

On any Due Date occurring on or after the date that is three
(3) months prior to the Anticipated Repayment Date, all or any portion of the
principal balance hereof may be prepaid, at Maker's option, in full or in
part, without penalty or premium; PROVIDED, HOWEVER, that the requirements of
SECTION 2.10 of the Loan Agreement shall have been satisfied. In addition, a
portion of the principal amount hereof may be prepaid prior to the first day
of the Defeasance Period, upon satisfaction of the conditions in SECTION 2.7
of the Loan Agreement but without payment of a Yield Maintenance Payment, in
connection with a Casualty or Taking (PROVIDED THAT the Mortgage does not
require a Restoration of the applicable Mortgaged Property). Neither Holder
nor, following the Securitization, the Trustee or the Servicer shall be
required to accept or apply any prepayment requiring payment of a Yield
Maintenance Payment, as provided in this paragraph or in SECTION 1.3 hereof,
unless such prepayment is accompanied by the payment of such Yield
Maintenance Payment, and if any legal and other expenses are due and owing to
Holder, Trustee or Servicer in connection with such prepayment under the
terms of the Pooling and Servicing Agreement or any Loan Document, neither
Holder nor the Servicer shall be required to accept or apply any prepayment
unless the prepayment also is accompanied by the amount that is due and
payable to Holder, Trustee or Servicer with respect to such expenses. Except
as provided above, this Mortgage Note may not be prepaid.

1.3 YIELD MAINTENANCE

If (i) all or any part of the principal amount of the Loan is
prepaid after the Closing Date but prior to the last day of the Defeasance
Period as a result of the acceleration of

2
<PAGE>

the maturity of the Mortgage Note after an Event of Default, Maker shall be
required to pay a Yield Maintenance Payment equal to the greater of (A) 1% of
the amount of the principal prepayment that is to be applied to the outstanding
principal balance hereof and (B) the present value as of the end of the
applicable Debt Service Period, discounted at the Reinvestment Yield, of a
series of payments each equal to the Payment Differential on each of the
remaining Due Dates prior to and including the Anticipated Repayment Date, after
giving effect to the regularly scheduled payment of principal that is to be made
on the Prepayment Date. No Yield Maintenance Payment shall be required in
connection with prepayments made on or after the last day of the Defeasance
Period.

Promptly following acceleration of this Mortgage Note or
following the occurrence of any other event, the occurrence of which obligates
Maker to make a Yield Maintenance Payment, Holder shall notify Maker of the
amount and basis of determination of the Yield Maintenance Payment promptly upon
determining the Treasury Rate, as contemplated below. Absent manifest error,
the Maker shall not dispute Holder's calculations hereunder.

For purposes of this SECTION 1.3, the following terms shall have
the meanings ascribed to them below:

"PAYMENT DIFFERENTIAL" means, an amount equal to (x) the Base
Rate, minus the Reinvestment Yield, divided by (y) 12, and multiplied
by (z) the amount of the principal prepayment.

"REINVESTMENT YIELD" is the Treasury Rate converted to a monthly
compounded nominal annual yield.

"TREASURY RATE" is equal to the lesser of (A) the annual yield on
the United States Treasury issue (primary issue) with a maturity date
closest to the Final Maturity Date and (B) the annual yield on the
United States Treasury issue (primary issue) with a maturity equal to
the remaining average life of this Mortgage Note with each such yield
being based on the bid price for such issue as published in THE WALL
STREET JOURNAL on the date that is 14 days prior to (x) the applicable
Prepayment Date set forth in the notice of prepayment provided by the
Maker or (y) the date of acceleration by the Holder (or if such bid
price is not published on that date, the next preceding date on which
such bid price is so published).

1.4 METHOD OF PAYMENT; PAYMENTS ABSOLUTE

All payments due hereunder shall be made in legal currency of the
United States of America in immediately available federal funds by credit to the
Holder's account in the United States as announced by the Holder from time to
time in writing to Maker. If any payment is due on a day that is not a Business
Day, the date for payment thereof shall be extended to the next Business Day,
without additional interest, except that, if the Final Maturity Date is not a
Business Day, the date for payment of the amount, if any, that is due on the
Final Maturity Date shall be extended to the next succeeding Business Day, and
any interest payable thereon shall accrue and be payable for such extension of
time at the Adjusted Interest Rate.

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<PAGE>

The terms of this Mortgage Note are hereby supplemented in full
by the terms of the Loan Agreement and the other Loan Documents.

2. SECURITY FOR THE LOAN.

This Mortgage Note is secured by, among other things,
17 Mortgaged Properties owned by Maker, including all assets of Maker related
thereto, pursuant to a Mortgage encumbering the Land, the Buildings located
thereon and other Improvements relating to such Buildings and granting a lien
on and security interest in certain other Property described therein, and by
other Security Documents effecting and granting a lien on and security
interest in other Collateral, including but not limited to, the Security
Agreement, the Assignment of Rents and Leases, and the Collateral Assignment
of Management Agreement.

3. EVENTS OF DEFAULT.

The entire outstanding principal balance of this Mortgage Note,
together with all accrued and unpaid interest thereon and all other sums due
hereunder or under any of the Loan Documents (all such sums, collectively, the
"DEBT"), or any portion thereof, shall without notice, except such notice as is
required under the terms of any Loan Document, become immediately due and
payable at the option of Holder: (a) if payments of principal, interest and
premium, if any, due hereunder are not made when due or (b) an Event of Default
shall have occurred and be continuing under the Loan Agreement (each of the
foregoing, an "EVENT OF DEFAULT"). In the event that Holder retains counsel to
collect all or any part of the Debt, or to protect or foreclose the security
provided in connection herewith, Maker agrees to pay reasonable costs of
collection incurred by Holder, including reasonable attorneys' fees.

4. DEFAULT INTEREST; LATE PAYMENT FEE.

Maker does hereby agree that, if any amount due hereunder is not
paid when due, including, without limitation, Maker's failure to pay the Debt in
full on the Maturity Date or on the date set for acceleration following an Event
of Default, Holder shall be entitled to receive, and Maker shall pay, to the
extent permitted by applicable law, interest to Holder on such past due amounts
beginning on the date such payment becomes past due at a rate of interest equal
to the lesser of (a) the greater of (i) the Base Rate plus three percentage
points (3%) (or, on and after the Anticipated Repayment Date, the Adjusted
Interest Rate plus three percentage points (3%)) and (ii) the Prime Rate plus
two percentage points (2%), and (b) the maximum rate of interest allowed to be
collected under applicable law.

In addition to Default Interest, in the event Borrower fails to
make any payment of interest, Yield Maintenance Payment or other payment
hereunder when due, Borrower shall be liable for the payment of a late charge
equal to five percent (5%) of the amount of the payment; provided, however,
prior to a Securitization, Borrower shall not be liable to pay such a late
payment fee the first time Borrower fails to make a Monthly Debt Service Payment
when due.

4
<PAGE>

5. LIMITATIONS ON RECOURSE.

Notwithstanding any contrary provision in this Mortgage Note or
any of the Loan Documents, it is hereby expressly agreed that, except as
otherwise provided in this SECTION 5 or in any section of any Loan Document that
is substantially similar to this SECTION 5, there shall be no recourse to the
assets of Maker or either of its Partners (other than against the Collateral
and any other property given as security for the payment of this Mortgage Note)
for (i) the payment of principal, interest, Defeasance Deposits, Yield
Maintenance Payments or other charges hereunder or for any other amount that is
or may become due and owing to Holder by Maker under this Mortgage Note or any
of the other Loan Documents or (ii) the performance or discharge of any covenant
or undertaking hereunder or under the other Loan Documents, and in the event of
any Event of Default hereunder or thereunder, Holder agrees to proceed solely
against the Collateral and any other property given as security for payment of
this Mortgage Note, and Holder shall not seek or claim recourse against Maker or
the General Partner (other than against the Collateral and any other property
given as security for payment of this Mortgage Note) for any deficiency or for
any personal judgment after a foreclosure of the lien of the Mortgage or other
Security Documents or for the performance or discharge of any covenants or
undertakings of Maker hereunder or under any other Loan Documents (except that
Maker may be made a party to a proceeding to the extent legally necessary for
the conduct of a foreclosure or the exercise of other similar remedies under the
Mortgage or other Security Documents). Notwithstanding the foregoing, nothing
contained in this SECTION 5 shall relieve Maker or the General Partner of any
personal liability for any loss, cost, expense, damage or liability arising or
resulting from (A) any breach of any representation or warranty made in the Loan
Agreement that was materially incorrect when made and that was made with
fraudulent intent, (B) any amount paid or distributed to the Partners, the
Manager or any Affiliate of any of them in violation of the provisions of the
Loan Documents, (C) fraud or breach of trust, including misapplication of Loan
proceeds or any Insurance Proceeds or Awards or other sums that are part of the
Collateral that may come into the possession or control of Maker or the General
Partner or any Affiliate of any of them, (D) liability under the Environmental
Indemnity Agreement or (E) following the occurrence of a Lockbox Event, the
willful failure of Maker to instruct Tenants of the Mortgaged Properties to make
payments of Rents into the Lockbox Account or the failure of Borrower or the
Manager to deposit payments of Rents received by Borrower or Manager into the
Lockbox Account promptly upon receipt thereof. It is hereby expressly agreed
that neither the General Partner nor any director, officer, shareholder, partner
or employee of Maker or the General Partner, nor the legal or personal
representative, successor or assign of any of the foregoing, nor any other
principal of Maker or the General Partner, whether disclosed or undisclosed,
shall have any personal liability under the Loan Agreement or any of the other
Loan Documents, except as personal liability may be specifically imposed upon
the General Partner in accordance with clauses (A), (B), (C), (D) or (E) of this
SECTION 5, and in no event shall any limited partner of Maker have any liability
whatsoever with respect to the Loan or any monetary obligations with respect
thereto, or any of the matters described in clause (A), (B), (C), (D) or (E)
above. It is the intention of the parties hereto that this SECTION 5 shall
govern every other provision of the Loan Documents and that the absence of
explicit reference to this SECTION 5 in any provision of the Loan Documents or
the absence of any Section similar to this SECTION 5 in any Loan Document shall
not be construed to deny the application of this SECTION 5 to such provision,

5
<PAGE>

notwithstanding the presence of explicit reference to this SECTION 5 in other
provisions of the Loan Documents.

6. NO USURY.

It is expressly stipulated and agreed to be the intent of Maker
and Holder at all times to comply with applicable state law and with applicable
United States federal law (to the extent that it permits Holder to contract for,
charge, take, reserve, or receive a greater amount of interest than under state
law) and that this Section shall control every other covenant and agreement in
this Mortgage Note and the other Loan Documents. If the applicable law (state
or federal) is ever judicially interpreted so as to render usurious any amount
called for under this Mortgage Note or under any of the other Loan Documents, or
contracted for, charged, taken, reserved, or received with respect to the Debt,
or if Holder's exercise of the option to accelerate the maturity of this
Mortgage Note, or if any prepayment by Maker results in Maker having paid any
interest in excess of that permitted by applicable law, then it is Maker's and
Holder's express intent that all excess amounts theretofore collected by Holder
shall be credited to the principal balance hereof and all other debt in the
order specified above (or, if this Mortgage Note and all other Debt have been or
would thereby be paid in full, shall be refunded to Maker), and the provisions
of this Mortgage Note and the other Loan Documents shall immediately and
automatically be deemed to be reformed, and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any
new documents, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder or thereunder.
All sums paid or agreed to be paid to Holder for the use, forbearance, or
detention of the Debt shall, to the fullest extent permitted by applicable law,
be amortized, prorated, allocated, and spread throughout the full stated term of
the Debt until payment in full so that the rate or amount of interest on account
of the Debt does not exceed the maximum lawful rate from time to time in effect
and applicable to the Debt for so long as the Debt is outstanding.

7. AUTHORITY.

Maker represents that Maker has full power, authority and legal
right to execute and deliver this Mortgage Note and to perform its obligations
hereunder, and that this Mortgage Note constitutes the valid and binding
obligation of Maker, enforceable against Maker in accordance with its terms,
except as enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and (ii) general principles of
equity, regardless of whether considered in proceedings at law or in equity.

8. NOTICES.

All notices or other communications required or permitted to be
given pursuant hereto shall be given in the manner specified in the Loan
Agreement directed to the parties at their respective addresses as provided
therein.

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<PAGE>

9. WAIVER OF JURY TRIAL.

MAKER, AND BY ACCEPTANCE HEREOF, HOLDER, EACH (1) COVENANTS AND
AGREES NOT TO ELECT TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY A JURY, AND
(2) WAIVES ANY RIGHTS TO TRIAL BY JURY TO THE FULL EXTENT THAT ANY SUCH RIGHT
SHALL NOW OR HEREAFTER EXIST. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS
SEPARATELY GIVEN, KNOWINGLY AND VOLUNTARILY, BY EACH PARTY HERETO, AND THIS
WAIVER IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO
WHICH THE RIGHT TO A JURY TRIAL WOULD OTHERWISE ACCRUE. THE PARTIES ARE HEREBY
AUTHORIZED TO SUBMIT THIS MORTGAGE NOTE TO ANY COURT HAVING JURISDICTION OVER
THE SUBJECT MATTER TO BE TRIED SO AS TO SERVE AS CONCLUSIVE EVIDENCE OF THE
OTHER PARTY'S HEREIN CONTAINED WAIVER OF THE RIGHT TO JURY TRIAL. FURTHER, EACH
PARTY HERETO CERTIFIES THAT NO REPRESENTATIVE OF THE OTHER PARTY (INCLUDING SUCH
OTHER PARTY'S COUNSEL) HAS REPRESENTED, EXPRESSLY OR OTHERWISE, TO THAT PARTY,
THAT THE OTHER PARTY WILL NOT SEEK TO ENFORCE THIS WAIVER BY SUCH CERTIFYING
PARTY OF THE RIGHT TO A JURY TRIAL.

10. GOVERNING LAW.

This Mortgage Note shall be governed by and construed under and
in accordance with the laws of the State of New York, excluding the choice of
law rules thereof.

11. MISCELLANEOUS.

(a) No release of any security for the Debt or any person liable
for payment of the Debt, no extension of time for payment of this Mortgage Note
or any installment hereof, and no alteration, amendment or waiver of any
provision of the Loan Documents made by agreement between Holder and any other
person or party shall release, modify, amend, waive, extend, change, discharge,
terminate or affect the liability of Maker or any other person or party who
might be or become liable for the payment of all or any part of the Debt, under
the Loan Documents.

(b) Maker and all others who may become liable for the payment
of all or any part of the Debt do hereby severally waive presentment and demand
for payment, notice of dishonor, protest, notice of protest, notice of
non-payment, and notice of intent to accelerate the maturity hereof and of
acceleration.

(c) This Mortgage Note may not be modified, amended, waived,
extended, changed, discharged or terminated orally or by any act or failure to
act on the part of Maker or Holder, but only by an agreement in writing signed
by the party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.

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<PAGE>

(d) Whenever used, the singular number shall include the plural,
the plural the singular, and the words "Holder" and "Maker" shall include their
respective successors, assigns, heirs, executors and administrators.

IN WITNESS WHEREOF, Maker has duly executed or has caused its
duly authorized officer to execute this Mortgage Note on its behalf, as of the
day and year first above written.

MAKER:

ARDEN REALTY FINANCE PARTNERSHIP,
L.P.

By: Arden Realty Finance, Inc.,
its general partner

By: /s/ Diana M. Laing
------------------------------
Its: Chief Financial Officer
-----------------------------

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<PAGE>

EXHIBIT B

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SPACE ABOVE THIS LINE RESERVED FOR
RECORDER'S USE

TITLE(S)
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DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES,
SECURITY AGREEMENT AND FIXTURE FILING
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DEED OF TRUST,
ASSIGNMENT OF RENTS AND LEASES,
SECURITY AGREEMENT, AND
FIXTURE FILING

Dated as of June 11, 1997

Made by

ARDEN REALTY FINANCE PARTNERSHIP, L.P.
as Grantor,

FIRST AMERICAN TITLE INSURANCE COMPANY
as Trustee

for the benefit of

LEHMAN BROTHERS REALTY CORPORATION
as Beneficiary

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TABLE OF CONTENTS

PAGE
----
RECITALS ........................................................ 1
GRANTING CLAUSES ................................................ 2

1. COVENANTS, REPRESENTATIONS AND WARRANTIES ............................... 5
1.1 Payment of Mortgage Note; Performance of Other Obligations....... 5
1.2 General Representations, Warranties and Covenants................ 5
1.2.1 Authority, Enforceability, Etc. ........................ 5
1.2.2 No Defaults ............................................ 5
1.2.3 No Litigation .......................................... 5
1.2.4 Compliance with Law, Etc. .............................. 6
1.2.5 Good Title ............................................. 6
1.2.6 Covenant of Title ...................................... 7
1.2.7 Negative Pledge ........................................ 7
1.2.8 Necessary Permits ...................................... 7
1.2.9 Flood Zone ............................................. 7
1.2.10 Separate Tax Lot; Assessments .......................... 7
1.3 Title Insurance ................................................. 7
1.4 Recordation; Preservation of Lien ............................... 8
1.5 Taxes, Liens, and Permitted Encumbrances ........................ 8
1.5.1 Taxes .................................................. 8
1.5.2 Liens; Permitted Encumbrances .......................... 8
1.5.3 Permitted Contests ..................................... 9
1.5.4 No Credit for Payment of Taxes or Impositions .......... 9
1.6 Care of the Property ............................................ 9
1.6.1 Condition of the Property .............................. 9
1.6.2 Alterations; Building Only ............................. 10
1.6.3 Right to Inspect ....................................... 10
1.6.4 Compliance with Laws and Covenants ..................... 10
1.7 Insurance ....................................................... 10
1.7.1 Risks to Be Insured .................................... 10
1.7.2 Qualified Insurers ..................................... 11
1.7.3 Policy Provisions ...................................... 11
1.7.4. Delivery of Certificates ............................... 12
1.7.5. No Separate Insurance .................................. 13
1.8. Damage to or Destruction of Property ............................ 13
1.8.1. Notice ................................................. 13
1.8.2. Restoration ............................................ 13
1.8.3. Application of Insurance Proceeds or Awards ............ 14
1.9. Condemnation .................................................... 14
1.9.1. Grantor to Give Notice, Etc. ........................... 14
1.9.2. Total and Substantial Taking ........................... 15
1.9.3. Partial and Temporary Taking ........................... 15
1.10 Notices Concerning the Property ................................. 16
1.11 Alterations ..................................................... 16
1.11.1 Alteration Conditions .................................. 16
1.11.2 Right to Inspect ....................................... 16
1.11.3 Cooperation ............................................ 17
1.12. Indemnification by the Grantor .................................. 17
1.13. Expenses ........................................................ 17
1.14. Monthly Escrow Deposits ......................................... 18
1.15 Further Assurances .............................................. 18

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1.16 Additions to Security ........................................... 18
1.17. U.C.C. Security Agreement and Fixture Filing .................... 19
1.17.1 Grant of Security .................................... 19
1.17.2. Financing Statements ................................. 19
1.17.3. Multiple Remedies .................................... 19
1.17.4. Waiver of Rights ..................................... 19
1.17.5. Expenses of Disposition of the Properties ............ 19
1.17.6. Fixture Filing ....................................... 20
1.18. Ground Leases ................................................... 20
1.18.1. Ground Lease ......................................... 20
1.18.2. No Amendments ........................................ 20
1.18.3. Legal Actions under Agreements ....................... 21
1.18.4 Right to Cure ........................................ 21
1.18.5. Notice of Arbitration or Appraisal ................... 21
1.18.6. Additional Ground Lease Provisions ................... 21
1.18.6.1 ...................................................... 21
1.18.6.2 ...................................................... 22
1.18.6.3 ...................................................... 22
1.18.6.4 ...................................................... 22
1.18.6.5 ...................................................... 22
1.18.6.6 ...................................................... 23
1.18.7 Representations and Warranties Regarding Ground Lease. 23
1.19. Compliance with Access Laws ..................................... 23
1.20 Assignment of Rents and Grantor's Interest in Leases; Lease
Covenants ..................................................... 23
1.20.1. Assignment and License ............................... 23
1.20.2. Rights and Powers Assigned ........................... 24
1.20.3. No Set-Off ........................................... 24
1.20.4. Termination of License ............................... 24
1.20.5. Right to Collect Upon Event of Default ............... 25
1.20.6. Leases Unaffected ................................... 25
1.20.7. Inconsistent Actions Void ............................ 25
1.20.8. Satisfaction and Release ............................. 25
1.20.9. No Obligations ....................................... 25
1.20.10. Rights in Litigation and Bankruptcy .................. 26
1.20.11. Additional Lease Provisions .......................... 26
1.20.11.1 ..................................................... 26
1.20.11.2 ..................................................... 26
1.20.11.3 ..................................................... 27
1.20.11.4 ..................................................... 27
1.20.11.5 ..................................................... 27
1.20.11.6 ..................................................... 27
1.20.11.7 ..................................................... 28
1.20.11.8 ..................................................... 28
1.20.11.9 ..................................................... 28
1.20.12. Assignment to Beneficiary Controlling ................ 28
1.21. Environmental Covenants and Representations ..................... 28
1.21.1 ........................................................ 28
1.21.2 ........................................................ 28
1.21.3 ........................................................ 29
1.21.4 ........................................................ 29
1.21.5 ........................................................ 29
1.21.6 ........................................................ 29
1.21.7 ........................................................ 29
1.21.8 ........................................................ 29

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1.22. Release ......................................................... 29
1.22.1. Satisfaction of Obligations ........................... 29
1.22.2. Release of Building; Partial Releases ................. 30
1.23. Transfers, Indebtedness and Subordinate Liens ................... 30
1.23.1. Transfers ............................................. 30
1.23.2. Indebtedness .......................................... 30
1.23.3. Additional Permitted Transfers ........................ 30
1.23.4. Delivery of Documents to the Beneficiary .............. 31
1.24. Utility Services ................................................ 31
2. EVENTS OF DEFAULT ....................................................... 31
2.1. Payment Default ................................................. 31
2.2. Material Breach of Representation and Warranty .................. 32
2.3. Material Breach of Covenant ..................................... 32
2.4. Event of Default Under Loan Agreement ........................... 32
2.5. Ground Lease .................................................... 32
3. REMEDIES ................................................................ 32
3.1. Legal Proceedings; Cost of Enforcement .......................... 32
3.1.1. Legal Proceedings ..................................... 32
3.1.2. Cost of Enforcement ................................... 32
3.2. Acceleration .................................................... 33
3.3. Right to Perform Grantor's Covenants, Etc. ...................... 33
3.4. Possession Upon Default ......................................... 33
3.4.1. Surrender or Taking of Possession ..................... 33
3.4.2. Entering into Possession .............................. 33
3.4.3. Satisfaction of Default ............................... 34
3.5. Sale of Property ................................................ 34
3.5.1 ......................................................... 34
3.5.2 ......................................................... 34
3.5.3 ......................................................... 34
3.5.4 ......................................................... 35
3.5.5 ......................................................... 35
3.5.6 ......................................................... 35
3.6. Appointment of Receiver ......................................... 35
3.7. Trustees Authorized to Execute Deeds, Etc. ...................... 36
3.8. Purchase of the Property by the Beneficiary ..................... 36
3.9. Foreclosure of Personalty ....................................... 36
3.10. Receipt a Sufficient Discharge to Purchaser ..................... 36
3.11. Sale Shall be a Bar Against Grantor ............................. 37
3.12. Application of Proceeds of Sale and Other Monies ................ 37
3.13. Remedies Cumulative ............................................. 37
3.14. No Waiver, Etc. ................................................. 37
3.15. Cross-Collateralization; Waiver of Marshalling, Appraisal,
Valuation ..................................................... 37
4. CONCERNING TRUSTEES ..................................................... 39
4.1. Acts of One Trustee Valid ........................................ 39
4.2. Removal and Substitution of Trustees ............................. 39
4.3. Trustee's Compensation, Expenses, Etc. ........................... 39
5. MISCELLANEOUS ........................................................... 39
5.1. Notices .......................................................... 39
5.2. Invalidity of Any Provision; Entire Agreement .................... 40
5.3. Amendment ........................................................ 40
5.4. Parties Bound and Benefited ...................................... 41
5.5. Effect of Renewal, Amendment, Waiver, Etc. ....................... 41
5.6. Estoppel Certificates ............................................ 41
5.7. Headings ......................................................... 41

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5.8. Pronouns ........................................................ 41
5.9. Governing Law; Service of Process ............................... 42
5.10. Waiver of Jury Trial ............................................ 42
5.11. Limitation of Liability ......................................... 42
5.12 Assignment to Finance Trustee ................................... 43
5.12.1 Anticipated Assignment ................................. 43
5.12.2 Recognition of Finance Trustee as Beneficiary .......... 43
5.12.3 Delivery of Amounts to Servicer ........................ 44
6. DEFINITIONS ............................................................. 44
6.1. Certain Defined Terms ............................................ 44

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EXHIBITS

EXHIBIT A Description of Land (and Ground Lease, as applicable)
EXHIBIT B Description of Buildings

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THIS DEED OF TRUST, ASSIGNMENT OF RENTS AND LEASES, SECURITY
AGREEMENT, AND FIXTURE FILING (this "Deed of Trust") is made and entered into
as of this 11th day of June, 1997, by and between ARDEN REALTY FINANCE
PARTNERSHIP, L.P., a California limited partnership having its principal
offices at 9100 Wilshire Boulevard, East Tower, Suite 700-B, Beverly Hills,
California 90212 ("Grantor") to FIRST AMERICAN TITLE INSURANCE COMPANY (the
"Trustee"), for the benefit of LEHMAN BROTHERS REALTY CORPORATION having an
address at Three World Financial Center, 200 Vesey Street, New York, New York
10285 ("Beneficiary").

RECITALS

A. Beneficiary has, on or about the date hereof, made a loan (the
"Loan") to Grantor in the aggregate principal amount of $175,000,000.00
pursuant to that certain Loan Agreement by and between Beneficiary and
Grantor, dated as of June 11, 1997 (the "Loan Agreement"), which Loan is
evidenced by the Mortgage Note (the "Mortgage Note") of even date herewith by
Grantor to the order of Beneficiary (together with its successors and assigns
thereto, the "Noteholder") in the aggregate principal amount of the Loan,
which Mortgage Note has a final maturity date of June 10, 2012.

B. The Grantor is the owner of, among other things, a fee or leasehold
interest in the seventeen (17) parcels of land described on EXHIBIT A-1
through EXHIBIT A-17 attached hereto and incorporated herein (collectively,
the "Land").

C. On each parcel of Land is located one or more office buildings (the
building or buildings located on an individual parcel of Land, whether one or
more, shall be known as a "Building" and the buildings located on all
seventeen (17) parcels of Land collectively shall be known as the
"Buildings").

D. In connection with the execution and delivery of the Mortgage Note
and as additional security for the Mortgage Note, Grantor is executing and
delivering this Deed of Trust for the purpose of granting, conveying,
transferring and assigning to the Trustee for the benefit of the Beneficiary
a first priority lien on and security interest in all of Grantor's right,
title and interest in and to the Land, together with the Buildings and all
other buildings, structures, parking structures, fixtures and improvements
now or hereafter located or placed thereon (which Buildings and other
buildings, structures, fixtures and improvements, together with any additions
thereto or alterations or replacements thereof, are sometimes herein referred
to as the "Improvements") and in certain other Property more fully described
herein, as security for the Loan and the payment and satisfaction when due of
the Obligations (as defined herein).

E. Without limiting Beneficiary's rights otherwise to assign this Deed
of Trust, the Loan Agreement, the Mortgage Note and all other Loan Documents
(as defined in the Loan Agreement), all of Beneficiary's rights under this
Deed of Trust, the Loan Agreement, the Mortgage Note and all other Loan
Documents (as defined in the Loan Agreement) may be assigned by Beneficiary,
along with mortgage loans made to other borrowers, to, among others, an
institutional trustee (the "Finance Trustee") under the Pooling and Servicing
Agreement (as defined in the Loan Agreement) for the benefit of the holders
from time to time of certain mortgage-backed certificates (the
"Certificates"), and may be serviced by a professional loan servicing company
selected by Beneficiary (the "Servicer") on behalf of the Finance Trustee.

F. A glossary of capitalized terms used herein may be found at Article
VI hereof.

NOW, THEREFORE, in order to secure: (i) payment by Grantor, as and when
due, of the principal of and interest on the Mortgage Note, (ii) any
Defeasance Deposits and Yield Maintenance Payments (as defined in the Loan
Agreement) that may become due thereunder or under any other Loan Document,
(iii) any and all other amounts that may become due and payable under the
Mortgage Note, (iv) the payment of all amounts payable under this Deed of
Trust, the Loan Agreement and the other Loan Documents, (v) the performance
by Grantor of its covenants and agreements contained in this Deed of Trust,
the Loan Agreement and the other Loan Documents, (vi) if the Securitization
has occurred, the reimbursement by Grantor to Beneficiary of all sums

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required to be paid by Beneficiary under the Pooling and Servicing Agreement
as the same may be amended, modified or supplemented (the items in clauses
(i) through (vi) of this paragraph being sometimes collectively referred to
herein as the "Obligations"); and for other good and valuable consideration,
the receipt and sufficiency of which the parties hereto acknowledge, Grantor,
Beneficiary and the Trustee by these presents do hereby agree as follows:

GRANTING CLAUSES

Grantor by these presents hereby grants, bargains, sells, assigns,
mortgages, pledges, conveys, confirms, transfers and warrants to the Trustee,
and its successors and assigns, IN TRUST for Beneficiary, with power of sale and
right of entry and possession, all estate, right, title and interest of Grantor,
whether now owned or hereafter acquired, and grants to the Trustee for the
benefit of Beneficiary a security interest in and to, all right, title and
interest of Grantor in and to the following (such right, title and interest of
the Grantor being hereinafter referred to as the "Property"):

(i) the Land described in EXHIBIT A-1 through EXHIBIT A-17
attached hereto (including, in the case of a Building or other Improvements
located on land that the Grantor leases under a long-term ground lease, the
leasehold estate and the Grantor's other rights as lessee under the ground
lease agreement (the "Ground Lease") described on EXHIBIT A-17 attached
hereto), together with the Buildings and all other Improvements located on
the Land;

(ii) all rights and interests appurtenant to or benefiting the
Land and/or the Improvements, including, without limitation, (a) all
easements, rights of way, streets, ways, alleys or passages, all sewer
rights, water, water courses, water rights and powers, riparian rights, and
public places adjoining, benefiting or appurtenant to said Land, and any
other interests in property constituting appurtenances to the Land or the
Improvements, or which hereafter shall in any way belong, relate or be
appurtenant thereto and all land lying in the bed of any street, road or
avenue opened or proposed, in front of or adjoining the Land and (b) all
hereditaments, tenements, gas, oil, minerals and mineral rights and other
rights of every kind and nature whatsoever, relating to or located in, on or
under the Land or the Improvements and all other rights and privileges
thereunto belonging or appertaining, and all extensions, additions,
improvements, betterments, renewals, substitutions and replacements to or of
any of the rights and interests described in subparagraphs (a) and (b) above
(hereinafter, together with the items described in Granting Clause (i) and
the real property, if any, described in Granting Clause (iii) being
hereinafter sometimes referred to as the "Real Property Rights");

(iii) all real and personal property of whatever kind or nature
whatsoever used or useful in the operation of the Buildings, or any of them
or the other Improvements, or in any way related to the Land, the Buildings
of any of them or the other Improvements, whether located on, affixed to, or
attached to the Land, the Buildings or the other Improvements or otherwise
related thereto or arising therefrom, and whether tangible or intangible,
direct or indirect, fully matured or contingent, and all extensions,
additions, improvements, betterments, renewals, substitutions, and
replacements to or of any of the foregoing, including, without limitation all
machinery; all equipment; all screens, window shades, blinds, storm doors and
windows; all lighting, laundry, incinerating and power equipment; all
engines, boilers, machines, motors, furnaces, compressors and transformers,
all generating equipment; all pumps, tanks, ducts, conduits, wires, switches,
fans, switchboards, and other electrical equipment and fixtures; all
telephones, televisions, radios, remote control units, cable boxes, and other
electronic equipment and all vending machines; all piping, tubing, plumbing
equipment and fixtures; all heating, refrigeration, air conditioning,
cooling, ventilating, sprinkling, water, power and communications equipment,
systems and apparatus; all fire prevention, alarm and extinguishing systems
and apparatus; all lift, elevator and escalator equipment and apparatus; all
partitions, exterior and interior signs, gas fixtures, stoves, ovens,
refrigerators, garbage disposals and compactors, dishwashers, cabinets,
mirrors, mantles, floor coverings, carpets, rugs, draperies and other
furnishings and furniture installed or to be installed or used or usable in
any way in the operation of any Improvements or appurtenant facilities
erected or to be erected in or upon any of the Land; and all sculpture, art
and other artifacts; it being mutually intended, agreed and declared by the
parties hereto that all items of the foregoing property that now are or
hereafter become attached or affixed to any of the Land or the Improvements
in such a way as to constitute them "fixtures" under applicable law (the
"Fixtures"),

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shall, to the fullest extent permitted by law, be deemed to be and form a
part of the Land and Improvements and, for purposes of this Deed of Trust,
shall be deemed to be real estate subject to the lien created by this Deed of
Trust;

(iv) any and all additions and accessions to the foregoing, and
all proceeds thereof, including, without limitation, proceeds of the
conversion, voluntary or involuntary, of any of the foregoing into cash or
liquidated claims, including, without limitation, all Awards (as defined in
Section 1.9 hereof) and other payments as a result of any Taking (as defined
in Section 1.9 hereof), all Insurance Proceeds (as defined in Section 1.8
hereof), and all proceeds of the title insurance referred to in Section 1.3
hereof, together with all amounts received by the Beneficiary or the Trustee
or due and payable to the Trustee or the Beneficiary pursuant to this Deed of
Trust, including, without limitation, any unearned premiums or refunds of
premiums on any insurance policies covering all or any part of the Land or
Improvements and the right to receive and apply the proceeds of any
insurance, or of any judgments or settlements made in lieu thereof for damage
to or diminution of the Land or Improvements, in accordance with the terms of
this Deed of Trust;

(v) all real estate tax refunds and credits and all awards or
payments, including interest on any of them, and the right to receive the
same, which Grantor may have, which may be made with respect to any of the
Land or any Improvements whether from a Taking thereof or for any other
injury to, decrease in the value of, or other occurrence affecting any of the
Land or any Improvements, subject, in each case, to the rights of the
landlord under the Ground Lease or of tenants under any leases or subleases
of the Property to the extent such Ground Lease or other leases are not
subordinate to the terms of this Deed of Trust;

(vi) all leases and other agreements affecting the use,
enjoyment or occupancy of the Land, the Buildings and the Improvements or any
portion thereof heretofore or hereafter entered into, whether before or after
the filing by or against Grantor of any petition for relief under 11 U.S.C.
Section 101 et seq., as the same may be amended from time to time (the
"Bankruptcy Code") (the "Leases"), and all right, title and interest of
Grantor, its successors and assigns therein and thereunder including, without
limitation, cash or securities deposited thereunder to secure the performance
by the lessees of their obligations thereunder and all rents (as defined in
the Loan Agreements), additional rents, revenues, issues and profits
(including all oil and gas and other mineral royalties and bonuses, if any)
from the Land, the Buildings and the Improvements whether paid or payable
under Leases or otherwise and whether paid or accruing before of after the
filing by or against Grantor of any petition for relief under the Bankruptcy
Code (the "Rents") and all proceeds from the sale or other disposition of the
Leases and the right to receive and apply the Rents to the payment of the
Obligations;

(vii) all present and future licenses, contracts or other
agreements relating to the ownership of the Land and/or the Improvements
(including all of Grantor's rights under any contracts for the sale of any
portion of the Land or the Improvements, any purchase options, rights of
first refusal or similar rights of Grantor under any Ground Lease, and all
revenues and royalties under any oil, gas and mineral leases relating to the
Land) (collectively, the "Contracts") and revenues derived by the Grantor
therefrom and otherwise from the Land and Improvements;

(viii) all "general intangibles" (as defined the Uniform
Commercial Code in effect in the State of California and, to the extent a
broader definition is contained therein, in the State of New York) (the
"U.C.C.") relating to any of the Land or any of the Improvements, including,
without limitation, to the extent assignable, all rights relating to design,
development, operation, and use of the Land or Improvements, all certificates
of occupancy, zoning variances, building, use or other permits, approvals,
authorizations, licenses and consents obtained from any governmental agency
in connection with the development, use, operation or management of any of
the Land or any of the Improvements, all construction, service, engineering,
consulting, architectural and other similar contracts concerning the design,
construction, operation, occupancy and/or use of any of the Land or any of
the Improvements, all architectural drawings, plans, specifications, soil
tests, appraisals, engineering reports and similar materials relating to all
or any portion of the Land or Improvements, and all payment and performance
bonds or warranties or guarantees relating to any of the Land or any of the
Improvements; all rights in the Lockbox Account, the Cash Collateral Account,
and the Tax and Insurance Escrow Account and any investments of Rents, rights
of Grantor in the Management Agreement (as defined in the

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<PAGE>
Loan Agreement), the Contribution Agreement (as defined in the Loan
Agreement), Grantor's partnership agreement, and all rights under the Leases,
all trademarks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, service marks, logos, other source
and business identifiers, trademark registrations and applications for
registration used exclusively at or relating exclusively to any part of the
Property; all renewals, extensions and continuations-in-part of the items
referred to above; any written agreements granting to Grantor any right to
use any trademark or trademark registration at or in connection with any part
of the Property; and the right of Grantor to sue for past, present and future
infringements of the foregoing; and the right in the name and on behalf of
Grantor to appear in and defend any action or proceeding brought with respect
to any part of the Property and to commence any action or proceeding to
protect the interest of the Beneficiary in such Property;

(ix) all "accounts," "goods," "documents," "instruments," and
"chattel paper" (as those terms are defined in the U.C.C.), including,
without limitation, equipment, inventory, motor vehicles, all items of
personal property of the kind described in clause (iii) above, all stocks,
bonds, interests in mutual funds and other investments, all rights under
equipment leases, all bills of lading and warehouse receipts, and other
assets of any kind;

(x) all extensions, improvements, betterments, renewals,
substitutes and replacements of, and all additions and appurtenances to, the
Property, hereafter acquired by or released to Grantor or constructed,
assembled, or placed by Grantor thereon, immediately upon such acquisition,
release, construction, assembling or placement, as the case may be, and in
each such case, without any further mortgage, conveyance, assignment or other
act by Grantor, any of such extensions, improvements, betterments, renewals,
substitutes and replacements shall become subject to the lien of this Deed of
Trust, and the security and other interests created hereby, as fully and
completely, and with the same effect, as though now owned by Grantor and
specifically described herein; and

(xi) all other proceeds (including, without limitation, as
defined in the U.C.C.), both cash and noncash, of the foregoing which may be
sold or otherwise disposed of.

TO HAVE AND TO HOLD the said Property unto the Trustee, in trust for the
benefit of Beneficiary, and its or their successors and assigns forever to
secure payment to Beneficiary of the full principal and interest on the
Mortgage Note and the performance by Grantor of the other Obligations
thereunder, under this Deed of Trust and under the other Loan Documents;
PROVIDED, HOWEVER, that, except as otherwise provided in Schedule 5.11 to the
Loan Agreement, unless and until an Event of Default (as defined in Article
II hereof) shall have occurred and be continuing, Grantor shall have the
right to possess and enjoy the Property, and to receive the rents, issues,
and profits therefrom, subject to the terms of the Loan Agreement, the
Mortgage Note, this Deed of Trust, and the other Loan Documents; and
PROVIDED, FURTHER, that if the Grantor shall pay and satisfy in full the
principal of and interest on the Mortgage Note and all other monetary
Obligations which this Deed of Trust by its terms secures, then the lien of
this Deed of Trust shall be released by the Trustee to Grantor upon the
written request and at the expense of Grantor; and PROVIDED, FURTHER, that
nothing herein contained shall be construed as constituting Beneficiary or
the Trustee as a mortgagee-in-possession unless and to the extent Beneficiary
or the Trustee shall have taken actual possession of the Land and
Improvements; PROVIDED, FURTHER, that nothing contained in this Deed of Trust
shall be construed as imposing on Beneficiary or the Trustee any of the
obligations of the lessee under the Ground Lease, or of the lessor under any
lease of the Land or the Improvements, or of any contract party to any of the
Leases or the Contracts, unless the Beneficiary or the Trustee shall have
foreclosed the lien of this Deed of Trust or expressly assumed such
obligations in writing; and PROVIDED, FURTHER, that all items of the
foregoing Property that may constitute collateral of the kind in which a
security interest may be created and perfected under the Uniform Commercial
Code as in effect in the State in which the Land is located shall be subject
to the grant of security interest made in Section 1.17 hereof, which Section
1.17 shall be supplemental to, and shall not be deemed to limit, supersede or
impair, these Granting Clauses.

AND IT IS HEREBY COVENANTED AND AGREED by Grantor, for itself and its
heirs, legal representatives, successors, and assigns, that the Property is
to be held and applied subject to the terms herein set forth, and Grantor,
for itself and its heirs, legal representatives, successors, and assigns,
hereby covenants and agrees with Beneficiary (and the Trustee for the benefit
of Beneficiary, as applicable), as follows:

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ARTICLE I

1. COVENANTS, REPRESENTATIONS AND WARRANTIES

1.1 PAYMENT OF MORTGAGE NOTE; PERFORMANCE OF OTHER OBLIGATIONS

Grantor represents and warrants that it has duly authorized, executed,
issued and delivered the Mortgage Note, this Deed of Trust and the other Loan
Documents and covenants that it shall duly and punctually pay and perform all
of its Obligations as the same shall become due and payable, and shall
otherwise duly, fully and timely comply with all of the terms, covenants,
conditions, and agreements contained in (or incorporated into) this Deed of
Trust, the Mortgage Note and the other Loan Documents.

1.2 General Representations, Warranties and Covenants

Grantor hereby covenants, represents and warrants that:

1.2.1 Authority, Enforceability, Etc.

This Deed of Trust, the Mortgage Note and all of the other Loan Documents
executed by Grantor have been duly executed and delivered by Grantor pursuant
to authority legally adequate therefor, and Grantor has been and is
authorized and empowered by all necessary persons having the power of
direction over it to execute and deliver this Deed of Trust, the Mortgage
Note and each such other Loan Document and to carry out the transactions
contemplated herein and therein. Each of this Deed of Trust, the Mortgage
Note and each such other Loan Document is a legal, valid and binding
obligation of Grantor, enforceable against Grantor in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws affecting the
enforcement of creditors' rights generally and by general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity
or at law); and

1.2.2 No Defaults

Grantor is not now in default in any material respect under any
instruments or obligations relating to all or any part of the Property, and
no party has asserted in writing any material claim of default against
Grantor relating to all or any part of the Property. The execution and
delivery by Grantor of this Deed of Trust, the Mortgage Note, the Loan
Agreement or any other Loan Document, and the consummation of the
transactions contemplated hereby or thereby, will not result in any breach
of, or constitute a default under, any mortgage, lease, loan agreement,
credit agreement, trust indenture, deed of trust, or other instrument,
contract or agreement to which Grantor is a party or by which it or the
Property (or any part thereof) is bound or affected, nor do any such
instruments, contracts or agreements impose any obligations upon Grantor that
are inconsistent with the obligations imposed on Grantor hereunder or under
the Mortgage Note, the Loan Agreement or any other Loan Document; and

1.2.3 No Litigation

There are no actions, investigations, suits or proceedings (including,
without limitation, any condemnation or bankruptcy proceedings) pending or,
to Grantor's knowledge, threatened against or affecting any of the Property,
which may materially and adversely affect any of the Property or the validity
or enforceability of this Deed of Trust, the Mortgage Note, the Loan
Agreement, or any other Loan Document, at law or in equity, or before or by
any governmental authority, and Grantor is not in default with respect to any
writ, injunction, decree or demand of any court or any governmental authority
affecting any of the Property; and

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1.2.4 Compliance with Law, Etc.

All of the Property and the use, operation and maintenance thereof comply
in all material respects with (and Grantor is in compliance in all material
respects with) all restrictive covenants, zoning and subdivision regulations,
and ordinances and building codes applicable to the Property, and each
Building and other Improvement complies in all material respects with the
requirements of the Americans with Disabilities Act of 1990, and all rules,
regulations and orders issued pursuant thereto, to the extent applicable
thereto; and

1.2.5 Good Title

Grantor is well seized and possessed of, and is transferring to the
Trustee, good, valid and marketable fee simple title (or, with respect to
Land leased pursuant to a Ground Lease, leasehold title) in and to the Land
and Improvements, and good and valid title to all of the other Property, in
each case, free and clear of any mortgage, deed of trust, lien, claim,
option, encumbrance, encroachment, reservation, right of way, easement,
covenant, lease, condition or restriction, pledge, security interest,
hypothecation, assignment, assigned deposit arrangement, charge or defect of
any kind, or any preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement (all of
the foregoing being hereinafter referred to each individually as a "Lien" and
collectively as "Liens"), subject only to the following (the "Permitted Liens
and Encumbrances") (none of which Permitted Liens and Encumbrances do or will
materially or adversely interfere with (x) the ability of Grantor to pay the
Obligations in full or (y) the use, operation or value of any of the Property
as of the date hereof):

(i) Liens created by the Loan Documents in favor of the
Beneficiary (or the Trustee, as applicable);

(ii) Liens, if any, for taxes, assessments and other
charges that are not yet due or payable (or are due and payable but not yet
delinquent);

(iii) Applicable building and zoning laws and regulations
and other applicable laws and regulations affecting the use and occupancy of
any of the Property;

(iv) Liens of mechanics and materialmen currently
affecting the Property against which the Beneficiary has been adequately
insured by the applicable Title Insurance Policy described in Section 1.3
hereof and future liens of mechanics or materialmen for work or services for
which payment is not yet due or the payment of which is being contested by
appropriate proceedings in accordance with Section 1.5.3 hereof and as to
which Grantor has deposited with the Beneficiary the amounts required by
Section 6.2 of the Loan Agreement;

(v) Matters set forth on Schedule B to the Title
Insurance Policies;

(vi) Any applicable Ground Lease;

(vii) Easements, restrictions, covenants, reservations and
rights of way granted in the ordinary course of business for traffic
circulation, ingress, egress, parking, access, water and sewer lines,
telephone and telegraph lines, electric lines or other utilities or for other
similar purposes that are not encroached upon by the Improvements;

(viii) the Leases;

(ix) Liens securing purchase money financing or finance
leasing of the kind permitted by Section 1.5.2 hereof; and

(x) Matters described as "Permitted Liens" in the Loan
Agreement; and

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1.2.6 Covenant of Title

Grantor, at its own expense, does hereby and shall forever warrant and
defend to the Trustee for the benefit of Beneficiary, and its or their
successors and assigns forever, title to the Property as described in Section
1.2.5 and the lien and interest of the Trustee created by this Deed of Trust
on and in the Property, and the first priority thereof, against all claims
and demands of any and all persons whomsoever, and shall maintain and
preserve such title and lien so long as the Mortgage Note, the Loan
Agreement, this Deed of Trust, or any other Loan Document is outstanding and
until such time as all sums secured hereby and thereby have been paid in full
and all other Obligations have been duly performed; and

1.2.7 Negative Pledge

Except as set forth in Sections 1.5.2 and 1.23 hereof, during the term of
this Deed of Trust, Grantor shall not, directly or indirectly, assign,
transfer, pledge, convey, mortgage or encumber, or permit the assignment,
transfer, pledge, conveyance, mortgaging or encumbrance of, any or all of
Grantor's legal or equitable interest in the Property, other than Permitted
Liens and Encumbrances, without the prior written consent of the Beneficiary;
and

1.2.8 Necessary Permits

Grantor owns, or otherwise has the right to use or is in possession of,
all licenses, permits and government approvals or authorizations that are
required by applicable law to occupy and conduct its operations on or in the
Land and Improvements as currently conducted, except to the extent the lack
of any such license, permit, approval or authorization would not reasonably
be expected to materially adversely affect the occupancy of the Land or
Improvements or any portion thereof, the operation or value of the
Improvements or any portion thereof or the ability of Beneficiary or the
Trustee as applicable to exercise their rights or remedies hereunder; and

1.2.9 Flood Zone

No portion of the Improvements is located in an area identified by the
Secretary of Housing and Urban Development as an area having special flood
hazards pursuant to the National Flood Insurance Act of 1968 or the Flood
Disaster Act of 1973, as amended, or any successor law, or, if located within
any such area, Grantor has obtained and will maintain the insurance
prescribed in Section 1.7.1(iv); and

1.2.10 Separate Tax Lot; Assessments

(a) Each Individual Property is assessed for real estate tax purposes as
one or more wholly independent tax lot or lots, separate from any adjoining
land or improvements not constituting a part of such lot or lots, and no
other land or improvements is assessed and taxed together with the Property
or any portion thereof; and

(b) To Grantor's knowledge, there are no pending or, proposed, special
or other assessments for public improvements or otherwise affecting any of
the Property, nor, to Grantor's knowledge, are there any contemplated
improvements to any of the Property that may cause or result in any special
or other assessments.

1.3 Title Insurance

The Grantor has delivered or caused to be delivered to the Beneficiary
one or more prepaid Mortgagee's policies of title insurance (each a "Title
Insurance Policy" and collectively, the "Title Insurance Policies") issued by
First American Title Insurance Company or another title insurance company
reasonably satisfactory to Beneficiary (singly or collectively, the "Title
Company"), insuring the interest of Beneficiary as holder of a valid
first-priority mortgage, deed of trust, or similar lien upon good and
marketable fee simple title to the Land and

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Improvements (except that such insurance for any Individual Property subject
to a Ground Lease shall insure a leasehold interest in the Land and fee
simple title to the Improvements located thereon), in a total amount equal in
the aggregate to the original principal amount of the Mortgage Note, subject
only to Permitted Liens and Encumbrances. All proceeds received by
Beneficiary or the Trustee for any loss under such title insurance policy, or
under any title insurance policies delivered to Beneficiary in substitution
therefor or in replacement thereof, shall be received by Beneficiary and
distributed in the manner set forth in Section 2.4.5 of the Loan Agreement.

1.4 Recordation; Preservation of Lien

Grantor, at its expense, shall at all times cause this Deed of Trust and
all amendments and supplements hereto, and such financing statements,
continuation statements, and other instruments as may be reasonably required
by Beneficiary or the Trustee, or applicable law to be recorded, registered,
and filed in such manner and in such places as may be required or advisable
under applicable law in the good faith judgment of Beneficiary or the Trustee
to establish, preserve, maintain, and protect the lien of this Deed of Trust
on all or substantially all of the Property (including, without limitation,
any of the Property acquired after the execution hereof), and to perfect and
maintain the security interest granted by this Deed of Trust or any other
Loan Document with respect to the Property referred to herein, and shall pay
all recording, registration, filing, and other taxes, fees, and charges
relating thereto, and shall comply in all material respects with all laws,
rules, and regulations in connection therewith.

1.5 Taxes, Liens, and Permitted Encumbrances

1.5.1 Taxes

Subject to the right of contest described in Section 1.5.3 hereof,
Grantor shall pay all taxes, assessments (including, without limitation, all
assessments for public improvements or benefits, whether or not commenced or
completed prior to the date hereof), ground rents, water, sewer and other
rents, rates and charges, excises, levies, license fees, permit fees,
inspection fees, common area maintenance fees, dues and fees owing to
property owners' associations having jurisdiction over any of the Property
and other authorization fees and other charges (collectively, "Impositions"),
in each case whether general or special, ordinary or extraordinary, foreseen
or unforeseen, public or private, of every character (including all interest
and penalties thereon), which at any time from and after the date hereof may
be assessed, levied, confirmed or imposed on or in respect of, or be a lien
upon (i) the Property, or any part thereof or any rent therefrom or any
estate, right, title or interest therein, or (ii) any occupancy, use or
possession of or activity conducted on the Property or any part thereof.
Such payments shall be made before any fine, penalty, interest or cost may be
added for nonpayment. At Beneficiary's request, Grantor shall furnish to
Beneficiary official receipts or other satisfactory proof evidencing such
payments. Upon default by Grantor in the payment of any such tax, assessment
or other charge, unless the same is being properly contested in accordance
with Section 1.5.3 hereof, Beneficiary may (but shall have no obligation to)
pay or cause to be paid the amount thereof, together with any amount of
interest or penalties that may be due with respect thereto, and such amounts
(together with any expenses incurred by Beneficiary in connection therewith,
including, without limitation, reasonable attorneys' fees and charges) shall
be secured by this Deed of Trust and shall be repaid upon demand, together
with interest thereon at the Default Interest Rate specified in the Loan
Agreement.

1.5.2 Liens; Permitted Encumbrances

The Grantor shall not effect any financing using the Property or any part
thereof as security, except for (i) the Loan and (ii) purchase money
financings or finance leasing of particular items of furniture, fixtures and
equipment to the extent permitted under the Loan Agreement, and shall not
directly or indirectly create or permit or suffer to be created or to remain,
and will discharge, or promptly cause to be discharged, any Lien on or with
respect to the Property or any part thereof, or Beneficiary's or the
Trustee's, as applicable, interest therein, other than (1) this Deed of
Trust, and (2) the Permitted Liens and Encumbrances.

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1.5.3 Permitted Contests

Anything to the contrary contained herein notwithstanding, Grantor, at
its expense, may contest, by appropriate legal, administrative or other
proceedings conducted in good faith and with due diligence, the amount or
validity or application, in whole or in part, of any Impositions, including
any taxes, assessments, charges or other amounts required to be paid pursuant
to the provisions of this Section 1.5, or the application of any instrument
of record affecting the Property or any part thereof (other than the Loan
Documents), or any claims or judgments of mechanics, materialmen, suppliers,
vendors or other Persons or any Lien therefor, or any other charge or cost
imposed on the Grantor or all or any part of the Property and may withhold
payment of the same pending such proceedings if permitted by law; PROVIDED
that (i) in the case of any Impositions or liens therefor or any claims or
judgments of mechanics, materialmen, suppliers, vendors or other Persons or
any liens therefor, such proceedings shall suspend the collection thereof,
(ii) neither the Property nor any part thereof or interest therein would be
in danger of being sold, forfeited or lost during the pendency of such
contest, and the Grantor will pay or satisfy the underlying claim if the
Grantor does not prevail in the contest or if payment or satisfaction is
required to avoid the sale, forfeiture or loss of the Property (and, where
required by Section 6.2 of the Loan Agreement and as further security
hereunder, deposit with the Beneficiary, or, following the assignment
contemplated by Section 5.12 hereof, the Servicer, such amounts in connection
with such contest as are required by Section 6.2 of the Loan Agreement),
(iii) in the case of an obligation with respect to the insurance requirements
set forth in Section 1.7 hereof, the failure of Grantor to comply therewith
shall not impair the validity of any insurance required to be maintained by
Grantor under Section 1.7 or the right to full payment of any claims
thereunder, (iv) in the case of taxes, if an amount can be contested without
being paid, the Grantor shall deposit (where required by Section 6.2 of the
Loan Agreement) with the Beneficiary, or, following the assignment
contemplated by Section 5.12 hereof, the Servicer (to the extent not
deposited with Beneficiary or the Servicer, as applicable, pursuant to the
foregoing subsection (ii)) in accordance with Section 6.2 of the Loan
Agreement 125% of the amount being contested together with interest and
penalties reasonably expected to accrue thereon for so long as such amount is
due and payable and unpaid, (v) in the case of any utility service, any
contest or failure to pay will not result in a discontinuance of any such
service, and (vi) in the case of any instrument of record affecting the
Property or any part thereof, the contest or failure to perform under any
such instrument shall not result in the placing of any Lien on the Property
or any part thereof unless such Lien is bonded or otherwise discharged or
enforcement thereof is stayed.

1.5.4 No Credit for Payment of Taxes or Impositions

Grantor shall not be entitled to any credit against the principal of or
interest, if any, payable on the Mortgage Note, and the Grantor shall not be
entitled to any credit against any other amounts which may become payable
under the terms thereof or hereof, by reason of the payment of any tax on the
Property or any part thereof or by reason of the payment of any other
Imposition or other amount required to be paid hereunder. No deduction shall
be made or claimed from the taxable value of the Property or any part thereof
by reason of this Deed of Trust.

1.6 Care of the Property

1.6.1 Condition of the Property

Grantor shall keep the Property in good and clean order and condition and
repair in accordance with the requirements of the Loan Agreement, shall not
commit or suffer waste thereto, and shall not do or suffer to be done
anything that will increase the risk of fire or other hazard to the Property
or any material part thereof and shall in accordance with the requirements of
the Loan Agreement keep all Property used or useful in its business in good
repair, working order and condition, and from time to time make all necessary
or appropriate repairs thereto and renewals and replacements thereof.

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1.6.2 Alterations; Building Only

The Grantor shall not remove or demolish or materially alter the overall
design or structural character of the Improvements or impair the structural
integrity thereof or of any other part of the Property except in accordance
with Section 1.8 or Section 1.11 hereof, as applicable, and shall at all
times use the Property or cause the Property to be used only for the purpose
of operating the Land and Improvements in substantially the same manner as
currently operated; PROVIDED, HOWEVER, that Grantor shall be permitted to
make alterations and repairs to the Property without restriction as
reasonably necessary to maintain the Property in as good condition as existed
on the date hereof, reasonable wear and tear excepted.

1.6.3 Right to Inspect

Beneficiary and the Trustee or their representatives or both are hereby
authorized to enter upon and inspect the Property at their own cost (or, upon
the occurrence and during the continuation of an Event of Default, at the
Grantor's cost) at any time upon reasonable notice and during normal business
hours; PROVIDED, HOWEVER, that Beneficiary and the Trustee must at all times
use reasonable efforts to minimize any disruption to the operations on the
Land.

1.6.4 Compliance with Laws and Covenants

Grantor shall promptly comply with (a) all present and future Laws
affecting the Property or any part thereof, (b) all conditions, covenants,
restrictions, common area maintenance, reciprocal easement and similar
agreements affecting the Property or any part thereof and (c) all Laws
necessary for the operation and maintenance of the Improvements in the manner
they are currently operated and maintained. Grantor shall not initiate, join
in, acquiesce in, or consent to any change in any private restrictive
covenant, zoning law or other public or private restriction, limiting or
defining the uses which may be made of the Property or any part thereof; if
under applicable zoning provisions the use of all or any portion of the
Property is or shall become a nonconforming use, Grantor will not cause or
permit the nonconforming use to be discontinued or abandoned without the
express written consent of Beneficiary.

1.7 Insurance

1.7.1 Risks to be Insured

Grantor (or its designee), at the Grantor's expense, will obtain and
maintain in full force and effect at all times until all Obligations have
been fully paid and performed, with Qualified Insurance Companies (as that
term is defined in Section 1.7.2), insurance against the following risks:

(i) Loss and damage by fire and all other casualties on
or to the Property as are included in the form of casualty insurance commonly
referred to as "extended coverage" (including, without limitation, windstorm,
explosion and such other risks as are typically insured against by owners of
like properties in the area in which the Buildings are located) in such
amounts as are reasonably satisfactory to Beneficiary, but in no event less
than one hundred percent (100%) of the full replacement cost of the Property
(exclusive of excavation and foundations and without deduction for physical
depreciation) and in no event less than the amount required to prevent
Grantor from becoming a co-insurer within the terms of the applicable
policies and in no event less than the outstanding amount of the obligations;
such insurance shall contain an "Ordinance or Law Coverage" or "Enforcement"
endorsement if any of the Improvements or the use of the Property constitute
legal, non-conforming structures or uses;

(ii) Comprehensive public liability insurance on an
"occurrence basis" against claims for personal injury, including without
limitation, bodily injury, death or property damage occurring on, in or about
the Property with a combined single limit of not less than $3,000,000 with
respect to personal injury or

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death to one or more persons and with "umbrella" liability coverage of not
less than $25,000,000, or such greater amounts as may from time to time be
required by institutional lenders for similar loans;

(iii) Business interruption insurance for an amount
not less than the greater of (x) twenty-four months' gross income from
the Property and (y) estimated operating expenses (including debt
service) for the Property for a twenty-four month period that
commences on the effective date of said insurance policy or each
renewal thereof, as applicable (in either case on an "actual loss
sustained" basis) covering the same risks as are covered by the
policies described in Section 1.7.1(i);

(iv) If the Land is located in an area designated by the
U.S. Department of Housing and Urban Development as a flood hazard area,
insurance for the peril of flood as is available through the National Flood
Insurance Program;

(v) Broad form boiler and machinery insurance on a
"comprehensive" form in an amount adequate to provide protection against the
maximum amount of damage possible to building, improvements and contents
resulting from explosion or other occurrences relating to boilers, pressure
vessels, machinery and equipment on or about the Property;

(vi) Workers' compensation insurance in such forms and in
such amounts as may be required by the laws of each state in which any
Building is located;

(vii) A blanket policy of insurance insuring the Property
against damage by earthquake in an aggregate insured amount not less than $
26,615,000 and having a deductible of not more than 5% per unit subject to a
$100,000 minimum or such other earthquake insurance as may be required by
Section 8.3 of the Loan Agreement (a unit being defined as each Building on
an Individual Property); and

(viii) Such other insurance as is generally available on
commercially reasonable terms and is generally required by institutional
lenders on loans secured by properties similar to any Individual Property.

1.7.2 Qualified Insurers

An insurer satisfying the applicable requirements of this Section 1.7.2
shall be deemed to be a "Qualified Insurance Company." All primary
insurers must be authorized to issue insurance in the State of California.
All primary insurance coverage required by Section 1.7.1 (other than flood
insurance and workers' compensation insurance) shall be provided by one or
more insurers having a rating for claims paying ability of at least "AA" from
S&P and an equal or equivalent rating from at least one other Rating Agency.
If permitted by the laws of the State of California, the insurance required
by clause (vi) of Section 1.7.1 may be provided by a state approved and
regulated employer's self-insurance fund.

1.7.3 Policy Provisions

All insurance policies required by Section 1.7.1 shall be on forms, with
endorsements and with deductible amounts reasonably satisfactory to
Beneficiary (but in no event shall a deductible amount exceed ten percent
(10%) of the policy limits above). All policies of insurance required by
Sections 1.7.1(i), (iii), (iv), (v) and (vii) shall contain suitable
loss-payable and standard noncontribution mortgagee clauses acceptable to and
in favor of Beneficiary or the Trustee and their assigns. If an Event of
Default shall have occurred at the time of receipt of any insurance proceeds,
Beneficiary or the Trustee may, at Beneficiary's option, apply the same to
the repayment of the Obligations in accordance with the Mortgage Note or
other Loan Documents. In all other cases, proceeds of such insurance shall
be applied in the manner contemplated by Section 1.8 hereof.

All policies of insurance maintained by Grantor pursuant to this
Section 1.7.2 shall:

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(i) Name Beneficiary and the Trustee as additional
insureds or loss payees, as applicable, as their respective interests may
appear;

(ii) provide that Beneficiary shall be advised in writing
of any casualty insurance claims exceeding $100,000 before payment thereon is
made and, except in the case of worker's compensation and public liability
insurance, that all proceeds for losses of One Hundred Thousand Dollars
($100,000) or less, shall be paid to and adjusted by Grantor, and all
proceeds for losses of more than One Hundred Thousand Dollars ($100,000)
shall be paid to Beneficiary or Grantor in accordance with Section 1.8.3 and
adjusted by Grantor with approval of Beneficiary, pursuant to a mortgagee
endorsement acceptable to Beneficiary;

(iii) provide that the casualty insurance (or insurance
otherwise known as property insurance) shall not be impaired or invalidated
by virtue of (A) any act, failure to act, or neglect of Grantor, (B) the
occupation or use of the insured properties for purposes more hazardous than
permitted by the terms of the policy, (C) any foreclosure or other proceeding
or notice of sale relating to the insured properties, or (D) any change in
the possession of the insured properties without a change in the identity of
the holder of actual title to the Property (provided that with respect to
items (C) and (D), any notice requirements of the applicable policies are
satisfied);

(iv) provide that no material changes or mid-term
cancellation shall be effective until at least thirty (30) days after receipt
of written notice thereof by Grantor and Beneficiary (and no termination for
non-payment of premium shall be effective until at least ten (10) days after
receipt of written notice thereof by Grantor and Beneficiary), with
Beneficiary having the opportunity, but being under no obligation, to pay all
moneys or to do any act necessary to prevent such alteration, cancellation,
termination or expiration or to cause such renewal, the cost thereof,
together with interest thereon at the Default Interest Rate provided for in
the Loan Agreement, to be added to the indebtedness of Grantor under the
Mortgage Note and to be secured hereby;

(v) include effective waivers by the insurer of all
claims for insurance premiums against all loss payees and additional insureds
(other than Grantor) and, where applicable, all rights of subrogation against
any loss payee, additional insured or named insured;

(vi) permit Beneficiary to pay the premiums and continue
any insurance upon failure of Grantor to pay premiums when due, upon the
insolvency of Grantor, or through foreclosure or other transfer of title to
the Property or any portion thereof (it being understood that Grantor's
rights to coverage under such policies may not be assignable without the
consent of the provider); and

(vii) be reasonably satisfactory to Beneficiary in all
other respects.

The insurance required to be maintained by clauses (i), (ii), (iii),
(iv) and (v) of Section 1.7.1 may be provided by a blanket policy so long as
the blanket policy complies with the terms of this Section 1.7 and
Beneficiary is provided with reasonably satisfactory evidence that the policy
limits required hereunder are satisfied by such policy and that such coverage
and limits will be no less than those that would be provided under separate
policies even if there is a total loss of all properties covered by the
blanket policy.

1.7.4. Delivery of Certificates

Prior to the execution of this Deed of Trust, and thereafter not less
than fifteen (15) days prior to the expiration date of any policy required
pursuant to this Section 1.7, Grantor will deliver to the Beneficiary
original certificates of the insurers for all policies of insurance required
by this Deed of Trust, which shall bear notations evidencing the payment of
premiums then due and payable and the date through which said coverage is
made effective by the evidenced payment. Grantor also shall deliver to
Beneficiary from time to time, at Beneficiary's request, (i) schedules
setting forth all such insurance then in effect and (ii) certified copies of
all such policies.

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1.7.5. No Separate Insurance

Grantor will not take out separate insurance of the kind described in
clauses (i), (iii), (iv), (v) or (vii) of Section 1.7.1 or other forms of
casualty insurance concurrent in form or contributing in the event of loss
with that required to be maintained pursuant to this Section 1.7 unless such
insurance complies with Sections 1.7.2 and 1.7.3.

1.8. Damage to or Destruction of Property

1.8.1. Notice

In case of any material damage to or destruction of the Property or any
part thereof (each, a "Casualty"), Grantor will, promptly upon becoming aware
thereof, give written notice thereof to Beneficiary describing the nature and
extent of such damage or destruction.

1.8.2. Restoration

In case of a Casualty to one or more of the Individual Properties (each,
a "Casualty Property"), Grantor, whether or not the insurance proceeds
(hereafter "Insurance Proceeds") on account of such Casualty shall be
sufficient for such purpose, at its expense, will promptly commence and
complete the restoration, replacement or rebuilding of the Casualty Property
as nearly as possible to its value, condition and character immediately prior
to such Casualty (such restoration, replacement, and rebuilding, together
with any temporary repairs and property protection pending completion of the
work, being herein referred to as the "Restoration"), PROVIDED, HOWEVER, in
the event Restoration is not required under any applicable Ground Lease and
either (i) the Restoration adversely affects the cash flow from the Casualty
Property in any material respect and cannot reasonably be expected to be
completed within a period of 12 months after the date of the Casualty (or, if
shorter, by the date on which the proceeds of business interruption insurance
will no longer be available) or (ii) the extent of the damage makes it
impracticable in Grantor's good faith business judgment, to restore the
Casualty Property to substantially the same condition as existed prior to the
Casualty or the Casualty results in the permanent loss of access to the
Casualty Property or the Improvements thereon or (iv) the Casualty Property
and the use thereof after the Restoration would not be in material compliance
with and permitted under all applicable laws, or (v) the Insurance Proceeds
payable on account of such Casualty equal or exceed the Allocated Loan Amount
applicable to the Casualty Property, then Restoration shall not be required
or permitted and instead the Insurance Proceeds shall be collected and paid
over to Beneficiary up to the amount of the Allocated Loan Amount for such
Casualty Property (with any excess to be paid to Grantor) and the amount
thereof shall be held and applied by Beneficiary (or the Servicer on its
behalf in accordance with Section 5.12.3 hereof) (net of any amounts
necessary to avoid or eliminate any hazardous condition on the Casualty
Property or to prevent imminent and substantial physical deterioration of the
Casualty Property), (a) (i) if applied prior to the first day of the
Defeasance Period, to prepayment of the outstanding principal balance of the
Mortgage Note, without the requirement of a Yield Maintenance Payment, in
accordance with Section 2.7 of the Loan Agreement, or (ii) if applied during
the Defeasance Period and after the Securitization has occurred, to the
purchase of U.S. Obligations in accordance with Section 2.5 and Section 2.9
of the Loan Agreement, or (iii) if applied after the Defeasance Period, to
prepayment of the outstanding principal balance of the Mortgage Note, in
accordance with Section 2.10 of the Loan Agreement, without the requirement
of a Yield Maintenance Payment and (b) to the payment of all other
indebtedness which this Deed of Trust secures in such order as is
contemplated under the Loan Documents; PROVIDED, HOWEVER, that such
prepayment must be in an amount at least equal the greater of (A) the
Allocated Loan Amount for such Casualty Property and (B) the Net Sales
Proceeds received by Grantor from the sale of the Casualty Property or the
part thereof that remains following the Casualty (plus any remaining
Insurance Proceeds not previously applied to repayment of the Loan or
Restoration), but in no event more than the Release Price of such Casualty
Property, regardless of the amount of Insurance Proceeds, and shall be
payable by Grantor (and the amounts described in the immediately preceding
parenthetical phrase shall not be deducted from the Insurance Proceeds to the
extent that the same shall not be sufficient to pay the Allocated Loan Amount
plus such interest).

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1.8.3. Application of Insurance Proceeds or Awards

All Insurance Proceeds received by any one or more of Grantor,
Beneficiary or Trustee, on account of any Casualty affecting the Property or
any part thereof (less the costs, fees and expenses reasonably incurred by
Beneficiary or Trustee, as applicable, in the collection thereof, including,
without limitation, all adjusters' fees and expenses and reasonable
attorneys' fees and charges, which shall be deemed to be incurred for the
account of Grantor) shall be delivered to and held by Grantor, if such
Insurance Proceeds total 2.5% of the Allocated Loan Amount applicable to the
Casualty Property, or less, in the aggregate for a single Casualty or, if the
amount of such Insurance Proceeds is more than 2.5% of the Allocated Loan
Amount applicable to the Casualty Property, to Beneficiary to be held by
Beneficiary (or the Servicer on its behalf in accordance with Section 5.12.3
hereof) and applied in accordance with the terms hereof. Except as provided
in Section 1.8.2, all Insurance Proceeds shall be used and applied in either
case, so long as no Default or Event of Default shall have occurred and be
continuing, to reimburse Grantor for the cost of Restoration from time to
time as Restoration progresses, and advances of funds held by Beneficiary
shall be made within thirty (30) days after Grantor's written request for
reimbursement; PROVIDED, HOWEVER, that if the cost of Restoration as to which
Insurance Proceeds have been paid or are payable in connection with any
single Casualty exceeds or is expected to exceed 2.5% of the Allocated Loan
Amount applicable to the Casualty Property, Beneficiary shall have the right
to approve the plans and specifications for such Restoration before the
Restoration work begins, to appoint a Qualified Supervising Professional to
oversee the Restoration, and to require as a condition to the release of
funds to pay the costs of such Restoration (A) a certificate of the Qualified
Supervising Professional certifying (x) that the amount that Beneficiary is
requested to advance is necessary to pay invoices for work completed that
have been submitted to Grantor (and which have not previously been paid), (y)
that the amount of Insurance Proceeds and other funds of Grantor, if required
by this Section, that Beneficiary will hold following payment of the
requested advance is expected to be sufficient to complete the Restoration,
and (z) that the Restoration work for which such proceeds are requested has
been completed in accordance with the approved plans and specifications and
with applicable law, (B) lien waivers from all materialmen, laborers and
contractors who are to be paid with such advances, (C) an endorsement to the
title policy described in Section 1.3 hereof relating to the Casualty
Property insuring against mechanic's liens that may arise out of the
Restoration, and (D) such other documents as Beneficiary or the Trustee may
request; and PROVIDED, FURTHER, that if the cost of Restoration as to which
Insurance Proceeds have been paid or are payable in respect of the applicable
Casualty is (or is expected to be) 5% of the Allocated Loan Amount applicable
to the Casualty Property or less, in lieu of the documentation referred to in
clauses (A) and (B) of the preceding proviso, Beneficiary will accept a
certificate of an officer of the General Partner certifying to the matters
described in subparts (x), (y) and (z) of said clause (A). The balance of
the Insurance Proceeds held by Beneficiary or the Trustee, or both, shall at
no time be reduced below the amount necessary to complete the Restoration
(and any Restoration costs that cannot be paid out of the remaining balance
thereof as a result of this proviso shall be deposited by Grantor with the
Beneficiary, or its agent, promptly after demand therefor, out of Grantor's
own funds). Upon receipt by Beneficiary or the Trustee of the documents
required and the subsequent payment in full of the costs of Restoration, the
balance, if any, of any Insurance Proceeds shall be applied first, to the
Reserve Account to the extent the amount or deposit in the Reserve Account is
less than the Reserve Requirement, then if the Securitization has been
effected, to the Finance Trustee and the Servicer under the Pooling and
Servicing Agreement, if applicable, and thereafter shall be paid to Grantor
or any other Person entitled thereto; PROVIDED, HOWEVER, that all such
proceeds which pursuant to this Section 1.8.3 are payable to Grantor shall,
if an Event of Default has occurred and is continuing, be paid to Beneficiary
to be held and distributed in accordance with the provisions of Section
5.12.3 hereof.

1.9. Condemnation

1.9.1. Grantor to Give Notice, Etc.

In case of any taking during the term hereof of all or any part of the
Property, or the taking or transfer of any interest therein or right accruing
thereto, as the result of or in lieu or in anticipation of the exercise of
the right of condemnation or eminent domain by any governmental authority
(each hereinafter a "Taking"), Grantor will promptly give written notice
thereof to Beneficiary and Trustee describing the nature and extent of the
Taking

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or any potential Taking, or the nature of the proceedings and negotiations
for such Taking or potential Taking and the nature and extent of the Taking
or potential Taking which might result therefrom, as the case may be.
Trustee or Beneficiary, or both, may appear in any proceedings for a Taking
or potential Taking or any negotiations relating to a Taking or potential
Taking. Grantor will promptly give the Trustee and Beneficiary copies of all
notices, pleadings, determinations, and other papers related to any such
Taking or potential Taking proceeding. The Grantor will, in good faith and
with due diligence, file and prosecute its claims for any award or payment on
account of any Taking (hereinafter an "Award"), and will pay all costs and
expenses (including, without limitation, reasonable attorneys' and
accountants' fees and charges and the reasonable expenses of the Trustee and
of Beneficiary) in connection with any such Taking, including expenses
incurred in seeking and obtaining any Award. Such costs and expenses, to the
extent advanced or paid by Beneficiary or the Trustee, shall be deemed paid
on behalf of Grantor, shall constitute indebtedness secured by this Deed of
Trust, shall be repayable by Grantor upon demand and shall bear interest at
the Prime Rate (as defined in the Loan Agreement) plus one percentage point
(1%) from the date of demand until paid, provided that Trustee and
Beneficiary shall have no obligation to make such advances or payments.

1.9.2. Total and Substantial Taking

In the case of (i) a Taking of the fee or leasehold of an entire
Individual Property, or (ii) a Taking resulting in the imposition of a
perpetual easement on an entire Individual Property that materially impairs
the operation of such Individual Property, or (iii) a Taking that adversely
affects the cash flow from an Individual Property in any material respect and
as to which any necessary Restoration cannot reasonably be expected to be
completed within 12 months from the date of the Taking and Restoration as
defined in Section 1.8.2 is not required under any applicable Ground Lease or
not otherwise permitted under Section 1.8.2 or (iv) if a Ground Lease affects
an Individual Property, a Taking occurs that results in a termination of the
Ground Lease pursuant to its terms, then, in any such event, any Award shall
be collected and paid over to the Beneficiary to be held by Beneficiary in
accordance with the provisions of Section 1.8.3 and Section 5.12.3 hereof and
the amount thereof (net of any amounts necessary to avoid or eliminate any
hazardous condition on the Individual Property and/or to prevent imminent and
substantial physical deterioration of the Individual Property), shall be
applied by Beneficiary (a) (i) if applied prior to the first day of the
Defeasance Period, to prepayment of the outstanding principal balance of the
Mortgage Note without the requirement of a Yield Maintenance Payment, or (ii)
if applied during the Defeasance Period and after the Securitization has
occurred, to the purchase of U.S. Obligations in accordance with Section 2.5
of the Loan Agreement, or (iii) if applied after the Defeasance Period, to
prepayment of the outstanding principal balance of the Mortgage Note in
accordance with Sections 2.6 and 2.7 of the Loan Agreement, without the
requirement of a Yield Maintenance Payment and (b) to the payment of all
other indebtedness which this Deed of Trust secures in such order as is
contemplated under the Loan Documents; PROVIDED, HOWEVER, that such
prepayment must be in an amount at least equal to the greater of (A) the
Allocated Loan Amount and (B) the sum of the Net Sales Proceeds received by
Grantor from the sale of the affected Individual Property or the part thereof
that remains following the Taking (plus any remaining Award not previously
applied to repayment of the Loan or Restoration), but in no event more than
the Release Price, regardless of the amount of the Award and shall be payable
by Grantor (and the amounts described in the immediately preceding
parenthetical phrase shall not be deducted from the applicable Award to the
extent that the same shall not be sufficient to pay the Allocated Loan Amount
plus such interest).

1.9.3. Partial and Temporary Taking

In the case of any Taking other than a Taking referred to in Section
1.9.2 hereof, and in case such Taking requires repairs to or Restoration of
the affected Individual Property in order to maintain the quality of the
operations of the Individual Property, any Award shall be paid over to
Grantor or Beneficiary, as applicable, to be used or to be held and
distributed in accordance with the provisions of Sections 1.8.3 and 5.12.3
hereof in the same manner as if such Taking were a Casualty affecting such
Individual Property and as if such Award constituted Insurance Proceeds
relating thereto, except that any amount of the Award not used to pay for any
necessary Restoration shall be applied by Beneficiary to the prepayment of
the Mortgage Note, and to the payment of all other indebtedness which this
Deed of Trust secures, all in the manner contemplated by Section 2.4.3 of the
Loan Agreement.

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1.10 Notices Concerning the Property

Grantor shall deliver to Beneficiary promptly upon receipt of same,
copies of all notices, certificates, documents, and instruments received by
it which materially affect the Property as a whole, any Individual Property
or Beneficiary's rights hereunder.

1.11 Alterations

1.11.1 Alteration Conditions

Provided that no Event of Default shall have occurred and be continuing,
Grantor may, subject to the terms of this Section 1.11.1 undertake any
alteration, expansion, improvement, demolition or removal (each, an
"ALTERATION") of any Individual Property or any portion thereof so long as
such Alteration (i) is undertaken with Beneficiary's prior written consent
where the estimated cost of the Alteration exceeds 5% of the Allocated Loan
Amount applicable to such Individual Property, (ii) is undertaken in
accordance with the applicable provisions of this Deed of Trust and the other
Loan Documents, (iii) is permitted by any applicable Ground Lease, (iv) is
paid for from reserves established by the Grantor or from capital
contributions by the partners of Grantor that are deposited with Beneficiary
or the Servicer, as applicable, prior to the commencement of such work, which
amounts (including, in either case, additional deposits made from time to
time to prevent a deficiency between the amount then on deposit with
Beneficiary and the amount reasonably estimated at such time to complete the
Alteration) shall be held by Beneficiary (or Servicer on its behalf in
accordance with Section 5.12.3 hereof), and (v) could not reasonably be
expected (A) to decrease the value of the Individual Property, (B) to impair
the utility and operation of the Individual Property in a manner consistent
with its current use and operation and as required by the Loan Documents, (C)
upon completion, to reduce the Net Operating Income from the Individual
Property below the level available immediately prior to commencement of such
Alteration (except in the case of tenant improvement work), (D) to result in
any Lien being placed on the Individual Property (other than mechanics' liens
filings for amounts not yet due and payable that are not yet forecloseable
under the applicable Laws of the State of California) or (E) to adversely
affect the ability of the Grantor to pay and perform the Obligations or make
principal and interest payments with respect to the Mortgage Note as and when
due. Any Alteration which involves an estimated cost of more than 5% of the
Allocated Loan Amount applicable to the Individual Property shall be
conducted under the supervision of a Qualified Supervising Professional
selected by Beneficiary, to oversee such Alteration, and no such Alteration
as to which plans and specifications are required by any Laws and which
involves an estimated cost of more than 5% of the Allocated Loan Amount
applicable to the Individual Property shall be undertaken until detailed
plans and specifications and cost estimates therefor have been approved in
writing by Beneficiary and such Qualified Supervising Professional. Such
plans and specifications may be revised at any time and from time to time
provided that material revisions of such plans and specifications are
approved by Beneficiary, such approval not to be unreasonably withheld,
together with the written approval thereof by such Qualified Supervising
Professional. All work done in connection with any Alteration shall be
performed with due diligence in a good and workmanlike manner, all materials
used in connection with any Alteration shall not be less than the standard of
quality of the material currently used at the Individual Property, and all
work performed and all materials used shall be in accordance with all
applicable Laws and insurance requirements.

1.11.2 Right to Inspect

Beneficiary and any Persons authorized by it at all reasonable times and
upon reasonable notice may enter and examine the Individual Property and may
inspect all work done, labor performed and materials furnished in respect of
any Alteration. Beneficiary shall not have any duty to make any such
inspection and shall not have any liability or obligation for making or not
making any such inspection.

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1.11.3 Cooperation

Beneficiary will cooperate with Grantor and execute and deliver to
Grantor such instruments and agreements as are reasonably requested of it by
Grantor, at Grantor's expense, in order to consummate or facilitate any
Alteration permitted hereby (provided the same shall not subject Beneficiary
to any risk of liability or cost not paid for by Grantor).

1.12. Indemnification by the Grantor

Grantor shall protect, defend, and indemnify Beneficiary and the Trustee,
and each of Beneficiary's and the Trustee's officers, directors and employees
(collectively the "Indemnitees") from and against any and all losses,
liabilities, obligations, claims, damages, penalties, causes of action,
fines, judgments, penalties, charges, costs, and expenses (including, without
limitation, reasonable attorneys' and accountants' fees and charges, whether
based on private agreements or in tort, contract, implied or express
warranties, statute, regulation, common law, or otherwise, imposed upon or
incurred by or asserted against such Indemnitee (each a "Claim" and
collectively "Claims") including Claims in connection with any investigative,
administrative or judicial proceedings, by reason of:

1.12.1. the Lien of this Deed of Trust on the Property or any
interest therein, or receipt of any rent or other sum from the Property;

1.12.2. any accident to, injury to or death of persons or loss of
or damage to property occurring on or about the Property or the adjoining
sidewalks, curbs, vaults or vault space, if any, streets or ways;

1.12.3. the ownership, leasing, use, non-use or condition of the
Property or the adjoining sidewalks, curbs, vaults or vault space, if any,
streets or ways;

1.12.4. any failure on the part of Grantor to perform or comply
with any of the terms of this Deed of Trust, the Mortgage Note, the Loan
Agreement, any other Loan Document, or any agreement or document referred to
herein or therein; or

1.12.5. performance of any labor or services or the furnishing of
any materials or other property in respect of the Property or any part
thereof for construction or maintenance or otherwise.

The provisions of this Section 1.12 shall survive the termination of
this Deed of Trust; PROVIDED, HOWEVER, that, notwithstanding anything
contained in this Section 1.12 to the contrary, the foregoing indemnity
provisions in favor of any Indemnitee shall not extend to claims arising out
of the gross negligence or willful misconduct of such Indemnitee. Any
amounts payable to any Indemnitee under this Section 1.12 which are not paid
within ten (10) days after written demand therefor shall bear interest at the
lesser of (i) a rate per annum equal to the Default Interest Rate or (ii) the
maximum rate per annum then permitted by law from the date of such demand
and, to the fullest extent permitted by law, shall be secured by this Deed of
Trust. In the event any action, suit or proceeding is brought against any
Indemnitee by reason of any such occurrence, notice thereof shall be given to
Grantor promptly after such Indemnitee becomes aware of any Claim or threat
of Claim against which such Indemnitee is indemnified hereunder. Grantor,
upon the request of the Indemnitees and at Grantor's expense, shall resist
and defend such action, suit or proceeding or cause the same to be resisted
and defended by counsel designated by Grantor and reasonably acceptable to
the Indemnitees. The Indemnitees will, insofar as is possible without
risking material conflicts of interests, coordinate their claims under this
Section 1.12 and act through a single counsel.

1.13. Expenses

Grantor, on demand, shall pay or reimburse (a) Beneficiary and the
Trustee for all reasonable costs and expenses, including, without limitation,
reasonable attorneys' fees and charges, incurred by Beneficiary or the

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Trustee in any action, legal proceedings or dispute of any kind with respect
to which Beneficiary or the Trustee are made parties, or in which any appear
as party plaintiff or defendant, affecting the Property or any part thereof,
this Deed of Trust or the indebtedness secured hereby, including, without
limitation, any Taking involving any of the Property or any action to protect
the security hereof or thereof and (b) the Finance Trustee and the Servicer,
if applicable, for any amounts required to be paid pursuant to the Pooling
and Servicing Agreement and any amounts described in clauses (a) and (b)
above that are paid by Beneficiary or the Trustee and not reimbursed as
aforesaid shall be added to the Obligations secured by the Lien of this Deed
of Trust.

1.14. Monthly Escrow Deposits

Without limiting its obligations under the Cash Management Procedures,
Grantor, upon request of Beneficiary, following an Event of Default, shall
deposit in escrow with Beneficiary monthly, commencing on the due date of the
next installment of principal and/or interest under the Mortgage Note, a sum
which, in the good faith estimation of Beneficiary shall be equal to
one-twelfth of the taxes, assessments, and hazard insurance premiums on the
Property coming due in the next succeeding 12 months, and such escrow
deposits shall be held by the Beneficiary free of any liens or claims on the
part of creditors, and shall, except as otherwise provided in this Section
1.14, be used by Beneficiary to pay taxes, assessments, and insurance
premiums on the Property as the same accrue and are payable. To the extent
anything in this Section 1.14 conflicts with the requirements of the Cash
Management Procedures, the provisions of the Cash Management Procedures shall
be controlling. If the amount of such escrow deposits is insufficient to pay
the taxes, assessments, and insurance premiums in full as the same become
payable, Grantor shall immediately pay to Beneficiary such additional sums as
are necessary in order for Beneficiary to pay such taxes, assessments, and
insurance premiums in full as they become due. If the amount of such escrow
deposits shall exceed payments made by Beneficiary for such taxes,
assessments, and insurance premiums, the excess so deposited shall be
credited to subsequent deposits to be made by Grantor under this Section
1.14. Upon the occurrence and during the continuation of any Event of
Default, Beneficiary, may, at its option, apply any money in the fund
resulting from said escrow deposits to the payment of the Obligations in the
manner and in the order contemplated by Section 2.4.3 of the Loan Agreement.

1.15 Further Assurances

At any time, and from time to time, upon request by Beneficiary or the
Trustee, as applicable, Grantor, at its expense, shall make, execute,
deliver, and record, or cause to be made, executed, delivered, and recorded,
any and all further instruments, certificates, and other documents, and shall
take all such further actions as may, in the reasonable opinion of
Beneficiary or the Trustee be necessary or desirable in order to effectuate,
complete, perfect, continue, and/or preserve the obligations of Grantor under
this Deed of Trust, the lien hereof, and all modifications, extensions, and
other amendments hereof or hereto.

1.16 Additions to Security

All right, title, and interest of Grantor in and to all extensions,
improvements, betterments, renewals, substitutes, and replacements of, and
all additions and appurtenances to the Property, hereafter acquired by or
released to the Grantor or constructed, assembled or placed by Grantor on the
Property, and all conversions of the security constituted thereby,
immediately upon such acquisition, release, construction, assembling,
placement or conversion, as the case may be, and in each such case, without
any further pledge, grant of security interest, conveyance, assignment or
other act by Grantor of any kind, shall, to the fullest extent permitted by
law, become subject to the lien of this Deed of Trust as fully and
completely, and with the same effect, as though now owned by Grantor and
specifically described in the granting clauses hereof, but at any and all
times Grantor shall execute and deliver to Beneficiary or the Trustee, as
applicable, any and all such further assurances, deeds of trust, conveyances
or assignments thereof as Beneficiary or the Trustee, as applicable, may
reasonably require for the purpose of expressly and specifically subjecting
the same to the lien of this Deed of Trust.

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1.17. U.C.C. Security Agreement and Fixture Filing

1.17.1 Grant of Security

This Deed of Trust is intended to be, among other things, a security
agreement within the meaning of the Uniform Commercial Code as in effect in
each of the State of New York and the State of California with respect to all
Property in which a security interest may be created and perfected under the
Uniform Commercial Code (the "U.C.C. Collateral"). Grantor hereby grants to
Beneficiary a security interest in and to all of Grantor's right, title, and
interest in all such U.C.C. Collateral to secure the Obligations. Grantor
hereby agrees that it will not change the location of its principal place of
business or the place where its books and records are kept from the location
described in Section 5.5 of the Loan Agreement without first giving
Beneficiary at least thirty (30) days' advance written notice thereof. Any
completely executed counterpart of this instrument may be filed as a mortgage
on real property or fixtures, as a security agreement or financing statement
on personal property, or as both.

1.17.2. Financing Statements

Grantor shall cause financing and continuation statements and other
instruments with respect to the U.C.C. Collateral at all times to be kept
recorded, filed or registered in such manner and in such places as may be
required by law as fully as possible to evidence, perfect and secure the
interests of Beneficiary in all of the U.C.C. Collateral, and shall pay all
filing fees in connection therewith.

1.17.3. Multiple Remedies

If an Event of Default shall have occurred and be continuing, Beneficiary
shall have the option of proceeding, to the extent permitted under applicable
law, as to both real and personal property in accordance with its rights and
remedies in respect of the real property as an alternative to proceeding in
accordance with the provisions of the U.C.C., and Beneficiary may exercise
any and all of the other rights of a secured party under the U.C.C. All of
Beneficiary's rights and remedies hereunder, under any other Loan Document,
at law, under statute or otherwise shall be deemed cumulative and not
exclusive or exhaustive, and the exercise of any one remedy shall not impair
Beneficiary's right simultaneously or at any time or in any order to exercise
any other remedy nor shall the exercise of any remedy in one case impair or
otherwise affect Beneficiary's right or ability to exercise such remedy
contemporaneously or again in the same case or in any other case.

1.17.4. Waiver of Rights

To the extent permitted under applicable law, Grantor waives all rights
of redemption after foreclosure and all other rights and remedies of a debtor
under the Uniform Commercial Code or other applicable law, and all
formalities prescribed by law relative to the sale or disposition of the
U.C.C. Collateral (other than notice of sale) after the occurrence and during
the continuation of an Event of Default and all other rights and remedies of
Grantor with respect thereto. In exercising its right to take possession of
the U.C.C. Collateral upon the occurrence and during the continuation of an
Event of Default hereunder, Beneficiary, personally or by its agents or
attorneys, and subject to the rights of any Tenant (as hereinafter defined),
may enter upon any part of the Land without being guilty of trespass or any
wrongdoing, and without liability for damages thereby occasioned, except
damages arising from Beneficiary's gross negligence or willful misconduct.
In the event Beneficiary elects to proceed with respect to the U.C.C.
Collateral, separately from the real property, Beneficiary shall give at
least ten (10) days' notice of the sale of the U.C.C. Collateral, which shall
for all purposes be deemed to be commercially reasonable.

1.17.5. Expenses of Disposition of the Properties

Grantor shall reimburse the Beneficiary, on demand, for all reasonable
expenses of retaking, holding, preparing for sale, lease or other use or
disposition, selling, leasing or otherwise using or disposing of the U.C.C.

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Collateral which are incurred, including all reasonable attorneys' fees and
expenses, and all such expenses shall be added to Grantor's Obligations
secured hereby.

1.17.6. Fixture Filing

To the fullest extent permitted by law, this instrument, upon recording
or registration in the real estate records of the proper office of each City
or County in which a Building is located, shall constitute a "fixture-filing"
within the meaning of Sections 9-313 and 9-402 of the U.C.C. (or the local
state-law equivalents of such sections). The address of the Grantor, which
is the "Debtor" for purposes of the U.C.C. and this Section 1.17, and
Beneficiary, which is the "Secured Party" for purposes of the U.C.C. and this
Section 1.17, from whom information regarding the U.C.C. Collateral may be
obtained, are as stated in Section 5.1 of this Deed of Trust. Grantor agrees
to sign any separate "fixture filing" financing statements or similar
instruments as Beneficiary may request to confirm and perfect the security
interest in fixtures intended to be created by this Section 1.17.6.

1.18. Ground Leases

1.18.1. Ground Lease

Grantor shall timely perform and observe or cause to be performed or
observed in all material respects the terms, covenants and conditions
required to be performed and observed by Grantor under the Ground Leases, if
any, such that there will be no termination, loss or forfeiture of any of the
Ground Leases and no material and adverse impairment of the value of any
Individual Property or the Beneficiary's interest under this Deed of Trust,
including without limitation, the following:

(i) Pay when due, all payments (including without
limitation, payments of rent) and promptly perform all of the covenants and
agreements required to be paid, performed and observed by Grantor under each
Ground Lease and do all things necessary to preserve and to keep unimpaired
its rights thereunder;

(ii) Promptly notify Beneficiary of any default under any
Ground Lease of which Grantor is aware and provide Beneficiary with copies of
any notices delivered in connection therewith;

(iii) Promptly enforce the performance and observance in
all material respects of all of the covenants and agreements required to be
performed and/or observed by the landlord under each Ground Lease.

1.18.2. No Amendments

Without the prior written consent of Beneficiary, Grantor shall (i) not
(A) cancel, release, terminate or surrender any Ground Lease, if any, or
permit any cancellation, release, termination or surrender thereof, or (B)
amend, modify or alter the terms of any Ground Lease in any material respect,
or (C) waive, excuse, condone or in any way release or discharge in any
material respect the other party or parties thereto of or from the
obligations, covenants, conditions and agreements by such party to be
performed thereunder, (ii) give Beneficiary prompt notice of any notice of
default from the lessor under a Ground Lease, which notice shall include a
copy of the notice given or received by it, whether or not Beneficiary may be
entitled to such notice directly from such lessor, (iii) promptly furnish to
Beneficiary upon Beneficiary's reasonable request any and all information
concerning the performance by Grantor of the provisions of any Ground Lease,
and (iv) permit Beneficiary or its representative at all reasonable times to
make investigation or examination concerning the performance by it of the
provisions of each Ground Lease. Within ten (10) days after receipt of a
written request from Beneficiary, Grantor shall deposit with Beneficiary any
and all documentary evidence received by Grantor showing compliance by it
with the provisions of a Ground Lease; within fifteen (15) days after
receipt, Grantor shall deposit with the Beneficiary a copy of any notice or
other instrument or document received or given by it in any way relating to
or

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affecting a Ground Lease which may concern or affect materially the rights of
the parties under the estate of the lessor or the lessee in or under a Ground
Lease, if any.

1.18.3. Legal Actions under Agreements

If any legal action or proceeding shall be instituted to evict Grantor
under any Ground Lease, to terminate any Ground Lease, or for any other
purpose materially affecting any Ground Lease, Grantor will, promptly upon
service thereof on or to it, deliver to Beneficiary a copy of each petition,
summons, complaint, notice of motion, order to show cause and or any other
provisions, pleadings and papers, however designated, served in any such
action or proceeding. Grantor shall consult with Beneficiary prior to
instituting any action or proceeding against the lessor in connection with
such Ground Lease, but nothing herein shall obligate Beneficiary to become a
party to or participate in any such action or proceeding.

1.18.4 Right to Cure

Notwithstanding any other provision of this Deed of Trust or any Ground
Lease, if Grantor shall fail so to do, Beneficiary may (but shall not be
obligated to) take any such action that Beneficiary reasonably deems
necessary to prevent, mitigate or cure, in whole or in part, any default by
Grantor under any Ground Lease, provided that Beneficiary shall have first
given the Grantor notice of Beneficiary's intent so to act and a reasonable
time for Grantor to act to prevent or cure such default (unless there is
inadequate time for such notice without risking further damage to the
applicable Individual Property or any material adverse effect thereon or on
Beneficiary's interest therein) and if Grantor fails so to act, Beneficiary
may so act at the cost and expense of Grantor, and upon the receipt by
Beneficiary of any written notice of any such default by Grantor thereunder,
Beneficiary may rely thereon, and such notice shall constitute full authority
and protection to Beneficiary for any action taken by Beneficiary or its
agents in good faith reliance thereon. Nothing in this Section 1.18.4 shall
limit Grantor's rights under any Ground Lease to contest issues concerning
requirements of law or other similar matters to the extent permitted under
any such Ground Lease.

1.18.5. Notice of Arbitration or Appraisal

Grantor shall give the Beneficiary prompt notice of the commencement of
any arbitration or appraisal proceeding under and pursuant to the provisions
of any Ground Lease. Beneficiary shall have the right to participate in any
such arbitration or appraisal proceeding.

1.18.6. Additional Ground Lease Provisions

1.18.6.1

Upon the occurrence and during the continuation of an Event of
Default, Grantor shall not make any election or give any consent or approval
for which a right to do so is conferred upon the Grantor, as lessee under any
Ground Lease, without the Beneficiary's prior written consent. Upon the
occurrence and during the continuation of an Event of Default, all such
rights, together with all of the Grantor's rights, as lessee, to terminate,
cancel, modify, change, supplement, alter or amend any Ground Lease, shall
vest in and be exercisable solely by Beneficiary. In the event that Grantor,
as lessee under a Ground Lease, exercises any option or right to purchase any
parcel of land and/or improvements located thereon, which option or right is
granted under a Ground Lease or under a separate agreement, then upon the
vesting of the title of such parcel in it, the lien of this Deed of Trust
shall, pursuant to Section 1.18.6.3 hereof, to the fullest extent permitted
by applicable law, attach to and cover and be a Lien upon the fee title or
such other estate so acquired, and, to the fullest extent permitted by
applicable law, such fee title or other estate shall, without further
assignment, mortgage, conveyance or additional documentation of any kind,
become and be subject to the Lien of and be covered by this Deed of Trust.

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1.18.6.2

(a) To the extent permitted by applicable law, if there
shall be filed by or against Grantor a petition under the Bankruptcy Code and
Grantor, as lessee under the Ground Leases, shall determine to reject one or
more of the Ground Leases pursuant to Section 365(a) of the Bankruptcy Code,
Grantor shall give Beneficiary not less than ten (10) days' prior written
notice of the date on which Grantor shall apply to the Bankruptcy Court for
authority to reject a Ground Lease. Beneficiary shall have the right, but
not the obligation, to serve upon Grantor within such ten (10) day period a
notice stating that Beneficiary demands that Grantor assume such Ground Lease
and assign such Ground Lease to Beneficiary pursuant to Section 365 of the
Bankruptcy Code. If Beneficiary shall serve upon Grantor the notice
described in the preceding sentence, Grantor shall not seek to reject such
Ground Lease and shall comply with the demand provided for in the preceding
sentence.

(b) Grantor acknowledges that, pursuant to Section 365 of
the Bankruptcy Code, it is possible (although not intended hereby) that a
trustee in bankruptcy of the lessor under a Ground Lease (or the lessor under
a Ground Lease as a debtor-in-possession) could reject such Ground Lease, in
which case Grantor as lessee under such Ground Lease could have the election
described in Section 365(h) of the Bankruptcy Code (which election, as it may
be amended or revised from time to time, and together with any comparable
right under any other state or federal law relating to bankruptcy,
reorganization or other relief for debtors, whether now or hereafter in
effect, is called the "Election") to treat such Ground Lease as terminated by
such rejection or, in the alternative, to remain in possession for the
balance of the term of such Ground Lease and any renewal or extension thereof
that is enforceable by the lessee under such Ground Lease under applicable
non-bankruptcy law. Grantor shall not terminate or permit termination of
such Ground Lease by exercise of the Election without the prior written
consent of Beneficiary and any such Election (without the prior written
consent of Beneficiary) shall be null and void. Because each Ground Lease is
a significant part of the Beneficiary's security for the Loan, Beneficiary
does not anticipate that it would consent to termination of any Ground Lease
and shall not under any circumstances be obliged to give such consent.
Grantor acknowledges and agrees that the Election is in the nature of a
remedy and is not a property interest which can exist separate from a Ground
Lease. Therefore, it agrees that exercise of the Election in favor of
preserving the right to possession under any Ground Lease shall not be deemed
to constitute a taking or sale of any of the Property by Beneficiary and
shall not entitle Grantor to any credit against Beneficiary.

1.18.6.3

Unless Beneficiary shall otherwise elect, there shall be no
merger of any Ground Lease or any interest therein, or of the leasehold
estate created thereby, with the fee estate in the applicable Land or any
portion thereof by reason of the fact that such Ground Lease or such interest
therein or such leasehold estate may be held directly or indirectly by or for
the account of any Person who shall hold the fee estate in the applicable
Land or any portion thereof or any interest of the lessor under a Ground
Lease.

1.18.6.4

In the event that Grantor intends to acquire fee title to
leased Land as described in Section 1.18.6.1 hereof, it shall give
Beneficiary not less than ten (10) days' prior written notice of its
intention so to do.

1.18.6.5

Grantor shall promptly furnish to Beneficiary upon the
Beneficiary's reasonable request any and all information concerning the
performance by it of the provisions of each Ground Lease and shall permit the
Beneficiary or its representative at all reasonable times to make
investigation or examination concerning the performance by it of the
provisions of each Ground Lease. Within ten (10) days after receipt by
Grantor, Grantor shall deliver to Beneficiary a copy of any notice,
communication, plan, specification or other instrument or document received
or given by it in any way relating to or affecting any Ground Lease which may
materially

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concern or affect the rights of Grantor or the rights or estate of the lessor
or the lessee in or under such Ground Lease or the Land leased thereby.

1.18.6.6

Grantor shall do, or cause to be done, all things necessary to
preserve and keep unimpaired its rights as lessee under each Ground Lease and
will enforce the material obligations of the lessor under each Ground Lease
to the end that it may enjoy all of the rights granted to it thereunder.

1.18.7 Representations and Warranties Regarding Ground Lease

Grantor hereby represents and warrants that (i) each Ground
Lease is in full force and effect as between the parties thereto, (ii)
Borrower is not in default under any Ground Lease and, to the knowledge of
Borrower, there are no defaults by the other party thereto, (iii) a true and
complete copy of each Ground Lease, as amended, has been delivered to
Beneficiary and each Ground Lease constitutes the entire agreement with the
landlord thereunder, (iv) to the knowledge of Grantor, there is no existing
default or event of default which with the passage of time and/or the giving
of notice or both would constitute a default under a Ground Lease by any
party thereto, (v) each Ground Lease permits the interest of Grantor as
lessee thereunder to be encumbered by a mortgage, (vi) the term of each
Ground Lease (including all renewal options of Borrower, as lessee) extends
to a date not earlier than June 10, 2012.

1.19. Compliance with Access Laws

Grantor shall cause the Buildings and the other Improvements and the Land
to comply in all material respects with the requirements of the Americans
with Disabilities Act of 1990, all state and local laws and ordinances
related to access by the handicapped or disabled and all rules, regulations,
and orders issued pursuant thereto including, without limitation, the
Americans with Disabilities Act Accessibility Guidelines for Buildings and
Facilities (collectively, the "Access Laws"), to the extent such Access Laws
are applicable to the Buildings and the other Improvements, and give prompt
notice to Beneficiary of the receipt by Grantor of any complaints related to
violation at the Buildings or the other Improvements of any Access Laws and
of the commencement of any proceedings or investigations which relate to
compliance at the Buildings and the other Improvements with applicable Access
Laws and will use diligent efforts promptly to resolve the issues set forth
in any such complaint, proceedings or investigation.

1.20 Assignment of Rents and Grantor's Interest in Leases; Lease
Covenants

1.20.1. Assignment and License

The assignment by Grantor in Granting Clause (vi) of this Deed of Trust
of all of Grantor's right, title and interest, if any, in and to all present
and future Leases by Grantor, as landlord, to any other Person, as tenant
(each a "Tenant"), shall also be deemed to be an assignment of any and all
modifications, renewals, extensions or replacements thereof, and of any
guaranties of the Tenant's obligations under any Lease (each, a "Guaranty")
and shall be deemed to be, and is, a present, absolute, effective,
irrevocable and complete assignment by Grantor to Beneficiary of the Leases
and Guaranties and the right to collect all Rents and all other sums payable
to Grantor thereunder and apply the same against the Obligations in
accordance with the terms of this Deed of Trust, which assignment is not
conditioned upon Beneficiary being in possession of the Property. However,
so long as no Event of Default shall have occurred and be continuing, Grantor
shall have a license, to collect, receive and retain from the Tenants under
the Leases rent and all other sums payable under the Leases, to enforce the
obligations of Tenants under the Leases and to exercise all the rights and
remedies of the landlord under the Leases (except as otherwise provided
Schedule 5.11 to the Loan Agreement), subject, however, to compliance with
the provisions of this Deed of Trust. The portion of all sums received by
Grantor under the license granted hereby equal to the

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Obligations then due and owing, shall be held in trust for the benefit of
Beneficiary and used, as necessary, to pay the Obligations then due and owing.

1.20.2. Rights and Powers Assigned

The assignment referred to in Section 1.20.1 shall include, without
limitation, an assignment of

(i) the immediate and continuing right to receive and
collect all amounts payable by all Tenants, subtenants or other parties
pursuant to the Leases and any Guaranty;

(ii) all claims, rights, powers, privileges and remedies
of the Grantor, whether provided for in any Lease or Guaranty or arising by
statute or at law or in equity or otherwise, upon any failure on the part of
any Tenant to perform or comply with any term of any Lease;

(iii) all right to take all action upon the happening of a
default under any Lease or Guaranty as shall be permitted by any Lease or by
law, including, without limitation, the commencement, conduct and
consummation of proceedings at law or in equity; and

(iv) the full power and authority, in the name of Grantor
or otherwise, to enforce, collect, receive and make receipt for any and all
of the foregoing and to do any and all other acts and things whatsoever that
Grantor is or may be entitled to do under any Lease or Guaranty.

1.20.3. No Set-Off

Grantor hereby waives any and all right to assert any setoff or
counterclaim of any nature whatsoever with respect to the Obligations in any
action or proceeding by Beneficiary to collect any such Rents or other sums,
or to enforce and realize upon the lien and security interest created by this
Section 1.20 or any other Loan Documents, provided, however, that Grantor
expressly reserves the right to assert any such claim in a separate
proceeding and provided further that Grantor expressly reserves the right to
assert any claim in the same action commenced by Beneficiary if such claim is
of a mandatory or compulsory nature or would be barred or materially impaired
if not asserted in the action commenced by Beneficiary.

1.20.4. Termination of License

If any Event of Default shall have occurred and be continuing, the
license granted in Section 1.20.1 hereof shall immediately cease and
terminate, without waiver of such Event of Default, with or without notice,
any action or proceeding, or the intervention of a receiver appointed by a
court, and Beneficiary or an agent or receiver appointed by Beneficiary
(including, without limitation, Trustee) may, without regard for the adequacy
of the security for the indebtedness secured hereby, the commission of waste
or the solvency of Grantor, and subject to applicable statutory requirements,
if any, do any or all of the following:

(i) exercise any of Grantor's rights under the Leases and
Guaranties, including notifying Tenants to pay rent to an account or location
selected by Beneficiary or the Trustee;

(ii) enforce the Leases and Guaranties;

(iii) demand, collect, sue for, attach, levy, recover,
receive, compromise and adjust, and make, execute and deliver receipts and
releases for all rents or other payments that may then be or may thereafter
become due, owing or payable with respect to the Leases and Guaranties;

(iv) demand that any sums held by Grantor with respect to
any Lease or Guaranty (including, but not limited to, any security deposits,
other deposits or prepayments) be immediately remitted to Beneficiary or the
Trustee, to the extent permitted by applicable law; and

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(v) generally, do, execute and perform any other act,
deed, matter or thing whatsoever that ought to be done, executed and
performed in and about or with respect to the Leases and Guaranties.

1.20.5. Right to Collect Upon Event of Default

Grantor hereby irrevocably authorizes and directs each Tenant under a
Lease and each other party under a Guaranty, upon receipt of notice from
Beneficiary that an Event of Default has occurred and is continuing, to pay
directly to, or as directed by, Beneficiary all rents, issues and profits
accruing or due under such Lease or Guaranty from and after the receipt of
such notice. Grantor agrees that any Tenant under a Lease or any party to a
Guaranty shall have the right to rely upon the notice from Beneficiary, and
shall pay such rents, issues and profits to or as directed by Beneficiary
without any obligation to inquire into the actual existence of any Event of
Default claimed by Beneficiary, and notwithstanding any notice from or
contrary claim by Grantor, and Grantor shall have no right or claim for any
rents, issues or profits so paid to Beneficiary.

1.20.6. Leases Unaffected

Grantor at its expense will prudently enforce in all material respects
each of the Leases and Guaranties in accordance with their terms to the
extent any failure so to enforce would reasonably be expected to have a
material adverse effect on the operation of any of the Buildings or other
Improvements, the value thereof, or the ability of Beneficiary or the
Trustee, as applicable, to exercise their rights and remedies hereunder.
Neither the execution and delivery of this Deed of Trust or any other
Security Document nor any action or inaction on the part of Beneficiary shall
release (i) any Tenant from its Lease, (ii) any guarantor from any Guaranty
or (iii) Grantor from any of its obligations under the Leases or constitute
an assumption of any such obligation under the Leases on the part of
Beneficiary. No action or failure to act on the part of Grantor shall, to
the fullest extent permitted by applicable law, adversely affect or limit the
rights of Beneficiary under this Deed of Trust or, through this Deed of
Trust, under the Leases and Guaranties.

1.20.7. Inconsistent Actions Void

During the term hereof, all rights, powers and privileges of Beneficiary
herein set forth are coupled with an interest and are irrevocable, subject to
the terms and conditions hereof, and Grantor will not take any action under
the Leases or Guaranties or otherwise which is inconsistent with this Deed of
Trust or any of the terms hereof or thereof, and any such action inconsistent
herewith or therewith shall, to the fullest extent permitted by law, be void.
Any further assignment of any rents, issues, or profits from the Property
shall to the fullest extent permitted by law be void except as permitted by
the terms hereof. To the fullest extent permitted by applicable law, Grantor
hereby waives any requirement that Beneficiary commence any foreclosure
proceeding with respect to any or all of the Mortgaged Properties prior to
enforcement of any remedies pursuant to this Section 1.20, including the
right to commence and prosecute an action to appoint a receiver for rents and
all other amounts due under any Leases. Grantor will, from time to time,
upon request of Beneficiary, at Grantor's sole cost and expense, execute on a
non-recourse basis all instruments and further assurances and all
supplemental instruments and take all such actions as Beneficiary from time
to time may reasonably request in order to perfect, preserve and protect the
interests intended to be assigned to Beneficiary by this Section 1.20.

1.20.8. Satisfaction and Release

Upon satisfaction of the requirements of Section 1.22 hereof providing
for a release of the lien of this Deed of Trust, the assignment made in this
Section 1.20 and all rights hereunder assigned to Beneficiary shall cease and
terminate and shall revert to Grantor.

1.20.9. No Obligations

This Section 1.20 shall not be construed to bind Beneficiary or the
Trustee to the performance of any of the covenants, conditions or provisions
contained in any Lease or Guaranty or otherwise impose any obligation

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upon Beneficiary or the Trustee. Neither Beneficiary nor the Trustee shall
be liable for any loss sustained by Grantor resulting from any act or
omission of Beneficiary or the Trustee in managing the Property after an
Event of Default. This Section 1.20 shall not operate to place any
obligation or liability for the control, care, management or repair of any
part of the Property upon Beneficiary or the Trustee, nor for the carrying
out of any of the terms and conditions of the Leases or any Guaranty; nor
shall it operate to make Beneficiary or the Trustee responsible or liable for
any waste committed on the Land, including, without limitation, the presence
of any Hazardous Materials, or for any negligence by any person (other than
Beneficiary or the Trustee) in the management, upkeep, repair or control of
the Property resulting in loss or injury or death to any tenant, licensee,
employee or stranger. Nothing in this Section 1.20 shall be construed as
constituting Beneficiary or the Trustee a "mortgagee in possession" in the
absence of the taking of actual possession of the Property by Beneficiary.

1.20.10. Rights in Litigation and Bankruptcy

(i) If an Event of Default shall have occurred and be
continuing, Beneficiary shall have the right to proceed in its own name or in
the name of Grantor in respect of any claim, suit, action or proceeding relating
to the rejection of any Lease by or on behalf of any lessee thereunder,
including, without limitation, the right to file and prosecute, to the exclusion
of Grantor, any proofs of claim, complaints, motions, applications, notices and
other documents, in any case in respect of the lessee under such Lease under the
Bankruptcy Code.

(ii) If there shall be filed by or against Grantor a
petition under the Bankruptcy Code, and Grantor, as lessor under any Lease,
shall determine to reject such Lease pursuant to Section 365(a) of the
Bankruptcy Code, then Grantor shall give Beneficiary not less than fifteen
(15) days' prior notice of the date on which Grantor shall apply to the
bankruptcy court for authority to reject such Lease. Beneficiary shall have
the right, but not the obligation, to serve upon Grantor within such fifteen
(15) day period a notice stating that (a) Beneficiary demands that Grantor
assume and assign such Lease to Beneficiary pursuant to Section 365 of the
Bankruptcy Code and (b) Beneficiary covenants to cure or provide adequate
assurance of future performance under such Lease. If Beneficiary serves upon
Grantor the notice described in the preceding sentence, Grantor shall not
seek to reject such Lease and shall comply with the demand provided for in
clause (a) of the preceding sentence within thirty (30) days after the notice
shall have been given, subject to the performance by Beneficiary of the
covenant provided for in clause (b) of the preceding sentence.

1.20.11. Additional Lease Provisions

1.20.11.1

Grantor covenants and agrees (i) to perform punctually all
obligations and agreements to be performed by it as lessor or party thereto
under any Lease, such that there will be no material and adverse impairment
of the value of the Property or Beneficiary's interest under this Deed of
Trust, and (ii) to do all things necessary or appropriate to compel
performance by each Tenant of such Tenant's obligations and agreements under
the Lease to which such Tenant is a party. Except as otherwise permitted
hereunder, Grantor shall not give any notice, approval or consent or exercise
any rights under or in respect of any Lease or any of such other instruments,
which action, omission, notice, approval, consent or exercise of rights would
release any Tenant or other party from, or reduce any Tenant's or any other
party's obligations or liabilities under, or would result in the termination,
surrender or assignment of, or the amendment or modification of in any
material adverse respect, or would impair the validity of, any Lease or any
of such other instruments, if any of the foregoing would affect any
Individual Property in any material adverse respect, without the prior
written consent of Beneficiary, and any attempt to do any of the foregoing
without such consent shall be of no force and effect.

1.20.11.2

Grantor will promptly deliver to Beneficiary a copy of any
notice from any Tenant under any Material Lease (defined below), in any such
case claiming that Grantor is materially in default in the performance or
observance of any of the terms, covenants or conditions thereof to be
performed or observed by

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Grantor and Grantor will provide in each Material Lease at the Property
executed after the date hereof to which Grantor is a party that any tenant
delivering any such notice shall send a copy of such notice directly to
Beneficiary. The term "Material Lease" as used herein shall mean (i) any
Lease covering seven and one-half percent (7.5%) or more of gross leaseable
area of any individual Building on any Individual Property or gross leaseable
area of any individual Building on any Individual Property in an amount of at
least 8,000 rentable square feet and (ii) any Lease which represents greater
than five percent (5%) of income from Rents derived from any Individual
Property.

1.20.11.3

Grantor may, without the consent of Beneficiary, enter into any
Lease after the date hereof or renew or extend any existing Lease on the
following terms and conditions: (i) the Lease is written on Grantor's
standard form of Lease that has been approved by Beneficiary (as revised from
time to time, the "Approved Form") without any material changes to the
provisions of the Approved Form relating to lender protections (including
subordination, non-disturbance and attornment), defaults and remedies, (ii)
the annual base rental income payable under the Lease would not exceed ten
percent (10%) of the annual base rental income from the Individual Property
to which such Lease relates, (iii) the Lease covers less than the greater of
(A) ten percent (10%) of the total rentable square footage in the Individual
Property to which such Lease relates or (B) 8,000 rentable square feet, (iv)
the Lease is for a term of not more than fifteen (15) years; provided that if
the lease term extends beyond ten years by virtue of renewal options such
renewal options must be at a rental rate not less than 95% of the fair market
value as of the commencement of the renewal term, (v) the Lease shall be
entered into in an arms length transaction and the tenant thereunder shall be
a bona fide third party tenant that is not an Affiliate of Grantor, and (vi)
such Lease shall not have a material adverse effect on the value of the
Individual Property to which such Lease relates or the ability of Grantor to
perform the Obligations. Any other Lease may be entered into or renewed or
extended only with the consent of Beneficiary, which consent shall not be
unreasonably withheld and which consent shall be deemed granted unless
Beneficiary notifies Grantor within ten (10) Business Days of any request for
such consent that it is withholding such consent.

1.20.11.4

Grantor may, without the consent of the Beneficiary, amend,
modify or waive the provisions of any Lease, provided that such action does
not have a material adverse effect upon the value of any Individual Property,
and provided further that such Lease, as amended, modified or waived, is
otherwise in compliance with the requirements of this Deed of Trust
(including the requirements of Section 1.20.11.3 hereof) and a duplicate
original or certified copy of the amendment, modification or waiver is
delivered to the Beneficiary.

1.20.11.5

Grantor may, without the consent of Beneficiary, terminate or
permit the early termination of any Lease (other than a Material Lease) of
space or accept surrender of all or any portion of the space demised under
the Lease or acquire any Lease (other than a Material Lease) or reduce the
rentals reserved under or shorten the term of any Lease (other than a
Material Lease) so long as such action (taking into account the planned
alternative uses of the space) does not materially adversely affect the value
of any of the Property (it being agreed that termination of the Lease of a
Tenant that is in default, after any applicable notice and cure periods,
shall be considered to be for the benefit of any of the Property) or the
ability of Grantor to perform the Obligations.

1.20.11.6

Grantor shall not enter into any Lease with an Affiliate of
Grantor at any of the Property, unless (i) the space is for the use and
occupancy of one or more of such Affiliates, and (ii) the material terms of
such Lease comply with the requirements set forth in Section 1.20.11.3
hereof; provided, however, that a reasonable amount of office space not in
excess of 2500 net leaseable square feet in each Building can be

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provided to Beneficiary for the purpose of management of such Building and
the Individual Property associated therewith at less than fair market rental
or at no rental, at the Grantor's discretion. Grantor shall have the right,
subject to the provisions of this Deed of Trust, to acquire Leases by way of
assignment, surrender, acquisition or further sublease.

1.20.11.7

Upon receipt by Beneficiary of a written request from Grantor
therefor, Beneficiary shall execute and deliver to the tenant under any Lease
(other than a Lease to an Affiliate of Grantor) existing on the date hereof
or made in accordance with the provisions of this Section 1.20.11, a
non-disturbance and attornment agreement in a form reasonably satisfactory to
Beneficiary.

1.20.11.8

Grantor shall not receive or collect, or permit the receipt or
collection of, any rental or other payments under any Lease more than one (1)
month in advance of the respective period in respect of which they are to
accrue, except that (i) in connection with the execution and delivery of any
Lease or of any amendment to any Lease, rental payments thereunder may be
collected and received in advance in an amount not in excess of one (1)
month's rent and a security deposit (including advance rents as or in lieu of
a security deposit) may be required thereunder (provided that such deposits
are maintained in accordance with applicable Laws and in accordance with the
terms of this Deed of Trust and the Assignment of Leases and Rents executed
in connection herewith), (ii) Grantor may receive and collect escalation,
percentage rent and other charges in accordance with the terms of each Lease
and (iii) Grantor may receive and collect more than one month's rent in
connection with a Tenant terminating its Lease if the termination of the
Lease is permitted under this Deed of Trust.

1.20.11.9

Grantor shall at all times hold monies representing security
deposits under the Leases in the manner required by applicable Laws.

1.20.12. Assignment to Beneficiary Controlling

The rights of Trustee in the Leases and the Rents created under
Granting Clause (vi) of this Deed of Trust shall be subject to (i) the rights
of Beneficiary in the Leases and the Rents created under this Section 1.20,
and (ii) the rights of Beneficiary in the Leases and the Rents created under
the Assignment of Rents and Leases executed in connection herewith.

1.21. Environmental Covenants and Representations

Except as described in any report listed on Schedule 3.21 to the Loan
Agreement, Grantor represents and covenants that:

1.21.1.

The operations of Grantor at the Land and Improvements, and the Land
and Improvements themselves, substantially comply with all applicable
Environmental Laws;

1.21.2.

Grantor will hereafter comply with and cause the Land and
Improvements to comply with and use diligent efforts to cause its employees,
agents and contractors on the Land or the Improvements to comply with all
applicable Environmental Laws;

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1.21.3.

Grantor has obtained, and will hereafter maintain, all permits
required by applicable Environmental Laws for the operations of Grantor at
the Land and Improvements;

1.21.4.

Neither the Land and Improvements nor the Grantor's operations
thereat or thereon is subject to any order from or agreement with any
governmental authority or private party with respect to the release or
threatened release of Hazardous Materials from the Land and Improvements into
the environment;

1.21.5.

There are no pending or, to the best knowledge of the Grantor,
threatened judicial or administrative proceedings alleging a violation of any
Environmental Law with respect to the Land and Improvements or the Grantor's
operations thereon;

1.21.6.

None of the Grantor's operations at the Land and Improvements is the
subject of any investigation by any governmental authority evaluating whether
any remedial action is needed to respond to a release or threatened release
of Hazardous Materials from the Land and Improvements into the environment;

1.21.7.

Grantor has not filed any notice under any statute, regulation, or
other governmental requirement with respect to the Land and Improvements
indicating present treatment, storage or disposal of Hazardous Materials
thereon; and

1.21.8.

Grantor has not filed any notice under any applicable statute,
regulation or other governmental requirement with respect to the Land and
Improvements reporting a release of any Hazardous Materials from the Land and
Improvements into the environment.

1.22. Release

1.22.1. Satisfaction of Obligations

If Grantor shall pay the principal of and interest on the Mortgage Note
in full at maturity or earlier as permitted in accordance with the terms of
the Loan Agreement and this Deed of Trust and shall pay all other Obligations
payable to Beneficiary by Grantor hereunder and under the other Loan
Documents, then this Deed of Trust and all the other Loan Documents shall be
discharged and satisfied or, to the extent not prohibited by law, assigned to
Grantor or to any other Person at the Grantor's direction, at the Grantor's
option, without representation, recourse or warranty, other than for the acts
of the Beneficiary, at the expense of Grantor upon its written request,
except that the indemnifications of Grantor in favor of Beneficiary set forth
in Section 1.12 hereof and in the Environmental Indemnity Agreement shall
survive as set forth therein. Concurrently with such release and
satisfaction or assignment of this Deed of Trust and all the other Loan
Documents, Beneficiary will return to Grantor the Mortgage Note and all title
and other insurance policies relating to the Property and, on the written
request and at the expense of the Grantor, will execute and deliver such
proper instruments of release (including, without limitation, appropriate
U.C.C. termination statements) as may reasonably be requested by Grantor to
evidence such release and satisfaction or assignment, and any such
instrument, when duly executed by Beneficiary and duly recorded in the places
where this Deed of Trust and each other Security Document is recorded, shall

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conclusively evidence the release and satisfaction or assignment of this Deed
of Trust and the other Loan Documents. Any release of this Deed of Trust
with respect to the Property pursuant to Section 1.22.2 shall be effected in
accordance with the same procedures specified in the immediately preceding
two sentences to the extent applicable to such release.

1.22.2. Release of Building; Partial Releases

Grantor shall further be entitled to partial release of the Lien hereof
in the circumstances and on the conditions specified in Section 2.8, Section
2.9, Section 2.10 and Section 11 of the Loan Agreement as it relates to a
particular Individual Property and to a release of the Lien hereof in the
circumstances and on the conditions specified in Section 2.7 of the Loan
Agreement. Beneficiary shall also grant partial releases of the Lien hereof
on certain Property to be sold under Section 1.23 of this Deed of Trust,
contemporaneously with such sales, provided the conditions set forth in said
Section 1.23 are satisfied.

1.23. Transfers, Indebtedness and Subordinate Liens

1.23.1. Transfers

(i) Unless such action is permitted by the provisions of
this Section 1.23, Grantor will not (1) sell, assign, convey, transfer or
otherwise dispose of or encumber the Property or any of the Grantor's right,
title or interest therein, (2) mortgage, hypothecate or otherwise encumber or
grant a security interest in all or any part of the Property, (3) file a
declaration of condominium with respect to any of the Property or (4) permit
the transfer or assignment of any interest in the Grantor.

(ii) Notwithstanding the provisions of Section 1.23.1(i),
Grantor may transfer or dispose of Fixtures that are either being replaced or
that are no longer necessary in connection with the operation of the Property
free from the interest of Beneficiary under this Deed of Trust, PROVIDED that
such transfer or disposal will not adversely affect the value of any of the
Property, and will not materially impair the utility of any of the Property,
in either case as a result thereof, and PROVIDED that any new Fixtures
acquired by Grantor (and not so disposed of) shall be subject to the interest
of Beneficiary under this Deed of Trust (unless leased to the Grantor, in
which case the Grantor's interest in such lease shall be collaterally
assigned to the Beneficiary). Beneficiary shall, from time to time, upon
receipt of a certificate of an officer of the General Partner requesting the
same and confirming satisfaction of the conditions set forth above, execute a
written instrument in form reasonably satisfactory to it to confirm that such
Fixtures which are to be, or have been, sold or disposed of are free from the
interest of Beneficiary under this Deed of Trust.

1.23.2. Indebtedness

Grantor shall not incur, create or assume any Indebtedness other than
Permitted Debt (as defined in the Loan Agreement).

1.23.3. Additional Permitted Transfers

Notwithstanding the foregoing provisions of this Section 1.23.1, Grantor
without the consent of Beneficiary may (i) make transfers of portions of the
Property (by sale, ground lease, subordination of fee interest to a leasehold
mortgage, sublease or other conveyance of any interest) to any federal, state
or local government or any political subdivision thereof in connection with
(and in lieu of) Takings of any portion of the Property for dedication or
public use (and proceeds of any such transfer shall be deemed to be an Award
subject to the provisions of Section 1.9 hereof), and (ii) dedicate portions
of the Property or grant easements, restrictions, covenants, reservations and
rights of way in the ordinary course of business for traffic circulation,
ingress, egress, parking, access, water and sewer lines, telephone and
telegraph lines, electric lines or other utilities or for other similar
limited purposes benefiting the Property, PROVIDED, that no transfer,
conveyance or other encumbrance set forth in the foregoing clauses (i) and
(ii) shall impair the utility and operation of any Individual Property,

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adversely affect the value of any Individual Property, or cause any
Individual Property to be in violation of any applicable laws in each case
taken as a whole. Beneficiary hereby agrees to execute and deliver any
instrument reasonably necessary or appropriate to evidence any desired
consent to said action and, in the case of any transfers of fee interests
referred to in clauses (i) or (ii) of the first sentence of this Section
1.23.3, to release the portion of the Land affected by such Taking or such
transfer from the Lien of this Deed of Trust upon receipt by Beneficiary of:

(1) a copy of the instrument of transfer;

(2) a certificate of an officer of the General Partner stating
(x) with respect to any Taking, the consideration, if any, being paid
for the transfer and (y) that such transfer does not materially impair
the utility and operation of the Land, reduce its value or cause any
Individual Property to be in violation of any applicable laws,
including laws relating to the number of parking spaces at the
applicable Building; and

(3) as to any Taking or transfers under clauses (i) or (ii), an
endorsement to Beneficiary's title insurance policy insuring that the
priority of the Lien of this Deed of Trust is unaffected by reason of
the fact that a portion of the Land has been released from the Lien of
this Deed of Trust, the cost of any such endorsement to be paid for by
the Grantor.

All proceeds from any Takings shall be applied in accordance with the
provisions of Section 1.9 hereof.

1.23.4. Delivery of Documents to the Beneficiary

No more than fifteen (15) days after the completion of any transaction
subject to this Section 1.23, Grantor shall provide Beneficiary with copies of
executed deeds, mortgages and such other similar closing documents as may be
reasonably requested by Beneficiary.

1.24. Utility Services

Grantor will pay or cause to be paid when due all charges for all public
or private utility services, all public or private highway services, all
public or private communication services and all sprinkler systems and
protective services at any time rendered to or in connection with the
Property or any part thereof and which are incurred by or on behalf of
Grantor.

ARTICLE II

2. EVENTS OF DEFAULT

Grantor hereby agrees that the occurrence of any one or more of the
following shall constitute an Event of Default ("Event of Default") under
this Deed of Trust, entitling the Beneficiary, its successors and assigns, to
exercise the remedies set forth in Article III hereof, and any other remedies
available at law, in equity, or under the other Security Documents:

2.1. Payment Default

(a) Failure by Grantor to make any payment of principal, interest,
Defeasance Deposit or Yield Maintenance Payment due on the Mortgage Note when
the same shall become due and payable (whether at maturity, on a date fixed
for any payment or prepayment thereof, upon acceleration or otherwise) or (b)
failure by Grantor to make any other payment required under the Mortgage
Note, this Deed of Trust, or any other Loan Document when due; or

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2.2. Material Breach of Representation and Warranty

Any representation or warranty made by Grantor in this Deed of Trust or
any other Loan Document shall fail to have been true in any material and
adverse respect when made, which failure remains uncured for a period of
thirty (30) days after receipt of written notice of such failure; PROVIDED,
HOWEVER, that it shall not be an Event of Default if such failure is curable
but is not reasonably capable of being cured within such 30-day period but
Grantor shall have promptly commenced to cure within such 30-day period and
thereafter diligently pursues such cure to completion (but in no event later
than 180 days after receipt of such written notice); or

2.3. Material Breach of Covenant

Grantor shall fail to perform or comply in any material and adverse
respect with any non-monetary term, covenant or condition imposed in this
Deed of Trust or any other Loan Document, (a) which failure remains uncured
for a period of thirty (30) days after the Grantor's receipt of written
notice of such failure, or (b) in the case of any failure or breach of
covenant relating to the payment of taxes or maintenance of insurance as
provided herein, which failure remains uncured for a period of ten (10) days
after receipt of written notice by Grantor of such failure; PROVIDED,
HOWEVER, that, in the case of clause (a), it shall not be an Event of Default
if such failure is curable but is not reasonably susceptible of being cured
within such 30-day period but Grantor promptly commences to cure within such
30-day period and thereafter diligently pursues such cure to completion (but
in no event later than 180 days after receipt of such written notice);

2.4. Event of Default Under Loan Agreement

The occurrence of an "Event of Default" under the Loan Agreement; or

2.5. Ground Lease

The occurrence and continuation of an event of default (after the
expiration of any applicable grace periods) of Grantor under any Ground Lease.

ARTICLE III

3. REMEDIES

3.1. Legal Proceedings; Cost of Enforcement

3.1.1. Legal Proceedings

If an Event of Default shall have occurred and be continuing, Beneficiary
or the Trustee may institute proceedings for the complete or partial
foreclosure of this Deed of Trust or take such steps to protect and enforce
its rights whether by action, suit or proceeding in equity or at law for the
specific performance of any covenant, condition or agreement in the Mortgage
Note or in this Deed of Trust (without being required to foreclose this Deed
of Trust), or in aid of the execution of any power herein granted, or for any
foreclosure hereunder, or for the enforcement of any other appropriate legal
or equitable remedy or otherwise as Beneficiary shall elect.

3.1.2. Cost of Enforcement

Grantor shall pay within ten (10) days after written demand therefor all
costs and expenses (including, without limitation, attorneys' fees and
charges) incurred by or on behalf of Beneficiary or the Trustee in enforcing
or sustaining the lien of this Deed of Trust or the priority thereof, the
Mortgage Note, or any and all other Loan

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Documents, or occasioned by any Event of Default. Such costs and expenses
shall constitute Obligations secured by this Deed of Trust, payable on demand
and shall bear interest at the Default Interest Rate from the time of demand
until paid.

3.2. Acceleration

If an Event of Default shall have occurred and be continuing, regardless
of the pendency of any proceeding which has or might have the effect of
preventing Grantor from complying with the terms of this Deed of Trust, the
Mortgage Note, or any other Loan Document, then, in any such event, the
entire unpaid amount of the indebtedness evidenced by the Mortgage Note, this
Deed of Trust or any other Loan Documents, and any other unpaid sum secured
by this Deed of Trust, shall, at the option of Beneficiary become immediately
due and payable in full without presentment, demand, protest or notice, all
of which are hereby waived by Grantor (except to the extent notice is
expressly required herein) and shall thereafter bear interest at the Default
Interest Rate.

3.3. Right to Perform Grantor's Covenants, Etc.

If Grantor shall fail to make any payment or perform any act required to
be made or performed under this Deed of Trust, the Mortgage Note, or any
other Loan Document, within ten (10) days after written notice thereof (or
such shorter notice as shall be required to avoid a material impairment in
the value of the Property or in the Beneficiary's security, and without
notice where required to avoid such impairment), Beneficiary (or the Trustee
at the request of the Beneficiary, as applicable), without waiving or
releasing any obligation or Event of Default, may (but shall be under no
obligation to) make such payment or perform such act for the account, and at
the expense, of Grantor and may enter upon the Property or any part thereof
for such purpose and take all such actions thereon as, in the reasonable
opinion of the Beneficiary, may be necessary or appropriate therefor. All
sums so paid by Beneficiary or the Trustee and all costs and expenses
(including, without limitation, reasonable attorneys' fees and charges) so
incurred, shall constitute part of the Obligations secured by this Deed of
Trust and shall be paid by Grantor to Beneficiary or the Trustee upon demand
and, if not so paid within ten (10) days after demand, shall thereafter bear
interest at the Default Interest Rate.

3.4. Possession Upon Default

3.4.1. Surrender or Taking of Possession

If an Event of Default shall have occurred and be continuing, the
Grantor, upon demand of the Beneficiary, shall forthwith surrender to
Beneficiary or to the Trustee, as applicable, the actual possession of the
Property or any part thereof from time to time (without limit as to the
number of times) as may be designated by Beneficiary or the Trustee and, to
the extent permitted by law, Beneficiary or the Trustee may enter and take
possession of all or any such part of the Property and may exclude Grantor
and the Grantor's agents and invitees wholly therefrom. If Grantor shall
fail to surrender to Beneficiary or to the Trustee, as applicable, the actual
possession of such Property upon demand, then Beneficiary or the Trustee, to
the extent permitted under applicable law, without further notice, may (1)
enter upon and take possession of the Property or any part thereof by force,
summary proceedings, ejectment or otherwise; (2) remove Grantor and all other
persons from the Property; and (3) remove from the Property any and all
property owned by third parties (so long as reasonable measures for the
safekeeping of such third party property are taken).

3.4.2. Entering into Possession

Upon every such entering and taking of possession, Beneficiary or the
Trustee, as applicable, may hold, store, use, operate, manage, control, and
maintain the Property and conduct the business thereof, which right shall
include, without limitation, the right to (1) make all necessary and proper
repairs, renewals, replacements, additions, betterments and improvements
thereto and thereon and purchase and otherwise acquire additional fixtures,
personalty, and other property as may be necessary to preserve, maintain or
restore the value thereof to

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the condition required herein or in any other Loan Document; (2) insure the
Property or keep the Property insured; (3) manage and operate the Property
and exercise all the rights and powers of the Grantor, in its name or
otherwise, with respect to the Property; and (4) enter into any agreements
with respect to the exercise by others of any of the powers herein granted to
Beneficiary or the Trustee, all as Beneficiary or the Trustee may from time
to time determine to be necessary or desirable. Beneficiary or the Trustee
also may collect and receive all of the earnings, income, rents, profits,
issues and revenues of the Property or any part thereof, including those past
due as well as those accruing thereafter; PROVIDED, HOWEVER, that any amount
so received by Beneficiary or the Trustee shall be applied as provided in
Section 3.12 hereof. Beneficiary or the Trustee shall not be liable for or by
reason of any such entry, taking of possession or removal, or holding,
operation or management, except for liability arising out of the gross
negligence or willful misconduct of the Beneficiary, the Trustee, or the
agents, officers, directors or employees of Beneficiary or the Trustee. All
sums expended by Beneficiary or the Trustee pursuant to this Section 3.4.2,
including any such amount in excess of the principal amount of the Mortgage
Note, shall be deemed to have been advanced to Grantor by the Beneficiary,
shall be secured by this Deed of Trust and shall be paid by Grantor to
Beneficiary upon demand therefor and, if not so paid within ten (10) days
after written demand, shall thereafter bear interest at the Default Interest
Rate.

3.4.3. Satisfaction of Default

Whenever all Events of Default have been cured and satisfied, Beneficiary
may, in its sole and absolute discretion, upon receipt of a written request
therefor from Grantor, surrender possession or direct the Trustee, to
surrender possession of the Property to Grantor, provided that the right of
Beneficiary or the Trustee, as applicable, to take possession of the Property
from time to time pursuant to Section 3.4.1 shall continue to exist
unimpaired and undiminished if any subsequent Event of Default shall occur
and be continuing.

3.5. Sale of Property

Beneficiary or the Trustee may cause the Property and all estate,
right, title and interest, claim and demand therein, or any part thereof to
be sold as follows:

3.5.1.

Beneficiary may proceed as if all of the Property were real
property, in accordance with Section 3.5.4 below, or Beneficiary may elect to
treat any of the Property which consists of a right in action or which is
property that can be severed from the premises without causing structural
damage thereto as if the same were personal property, and dispose of the same
in accordance with Section 3.5.3 below, separate and apart from the sale of
real property, with the remainder of the Property being treated as real
property.

3.5.2.

Beneficiary may cause any such sale or other disposition to be
conducted immediately following the expiration of any grace period, if any,
herein provided (or required by law) or Beneficiary may delay any such sale
or other disposition for such period of time as Beneficiary deems to be in
its best interest. Should Beneficiary desire that more than one such sale or
other disposition be conducted, Beneficiary may, at its option, cause the
same to be conducted simultaneously, or successively on the same day, or at
such different days or times and in such order as Beneficiary may deem to be
in its best interest.

3.5.3.

Should Beneficiary elect to cause any of the Property to be disposed
of as personal property as permitted by Section 3.5.1 above, it may dispose
of any part thereof in any manner now or hereafter permitted by Division 9 of
the U.C.C. or in accordance with any other remedy provided by law. Both
Grantor and Beneficiary shall be eligible to purchase any part of all of such
property at any such disposition. Any such disposition may be either public
or private as Beneficiary may so elect, subject to the provisions of the UCC.
Beneficiary shall give

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Grantor at least five (5) days prior written notice of the time and place of
any public sale or other disposition of such property or of the time at or
after which any private sale or any other intended disposition is to be made,
and if such notice is sent to Grantor it shall constitute reasonable notice
to Grantor.

3.5.4.

Should Beneficiary elect to sell the Property which is real property
or which Beneficiary has elected to treat as real property, upon such
election Beneficiary or the Trustee shall give such Notice of Default and
Election to Sell (a "Notice of Sale") as may then be required by law.
Thereafter, upon the expiration of such time and the giving of such Notice of
Sale as may then be required by law, the Trustee, at the time and place
specified in the Notice of Sale, shall sell such Property, or any portion
thereof specified by Beneficiary, at public auction to the highest bidder for
cash in lawful money or the United States, subject, however, to the
provisions of Section 3.5.5 below. Beneficiary may, from time to time,
postpone the sale by public announcement thereof at the time and place
noticed therefor. If the Property consists of several lots or parcels,
Beneficiary may designate the order in which such lots or parcels may be
offered for sale or sold, and may direct that such property be sold in one
parcel, as an entirety, or in such parcels as Beneficiary, in its sole
discretion, may elect. Grantor expressly waives any right which it may have
to direct the order in which any of the Property shall be sold, and its
rights, if any, to require that the Property be sold as separate tracts,
lots, units or parcels. Any person, including Grantor, the Trustee or
Beneficiary, may purchase at the sale. Upon any sale, the Trustee shall
execute and deliver to the purchaser or purchasers a deed or deeds conveying
the property so sold, but without any covenant or warranty whatsoever,
express or implied, whereupon such purchaser or purchasers shall be let into
immediate possession.

3.5.5.

Upon any sale of the Property, whether made under a power of sale
herein granted or pursuant to judicial proceedings, if the holder of the
Mortgage Note is a purchaser at such sale, it shall be entitled to use and
apply all or any portion of the indebtedness then secured hereby for or in
settlement or payment of all or any portion of the purchase price of the
property purchased.

3.5.6.

In the event of a sale or other disposition of any such Property or
any part thereof, and the execution of a deed or other conveyance pursuant
thereto, the recitals in the deed or deeds of facts (such as of a default,
the giving of notice of default and notice of sale, demand that such sale
should be made, postponement of sale, terms of sale, sale, purchaser, payment
of purchase money, and any other fact affecting the regularity or validity of
such sale or disposition) shall be conclusive proof of the truth of such
facts; and any such deed or conveyance shall be conclusive against all
persons as to such facts recited therein.

3.6. Appointment of Receiver

Beneficiary shall be entitled, as a matter of strict right, without
notice and upon ex parte application, and without regard to the value or
occupancy of the security, or the solvency of Grantor, or the adequacy of the
Property or other collateral as security for the Mortgage Note, to have a
receiver appointed to enter upon and take possession of the Property, collect
the Rents and apply the same as the court may direct, such receiver to have
all the rights and powers permitted under the laws of the jurisdiction in
which the Property is located. Grantor hereby waives any requirements on the
receiver or Beneficiary to post any surety or other bond. Beneficiary or the
receiver may also take possession of, and for these purposes use, any and all
personalty which is a part of the Property and used by Grantor in the rental
or leasing thereof or any part thereof. The expense (including the
receiver's fees, counsel fees, costs and agent's compensation) incurred
pursuant to the powers herein contained shall be secured by this Indenture.
To the extent not prohibited by applicable law, Beneficiary shall (after
payment of all costs and expenses incurred) apply such Rents received by it
in the order set forth in Section 3.12 of this Deed of Trust. The right to
enter and take possession of the Property, to manage and operate the same,
and to collect the Rents, whether by receiver or otherwise, shall be
cumulative to any other right or remedy

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hereunder or afforded by law, and many be exercised concurrently therewith or
independently thereof. Beneficiary shall be liable to account only for such
Rents actually received by Beneficiary.

3.7. Trustees Authorized to Execute Deeds, Etc.

Grantor irrevocably appoints the Trustee its true and lawful
attorneys-in-fact, with full power of substitution, in its name and stead and
on its behalf, for the purpose of effectuating any sale, assignment, transfer
or delivery for the enforcement of this Deed of Trust pursuant to foreclosure
or power of sale or otherwise, to execute and deliver all such certificates,
deeds, bills of sale, assignments, and other instruments as the Trustee may
reasonably consider necessary or appropriate. Grantor hereby ratifies and
confirms all that such attorneys-in-fact or any substitute therefor shall
lawfully do by virtue hereof. Nevertheless, if so requested by the Trustee
or any purchaser, Grantor shall ratify and confirm any such sale, assignment,
transfer or delivery by executing and delivering to the Trustee or such
purchaser all proper certificates, deeds, bills of sale, assignments,
releases, and other instruments as may reasonably be designated in any such
request.

3.8. Purchase of the Property by the Beneficiary

Beneficiary may be a purchaser of the Property or of any part thereof or
of any interest therein at any sale thereof, whether pursuant to foreclosure
or power of sale or otherwise hereunder (subject to applicable provisions of
the U.C.C.), and may apply upon the purchase price the indebtedness secured
hereby owing to the Beneficiary. Beneficiary shall, upon any such purchase,
acquire good title to the properties so purchased, free of the lien of this
Deed of Trust and, to the fullest extent permitted by applicable law, free of
all rights of redemption in Grantor and free of all liens and encumbrances
subordinate to this Deed of Trust.

3.9. Foreclosure of Personalty

Upon the occurrence and during the continuation of an Event of Default,
should Beneficiary or the Trustee, as applicable, elect to cause any of the
Property to be disposed of as personal property because the same consists of
a right of action or property that can be severed from the Land or the
Improvements without causing material damage thereto, Beneficiary, or the
Trustee, as applicable, may dispose of all or any part thereof in any manner
now or hereafter permitted under the U.C.C. or in accordance with any other
remedy provided by law. Any such disposition may be conducted by an employee
or agent of Beneficiary or the Trustee. Beneficiary or the Trustee shall be
entitled to purchase any part or all of such property at such disposition.
Any such disposition may be by public or private sale as Beneficiary or the
Trustee may so elect, subject to the provisions of the U.C.C. Beneficiary
shall have all the rights and remedies of a secured party under the U.C.C.
Expenses of retaking, holding, preparing for sale, selling or the like shall
include Beneficiary's and the Trustee's attorneys' and accountants' fees and
charges. Upon the occurrence and during the continuation of any Event of
Default, the Grantor, upon demand of Beneficiary or the Trustee shall
assemble such personal property and make it available to Beneficiary and the
Trustee at any of the Land, or at a place which is deemed to be reasonably
convenient to Beneficiary or the Trustee. It is agreed that ten (10) days'
prior written notice to Grantor of the time and place of any public sale or
other disposition of such property or the time at or after which any private
sale or any other intended disposition is to be made shall constitute
commercially reasonable notice.

3.10. Receipt a Sufficient Discharge to Purchaser

Upon any sale of the Property or any part thereof or any interest
therein, whether pursuant to foreclosure or power of sale or otherwise
hereunder, the receipt of the officer making the sale under judicial
proceedings or of the Trustee or auctioneer in the event of a private sale
shall be sufficient discharge to the purchaser for the purchase money, and
such purchaser shall not be obligated to see to the application thereof.

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3.11. Sale Shall be a Bar Against Grantor

The sale of all or any portion of the Property in connection with the
exercise of remedies under this Deed of Trust after the Mortgage Note becomes
due and payable, whether at maturity, by declaration of acceleration or by
automatic acceleration after an Event of Default or otherwise, shall, upon
the expiration of any applicable redemption period, to the full extent
legally permitted, forever be a perpetual bar against Grantor asserting any
claim to title to such portion of the Property so sold.

3.12. Application of Proceeds of Sale and Other Monies

The proceeds of any sale of the Property or of any interest therein,
whether pursuant to foreclosure or power of sale or otherwise hereunder,
together with any other monies at any time held by Beneficiary or the
Trustee, as applicable, pursuant to this Deed of Trust, the Mortgage Note, or
any Loan Document, shall, unless otherwise elected by Beneficiary in its sole
discretion or unless otherwise required by applicable law, be applied in the
manner and in the order set forth in Section 2.4.3 of the Loan Agreement.

3.13 Remedies Cumulative

Each of the rights, powers, and remedies provided herein are intended and
are hereby deemed to be cumulative, concurrent and in addition to, and not in
limitation of, those rights, powers, and remedies provided elsewhere
hereunder or in any other Loan Document or now or hereafter existing at law
or in equity or by statute or otherwise. If the Obligations are secured by
more than one property, lot, or parcel pursuant to this Deed of Trust, or any
other Deed of Trust or Security Document, and if this Deed of Trust or any
other Security Document is foreclosed upon, or if Beneficiary or the Trustee
shall exercise the power of sale or any other remedy granted herein,
execution may be made upon, or Beneficiary or the Trustee may exercise their
power of sale against, any one or more of the properties, lots or parcels and
not upon the others, or upon all of such properties or parcels, either
together or separately, and at different times or at the same, and sales or
sales by advertisement may likewise be conducted separately or concurrently,
in each case at the Beneficiary's or the Trustee's election. In the event of
a foreclosure of this Deed of Trust or any other Security Document, the
obligations then due shall not be merged into any decree of foreclosure
entered by the court, and Beneficiary or the Trustee may concurrently or
subsequently seek to foreclose one or more other Security Document which also
secure said Obligations listed hereby or thereby.

3.14. No Waiver, Etc.

No failure by Beneficiary or the Trustee to insist upon the strict
performance of any term hereof or to exercise any right, remedy, power or
privilege provided herein or by statute or at law or in equity or otherwise,
nor delay therein, shall constitute a waiver thereof, nor shall any single or
partial exercise of any such right, remedy, power or privilege preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The waiver of any Event of Default hereunder shall not
impair the rights of Beneficiary or the Trustee to enforce any concurrent or
future Event of Default, whether similar or dissimilar to the Event of
Default waived, or otherwise affect or alter this Deed of Trust, which shall
continue in full force and effect.

3.15. Cross-Collateralization; Waiver of Marshalling, Appraisal,
Valuation

Grantor acknowledges that the Obligations are secured by this Deed of
Trust, an Assignment of Leases and Rents and various other documents or
instruments securing or evidencing the Loan. Upon the occurrence of an Event
of Default, Beneficiary shall have the right to institute a proceeding or
proceedings for the total or partial foreclosure of this Deed of Trust and
any or all of the other Security Documents, whether by court action, power of
sale or otherwise, under any applicable provisions of law, for all of the
indebtedness secured by the Security Documents or the portion of such
indebtedness allocated to the Property, and the liens and the security
interests

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created by the Security Documents shall continue in full force and effect as
to the Buildings (and the property related thereto) not foreclosed, without
loss of priority securing that portion of the indebtedness then due and
payable and still outstanding. Grantor acknowledges that the Buildings are
located in two (2) different counties in the State of California and agrees
that, subject to Section 3.5 of this Deed of Trust, upon the occurrence and
during the continuation of an Event of Default hereunder Beneficiary shall be
entitled to enforce payment of the indebtedness secured by the Security
Documents and the performance of any term, covenant or condition of the
Security Documents and exercise any and all rights and remedies under the
Security Documents or as provided by law or at equity, by one or more
proceedings, whether contemporaneous, consecutive or both, to be determined
by Beneficiary in its sole discretion, in any one or more counties in which
the Buildings are located. Neither the acceptance of this Deed of Trust or
the other Security Documents nor the enforcement thereof in any one state,
whether by court action, foreclosure, power of sale or otherwise, shall
prejudice or in any way limit or preclude enforcement by court action,
foreclosure, power of sale or otherwise, of the Mortgage Note, this Deed of
Trust or the other Security Documents through one or more additional
proceedings in that state or in any other state. Any and all sums received
by Beneficiary under the Mortgage Note, this Deed of Trust or the other
Security Documents shall be applied toward the repayment of the Obligations
in such order and priority as Beneficiary shall determine, consistent with
the requirements of the Security Documents, but otherwise without regard to
the Allocated Loan Amount applicable to each Individual Property or the
appraised value of any of the Individual Properties. Grantor hereby waives
all rights, legal and equitable, it may now or hereafter have to require
marshalling of assets or to require, upon foreclosure, sales of assets in a
particular order. Each successor and assign of the Grantor, including a
holder of a Lien subordinate to the Lien created hereby (without implying
that Grantor has, except as expressly provided herein, a right to grant an
interest in, or a subordinate Lien on, any of the Property), by acceptance of
its interest or Lien agrees that it shall be bound by the above waiver, to
the same extent as if such holder gave the waiver itself. Grantor also
hereby waives, to the full extent it may lawfully do so, the benefit of all
laws providing for rights of appraisal, valuation, stay or extension or of
redemption after foreclosure now or hereafter in force.

GRANTOR HEREBY EXPRESSLY (i) WAIVES ANY RIGHTS IT MAY HAVE UNDER
CALIFORNIA LAW TO REPAY THE MORTGAGE NOTE, IN WHOLE OR IN PART, WITHOUT
PENALTY, UPON ACCELERATION OF THE MORTGAGE NOTE, AND (ii) AGREES THAT IF, FOR
ANY REASON, A PREPAYMENT OF ALL OR ANY PORTION OF THE PRINCIPAL AMOUNT OF THE
MORTGAGE NOTE IS MADE INCLUDING WITHOUT LIMITATION UPON OR FOLLOWING ANY
ACCELERATION OF THE MORTGAGE NOTE BY BENEFICIARY ON ACCOUNT OF ANY DEFAULT BY
GRANTOR INCLUDING, WITHOUT LIMITATION, ANY TRANSFER, DISPOSITION, OR FURTHER
ENCUMBRANCE PROHIBITED OR RESTRICTED BY THIS DEED OF TRUST, THEN GRANTOR
HEREBY DECLARES THAT (1) EACH OF THE FACTUAL MATTERS SET FORTH IN THIS
PARAGRAPH IS TRUE AND CORRECT, (2) BENEFICIARY'S AGREEMENT TO MAKE THE LOAN
EVIDENCED BY THE MORTGAGE NOTE CONSTITUTES ADEQUATE CONSIDERATION FOR THIS
WAIVER AND AGREEMENT, AND HAS BEEN GIVEN INDIVIDUAL WEIGHT BY GRANTOR AND
BENEFICIARY, (3) GRANTOR IS A SOPHISTICATED AND KNOWLEDGEABLE REAL ESTATE
INVESTOR WITH COMPETENT AND INDEPENDENT LEGAL COUNSEL AND (4) GRANTOR FULLY
UNDERSTANDS THE EFFECT OF THIS WAIVER AND AGREEMENT.

--------------------
GRANTOR INITIALS

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ARTICLE IV

4. CONCERNING TRUSTEES

4.1. Acts of One Trustee Valid

In the event at any time there is more than one Trustee hereunder, any
Trustee may act without the joining of any other Trustee under any provision
of this Deed of Trust with the same effect as if all Trustees under this Deed
of Trust acted jointly, and the act of any Trustee acting separately shall be
binding and conclusive upon all Trustees and all other parties in interest.

4.2. Removal and Substitution of Trustees

In the event at any time there is more than one Trustee hereunder, any
Trustee or any successor Trustee hereunder may at any time resign as a
Trustee or successor Trustees under this Deed of Trust upon the delivery of
written notice of such resignation to the Beneficiary. Beneficiary shall
have, and is hereby granted by Grantor, with warranty of further assurances,
the irrevocable power to remove the Trustees or any of them, without cause
and without specifying the reason therefor, by delivering a written
instrument or instruments to such effect to the Trustees and, if required by
law, to Grantor, and to appoint a successor Trustee or Trustees by delivering
a written instrument or instruments to such effect to such successor Trustee
or Trustees and by filing a substitution of trustee for recordation in the
office where this Deed of Trust is recorded. Such power of removal and
appointment may be exercised as often and whenever Beneficiary deems it
advisable, and the exercise of such power, no matter how often exercised,
shall not be an exhaustion thereof. Upon the recordation of such deed or
deeds of appointment, the Trustee or Trustees so appointed shall thereupon,
without any further act or deed or conveyance, be fully vested with
identically the same title and estate in and to the Property and with all of
the rights, powers, trusts and duties of their, his or its predecessors in
the trust hereunder, with like effect as if originally named as the Trustee
or one of the Trustees hereunder. After the recordation of such deed or
deeds of appointment, the Trustee or Trustees who have been removed shall, at
the expense of the Grantor, duly assign, transfer, and deliver to such
successor Trustee or Trustees all monies at the time held hereunder by such
Trustee or Trustees who have been removed, and shall execute and deliver such
proper instruments as reasonably may be requested by Beneficiary or the
successor Trustee or Trustees to evidence such assignment, transfer, and
delivery. Whenever in this Deed of Trust reference is made to the Trustees
or a Trustee, it shall be construed to mean the Trustees or the Trustee for
the time being, whether original or successor or successors in trust and, as
the context may require, to any one of such Trustees acting alone.

4.3. Trustee's Compensation, Expenses, Etc.

Trustee shall be entitled to reasonable compensation for all services
rendered or expenses incurred in the administration or execution of the trust
hereby created in an amount not to exceed the maximum amount permitted by law
and Grantor hereby agrees to pay same.

ARTICLE V

5. MISCELLANEOUS

5.1. Notices

All notices, requests and demands to or upon the respective parties
hereto shall be in writing (except as is otherwise specifically provided in
this Deed of Trust) and shall be deemed to have been duly given or made when
received (or when delivery thereof is refused by the intended recipient) if
mailed by first-class registered or

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certified mail, return receipt requested, postage prepaid, sent by facsimile
transmission with confirmation of receipt or delivery, sent by nationally
recognized overnight courier, or delivered by hand, addressed or directed as
follows (or to such other address or facsimile transmission number as may be
hereafter designated in writing by the respective parties hereto):

if to Grantor: Arden Realty Finance Partnership, L.P.
9100 Wilshire Boulevard
East Tower, Suite 700-B
Beverly Hills, California 90212
Attention: Diana M. Laing
Fax: (310) 274-6218

if to Beneficiary: Lehman Brothers Realty Corporation
Three World Financial Center
New York, New York 10285
Attention: Commercial Mortgage Loan Surveillance
Fax: (212) 528-6659

if to Trustee: First American Title Insurance Company
114 East Fifth Street
Santa Ana, California 92702
Attention: Tom Zowarka
Fax: (714) 541-4702

The Grantor, Beneficiary or the Trustee may from time to time, by
notice in writing served upon the others as described above, designate a
different mailing address to which all such notices or demands or
communications are thereafter to be addressed and delivered.

Grantor hereby requests that a copy of any notice of default and
every notice of sale hereunder be mailed to it as provided by law at
Grantor's address set forth in this Section 5.1.

5.2. Invalidity of Any Provision; Entire Agreement

All rights, powers and remedies provided herein may be exercised only to
the extent the exercise thereof does not violate any applicable law, and are
intended to be limited to the extent necessary so that they will not render
this Deed of Trust invalid, unenforceable or not entitled to be recorded,
registered or filed under any applicable law. The invalidity of any one or
more phrases, sentences, clauses, paragraphs or Sections hereof shall not
affect the remaining portions of this Deed of Trust or any part thereof. In
the event that one or more of the phrases, sentences, clauses, paragraphs or
Sections contained herein shall be invalid, or would operate to render this
Deed of Trust invalid, this Deed of Trust shall be construed as if such
invalid phrase or phrases, sentence or sentences, clause or clauses,
paragraph or paragraphs or Section or Sections had not been inserted. This
Deed of Trust including the Exhibits hereto, and the other documents and
instruments referred to herein or delivered pursuant hereto, contains the
entire agreement among the parties with respect to the subject matter hereof
and supersedes all prior or written agreements, commitments or understandings
with respect to such matters.

5.3. Amendment

This Deed of Trust shall not be amended, altered, modified, waived,
discharged or terminated except by an instrument in writing signed by the
party against which enforcement of such amendment, alteration, modification,
waiver, discharge or termination is sought.

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5.4. Parties Bound and Benefited

This Deed of Trust shall be binding upon and be enforceable against
Grantor and Beneficiary and their respective successors and assigns, and
shall be enforceable by and inure to the benefit of Beneficiary and its
successors and assigns, and Grantor and its successors and permitted assigns.

5.5. Effect of Renewal, Amendment, Waiver, Etc.

The Beneficiary, at its option, may at any time renew or extend this Deed
of Trust or the Mortgage Note or any other obligation secured hereby or, with
the consent of the Grantor, alter or modify the same in any way, and may
waive any of the covenants and conditions of the Mortgage Note or this Deed
of Trust imposing obligations on the Grantor, in whole or in part, either at
the request of Grantor or any other person then having an interest in the
Property or in any way liable on the indebtedness secured hereby, and may
take other security for said indebtedness or release any portion of the
Property covered hereby, or release any party primarily or secondarily liable
on the Mortgage Note or hereunder or on any such other security, and may
grant extensions or indulgences in relation to the Mortgage Note and this
Deed of Trust and the payment thereof, or may apply to the principal or
interest of the indebtedness or other sums secured hereby any part or all of
the proceeds obtained by sale or otherwise as herein provided, without resort
or regard to any other security, all without in any way releasing Grantor
from any of the covenants, agreements or conditions of the Mortgage Note,
this Deed of Trust or any other Loan Document or affecting the lien hereof or
thereof on the Property or impairing Beneficiary's or the Trustee's ability
to proceed against the Grantor's interests in the Property in such manner and
at such times as Beneficiary may see fit, upon the occurrence and during the
continuation of an Event of Default.

5.6. Estoppel Certificates

(a) If requested by Beneficiary or the Trustee Grantor will furnish
Beneficiary or the Trustee within fifteen (15) days after written demand
therefor, an estoppel certificate or a written statement which shall set
forth the amount due under the Mortgage Note (whether of principal, interest
or any other amount) and shall indicate whether any offsets or defenses exist
against the payment of the indebtedness secured hereby and, if any offsets or
defenses are alleged to exist, a detailed description of such alleged offsets
or defenses and the amount or amounts thereof.

(b) Grantor shall use its best efforts to deliver to the
Beneficiary, promptly upon request, duly executed estoppel certificates from
any one or more Tenants as required by Beneficiary attesting to such facts
regarding the Leases as Beneficiary may require, including but not limited to
attestations that each Lease covered thereby is in full force and effect with
no defaults thereunder on the part of any party, that none of the Rents have
been paid more than one month in advance, and that the lessee claims no
defense or offset against the full and timely performance of its obligations
under the Lease.

5.7. Headings

Article, Section and subsection headings contained in this Deed of Trust
are inserted for convenience of reference only, shall not be deemed to be a
part of this Deed of Trust for any purpose, and shall not in any way define
or affect the meaning, construction or scope of any of the provisions hereof.

5.8. Pronouns

All pronouns and other words and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the person or entity or the context may require.

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<PAGE>
5.9. Governing Law; Service of Process

(a) This Deed of Trust, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by and
construed in accordance with the laws of the State of New York, except that,
for purposes of determining the creation, validity, priority and enforcement
of the Lien created hereby and the exercise of remedies hereunder in
connection with such Lien, the law of the State in which the Land is located
shall govern.

(b) Grantor will maintain a place of business or an agent for
service of process in New York, New York and give prompt notice to
Beneficiary of the address of such place of business and of the name and
address of any new agent appointed by it, as appropriate. Grantor further
agrees that the failure of its agent for service of process to give it notice
of any service of process will not impair or affect the validity of such
service or of any judgment based thereon. If, despite the foregoing, there
is for any reason no agent for service of process of Grantor available to be
served, and if it at that time has no place of business in New York, New
York, then Grantor irrevocably consents to service of process by registered
or certified mail, postage prepaid, to it at its address given in or pursuant
to the first paragraph hereof.

(c) Grantor initially and irrevocably designates CT Corporation
System with offices on the date hereof at 1633 Broadway, New York, New York
10019, to receive for and on behalf of Grantor service of process in New
York, New York with respect to this Deed of Trust.

5.10. Waiver of Jury Trial

THE PARTIES HERETO WAIVE ANY RIGHT THEY MAY HAVE TO TRIAL BY JURY IN ANY
ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES HEREUNDER,
UNDER THE MORTGAGE NOTE, OR UNDER ANY LOAN DOCUMENT RELATING TO ANY OF THE
FOREGOING.

5.11. Limitation of Liability

Notwithstanding any contrary provision in any of the Loan Documents, it
is hereby expressly agreed that, except as otherwise provided in this Section
5.11 or in any Section of any Loan Document that is substantially similar to
this Section 5.11, there shall be no recourse to the assets of Grantor (other
than against the Property and any other property given as security for
payment of the Mortgage Note) for (i) the payment of principal, interest,
Defeasance Deposits, Yield Maintenance Payments or other charges hereunder or
under the Mortgage Note or for any other amount that is or may become due and
owing to Beneficiary by Grantor under this Deed of Trust or any of the other
Loan Documents or (ii) the performance or discharge of any covenant or
undertaking hereunder or under the other Loan Documents, and in the event of
any Event of Default hereunder or thereunder, Beneficiary agrees to proceed
solely against the Property and any other property given as security for
payment of the Mortgage Note, and Beneficiary shall not seek or claim
recourse against Grantor or the General Partner (other than against the
Property and any other property given as security for payment of the Mortgage
Note) for any deficiency or for any personal judgment after a foreclosure of
the lien of this Deed of Trust or other Security Documents or for the
performance or discharge of any covenants or undertakings of Grantor
hereunder or under any of the other Loan Documents (except that Grantor may
be made a party to a proceeding to the extent legally necessary for the
conduct of a foreclosure or the exercise of other similar remedies under this
Deed of Trust or other Security Documents). Notwithstanding the foregoing,
nothing contained in this Section 5.11 shall relieve Grantor or the General
Partner of any personal liability for any loss, cost, expense, damage or
liability arising or resulting from (A) any breach of any representation or
warranty made by Grantor in this Deed of Trust that was materially incorrect
when made and that was made with fraudulent intent, (B) any amount paid or
distributed to the General Partner, Arden OP, the Manager or any Affiliate of
any of them in violation of the provisions of the Loan Documents, (C) fraud
or breach of trust including misapplication of Loan proceeds or Awards or
other sums that are part of the Property that may come into the possession or
control of Grantor or the General Partner or any Affiliate of any of them,
(D) liability of such person under the Environmental Indemnity Agreement or
(E)

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<PAGE>
following the occurrence of a Lockbox Event, the willful failure of Grantor
to instruct tenants of the Mortgaged Properties to make payments of Rents
into the Lockbox Account or the failure of Grantor or the Manager to deposit
payments of Rents received by Grantor or the Manager into the Lockbox Account
promptly upon receipt thereof. It is hereby expressly agreed that neither
the General Partner nor any director, officer, shareholder, partner or
employee of Grantor or the General Partner, nor the legal or personal
representative, successor or assign of any of the foregoing, nor any other
principal of Grantor or the General Partner, whether disclosed or
undisclosed, shall have any personal liability under this Deed of Trust or
any of the other Loan Documents, except as personal liability may be
specifically imposed upon the General Partner in accordance with clauses (A),
(B), (C), (D) and (E) of this Section 5.11 and in no event shall any limited
partner of Grantor have any liability whatsoever with respect to the Loan or
any monetary obligations with respect thereto, or any of the matters
described in clause (A), (B), (C), (D) or (E) above. It is the intention of
the parties hereto that this Section 5.11 shall govern every other provision
of the Loan Documents and that the absence of explicit reference to this
Section 5.11 in any provision of the Loan Documents or the absence of any
Section similar to this Section 5.11 in any Loan Document shall not be
construed to deny the application of this Section 5.11 to such provision,
notwithstanding the presence of explicit reference to this Section 5.11 in
other provisions of the Loan Documents.

5.12 Assignment to Finance Trustee

5.12.1 Anticipated Assignment

Grantor acknowledges and agrees that, without limiting Beneficiary's
rights otherwise to assign this Deed of Trust and all other Loan Documents,
this Deed of Trust may be assigned together with all other Loan Documents,
and along with mortgage loans made to other borrowers, to the Finance
Trustee, as trustee under the Pooling and Servicing Agreement, and, pursuant
to the Pooling and Servicing Agreement, the Servicer will be appointed to
service this Deed of Trust and the other Loan Documents as provided therein.
Upon such assignment, the Finance Trustee shall for all purposes be the sole
Beneficiary hereunder (and all references herein to Beneficiary shall be
deemed to refer to the Finance Trustee) and the Finance Trustee, or the
Servicer on behalf of the Finance Trustee shall, among other things, (i) have
the sole and exclusive benefit of and the right and power to exercise, or to
direct the exercise of, all the rights and remedies of Beneficiary hereunder
and under the other Security Documents, including the right to inspect the
Property, to receive notices and financial information, to grant or withhold
consents or approvals, to benefit from indemnities, to receive, hold and
apply proceeds or any other amount or property provided by Grantor hereunder,
and, upon the occurrence and during the continuation of an Event of Default,
to take any action required or permitted of Beneficiary, all in the Finance
Trustee's or Servicer's own name, and to exercise all other rights and
remedies of Beneficiary hereunder, (ii) be bound by all the terms hereof
which apply to Beneficiary, and (iii) except to the extent otherwise
specified or required herein or in the Pooling and Servicing Agreement, if
applicable, including any action or inaction required to maintain the status
of a portion of any trust fund of which the Mortgage Note and other Loan
Documents are a part as a qualified real estate mortgage investment conduit
under U.S. tax law or any action or inaction at the direction of the Holders
or as a result of the failure of the Holders to so direct, act in a
commercially reasonable manner in making any determination called for of it
under this Deed of Trust or the other Loan Documents or in granting or
withholding any approval or consent called for under or requested pursuant to
this Deed of Trust.

5.12.2 Recognition of Finance Trustee as Beneficiary

Grantor hereby acknowledges the foregoing and agrees to be bound to the
Finance Trustee, upon such assignment, recognizing the Finance Trustee as
Beneficiary hereunder as if the Finance Trustee were named in this Deed of
Trust as the Beneficiary, recognizing that the Servicer is entitled to act on
behalf of the Finance Trustee and the Holders under and as provided in the
Pooling and Servicing Agreement and is entitled to and shall receive all
notices, financial and other information, agreements and other documents to
be delivered to Beneficiary hereunder or under any of the other Loan
Documents. Upon the assignment contemplated by Section 5.12.1 hereof,
Grantor's obligations to Beneficiary specified in this Deed of Trust shall be
satisfied by tendering full and timely payment or performance thereof to the
Finance Trustee or, if directed by the Finance Trustee, the Servicer. With
respect to delivery by Beneficiary of documents and other written material,
Beneficiary shall have

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only the obligations expressly required of Beneficiary herein or in the other
Loan Documents or in the Pooling and Servicing Agreement. All rights and
remedies of the Finance Trustee as Beneficiary hereunder, including all
indemnities running to Beneficiary, shall also operate for the benefit of the
Servicer and the Holders and shall be exercised by the Finance Trustee and
the Servicer in accordance with and subject to the terms and conditions set
forth in the Pooling and Servicing Agreement. Grantor acknowledges and
agrees that, until Grantor has received notice to the contrary from the
Finance Trustee, all deliveries and notifications to be made by Grantor to
the Finance Trustee pursuant to this Deed of Trust or any other Loan
Document, shall be made to the Servicer only and not to the Finance Trustee.

5.12.3 Delivery of Amounts to Servicer

Following the assignment contemplated by Section 5.12.3 hereof, any
amounts to be delivered to Beneficiary pursuant to Sections 1.8, 1.9 or 1.11
hereof shall be delivered to the Servicer and shall be held by the Servicer
in segregated subaccounts of the Cash Collateral Account (as defined in the
Loan Agreement) for application in accordance with said Sections and in
accordance with the Cash Management Procedures.

ARTICLE VI

6. DEFINITIONS

6.1. Certain Defined Terms

Wherever used in this Deed of Trust the capitalized terms set forth below
shall have the meanings ascribed to them below (or in the Sections of this
Deed of Trust or any other Loan Document referred to below) such definitions
to be equally applicable to the singular and plural forms of the terms
defined below. All capitalized terms not otherwise defined herein shall have
the meanings ascribed to such terms in the Loan Agreement.

"Access Laws" has the meaning set forth in Section 1.19 hereof.

"Affiliate" has the meaning set forth in the Loan Agreement.

"Allocated Loan Amount" has the meaning set forth in the Loan Agreement.

"Alteration" has the meaning set forth in Section 1.11.1 hereof.

"Assignment" has the meaning set forth in the Loan Agreement.

"Award(s)" has the meaning set forth in Section 1.9.1 hereof.

"Bankruptcy Code" has the meaning set forth in Granting Clause (vi)
hereof.

"Beneficiary" has the meaning set forth in the first paragraph of this
Deed of Trust.

"Building" has the meaning set forth in Paragraph B of the Recitals
hereof.

"Buildings" has the meaning set forth in Paragraph B of the Recitals
hereof.

"Cash Management Procedures" means has the meaning set forth in the Loan
Agreement.

"Casualty" has the meaning set forth in Section 1.8.1 hereof.

"Casualty Property" has the meaning set forth in Section 1.8.2 hereof.

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"Certificates" has the meaning set forth in Paragraph E of the Recitals
hereof.

"Claim(s)" has the meaning set forth in Section 1.12 hereof.

"Collateral Assignment of Management Agreement" means that certain
Collateral Assignment of Management Agreement and Subordination Agreement
dated as of the date hereof by and among Grantor, the Manager and Beneficiary.

"Contracts" has the meaning set forth in Granting Clause (vii) hereof.

"Debtor" has the meaning set forth in Section 1.17.6 hereof.

"Deed of Trust" has the meaning set forth in the first paragraph of this
document.

"Default Interest Rate" has the meaning set forth in the Loan Agreement.

"Defeasance Deposit" has the meaning set forth in the Loan Agreement.

"Defeasance Period" has the meaning set forth in the Loan Agreement.

"Due Date" has the meaning set forth in the Loan Agreement.

"ERISA" has the meaning set forth in the Loan Agreement.

"Election" has the meaning set forth in Section 1.18.6.2 hereof.

"Environmental Laws" has the meaning set forth in the Loan Agreement.

"Event of Default" has the meaning set forth in Article II hereof.

"Finance Trustee" has the meaning set forth in Paragraph E of the
Recitals hereof, being the same meaning ascribed to "Trustee" in the Loan
Agreement.

"Fixtures" has the meaning set forth in Granting Clause (iii) hereof.

"General Partner" has the meaning set forth in the Loan Agreement.

"Grantor" has the meaning set forth in the first paragraph of this Deed
of Trust.

"Ground Lease" has the meaning set forth in Granting Clause (i) hereof.

"Guaranty" has the meaning set forth in Section 1.20 hereof.

"Hazardous Material(s)" has the meaning set forth in the Loan Agreement.

"Holders" has the meaning set forth in the Loan Agreement.

"Impositions" has the meaning set forth in Section 1.5.1 hereof.

"Improvements" has the meaning set forth in Paragraph C of the Recitals
hereof.

"Indebtedness" has the meaning set forth in the Loan Agreement.

"Indemnitees" has the meaning set forth in Section 1.12 hereof.

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"Individual Property" means any one of the parcels of Land set forth on
Exhibit A-1, Exhibit A-2, Exhibit A-3, Exhibit A-4, Exhibit A-5, Exhibit A-6,
Exhibit A-7, Exhibit A-8, Exhibit A-9, Exhibit A-10, Exhibit A-11, Exhibit
A-12, Exhibit A-13, Exhibit A-14, Exhibit A-15, Exhibit A-16 and Exhibit
A-17, the Building and other Improvements on said parcel and all other
Property relating to said parcel, Building and other Improvements.

"Insurance Proceeds" has the meaning set forth in Section 1.8.2 hereof.

"Land" has the meaning set forth in Paragraph B of the Recitals hereof.

"Laws" has the meaning set forth in the Loan Agreement.

"Leases" has the meaning set forth in Granting Clause (vi) hereof.

"Lien(s)" has the meaning set forth in Section 1.2.5 hereof.

"Loan" has the meaning set forth in Paragraph A of the Recitals hereof.

"Loan Agreement" has the meaning set forth in Paragraph A of the
Recitals hereof.

"Loan Documents" has the meaning set forth in the Loan Agreement.

"Material Lease" has the meaning set forth in Section 1.20.11.2 hereof.

"Mortgage Note" has the meaning set forth in Paragraph A of the Recitals
hereof.

"Mortgaged Properties" has the meaning set forth in the Loan Agreement.

"Net Sales Proceeds" has the meaning set forth in the Loan Agreement.

"Noteholder" has the meaning set forth in Paragraph A of the Recitals
hereof.

"Notice of Sale" has the meaning set forth in Section 3.5.4 hereof.

"Obligations" has the meaning set forth in the paragraph beginning with
the words "NOW, THEREFORE . . . " on page 1 hereof.

"Partners" has the meaning set forth in the Loan Agreement.

"Permitted Debt" has the meaning set forth in the Loan Agreement.

"Permitted Liens" has the meaning set forth in the Loan Agreement.

"Permitted Liens and Encumbrances" has the meaning set forth in Section
1.2.5 hereof.

"Person" has the meaning ascribed to such term in the Loan Agreement.

"Pooling and Servicing Agreement" has the meaning set forth in the Loan
Agreement.

"Property" has the meaning set forth in the first full paragraph
following the heading "GRANTING CLAUSES," on page 2 hereof.

"Qualified Insurance Company" has the meaning set forth in Section 1.7.2
hereof and "Qualified Insurance Companies" means any two or more insurers
constituting a Qualified Insurance Company.

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"Qualified Supervising Professional" means a supervising engineer or
architect that is licensed to do business in the State in which the Property
is located and has at least five years' experience in the supervision of
commercial construction projects similar to the work to be supervised.

"Rating Agencies" has the meaning set forth in the Loan Agreement.

"Real Property Rights" has the meaning set forth in Granting Clause (ii)
hereof.

"Release Price" has the meaning set forth in the Loan Agreement.

"Renewal Lease" has the meaning set forth in Section 1.20.11.3 hereof.

"Rents" has the meaning set forth in Granting Clause (vi) hereof.

"Restoration" has the meanings set forth in Section 1.8.2 and Section
1.9.3 hereof.

"S&P" means Standard & Poor's Ratings Services, a division of
McGraw-Hill Companies, Inc.

"Secured Party" has the meaning set forth in Section 1.17.6 hereof.

"Securitization" has the meaning set forth in the Loan Agreement.

"Security Deposits" has the meaning set forth in Section 1.20.11.10
hereof.

"Security Documents" has the meaning set forth in the Loan Agreement.

"Servicer" has the meaning ascribed to it in Paragraph E of the Recitals
hereof.

"Taking" has the meaning set forth in Section 1.9.1 hereof.

"Tenant" has the meaning set forth in Section 1.20.1 hereof.

"Title Company" has the meaning set forth in Section 1.3 hereof.

"Title Insurance Policy" has the meaning set forth in Section 1.3 hereof.

"Trustee" means First American Title Insurance Company, and its
successors and assigns as trustee hereunder.

"U.C.C." has the meaning set forth in Granting Clause (viii) hereof.

"U.C.C. Collateral" has the meaning set forth in Section 1.17.1 hereof.

"Yield Maintenance Payment" has the meaning set forth in the Loan
Agreement.

[SIGNATURE PAGE TO FOLLOW]

- 47 -
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Deed of Trust,
Assignment of Rents and Leases, Security Agreement and Fixture Filing to be
duly executed and delivered as of the date first set forth hereinabove.

GRANTOR:

ARDEN REALTY FINANCE PARTNERSHIP, L.P.,
a California limited partnership

By: ARDEN REALTY FINANCE, INC.,
general partner

By: /s/ Diana M. Laing
-------------------------------------
Print Name: Diana M. Laing
-----------------------------
Its: Chief Financial Officer
------------------------------------

This instrument prepared by:

Lee E. Berner, Esq.
Hogan & Hartson L.L.P.
8300 Greensboro Drive
McLean, Virginia 22102

<PAGE>

STATE OF CALIFORNIA )
ss
COUNTY OF LOS ANGELES )

On June 11, 1997, before me Christina M. Rouser a notary public,
personally appeared Diana M. Laing, personally known to be (or proved to me
on the basis of satisfactory evidence) to be the person(s) whose name(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.

/s/ Christina M. Rouser
[SEAL] ----------------------------------
Notary Public
(Seal)

<PAGE>

EXHIBIT A-1

LEGAL DESCRIPTION

PARCEL 1:

PARCELS 1 AND 2 OF PARCEL MAP NO. 16945, IN THE CITY OF LONG BEACH, AS PER MAP
FILED IN BOOK 181 PAGES 58 AND 59 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY.

PARCEL 2:

PARCEL 3 OF PARCEL MAP NO. 16945, IN THE CITY OF LONG BEACH, AS PER MAP FILED IN
BOOK 181 PAGES 58 AND 59 OF PARCELS MAPS, IN THE OFFICE OF THE COUNTY RECORDER
OF SAID COUNTY.

100 West Broadway, Long Beach PAGE 1 OF 30

100 West Broadway, Long Beach

PAGE 2 OF 30

<PAGE>

ALSO EXCEPT ALL OIL, GAS AND OTHER HYDROCARBON SUBSTANCES IN AND UNDER OR THAT
MAY BE PRODUCED FROM A DEPTH BELOW 200 FEET OF THE SURFACE OF SAID LAND, BUT
WITHOUT RIGHT OF ENTRY UPON THE SURFACE OF SAID LAND, FOR THE PURPOSE OF MINING,
DRILLING, EXPLORING, OR EXTRACTING SUCH OIL, GAS, MINERALS AND OTHER HYDROCARBON
SUBSTANCES, AS RESERVED BY GEORGE P. BUNDY AND HELEN R. BUNDY, HUSBAND AND WIFE,
IN DEED RECORDED NOVEMBER 12, 1969 AS INSTRUMENT NO. 250 IN BOOK D4551 PAGE 554,
OFFICIAL RECORDS.

100 West Broadway, Long Beach

PAGE 3 OF 30

<PAGE>

EXHIBIT A-2

LEGAL DESCRIPTION

LOTS 8 TO 11 INCLUSIVE IN BLOCK 33 OF TRACT 7260, IN THE CITY OF LOS ANGELES, AS
PER MAP RECORDED IN BOOK 79 PAGES 98 AND 99 OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY.

10350 Santa Monica, Los Angeles

PAGE 4 OF 30

<PAGE>

EXHIBIT A-3

LEGAL DESCRIPTION

303 Glenoaks, Burbank

PAGE 5 OF 30

<PAGE>

EXHIBIT A-4

LEGAL DESCRIPTION

PARCEL 1:

LOTS 10 AND 11 OF TRACT 33152, IN THE CITY OF CULVER CITY, AS PER MAP RECORDED
IN BOOK 1020 PAGES 31 TO 35 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY.

400 Corporate Pointe, Culver City

PAGE 6 OF 30

<PAGE>

PARCEL 2:

PARCEL 3:

400 Corporate Pointe, Culver City

PAGE 7 OF 30

<PAGE>

EXHIBIT A-5
LEGAL DESCRIPTION

LOTS 24 TO 29 INCLUSIVE OF TRACT 752, IN THE CITY OF GLENDALE, AS PER MAP
RECORDED IN BOOK 16 PAGE 84 OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF
SAID COUNTY.

425 West Broadway, Glendale

PAGE 8 OF 30

<PAGE>

EXHIBIT A-6
LEGAL DESCRIPTION

PARCEL A:

PARCEL 1, AS SHOWN ON EXHIBIT "B" OF THAT CERTAIN "APPLICATION FOR LOT LINE
ADJUSTMENT NO. 86-1" RECORDED JUNE 2, 1986 AS INSTRUMENT NO. 86-227750 OF
OFFICIAL RECORDS OF ORANGE COUNTY, CALIFORNIA.

PARCEL B:

5832
Bolsa, Huntington Beach PAGE 9 OF 30

<PAGE>

EXHIBIT A-7

LEGAL DESCRIPTION

LOTS 1, 2, 81 AND 82 OF TRACT 5542, IN THE CITY OF LOS ANGELES, AS PER MAP
RECORDED IN BOOK 59 PAGES 53 TO 57 INCLUSIVE OF MAPS, IN THE OFFICE OF THE
COUNTY RECORDER OF SAID COUNTY.

6100 Wilshire, Los Angeles PAGE 10 OF 30

<PAGE>

EXHIBIT A-8

LEGAL DESCRIPTION

PARCEL 1:

EXCEPT THEREFROM THE WESTERLY 6 FEET FOR LAKE AVENUE.

ALSO EXCEPT THEREFROM THAT PORTION OF LOT 2 OF PARKER AND FARRIS SUBDIVISION
INCLUDED IN GREEN STREET, AS SAME PRESENTLY EXISTS.

PARCEL 2:

EXCEPT THEREFROM THE WEST 6 FEET THEREOF, CONVEYED TO IN THE CITY OF PASADENA
FOR STREET PURPOSES, BY DEED RECORDED IN BOOK 1164 PAGE 317 OF DEEDS.

PARCEL 3:

EXCEPT THEREFROM THE WEST 6 FEET THEREOF, CONVEYED TO THE CITY OF PASADENA, FOR
STREET PURPOSES, BY DEED RECORDED IN BOOK 1164 PAGE 317 OF DEEDS.

70 South Lake, Pasadena PAGE 11 OF 30

<PAGE>

EXHIBIT A-9

LEGAL DESCRIPTION

Beverly Atrium, Beverly Hills

PAGE 12 OF 30

<PAGE>

EXHIBIT A-10

LEGAL DESCRIPTION

LOT 3 OF TRACT 22864, IN THE CITY OF CULVER CITY, AS PER MAP RECORDED IN BOOK
880 PAGES 49 TO 55 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF
SAID COUNTY.

Bristol Plaza, Culver City

PAGE 13 OF 30

<PAGE>

EXHIBIT A-11

LEGAL DESCRIPTION

EXCEPT FROM SAID LOT 2 THAT PORTION THEREOF LYING NORTHERLY AND NORTHEASTERLY
OF A LINE DESCRIBED AS FOLLOWS:

Burbank Executive Plaza, Burbank

PAGE 14 OF 30

<PAGE>

EXHIBIT A-12

LEGAL DESCRIPTION

PARCEL A:

L.A. Corporate Center, Monterey Park

PAGE 15 OF 30

<PAGE>

PARCEL A-1:

PARCEL B:

L.A. Corporate Center, Monterey Park

PAGE 16 OF 30

<PAGE>

ALONG SAID SOUTHEASTERLY LINE OF LOT 4, NORTH 43 DEG. 51' 17"
EAST 31.53 FEET TO THE POINT OF BEGINNING.

ALSO THAT CERTAIN PORTION OF LOT 5 OF SAID TRACT 42611 DESCRIBED IN A
DOCUMENT RECORDED OCTOBER 25, 1984 AS INSTRUMENT NO. 64-1275473, AS FOLLOWS:

EXCEPT THEREFROM ALL GAS, OIL, AND OTHER HYDROCARBON SUBSTANCES AND ALL
OTHER MINERALS IN AND FROM THE LAND DESCRIBED IN DEED MENTIONED HEREAFTER,
PROVIDED, HOWEVER, NO RIGHT IS RESERVED TO ENTER IN OR FROM THE SURFACE OF
SAID LAND, THE RIGHT TO ENTER THE SUBSURFACE OF SAID PROPERTY, WHICH IS ALSO
RESERVED SHALL BE AT ANY POINT BELOW A DEPTH OF 500 FEET FROM THE SURFACE
THEREOF (MEASURED VERTICALLY FROM THE SURFACE THEREOF) IN ORDER TO TAKE FROM
SAID LAND AND REDUCE TO POSSESSION ANY OIL, GAS AND OTHER HYDROCARBON
SUBSTANCES AND ALL OTHER MINERALS, AS EXCEPTED AND RESERVED BY CLARA HELLMAN
HELLER, A WIDOW, ET AL., IN DEED TO BOBWILL BUILDING CO., A CORPORATION
RECORDED SEPTEMBER 13, 1955 AS INSTRUMENT NO. 2398 IN BOOK 48924 PAGE 346
OFFICIAL RECORDS.

PARCEL B-1:

L.A. Corporate Center, Monterey Park

PAGE 17 OF 30

<PAGE>

PARCEL C:

LOT 18 OF TRACT 42611, IN THE CITY OF MONTEREY PARK, AS PER MAP RECORDED IN
BOOK 1012 PAGES 21 TO 27 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY
RECORDER OF SAID COUNTY.

L.A. Corporate Center, Monterey Park

PAGE 18 OF 30
<PAGE>

PARCEL D:

EXCEPT THEREFROM ALL GAS, OIL, AND OTHER HYDROCARBON SUBSTANCES AND ALL OTHER
MINERALS IN AND FROM THE LAND DESCRIBED IN DEED MENTIONED HEREAFTER,
PROVIDED, HOWEVER, NO RIGHT IS RESERVED TO ENTER ON OR FROM THE SURFACE OF
SAID LAND, THE RIGHT TO ENTER THE SUBSURFACE OF SAID PROPERTY, WHICH IS ALSO
RESERVED SHALL BE AT ANY POINT BELOW A DEPTH OF 500 FEET FROM THE SURFACE
THEREOF (MEASURED VERTICALLY FROM THE SURFACE THEREOF) IN ORDER TO TAKE FROM
SAID LAND AND REDUCE TO POSSESSION ANY OIL, GAS AND OTHER HYDROCARBON
SUBSTANCES AND ALL OTHER MINERALS, AS EXCEPTED AND RESERVED BY CLARA HELLMAN
HELLER, A WIDOW, ET AL., IN DEED TO BOBWILL BUILDING CO., A CORPORATION,
RECORDED SEPTEMBER 13, 1955 AS INSTRUMENT NO. 2398 IN BOOK 48924 PAGE 346,
OFFICIAL RECORDS.

PARCEL D-1:

AN EASEMENT FOR PARKING AND INGRESS AND EGRESS AS GRANTED IN THAT CERTAIN
AGREEMENT OF PARKING EASEMENT AND MAINTENANCE AGREEMENT BY AND BETWEEN LOS
ANGELES CORPORATE CENTER VENTURE, A CALIFORNIA GENERAL PARTNERSHIP, AND LOS
ANGELES CORPORATE CENTER VENTURE II, A CALIFORNIA GENERAL PARTNERSHIP,
RECORDED JULY 23, 1986 AS INSTRUMENT NO. 86-931242 OVER THAT PORTION OF LOT 4
OF TRACT 42611, IN THE CITY OF MONTEREY PARK, AS PER MAP RECORDED IN BOOK
1012 PAGES 21 TO 27 INCLUSIVE OF MAPS, IN THE OFFICE OF THE COUNTY RECORDER
OF SAID COUNTY, DESCRIBED AS A WHOLE AS FOLLOWS:

L.A. Corporate Center, Monterey Park

PAGE 19 OF 30
<PAGE>

PARCEL E:

EXCEPT THEREFROM ALL GAS, OIL, AND OTHER HYDROCARBON SUBSTANCES AND ALL OTHER
MINERALS IN AND FROM THE LAND DESCRIBED IN DEED MENTIONED HEREAFTER,
PROVIDED, HOWEVER, NO RIGHT IS RESERVED TO ENTER ON OR FROM THE SURFACE OF
SAID LAND, THE RIGHT TO ENTER THE SUBSURFACE OF SAID PROPERTY, WHICH IS ALSO
RESERVED SHALL BE AT ANY POINT BELOW A DEPTH OF 500 FEET FROM THE SURFACE
THEREOF (MEASURED VERTICALLY FROM THE SURFACE THEREOF) IN ORDER TO TAKE FROM
SAID LAND AND REDUCE TO POSSESSION ANY OIL, GAS AND OTHER HYDROCARBON
SUBSTANCES AND ALL OTHER MINERALS, AS EXCEPTED AND RESERVED BY CLARA HELLMAN
HELLER, A WIDOW, ET AL., IN DEED TO BOBWILL BUILDING CO., A CORPORATION,
RECORDED SEPTEMBER 13, 1955 AS INSTRUMENT NO. 2398 IN BOOK 48924 PAGE 346,
OFFICIAL RECORDS.

L.A. Corporate Center, Monterey Park

PAGE 20 OF 30

<PAGE>

ON MAY 8, 1981 AS INSTRUMENT NO. 81-461705.

PARCEL F:

L.A. Corporate Center, Monterey Park

PAGE 21 OF 30
<PAGE>

EXHIBIT A-13

LEGAL DESCRIPTION

PARCEL 1 OF PARCEL MAP 12439, IN THE CITY OF NORWALK, AS PER MAP FILED IN
BOOK 120 PAGE 44 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY.

EXCEPT THAT PORTION LYING SOUTH AND EAST OF THE FOLLOWING DESCRIBED LINE:

SUCH PARCEL IS ALSO KNOW AS PARCEL 1 SHOWN ON EXHIBIT C TO LOT LINE
ADJUSTMENT NO. 25 RECORDED AUGUST 3, 1993 AS INSTRUMENT NO. 93-1496503.

NORWALK, Norwalk

PAGE 22 OF 30

<PAGE>

EXHIBIT A-14

LEGAL DESCRIPTION

PARCEL 1:

PARCELS "B" AND "C" OF PARCEL MAP L.A. NO. 4316, IN THE CITY OF LOS ANGELES,
AS PER MAP FILED IN BOOK 121 PAGE 46 OF PARCEL MAPS, IN THE OFFICE OF THE
COUNTY RECORDER OF SAID COUNTY.

PARCEL 2:

Skyview Center, Los Angeles PAGE 23 OF 30

<PAGE>

PARCEL 3:

PARCEL 4:

PARCEL 5:

LOTS 158, 159, 160, 161, 162, 163, 164, 165, 166, 167, 168, 169, 170, 171,
172, 173, 174, 190, 191,

Skyview Center, Los Angeles PAGE 24 OF 30

<PAGE>

Skyview Center, Los Angeles PAGE 25 OF 30

<PAGE>

PARCEL 6:

Skyview Center, Los Angeles PAGE 26 OF 30

<PAGE>

EXHIBIT A-15

LEGAL DESCRIPTION

PARCEL A:

PARCEL 2, IN THE CITY OF WESTLAKE VILLAGE, AS SHOWN ON PARCEL MAP NO. 14081,
AS PER MAP FILED IN BOOK 153 PAGES 19 AND 20 OF MAPS, IN THE OFFICE OF THE
COUNTY RECORDER OF SAID COUNTY.

EXCEPT ALL THE OIL, GAS, AND OTHER HYDROCARBON SUBSTANCES LYING BELOW A DEPTH
OF 500 FEET, MEASURED VERTICALLY, FROM THE SURFACE OF SAID LAND, WITHOUT,
HOWEVER, ANY RIGHT TO ENTER UPON THE SURFACE OF SAID LAND NOR INTO THAT
PORTION OF THE SURFACE THEREOF LYING ABOVE A DEPTH OF 500 FEET; MEASURED
VERTICALLY FROM SAID SURFACE, AS GRANTED TO AMERICAN-HAWAIIAN STREAMSHIP
COMPANY, BY DEED RECORDED APRIL 5, 1966 IN BOOK D3261 PAGE 937, OFFICIAL
RECORDS.

ALSO EXCEPT ANY AND ALL WATER, WATER RIGHTS AND PRIVILEGES, RIPARIAN RIGHTS
AND WATER EASEMENTS AND PROFITS BELONGING, OR IN ANY WAY APPURTENANT TO THE
DESCRIBED REAL PROPERTY.

PARCEL B:

Westlake, Westlake Village PAGE 27 OF 30
<PAGE>

EXHIBIT A-16

LEGAL DESCRIPTION

LOTS 14 TO 17 INCLUSIVE OF TRACT 29776, IN THE CITY OF LOS ANGELES, AS PER MAP
RECORDED IN BOOK 737 PAGES 33 TO 35 INCLUSIVE OF MAPS IN THE OFFICE OF THE
COUNTY RECORDER OF SAID COUNTY.

Woodland Hills Financial Center, Woodland Hills

PAGE 28 OF 30

<PAGE>

EXHIBIT A-17

LEGAL DESCRIPTION

A FEE, AS TO PARCEL A: AND

SAID LEASE WAS AMENDED BY FIRST AMENDMENT DATED NOVEMBER 15, 1994,
AS DISCLOSED BY SAID MEMORANDUM OF LEASE.

THE LESSEE'S INTEREST UNDER SAID LEASE HAS BEEN ASSIGNED TO 222
HARBOR ASSOCIATES, LLC., A NEVADA LIMITED LIABILITY COMPANY BY ASSIGNMENT WHICH
RECORDED NOVEMBER 22, 1994 AS INSTRUMENT NO. 94-675689 OF OFFICIAL RECORDS,
REFERENCE BEING HEREBY MADE TO THE RECORD THEREOF FOR FULL PARTICULARS.

THE INTEREST OF LESSEE UNDER SAID LEASE HAS BEEN FURTHER ASSIGNED TO
ARDEN REALTY FINANCE PARTNERSHIP, L.P., A CALIFORNIA LIMITED PARTNERSHIP, BY
THAT CERTAIN ASSIGNMENT AND ASSUMPTION OF LEASE RECORDED IMMEDIATELY PRIOR
HERETO.

Anaheim City Centre, Anaheim

PAGE 29 OF 30

<PAGE>

PARCEL A:

PARCEL 1 OF PARCEL MAP NO. 84-229, AS SHOWN ON A MAP FILED IN BOOK 194, PAGES
22 AND 23 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

PARCEL B:

PARCEL 1 OF PARCEL MAP NO. 86-142, AS SHOWN ON A MAP FILED IN BOOK 232, PAGES
15 THROUGH 19 OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY.

Anaheim City Centre, Anaheim

PAGE 30 OF 30

<PAGE>

Exhibit B to Deed of Trust

DESCRIPTION OF BUILDINGS

1. 100 West Broadway,
Long Beach CA

2. 10350 Santa Monica Boulevard,
Los Angeles, CA

3. 303 Glenoaks Boulevard,
Burbank, CA

4. 400 Corporate Pointe
400 Slauson Avenue
Culver City, CA

5. 425 West Broadway,
Glendale, CA

6. 5832 Bolsa Avenue,
Huntington Beach, CA

7. 6100 Wilshire (the New Wilshire),
Los Angeles, CA

8. 70 South Lake Avenue,
Pasadena, CA

9. Beverly Atrium,
350 S. Beverly Drive
Beverly Hills, CA

10. Bristol Plaza,
6167 Bristol Parkway
Culver City, CA

11. Burbank Executive Plaza
(333 Glen Oaks Boulevard and
300 Magnolia Boulevard),
Burbank, CA

12. L.A. Corporate Center
(900, 1000, 1200 and
1255 Corporate Center Drive),
Monterey Park, CA

13. 12501 East Imperial Highway,
Norwalk, CA

14. Skyview Center,
6033 W. Century Boulevard,
6053 W. 98th Street
Los Angeles, CA

15. 5601 Lindero Canyon Boulevard,
Westlake Village, CA

<PAGE>

16. Woodland Hills Financial Center
(21021 and 21031 Ventura Boulevard)
Woodland Hills, CA

17. 222 South Harbor Boulevard,
Anaheim, CA

<PAGE>

EXHIBIT C

To be attached.

<PAGE>

EXHIBIT D

<PAGE>

EXHIBIT D
TO LOAN AGREEMENT

FORM OF TENANT ESTOPPEL CERTIFICATE AND AGREEMENT

Lehman Brothers Realty Corporation
Three World Financial Center
20th Floor
New York, New York 10285

RE: TENANT LEASE FOR _________________, CALIFORNIA, SUITE ________________
(THE "PREMISES") _____________________________________________________

Ladies and Gentlemen:

We understand that Lehman Brothers Realty Corporation ("Lender") is
proposing to make a loan (the "Loan") to Arden Realty Finance Partnership,
L.P. (the "Finance Partnership"), an affiliate of Arden Realty Limited
Partnership, the current landlord under the Lease (as defined below), which
Loan will be secured by, among other things, a Deed of Trust, Assignment of
Rents and Leases, Security Agreement and Fixture Filing (the "Mortgage") and
an associated Assignment of Leases and Rents (the "Assignment") relating in
whole or in part to an office complex commonly known as
_[street address, but NO SUITE NUMBER]______, California (the "Property")
in which the undersigned is a tenant. Immediately prior to the closing of the
Loan, the Finance Partnership will acquire the Property from Arden Realty
Limited Partnership. We further understand that in connection with the Loan
it is necessary that Lender understand the precise nature of our tenancy and,
in order to so do, we hereby (i) agree with you as follows and (ii) warrant
and represent to you that, with respect to our lease, as amended (the
"Lease") and more particularly described in Schedule "A" attached hereto (the
"Schedule"), the following is true and correct:

1. The Lease constitutes the entire agreement between the
undersigned and the landlord thereunder with respect to the subject matter
thereof and the Lease has not been modified, amended or supplemented in any way
except by the amendments or other agreements described in the Schedule.

2. The summary of the basic terms of the Lease contained in the
Schedule is true and correct.

3. Except as provided in the Schedule, the undersigned has not
assigned, transferred or hypothecated the Lease or any interest therein or
entered into a sublease for any portion of the premises covered by the Lease and
no person or firm other than the undersigned or its employees is in possession
of such premises or any portion thereof.

4. The undersigned is not in default (or with the giving of notice
or the passage of time or both will not be in default) under the Lease and the
undersigned has no claim against, off-set, credit, defense, counterclaim or
deductions against the landlord thereunder or against any rent or other

<PAGE>

sums due or payable under the Lease, and the landlord thereunder is not in
default (or with the giving of notice or the passage of time or both will not be
in default) under the Lease.

5. Except as set forth on the Schedule, the undersigned has no
option, right of first refusal or other right to purchase the Property or any
portion thereof or any interest therein or to lease additional space in the
Property or to extend the term of the Lease and the only interest of the
undersigned in the Property is that of a tenant pursuant to the terms of the
Lease.

6. The undersigned has not and does not engage in the generation,
storage or disposal of "Hazardous Materials" on the Property and, to the best of
the undersigned's knowledge, there are no Hazardous Materials located in, on,
under or in the vicinity of the Premises except for normal office supplies. The
undersigned agrees not to use, store, or permit the use, storage or release of
any Hazardous Materials on, under or about the Premises or the Property other
than what is permitted by applicable law, codes, regulations or restrictions and
used by the undersigned in accordance with applicable laws and in amounts as
dictated by the normal conduct of the undersigned's business. The term
"Hazardous Material" means any toxic or hazardous substance, material or wastes
which is or becomes regulated by any local government, the State of California,
the United States government or any agency or division thereof.

7. The undersigned is not the subject of any bankruptcy, insolvency,
debtor's relief, reorganization, receivership or other similar proceedings.

8. The person executing this Certificate hereby warrants and
represents that he or she has the power and authority to execute and deliver
this Certificate on behalf of the tenant named herein.

9. The undersigned as tenant hereby ratifies and confirms the Lease
and the tenancy created thereby and upon consummation of the acquisition by the
Finance Partnership, agrees to accept the Finance Partnership as the landlord
thereunder.

10. The undersigned agrees to notify you at the address set forth
above (or at such other address of which the undersigned may be advised by you
or your successors or assigns, as applicable) of any default on the part of
landlord under the Lease, and further agrees that notwithstanding any provisions
of the Lease, no notice, cancellation or termination thereof shall be effective
unless Lender shall have received such notice and have failed to cure or
commence to cure such default within a reasonable time following receipt of such
notice and the expiration of any cure period applicable thereto.

11. All conditions under the Lease to be performed by landlord as of
the date hereof (including, without limitation, all work to be performed by
landlord in the leased premises) have been satisfied, and, except as set forth
on the Schedule, all contributions, if any, required to be paid by landlord
under the Lease to date for improvements to the Premises have been paid. The
undersigned is in possession of the Premises and is fully obligated to perform
and is performing all of the other obligations of the undersigned under the
Lease.

12. So long as the Loan remains outstanding, the undersigned shall
not amend, modify or cancel the Lease, or consent to an amendment, modification
or cancellation of the Lease, or agree to subordinate the Lease to any other
mortgage, without Lender's prior written consent in each instance.

<PAGE>

13. The undersigned agrees that, upon notice from Lender, the
undersigned will make all subsequent rental payments directly to or as directed
by Lender, it being understood and agreed that the payment of such rent to
Lender under the Assignment shall not be deemed to place control of the Premises
on Lender nor to render Lender liable for the obligations of the landlord under
the Lease. Notwithstanding the Assignment and any payment of rent which may be
made to Lender, Lender shall have no duty, liability or obligation under the
Lease either by virtue of the Assignment, the exercise thereof, or by any
subsequent action taken by Lender, until such time, if ever, as Lender shall
notify the undersigned in writing of Lender's election to assume the landlord's
obligation under the Lease, or upon acquisition of the Property by the Lender
following foreclosure in which event the purchaser at foreclosure shall be bound
by the Lease, but only so long as such purchaser is the owner of the Premises.

14. In the event Lender succeeds to the interest of the Finance
Partnership as landlord under the Lease, or if the Property or the Premises are
sold pursuant to the power of sale under the Mortgage or otherwise pursuant to
the exercise of remedies under the Mortgage, the undersigned shall attorn to
Lender, or a purchaser upon any such foreclosure sale, and shall recognize
Lender, or such purchaser, thereafter as the Landlord under the Lease. Such
attornment shall be effective and self-operative without the execution of any
further instrument. The undersigned agrees, however, to execute and deliver at
any time and from time to time, upon the request of any holder(s) of any of the
indebtedness or other obligations secured by the Mortgage, or upon request of
any such purchaser, any instrument or certificate which, in the reasonable
judgment of such holder(s), or such purchaser, may be necessary or appropriate
in any such foreclosure proceeding or otherwise to evidence such attornment.

We understand that you will, if you proceed with the making of the
Loan, rely on this Certificate. This Certificate may be relied upon by your
successors and assigns.

Very truly yours,

-----------------------------------
Name of Tenant

-----------------------------------
Signature

-----------------------------------
Date

<PAGE>

SCHEDULE "A"

SUMMARY OF LEASE TERMS

(1) Name of Tenant:
-----------------------------------------------------------
(2) Lease Date:
---------------------------------------------------------------
(3) Amendment Dates, Separate Agreements, if any:
----------------------------
(4) Suite No.: ; Estimated Square Footage:
-------------- --------------------
(5) Lease Commencement Date: ; Expiration of Term:
---------- -----------------
(6) Option(s) to Extend:
-----------------------------------------------------
(7) Option(s) for Additional Space:
-------------------------------------------
(8) Monthly Base Rent: $ ;
-----------
Escalations/CAM Charges: $ ;
-----------
Total Monthly Rent: $ .
-----------
Date to which Rent last paid:
---------------------
(9) Tenant's Percentage Share of Increased Operating Costs: %
-------------
(10) Security Deposit: $ ; Prepaid Rent:
---------------- --------------------
(11) Assignees/Subtenants:
-------------------------------------------------
(12) Parking Spaces:
-------------------------------------------------------
(13) Lease Guarantor(s):
---------------------------------------------------
(14) Uncured Defaults by Landlord: None
-----------------------------------------
(15) Exclusive Uses:
-------------------------------------------------------
(16) Free Rent Months remaining after 6/01/97:
-----------------------------
(17) Tenant Improvements or other allowances due Tenant: $
-------------------
(18) Comments, if any:
-----------------------------------------------------

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

--------------------------------------------------
Name of Tenant

By:
----------------------------------------------
Date:
--------------------------------------------

<PAGE>

EXHIBIT E

To be attached.

<PAGE>

EXHIBIT 11.1

Computation of fully-diluted earnings per share, using 21,921,256
weighted average shares outstanding.

Amount Per Share
----------- ---------
Net income $ 8,438,000 $.38

Calculation of number of weighted average
fully-diluted shares:
Proceeds from assumed exercise of options $17,908,955
Divided by quarter ended March 31, 1997
average closing price of common stock $27.51
Equals number of shares assumed purchased
under treasury stock method 660,998
Number of shares assumed purchased through
exercise of options 890,000
Less number of shares assumed purchased
under treasury stock method 660,998
Equals additional shares assumed outstanding
for fully-diluted earnings per share computation 239,002
Plus weighted average number of shares
outstanding, primary EPS calculation 21,682,254
Equals weighted average number of shares
outstanding, fully-diluted EPS calculations 21,921,256

<PAGE>
EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

Arden Realty Limited Partnership, a Maryland limited partnership

Arden Realty Finance, Inc., a California corporation

Arden Realty Finance Partnership, L.P., a California limited partnership

<PAGE>
EXHIBIT 23.1

CONSENT OF INDEPENDENT AUDITORS

We consent to the references to our firm under the captions "Experts",
"Summary Selected Financial Data" and "Selected Financial Information" and to
the use of our reports: dated January 31, 1997, on the consolidated balance
sheet of Arden Realty, Inc. and the combined balance sheet of the Arden
Predecessors as of December 31, 1996 and 1995, respectively, and the related
consolidated statements of operations, stockholders' equity and cash flows of
Arden Realty, Inc. for the period from October 9, 1996 (commencement of
operations) to December 31, 1996 and the related combined statements of
operations, owners' equity and cash flows of the Arden Predecessors for the
period from January 1, 1996 to October 8, 1996 and for the years ended December
31, 1995 and 1994; dated April 10, 1996, except for Note 1, as to which the date
is October 9, 1996, on the combined statement of revenue and certain expenses of
the 1996 Pre IPO Properties for the year ended December 31, 1995; dated April
19, 1996, except for Note 1, as to which the date is October 9, 1996, on the
combined statement of revenue and certain expenses of 303 Glenoaks and 12501
East Imperial Highway for the year ended December 31, 1995; dated February 5,
1997, on the statements of revenue and certain expenses of 10351 Santa Monica
and 2730 Wilshire for the twelve months ended October 31, 1996; dated February
7, 1997, on the combined statement of revenue and certain expenses of Burbank
Executive Plaza and California Federal Building for the twelve months ended
October 31, 1996; dated February 5, 1997, on the statement of revenue and
certain expenses of Center Promenade for the period from January 1, 1996 to
December 17, 1996; dated February 5, 1997, on the statement of revenue and
certain expenses of Los Angeles Corporate Center for the period from January 1,
1996 to December 18, 1996; dated February 5, 1997, on the statement of revenue
and certain expenses of 5200 West Century for the period from January 1, 1996 to
December 19, 1996; dated February 5, 1997, on the statement of revenue and
certain expenses of Sumitomo Bank Building for the period from January 1, 1996
to December 20, 1996; dated February 5, 1997, on the statement of revenue and
certain expenses of 10350 Santa Monica for the period from January 1, 1996 to
December 27, 1996; dated March 4, 1997, on the statements of revenue and certain
expenses of 535 Brand for each of the three years in the period ended December
31, 1996; dated February 28, 1997, on the statement of revenue and certain
expenses of 10780 Santa Monica for the year ended December 31, 1996; dated
February 24, 1997, on the combined statement of revenue and certain expenses of
Whittier Financial Center, Clarendon Crest and California Twin Centre for the
year ended December 31, 1996; dated March 7, 1997, on the statement of revenue
and certain expenses of Noble Professional Center for the year ended December
31, 1996; dated May 7, 1997, on the statement of revenue and certain expenses of
South Bay Centre for the year ended December 31, 1996; dated April 24, 1997, on
the statement of revenue and certain expenses of 8383 Wilshire for the year
ended December 31, 1996; dated May 6, 1997, on the statement of revenue and
certain expenses of Parkway Center for the year ended December 31, 1996; dated
April 30, 1997, on the statement of revenue and certain expenses of Centerpointe
La Palma for the year ended December 31, 1996; dated May 2, 1997, on the
combined statement of revenue and certain expenses of 1000 Town Center and
Mariner Court for the year ended December 31, 1996; dated June 6, 1997, on the
statement of revenue and certain expenses of Pacific Gateway II for the year
ended December 31, 1996; dated May 2, 1997, on the statement of revenue and
certain expenses of Crown Cabot for the year ended December 31, 1996; and dated
May 30, 1997, on the statement of revenue and certain expenses of 1100 Glendon
for the year ended December 31, 1996, all as in the Registration Statement filed
by Arden Realty Inc. on Form S-11 dated June 26, 1997 and the related
Prospectus.

/s/ ERNST & YOUNG LLP
------------------------------------------------------------------------------

Los Angeles, California
June 24, 1997

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> 3-MOS YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 MAR-31-1997
<CASH> 7,632 822
<SECURITIES> 0 0
<RECEIVABLES> 2,293 2,093
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 9,925 2,915
<PP&E> 546,707 601,146
<DEPRECIATION> 17,139 20,510
<TOTAL-ASSETS> 551,256 599,338
<CURRENT-LIABILITIES> 6,178 9,243
<BONDS> 155,000 197,800
0 0
0 0
<COMMON> 217 217
<OTHER-SE> 331,760 331,880
<TOTAL-LIABILITY-AND-EQUITY> 551,256 599,338
<SALES> 17,041 21,892
<TOTAL-REVENUES> 19,572 24,970
<CGS> 0 0
<TOTAL-COSTS> 6,005 7,894
<OTHER-EXPENSES> 3,861 4,480
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,280 3,024
<INCOME-PRETAX> 7,433 8,438
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> (13,105)<F1> 0
<CHANGES> 0 0
<NET-INCOME> (5,672) 8,438
<EPS-PRIMARY> (0.26) 0.38
<EPS-DILUTED> (0.26) 0.38
<FN>
<F1>EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT. THE ABOVE IS FROM
THE PERIOD OCTOBER 9, 1996 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31,
1996.
</FN>

</TABLE>