EQUITY OFFICE PROPERTIES TRUST, S-11, 1997-05-07

EQUITY OFFICE PROPERTIES TRUST
S-11, 1997-05-07

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 7, 1997

REGISTRATION NO. 333-
================================================================================

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

FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------

EQUITY OFFICE PROPERTIES TRUST
(Exact name of registrant as specified in its governing instrument)

TWO NORTH RIVERSIDE PLAZA, SUITE 2200
CHICAGO, ILLINOIS 60606
(Address of principal executive offices)
---------------------

STANLEY M. STEVENS
CHIEF LEGAL COUNSEL
TWO NORTH RIVERSIDE PLAZA, SUITE 2200
CHICAGO, ILLINOIS 60606
(Name and address of agent for service)
---------------------

COPIES TO:

<TABLE>
<S> <C>
SHELI Z. ROSENBERG J. WARREN GORRELL, JR.
RUTH PINKHAM HARING JAMES E. SHOWEN
ROSENBERG & LIEBENTRITT, P.C. HOGAN & HARTSON L.L.P.
TWO NORTH RIVERSIDE PLAZA, SUITE 1515 555 THIRTEENTH STREET, N.W.
CHICAGO, ILLINOIS 60606 WASHINGTON, D.C. 20004-1109
(312) 466-3456 (202) 637-5600
</TABLE>

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

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE 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 CLASS AMOUNT BEING OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
OF SECURITIES BEING REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares of Beneficial
Interest, $.01 par value per
share........................... 17,250,000 $20.00 $345,000,000 $104,545.40
======================================================================================================================
</TABLE>

(1) Includes 2,250,000 shares that are issuable upon exercise of the
Underwriters' over-allotment option.
(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> 2

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.

SUBJECT TO COMPLETION, DATED MAY , 1997
PROSPECTUS
- ----------

15,000,000 COMMON SHARES

EQUITY OFFICE PROPERTIES TRUST
COMMON SHARES OF BENEFICIAL INTEREST
---------------------

Equity Office Properties Trust (together with its subsidiaries, the
"Company") has been formed to continue and expand the national office property
business organized by Mr. Samuel Zell, Chairman of the Board of Trustees of the
Company. The Company will be a fully integrated self-administered and
self-managed real estate company and expects to qualify as a real estate
investment trust ("REIT") for federal income tax purposes. Upon completion of
the offering (the "Offering"), the Company will own 90 office properties
containing approximately 32.2 million rentable square feet and 14 parking
facilities containing approximately 14,785 parking spaces, located in 47 markets
throughout the United States. The Company expects to control the largest office
portfolio (based on revenues and square footage) of any publicly traded, full
service office company in the United States.

All of the common shares of beneficial interest, $.01 par value per share,
of the Company ("Common Shares") offered hereby are being sold by the Company
and will represent approximately % of the Company's outstanding common equity.
The remaining common equity in the Company will be beneficially owned % by
existing investors and % by officers and trustees of the Company and certain
other affiliated parties.

Prior to the Offering, there has been no public market for the Common
Shares. It is currently anticipated that the initial public offering price per
share will be $20.00. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The Company intends
to file an application to list the Common Shares on the New York Stock Exchange.
---------------------

SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE COMMON SHARES, INCLUDING:

- The possibility that the consideration paid by the Company for the
properties and other assets contributed to the Company in its formation may
exceed their fair market value, and the fact that there were no arm's
length negotiations or third-party appraisals of such properties and other
assets in connection with the formation of the Company;
- Real estate investment and property management risks, such as the need to
renew leases or relet space upon lease expirations, the potential
instability of cash flows and changes in the value of office properties
owned by the Company due to economic and other conditions;
- Risks associated with borrowing, including the possibility that the
Company may not be able to refinance outstanding indebtedness (initially
expected to be approximately $1.8 billion) upon maturity, that indebtedness
might be refinanced on less favorable terms, interest rates might increase
on variable rate indebtedness, and the lack of limitations in the Company's
organizational documents on the amount of indebtedness that the Company may
incur;
- Conflicts of interest in connection with the Company's formation,
including the receipt by trustees and officers of the Company of equity
interests; and
- 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.
---------------------

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

<TABLE>
<CAPTION>
======================================================================================================================
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Common Share........................... $ $ $
- ----------------------------------------------------------------------------------------------------------------------
Total(3)................................... $ $ $
======================================================================================================================
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 2,250,000 Common Shares on the same terms and conditions as
set forth above, solely to cover over-allotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discount and
Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
---------------------

The Common Shares are offered by the several Underwriters, subject to prior
sale, when, as and if issued to and accepted by them, subject to approval of
certain legal matters by counsel to the Underwriters and certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Common Shares offered hereby will be made in New York, New York,
on or about , 1997.
---------------------

MERRILL LYNCH & CO.
---------------------
The date of this Prospectus is , 1997.
<PAGE> 3

[INSERT MAP, CHARTS AND/OR PICTURES]

Certain persons participating in this Offering may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Shares.
Such transactions may include stabilizing, the purchase of Common Shares to
cover syndicate short positions and the imposition of penalty bids. For a
description of these activities, see "Underwriting."

Information contained in or delivered in connection with this Prospectus
contains "forward-looking statements" relating to, without limitation, future
economic performance, plans and objectives of management for future operations
and projections of revenue and other financial items, which can be identified by
the use of forward-looking terminology such as "may," "will," "should,"
"expect," "anticipate," "estimate" or "continue" or the negative thereof or
other variations thereon or comparable terminology. The cautionary statements
set forth under the caption "Risk Factors" and elsewhere in this Prospectus
identify important factors with respect to such forward-looking statements,
including certain risks and uncertainties, that could cause actual results to
differ materially from those in such forward-looking statements.
<PAGE> 4

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY..................................................... 1
Risk Factors.............................................. 2
Business and Growth Strategies............................ 2
The Properties............................................ 4
Recent Developments....................................... 5
Structure and Formation of the Company.................... 6
The Offering.............................................. 9
Distributions............................................. 9
Tax Status of the Company................................. 10
Summary Selected Combined Financial Information........... 11
RISK FACTORS................................................ 13
Absence of Arm's Length Negotiations in the
Consolidation.......................................... 13
Real Estate Risks......................................... 13
Debt Financing............................................ 14
Influence of Trustees, Officers and Significant
Shareholders........................................... 15
Federal Income Tax Risks.................................. 15
Risks of Limitations on Changes in Control and of
Ownership Limit........................................ 17
Immediate and Substantial Dilution........................ 18
Risks of Third-Party Management........................... 18
Conflicts of Interest in Business Decisions Regarding the
Company................................................ 18
Possible Environmental Liabilities........................ 19
Absence of Prior Public Market for Common Shares.......... 20
Other Conflicts of Interest............................... 20
Risks of Ownership of Common Shares....................... 21
Potential Litigation Related to the Consolidation......... 22
Dependence on Key Personnel............................... 22
Contingent or Undisclosed Liabilities..................... 22
THE COMPANY................................................. 23
General................................................... 23
Recent Developments....................................... 24
Operations................................................ 25
Operational Structure..................................... 26
BUSINESS AND GROWTH STRATEGIES.............................. 27
USE OF PROCEEDS............................................. 28
DISTRIBUTIONS............................................... 29
CAPITALIZATION.............................................. 34
DILUTION.................................................... 35
SELECTED COMBINED FINANCIAL DATA............................ 37
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 39
General................................................... 39
Results of Operations..................................... 39
Years ended December 31, 1996 and 1995................. 39
Years ended December 31, 1995 and 1994................. 40
Liquidity and Capital Resources........................... 42
Inflation................................................. 43
Funds From Operations..................................... 43
</TABLE>

(i)
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE PROPERTIES.............................................. 45
General................................................... 45
Office Property Market Information........................ 58
Parking Facilities........................................ 62
Lease Expirations by Region............................... 64
Lease Expirations -- Portfolio Total...................... 65
Lease Distributions....................................... 65
Tenant Retention and Expansions; National Marketing
Program................................................ 66
Capital Improvements...................................... 66
Tenant Improvement and Leasing Commission Costs........... 67
Occupancy................................................. 68
Debt Financing............................................ 68
Legal Proceedings......................................... 68
MANAGEMENT.................................................. 69
Trustees, Trustee Nominees and Executive and Senior
Officers............................................... 69
Committees of the Board of Trustees....................... 72
Compensation of the Board of Trustees; Payment in Common
Shares................................................. 73
Executive Compensation.................................... 73
Option and Restricted Share Plans......................... 74
401(k) Plan............................................... 75
Incentive Compensation.................................... 75
Limitation of Liability and Indemnification............... 75
STRUCTURE AND FORMATION OF THE COMPANY...................... 76
Operating Entities of the Company......................... 76
Formation Transactions.................................... 76
Pre-Formation Transactions:............................ 77
Formation Transactions................................. 77
Escrow of Common Shares; GP Incentive Distributions;
ZML Opportunity Partnership Liquidation............... 78
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES................. 81
Investment Policies....................................... 81
Financing Policies........................................ 81
Lending Policies.......................................... 82
Conflict of Interest Policies............................. 82
Policies with Respect to Other Activities................. 83
CERTAIN RELATIONSHIPS AND TRANSACTIONS...................... 83
Sale of Common Shares to Mr. Zell......................... 83
Leases and Parking Operations............................. 84
General Partner Interests................................. 84
Other..................................................... 84
PRINCIPAL SHAREHOLDERS...................................... 85
SHARES OF BENEFICIAL INTEREST............................... 87
General................................................... 87
Common Shares............................................. 87
Preferred Shares.......................................... 88
Power to Issue Additional Common Shares and Preferred
Shares................................................. 88
Restrictions on Ownership and Transfer.................... 88
Transfer Agent and Registrar.............................. 90
CERTAIN PROVISIONS OF MARYLAND LAW AND THE COMPANY'S
DECLARATION OF TRUST AND BYLAWS........................... 91
Classification and Removal of Board of Trustees; Other
Provisions............................................. 91
</TABLE>

(ii)
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Changes in Control Pursuant to Maryland Law............... 92
Amendments to the Declaration of Trust.................... 92
Advance Notice of Trustee Nominations and New Business.... 93
Anti-takeover Effect of Certain Provisions of Maryland Law
and of the Declaration of Trust and Bylaws............. 93
Maryland Asset Requirements............................... 93
PARTNERSHIP AGREEMENT....................................... 94
Management................................................ 94
Sales of Assets........................................... 94
Removal of the Managing General Partner; Transfer of the
Company's Interests.................................... 94
Reimbursement of the Company; Transactions with the
Company and its Affiliates............................. 94
Redemption of Units....................................... 95
Restrictions on Transfer of Units by Limited Partners..... 95
Issuance of Additional Units and/or Preference Units...... 95
Capital Contributions..................................... 96
Distributions; Allocations of Income and Loss............. 96
Exculpation and Indemnification of the Company............ 96
Amendment of the Partnership Agreement.................... 97
Term...................................................... 97
SHARES AVAILABLE FOR FUTURE SALE............................ 97
FEDERAL INCOME TAX CONSIDERATIONS........................... 98
Taxation of the Company................................... 99
Taxation of Taxable U.S. Shareholders of the Company
Generally.............................................. 106
Backup Withholding for Company Distributions.............. 107
Taxation of Tax-Exempt Shareholders of the Company........ 107
Taxation of Non-U.S. Shareholders of the Company.......... 108
Tax Aspects of the Company's Ownership of Interests in the
ZML Opportunity Partnerships and the Operating
Partnership............................................ 110
Other Tax Consequences for the Company, Its Shareholders
and the Management Corp. .............................. 112
ERISA CONSIDERATIONS........................................ 112
Employment Benefit Plans, Tax-Qualified Pension, Profit
Sharing or Stock Bonus Plans and IRS................... 112
Status of the Company and the Operating Partnership under
ERISA.................................................. 112
UNDERWRITING................................................ 115
EXPERTS..................................................... 116
LEGAL MATTERS............................................... 116
ADDITIONAL INFORMATION...................................... 117
GLOSSARY OF TERMS........................................... 118
</TABLE>

(iii)
<PAGE> 7

SUMMARY

The following summary is qualified in its entirety by the more detailed
information included elsewhere in the Prospectus. Unless otherwise indicated,
the information contained in this Prospectus assumes that (i) the initial public
offering price is $20.00 per share (the assumed public offering price set forth
on the cover page of this Prospectus), (ii) the transactions described under
"Structure and Formation of the Company" are consummated, and (iii) the
Underwriters' overallotment option is not exercised. As used herein, "Company"
means Equity Office Properties Trust, a Maryland real estate investment trust,
and one or more of its subsidiaries (including EOP Operating Limited
Partnership, a Delaware limited partnership (the "Operating Partnership")), and
the predecessors thereof or, as the context may require, Equity Office
Properties Trust only or the Operating Partnership only. See "Glossary" for the
meanings of other terms used herein. Unless otherwise required by the context,
all rental and square footage data is approximate and/or on a weighted average
basis and all Property information is presented as of December 31, 1996, except
as adjusted to reflect the sale of Barton Oaks Plaza II in January 1997. All
references to the historical activities of the Company refer to the activities
of the Equity Office Predecessors. The Company will be the managing general
partner of, will own a substantial majority interest in, and will conduct all of
its operations through, the Operating Partnership.

The Company has been formed to continue and expand the national office
property businesses organized by Mr. Samuel Zell, Chairman of the Board of
Trustees of the Company. The Company expects to qualify as a real estate
investment trust ("REIT") for Federal income tax purposes. The Company expects
to control the largest office portfolio (based on revenues and square footage)
of any publicly traded, full service office company in the United States.

The Company initially will own and operate 90 office properties (the
"Office Properties") and will own 14 stand-alone parking facilities (the
"Parking Facilities" and, together with the Office Properties, the
"Properties"). The Office Properties contain approximately 32.2 million rentable
square feet of office space located in 47 markets in 20 states and the District
of Columbia. The Company's portfolio includes what management believes are some
of the more prominent office assets in the United States, such as 580 California
and One Market in downtown San Francisco, Promenade II in midtown Atlanta, 161
North Clark in Chicago's "Loop," San Felipe Plaza in Houston's Galleria area,
The Plaza at La Jolla Village in suburban San Diego, SunTrust Center in downtown
Orlando, Reston Town Center in Reston, Virginia (a suburb of Washington, D.C.)
and Two California Plaza in downtown Los Angeles.

The Company has been among the most active buyers of institutional quality
office properties throughout the United States, investing in excess of $3.1
billion since 1988 and averaging $627 million annually in acquisitions
(calculated on a cost basis) for the three years ended December 31, 1996. The
average age of the Office Properties is 12 years. The average size of the Office
Properties is 355,000 rentable square feet, compared to an estimated average of
144,000 rentable square feet for all office buildings owned by publicly traded
REITs focusing primarily on office assets. At the time of acquisition, the
Office Properties were, on a weighted average basis, 77% occupied. During the
period from 1988 through 1996, the Company leased (net of expiring leases) in
excess of an additional 3.9 million rentable square feet of office space. As of
December 31, 1996, the Office Properties were 90% occupied by a total of 2,873
tenants, with no single tenant accounting for more than 2.7% of annualized rent.

The Company currently has approximately 770 employees providing in-house
expertise in property management, leasing, finance, tax, acquisition,
development, disposition, marketing, accounting, information systems and real
estate law. The five most senior executives have an average tenure of 11 years
with the Company or its affiliates and an average of 23 years experience in the
real estate industry.

The Company believes that, given its size, its UPREIT structure, and its
relationship with many of the major institutional owners of real estate in the
United States, it is well positioned to benefit from the consolidation that is
occurring in the real estate industry.
1
<PAGE> 8

RISK FACTORS

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

- the absence of arm's length negotiations and third-party appraisals with
respect to the Properties and the other assets contributed to the Company
in its formation, resulting in the risk that the consideration paid by
the Company for such assets may exceed their fair market value and that
the market value of the Common Shares may exceed the shareholders'
proportionate share of the aggregate fair market value of such assets;

- risks associated with real estate investments, such as the need to renew
leases or re-lease space upon lease expirations and to pay renovation and
re-leasing 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;

- risks associated with borrowing, such as the inability to refinance
outstanding indebtedness upon maturity or refinance such indebtedness on
favorable terms;

- conflicts of interest in connection with the Company's formation,
including the receipt by officers, trustees and affiliates of the Company
of equity interests in the Company;

- 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;

- the possible anti-takeover effect of the Company's ability to limit, for
purposes of maintaining its REIT status, the actual or constructive
ownership of Common Shares to 9.9% of the outstanding Common Shares, and
of certain other provisions contained in the organizational documents of
the Company and the Operating Partnership, which could 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 Shares or
otherwise would be in the best interests of the Company's shareholders;

- immediate and substantial dilution of $ in the net tangible book
value per Common Share purchased in the Offering;

- the inability of the Company to control the operations of its third-party
property management and leasing business, which could result in decisions
that do not reflect the Company's interests;

- conflicts of interest involving management of the Company and certain
members of the Board of Trustees in business decisions regarding the
Company; and

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

BUSINESS AND GROWTH STRATEGIES

The Company's primary business objective is to achieve sustainable
long-term growth in cash flow per share and to maximize long-term shareholder
value. The Company intends to achieve this objective by owning and operating
institutional quality office buildings and providing a superior level of service
to tenants in central business districts ("CBDs") and suburban markets across
the United States.

Internal Growth. Management believes that the Company's future internal
growth will come from (i) lease up of vacant space, (ii) tenant roll-over at
increased rents, (iii) repositioning of certain Properties which have not yet
achieved stabilization, and (iv) increasing economies of scale.

Company believes that the current average market rent for this space is $25.00
per square foot. The Company's average operating expenses for this space are
$9.89 per square foot. The following five Properties account for 56% of the
total vacant space as of December 31, 1996:

<TABLE>
<CAPTION>
VACANT VACANT/LEASED
SQUARE FOOTAGE SQUARE FOOTAGE
-------------- --------------
<S> <C> <C>
28 State Street, Boston, MA............................... 570,040 198,230
Two California Plaza, Los Angeles, CA..................... 412,666 204,702
161 North Clark, Chicago, IL.............................. 382,227 62,250
Bank One Center, Indianapolis, IN......................... 125,422 48,475
One Market, San Francisco, CA............................. 101,139 51,521
--------- -------
1,591,494 565,178
</TABLE>

During the period from December 31, 1996, through December 31, 2001, 2,331
leases for 14.7 million rentable square feet of space are scheduled to expire.
As of December 31, 1996, the average rent for this space was $19.31 per square
foot, the market rent for such space averaged $21.04 per square foot, and the
weighted average operating expenses were $8.03 per square foot. Replacement cost
rents (rents that would provide a 12% return on investment to a developer of new
office buildings of similar quality) for this space are estimated to be $33.22
per square foot.

Three Properties purchased in 1994 (1100 Executive Tower in Orange,
California, 9400 NCX in Dallas, Texas and Four Stamford Plaza in Stamford,
Connecticut) illustrate the Company's experience in successfully repositioning
Office Properties. These three Properties were, at the time of acquisition, on a
weighted average basis, 59% leased, and each was in a state of disrepair or
contained functionally obsolete common areas. As of December 31, 1996, after
spending an average of $6.1 million on capital and tenant improvements, these
Properties were, on a weighted average basis, 94% leased, and net operating
income before depreciation had increased by a total of $3.1 million or 82% for
the calendar year 1996 compared to calendar year 1995.

As one of the largest full service office companies in the United States,
the Company expects to benefit from certain economies of scale. Management
intends to maximize the benefits attributable to its large scale operations by
aggressive cash management, bulk purchasing, national and regional service
agreements and utilization of state-of-the-art information technology (which
provides the Company with extensive operational data, including daily leasing,
occupancy and other property and financial data). Historically, as the Company's
portfolio has increased in size, the Company's general and administrative costs
as a percentage of total revenue have decreased.

The Company owns a total of approximately 50 acres of undeveloped land
adjacent to 15 Office Properties on which approximately 2.1 million square feet
of office space could be developed. The Company may decide to develop these
properties if significant pre-leasing can be arranged, and does not currently
anticipate other development activities.

External Growth. The Company believes there will be significant
opportunities for future external growth by continuing to acquire institutional
quality properties with long-term competitive advantages such as a superior
location or a particularly high level of building improvement that is unlikely
to be reproduced in the foreseeable future. Management believes that properties
may be acquired for less than replacement cost in many markets and that current
rents generally do not justify new construction in these markets. Properties may
be acquired separately or as part of a portfolio, and may be acquired for cash
and/or in exchange for equity or debt securities of the Company, and such
acquisitions may be customary real estate transactions and/or mergers or other
business combinations.

trillion. The Company believes that given its size, its UPREIT structure (which
enables it to acquire properties in transactions that may permit sellers to
defer tax consequences) and its relationship with many of the major
institutional owners of real estate in the United States, it is well positioned
to benefit from the consolidation that is occurring in the real estate industry.

Parking Facilities. Management believes that Parking Facilities offer the
Company attractive investment opportunities which will be complementary to
investments in Office Properties. Because the parking industry is highly
fragmented, would benefit from economies of scale and is in the early stages of
consolidation and privatization, management expects there to be future
opportunities to acquire parking facilities from smaller owners who lack capital
for expansion, technological upgrades or repairs. Management also expects
municipalities and other government entities to be a significant source of
properties for acquisition as budget constraints force such entities to consider
nontraditional sources of capital such as privatization of parking facilities.
The Company will focus its acquisition efforts on municipal or private parking
facilities that have limited competition, no (or minimal) rental rate
restrictions and/or a superior location proximate to or affiliated with
airports, CBDs, entertainment projects or healthcare facilities.

THE PROPERTIES

Upon completion of the Offering, the Company expects to control the largest
office portfolio (based on revenues and square footage) of any publicly traded,
full service office company in the United States. The Properties are generally
well located in markets that exhibit strong growth characteristics, are well
maintained and professionally managed, and are generally capable of attracting
and retaining high quality tenants while maintaining high rent, occupancy and
tenant retention rates.

The operation of the Properties is under the direction of five regional
managers, each of whom has oversight responsibility for all of the Properties in
his respective region. Each regional manager reports to one of two divisional
managers at the Company's headquarters in Chicago who, in turn, report to the
Company's Executive Vice President -- Real Estate Operations.
4
<PAGE> 11

As of December 31, 1996, the Company owned 82 Office Properties and ten
Parking Facilities. The following table shows the distribution of these
Properties and the Company's employees by region:

DISTRIBUTION OF OFFICE PROPERTIES BY REGION
AS OF DECEMBER 31, 1996

<TABLE>
<CAPTION>
OFFICE PROPERTIES
--------------------- NUMBER
RENTABLE OF
REGION OFFICE NUMBER SQUARE FEET EMPLOYEES
------ ------ ------ ----------- ---------
<S> <C> <C> <C> <C>
Pacific Los Angeles
CBD............................................. 4 3,226,332
Suburban........................................ 12 2,736,305 70
Southeast Atlanta
CBD............................................. 6 2,887,795
Suburban........................................ 8 2,120,652 107
Northeast Washington, D.C.
CBD............................................. 12 4,089,741
Suburban........................................ 4 884,893 67
Central Chicago
CBD............................................. 6 4,335,605
Suburban........................................ 3 513,628 322(1)
Southwest Houston
CBD............................................. 3 1,423,948
Suburban........................................ 9 3,157,522 82
West Denver
CBD............................................. 1 230,022
Suburban........................................ 14 3,520,846 55
-- ---------- ---
Total................................... 82 29,127,289 703
== ========== ===
</TABLE>

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

(1) 183 of these employees are located at the Company's headquarters.

RECENT DEVELOPMENTS

Since December 31, 1996, the Company has (i) acquired eight additional
Office Properties containing an aggregate of 2,572,930 rentable square feet and
50% ownership of four Parking Facilities containing 7,464 spaces, and (ii)
disposed of one Office Property.

In January 1997, the Company acquired an Office Property containing 187,573
rentable square feet located at 177 Broad Street in Stamford, Connecticut. At
its date of acquisition, this Office Property had annualized rent per square
foot of $21.65. The market rent per square foot for this Property is $27.26, and
the estimated replacement cost rent per square foot is $38.45. As part of the
acquisition of this Office Property, the Company also acquired an appurtenant
540-space Parking Facility and a 17-story, 161-unit residential tower. With the
addition of this Property, the Company's Office Property portfolio in Stamford
now includes seven separate Office Properties with an aggregate of approximately
1.65 million rentable square feet.

In March 1997, the Company purchased Preston Commons, consisting of three
Office Properties containing a total of 418,604 rentable square feet located in
the Preston Center market of Dallas, Texas. Preston Commons has annualized rent
per square foot of $16.79, market rent per square foot of $22.06, and estimated
replacement cost rent per square foot of $29.25.

Property was 94% occupied, had annualized rent per occupied square foot of
$20.86, market rent per square foot of $19.68 and estimated replacement cost
rent per square foot of $36.44.

In April 1997, the Company acquired 201 Mission Street in San Francisco,
California, an Office Property containing 483,289 rentable square feet. This
Office Property is 100% occupied. At its date of acquisition, this Office
Property had annualized rent per occupied square foot of $18.80, market rent per
square foot of $29.08, and estimated replacement cost rent per square foot of
$48.89.

In April 1997, the Company purchased the Smith Barney Tower in The Plaza at
La Jolla Village in San Diego, California. With this purchase, the Company now
owns an interest in all six of the office buildings containing an aggregate of
822,026 rentable square feet within this complex. The Smith Barney Tower
contains 186,607 rentable square feet. At its date of acquisition, this Office
Property had annualized rent per occupied square foot of $19.40, market rent per
square foot of $21.82, and estimated replacement cost rent per square foot of
$39.50.

In April 1997, the Company acquired One Maritime Plaza in San Francisco,
California, an Office Property containing 523,929 rentable square feet. At its
date of acquisition, this Office Property was 97% occupied, had annualized rent
per occupied square foot of $29.81, market rent per square foot of $29.08, and
estimated replacement cost rent per square foot of $47.65.

Also in April 1997, the Company purchased 50% ownership in a portfolio of
four Parking Facilities in St. Louis, Missouri containing 7,464 spaces and
80,000 square feet of retail space. These Parking Facilities will serve the St.
Louis Cardinals, the majority of downtown St. Louis and a soon-to-be-completed
one million square foot Federal Court House.

The Company is actively negotiating the purchase of three institutional
quality Office Properties containing approximately 1.7 million rentable square
feet for an aggregate purchase price of approximately $218.8 million and the
purchase of a Parking Facility containing approximately 700 spaces and 15,000
square feet of retail space for a total purchase price of approximately $25.0
million. There can be no assurance that any of these properties will be
successfully acquired. The Company has entered into an agreement to dispose of
an Office Property at 8383 Wilshire in Los Angeles, California.

The table below summarizes the leasing activity for the first three months
of 1997:

<TABLE>
<CAPTION>
EXPIRING NEW BASE
EXPIRING BASE RENT NEW RENT
SQUARE ANNUALIZED PER SQUARE ANNUALIZED PER SQUARE
FOOTAGE BASE RENT FOOT BASE RENT FOOT
--------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
New Leases Executed.......... 1,188,261 $ -- $ -- $23,926,772 $20.14
Renewal of Existing Leases... 820,562(1) 14,721,194 17.94 15,348,656 18.56
Space Vacated................ 421,969 8,721,687 20.67 -- --
----------- ------ ----------- ------
Total/Weighted
Average.......... $23,442,881 $18.87 $39,275,428 $19.49
=========== ===========
</TABLE>

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

(1) 826,905 square feet upon renewal due to expansion or remeasurement.

STRUCTURE AND FORMATION OF THE COMPANY

Company Structure. At the completion of the Offering all of the Company's
assets will be owned by, and its operations conducted through, the Operating
Partnership and its subsidiaries. The Company will be the managing general
partner of the Operating Partnership and will contribute the proceeds of the
Offering to the Operating Partnership in exchange for a number of units of
limited partnership interest ("Units") in the Operating Partnership equal to the
number of Common Shares sold in the Offering.

Consolidation. Prior to or simultaneously with the completion of the
Offering, the Company will engage in the transactions described below, which are
designed to consolidate the ownership of the Office Properties, the Parking
Facilities and the Management Business (as defined below), to facilitate the
Offering and to
6
<PAGE> 13

enable the Company to qualify as a REIT for federal income tax purposes
commencing with the taxable year ending December 31, 1997.

- The ZML Opportunity Partnerships (the predecessor owners of the Office
Properties and Parking Facilities) will contribute to the Operating
Partnership all of their interests in the Office Properties and Parking
Facilities that will comprise the Company's initial portfolio.

- The ZML REITs (each a majority or sole limited partner of a ZML
Opportunity Partnership) will merge into the Company, with the Company
succeeding to their interest in, and becoming the managing general partner
of, the ZML Opportunity Partnerships.

- Certain entities (collectively, the "Equity Group") owned directly or
indirectly by certain affiliates of Mr. Zell (the "Equity Group Owners")
will contribute to the Operating Partnership substantially all of their
interest in their office property and asset management businesses and
parking facility asset management business (the "Management Business").

- Shareholders in the ZML REITs will receive Common Shares of the Company
in exchange for their interests in the ZML REITs.

- Partners in the ZML Opportunity Partnerships (including the Company as
the successor to the ZML REITs) will receive Units in the Operating
Partnership (to be distributed over the two-year period following the
Consolidation). Such Units are intended to correspond in value to, and
will be exchangeable commencing two years following the Closing for,
Common Shares of the Company or, at the Company's option, cash equal to
the fair market value of such Common Shares.

- Units in the Operating Partnership will be issued to the Equity Group in
exchange for the Management Business, which Units will be exchangeable
for Common Shares, or, at the Company's option, the cash equivalent
thereof, commencing one year following the Closing.

- The Operating Partnership and the Equity Group will transfer the
Third-Party Management Business to the Management Corp., in which the
Operating Partnership will own non-voting stock representing 95% of the
equity interest and the Equity Group will own voting stock representing
5% of the equity interest.

Benefits to Related Parties. Certain affiliates of the Company will
realize certain material benefits in connection with the Consolidation,
including the following:

- Through the Equity Group Owners and the ZML Partners (the current general
partners of the ZML Opportunity Partnerships), Mr. Zell will be deemed to
be the beneficial owner of an aggregate of
Units and Common Shares, with a total value of $ million based on the
assumed initial public offering price of the Common Shares. Such Units
and Common Shares will be issued in exchange for the Management Business
and shares of the ZML REITs owned by the ZML Partners. The aggregate book
value of the foregoing interests as of December 31, 1996 was
approximately $ million. The Company does not believe that the book
values of the interests and assets exchanged (which reflect the
depreciated historical cost of such interests and assets) are equivalent
to the fair market values of such interests and assets, but the fair
market value of such interests may vary from the value of the Common
Shares and Units issued in exchange therefor.

- Through the ZML Partners, Mr. Zell may become the deemed beneficial owner
of up to an additional Units that may be distributed by the ZML
Opportunity Partnerships over the two-year period following the
Consolidation. Any distribution of these Units to the ZML Partners will
not dilute the interest in the Company of the purchasers of Common Shares
in the Offering.

- The Equity Group and the ZML Partners will realize an immediate accretion
in the net tangible book value of their investment in the Company of
$ per Common Share representing an aggregate accretion amount of
$ .
7
<PAGE> 14

- Mr. Zell will serve as Chairman of the Board of Trustees of the Company
and will participate in the Company's Employee Plan, including grants of
options to purchase 200,000 Common Shares at the offering price.

- Commencing on the first anniversary of the Offering, the Equity Group and
the ZML Partners will have registration rights with respect to a portion
of the Common Shares received in the Consolidation as well as the Common
Shares that may be issued in exchange for Units received in the
Consolidation or in liquidation of the ZML Opportunity Partnerships.

The following diagram depicts the Company's structure following
consummation of the Offering:

-----------------------
| Shareholders |
-----------------------
|
|
------------------------------------
| |
| Equity Office Properties Trust |
| |
-----------------------------------
Units |
(GP & LP) |
-------|------
-------------- Units / \
| Equity | (LP) / Operating \
| Group |-----------/ Partnership (1) \
| | / \
---\---------- ----/---------------\--
\ / \
\ Voting Stock / Non-Voting Stock \
\ (5% of equity) / (95% of equity) \
\ / \--------------------
\--------------/ | Properties and |
| Management | | Property Owning |
| Corp. | | Subsidiaries |
---------------- --------------------

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

(1) The initial holders of Units will be the Company, the Equity Group, and the
ZML Opportunity Partnerships. The ZML Opportunity Partnerships will be
liquidated during the two-year period following consummation of the Offering
and, pursuant to such liquidation, Units will be distributed to the Company,
the ZML Partners and an Investor Limited Partner. Prior to liquidation, ZML
Opportunity Partnership II will be a non-managing general partner of the
Operating Partnership and the Company will be the sole managing general
partner of the Operating Partnership and each of the ZML Opportunity
Partnerships. Also, the Company may own nominal interests directly in some
Property-owning Subsidiaries and the Operating Partnership may own some
Common Shares. See "Structure and Formation of the Company -- Formation
Transactions."
8
<PAGE> 15

THE OFFERING

All of the Common Shares offered hereby are being offered by the Company.

Common Shares Offered by the
Company............................. 15,000,000 shares

Common Shares Outstanding After the
Offering............................ shares

Common Shares and Units Outstanding
After the Offering (1)............ shares and Units

Use of Proceeds..................... To repay indebtedness and to acquire
additional Office Properties and
Parking Facilities

Proposed NYSE Symbol................ "EOP"
- ---------------

(1) Units are exchangeable on a one-for-one basis for Common Shares or, at the
option of the Company, cash, subject to certain exceptions.

DISTRIBUTIONS

The Company intends initially to distribute annually approximately %
of estimated cash available for distribution. The Company's estimate of the cash
available for distribution for the twelve months ending December 31, 1997, is
based upon pro forma Funds from Operations for the 12 months ended December 31,
1996, with certain adjustments as described in "Distributions." The actual
distributions made by the Company will be affected by a number of factors,
including the gross revenues received from its Properties, the operating
expenses of the Company, the interest expense incurred in borrowing, and
unanticipated capital expenditures. No assurance can be given that the Company's
estimates will prove accurate or that any level of distributions will be made or
sustained. The Company anticipates that distributions will exceed net income
determined in accordance with generally accepted accounting principles due to
non-cash expenses, primarily depreciation and amortization.

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 shareholders as ordinary dividend income (except to the extent designated as
"capital gain" dividends). Distributions in excess of such earnings and profits
generally will be treated as first a non-taxable reduction of the shareholder's
basis in the Common Shares to the extent thereof (which may have the effect of
increasing the gain or decreasing the loss recognized on such shareholder's sale
of the Common Shares), and thereafter as taxable gain. The Company anticipates
that approximately % (or $ per Common Share) of the distributions
intended to be paid by the Company for the 12-month period following the
Offering will represent a return of capital for Federal income tax purposes.

For a discussion of the annual distribution requirements applicable to
REITs, see "Federal Income Tax Considerations -- Taxation of the
Company -- Annual Distribution Requirements Applicable to REITs." For a
discussion of the tax treatment of distributions to the holders of Common
Shares, see "Federal Income Tax Considerations -- Taxation of Taxable U.S.
Shareholders of the Company Generally" "-- Taxation of Tax-Exempt Shareholders
of the Company," and "-- Taxation of Non-U.S. Shareholders of the Company."
9
<PAGE> 16

TAX STATUS OF THE COMPANY

The Company intends to elect to be taxed as a REIT under Sections 856
through 860 of the Internal Revenue Code of 1986, as amended (the "Code"),
commencing with its taxable year ending December 31, 1997, and believes its
organization and proposed method of operation will enable it to meet the
requirements for qualification as a REIT. To maintain REIT status, an entity
must meet a number of organizational and operational requirements. In addition,
in order to maintain its qualification as a REIT under the Code, the Company
generally will be required each year to distribute at least 95% of its net
taxable income. As a REIT, the Company generally will not be subject to Federal
income tax on net income it distributes currently to its shareholders. If the
Company fails to qualify as a REIT in any taxable year, it will be subject to
Federal income tax at regular corporate rates. See "Federal Income Tax
Considerations -- Taxation of the Company -- Failure to Qualify" and "Risk
Factors -- Tax Risks -- Failure to Qualify as a REIT." Even if the Company
qualifies for taxation as a REIT, the Company will be subject to certain
Federal, state and local taxes on its income and property.
10
<PAGE> 17

SUMMARY SELECTED COMBINED FINANCIAL INFORMATION

The following sets forth summary selected combined financial and operating
information on a pro forma basis for the Company and on an historical basis for
the Company's predecessors ("Equity Office Predecessors"). The following
information should be read in conjunction with the combined financial statements
and notes thereto of Equity Office Predecessors included elsewhere in this
Prospectus. The summary selected combined historical financial and operating
information of Equity Office Predecessors at December 31, 1995 and 1996, and for
each of the three years in the period ended December 31, 1996, has been derived
from the historical combined financial statements of the Equity Office
Predecessors audited by Ernst & Young LLP, independent auditors, whose report
with respect thereto is included elsewhere in this Prospectus. The summary
selected combined historical financial and operating information of Equity
Office Predecessors at December 31, 1992, 1993 and 1994, and for each of the two
years in the period ended December 31, 1993, has been derived from the
historical unaudited combined financial statements of the Equity Office
Predecessors.

<TABLE>
<CAPTION>
EQUITY OFFICE PREDECESSORS (COMBINED HISTORICAL)
COMPANY YEARS ENDED DECEMBER 31,
PRO FORMA --------------------------------------------------------------
1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenue:
Rental, parking and other........ $ 650,423 $ 493,396 $ 356,959 $ 230,428 $ 150,315 $ 96,787
========== ========== ========== ========== ========== ==========
Total Revenue............. $ 665,144 $ 508,124 $ 371,457 $ 240,878 $ 159,246 $ 107,154
========== ========== ========== ========== ========== ==========
Expenses:
Interest......................... $ 129,771 $ 119,595 $ 100,566 $ 59,316 $ 36,755 $ 25,775
Depreciation and amortization.... 109,571 96,237 74,156 46,905 29,752 19,266
Property operating expenses(1)... 258,773 201,067 151,488 107,412 74,028 48,856
General and administrative....... 25,545 23,145 21,987 15,603 12,012 8,720
Provision for value impairment... 0 0 20,248 0 0 0
---------- ---------- ---------- ---------- ---------- ----------
Total Expenses............ $ 523,660 $ 440,044 $ 368,445 $ 229,236 $ 152,547 $ 102,617
========== ========== ========== ========== ========== ==========
Income before (income) loss
allocated to minority interests,
income from investments in
limited partnership and LLC, gain
on sale of real estate, and
extraordinary items.............. $ 141,484 $ 68,080 $ 3,012 $ 11,642 $ 6,699 $ 4,537
Minority interests allocation...... (2,086) (2,129) 1,437 1,772 1,793
Income from investments in limited
partnership and LLC.............. 4,726 2,093 2,305 1,778 0 0
Gain on sale of real estate and
extraordinary items.............. 5,338 5,338 31,271 1,705 0 0
---------- ---------- ---------- ---------- ---------- ----------
Net income................ $ $ 73,425 $ 34,459 $ 16,562 $ 8,471 $ 6,330
========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA:
(AT END OF PERIOD)
Investment in real estate after
accumulated depreciation......... $ $3,291,815 $2,393,403 $1,815,160 $1,220,268 $ 820,805
Total assets.............. 3,912,565 2,650,890 2,090,933 1,318,644 912,631
Mortgage debt and revolving line of
credit........................... 1,810,589 1,964,892 1,434,827 1,261,156 798,897 526,830
Total liabilities......... 1,922,043 2,174,483 1,529,334 1,350,552 845,315 552,666
Minority interests................. 11,080 31,587 9,283 (15,298) (14,133)
Owners'/Shareholders' equity....... 1,727,002 1,089,969 731,098 488,627 374,098
</TABLE>

11
<PAGE> 18

<TABLE>
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
General and administrative expenses as
a percentage of total revenues....... 3.8% 4.6% 5.9% 6.5% 7.5% 8.1%
Property operating margin.............. 60.2% 59.2% 57.6% 53.4% 50.8% 49.5%
Number of Office Properties owned at
period end(2)(3)(4).................. 90 83 73 63 48 33
Net rentable square feet of Office
Properties owned at period end (in
millions)(2)......................... 32.2 29.2 23.1 18.5 13.6 9.1
Occupancy of Office Properties owned at
period end(2)........................ 91% 90% 86% 88% 80% 73%
Number of Parking Facilities owned at
period end(5)........................ 14 10 3 0 0 0
Number of spaces at Parking Facilities
owned at period end(5)............... 14,785 7,321 3,323 0 0 0
Funds from Operations(6)............... $ 251,770 $ 160,460 $ 96,104 $ 60,372 -- --
Weighted average number of shares
outstanding..........................
Cash flow from operating activities.... -- $ 165,975 $ 93,878 $ 73,821 -- --
Cash flow from investing activities.... -- $ (924,227) $ (380,615) $ (513,965) -- --
Cash flow from financing activities.... -- $ 1,057,551 $ 276,513 $ 514,923 -- --
</TABLE>

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

(1) Includes Property operating expenses, real estate taxes, insurance, as well
as repair and maintenance expenses.
(2) The data at the periods ended December 31, 1996 and 1995 includes 28 State
Street, a 570,040 square foot Office Property which is undergoing major
redevelopment and is vacant. The weighted average occupancy, excluding 28
State Street, as of December 31, 1996 and 1995 was approximately 92% and
88%, respectively.
(3) The pro forma number of Office Properties includes Preston Commons, 177
Broad Street, Oakbrook Terrace Tower, One Maritime Plaza, 201 Mission
Street, Smith Barney Tower and 30 North LaSalle, each of which is
characterized as a 1997 acquisition under "-- Recent Developments," and
excludes Barton Oaks Plaza II and 8383 Wilshire, each of which is a 1997
disposition.
(4) The number of Office Properties owned as of December 31, 1996, as reflected
in the combined historical financial statements, includes Barton Oaks Plaza
II, an Office Property which was sold in January 1997.
(5) The pro forma number of Parking Facilities and number of spaces include the
50% ownership in a portfolio of four Parking Facilities in St. Louis,
Missouri containing 7,464 spaces, which is characterized as a 1997
acquisition under "-- Recent Developments."
(6) 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 defines Funds from Operations as net income (loss) (computed in
accordance with GAAP), excluding gains (or losses) from debt restructuring
and sales of properties, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. Management considers Funds from Operations an appropriate measure
of performance of an equity REIT because it is predicated on cash flow
analyses. The Company computes Funds from Operations in accordance with
standards established by NAREIT which may not be comparable to Funds from
Operations reported by other REITs that do not define the term in accordance
with the current NAREIT definition or that interpret the current NAREIT
definition differently than does the Company. Funds from Operations does not
represent cash generated from operating activities in accordance with GAAP
and 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 flow from operating activities (determined in
accordance with GAAP) as a measure of the Company's liquidity, nor is it
indicative of funds available to fund the Company's cash needs, including
its ability to make cash distributions. For a reconciliation of net income
and Funds from Operations, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Funds from Operations."
12
<PAGE> 19

RISK FACTORS

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

ABSENCE OF ARM'S LENGTH NEGOTIATIONS IN THE CONSOLIDATION

There have been no arm's length negotiations or third-party appraisals with
respect to the valuation of the Properties and other assets contributed to the
Company in its formation. See "Structure and Formation of the
Company -- Formation Transactions." As a result, the consideration paid by the
Company for such assets may exceed their fair market value and the market value
of the Common Shares may exceed a shareholder's proportionate share of the
aggregate fair value of such assets.

REAL ESTATE RISKS

Renewal of Leases and Reletting of Space. The Company will be subject to
the risks that leases may not be renewed, 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 57% of
the rentable square feet in the Properties will expire prior to 2003. If the
Company were unable to promptly relet or renew the leases for all or a
substantial portion of this space, if the rental rates upon such renewal or
reletting were significantly lower than expected rates or if its reserves for
these purposes proved inadequate, then the Company's cash flow and ability to
make expected distributions to shareholders may be adversely affected.

Risk of Acquisition Activities. The Company intends to actively continue
to acquire office and parking properties. See "Business and Growth Strategies."
Acquisitions of office and parking properties entail risks that investments will
fail to perform in accordance with expectations. Estimates of the 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. Finally, the Company expects that there will be significant
competition for attractive investment opportunities from other major real estate
investors with significant capital including both publicly traded REITs and
private institutional investment funds. The Company anticipates that future
acquisitions will be financed through a combination of advances under an
unsecured line of credit that the Company intends to establish with a consortium
of national and international banks in a principal amount of approximately $350
million (the "Line of Credit"), other forms of secured or unsecured financing
and proceeds from equity or debt offerings by the Company or the Operating
Partnership.

Uncontrollable Factors Affecting Performance and Value. Shareholders will
bear risks associated with real property investments. The yields available from
equity investments in real estate depend in large part on the amount of income
generated and expenses incurred. The economic performance and value of the
Company's real estate assets will be subject to all of the risks incident to the
ownership and operation of real estate. These include the risks normally
associated with changes in general national, regional and local economic and
market conditions. Such local real estate market conditions may include excess
supply and intense competition for tenants, including competition based on
rental rates, attractiveness and location of the property and quality of
maintenance, insurance and management services. Other factors that may adversely
affect the performance and value of a Property include changes in laws and
governmental regulations (including those governing usage, zoning and taxes),
changes in interest rates, the availability of financing and the possibility of
bankruptcies of tenants at the Properties.

Illiquidity of Real Estate Investments. Because real estate investments
are relatively illiquid, the Company's ability to vary its portfolio promptly in
response to economic or other conditions will be limited. In addition, certain
significant expenditures, such as debt service, real estate taxes, and operating
and maintenance costs generally are not reduced in circumstances resulting in a
reduction in income from the investment. The foregoing and any other factor or
event that would impede the ability of the Company to respond to

13
<PAGE> 20

adverse changes in the performance of its investments could have an adverse
effect on the Company's financial condition and results of operations.

Uninsured Loss. The Company carries comprehensive liability, fire,
extended coverage and rental loss insurance covering all of the Properties, with
policy specifications and insured limits which the Company believes are adequate
and appropriate under the circumstances. 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 Company 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 Company, would remain obligated
for any mortgage debt or other financial obligations related to the Property.
The Company carries earthquake insurance on all of its Properties, including
those located in California, subject to coverage limitations which the Company
believes are commercially reasonable. In light of the California earthquake
risk, California building codes since the early 1970's have established
construction standards for all new buildings. The current and strictest
construction standards were adopted in 1987. Of the 13 Properties located in
California, six have been built or renovated since January 1, 1988 and the
Company believes that all of the Properties were constructed in full compliance
with the applicable standards existing at the time of construction. No assurance
can be given that material losses in excess of insurance proceeds will not occur
in the future.

DEBT FINANCING

Debt Financing and Existing Debt Maturities. 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 pay distributions at expected levels
and meet required payments of principal and interest, the risk that existing
indebtedness on the Properties (which will not in all cases have been fully
amortized at maturity) will not be able to be refinanced or that the terms of
such refinancing will not be as favorable as the terms of existing indebtedness.
Upon consummation of the Offering, the Company expects to have substantial
outstanding indebtedness which will be secured by certain of the Properties. See
"The Properties -- Debt Financing." If principal payments due at maturity cannot
be refinanced, extended or paid with proceeds of other capital transactions,
such as 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
such maturing debt. Furthermore, if prevailing interest rates or other factors
at the time of refinancing (such as the possible reluctance of lenders to make
commercial real estate loans) result in higher interest rates upon refinancing,
the interest expense relating to such refinanced indebtedness would increase,
which would adversely affect the Company's cash flow and the amount of
distributions it can make to shareholders. If a Property or Properties are
mortgaged to secure payment of indebtedness and the Company is unable to meet
mortgage payments, the Property could be foreclosed by or otherwise transferred
to the mortgagee with a consequent loss of income and asset value to the
Company.

No Limitations on Indebtedness. Upon completion of the Offering, the
Company's Debt to Market Capitalization Ratio (as defined below) is expected to
be approximately %. At such time, the Company expects to enter into the Line
of Credit. The term of this facility is expected to be approximately two to
three years at various interest rate options including the 30-day LIBOR.

Upon completion of the Offering, the Company will adopt a policy of
incurring debt, either directly or through the Operating Partnership, only if
upon such incurrence the Company's Debt to Market Capitalization Ratio (i.e.,
the total consolidated and unconsolidated debt of the Company as a percentage of
the market value of outstanding Common Shares and Units plus total consolidated
and unconsolidated debt, but excluding (i) all nonrecourse consolidated debt in
excess of the Company's proportionate share of such debt and (ii) all
nonrecourse unconsolidated debt of partnerships in which the Company is a
limited partner) would be approximately 50% or less. However, the organizational
documents of the Company and the Operating Partnership will not contain any
limitation on the amount of indebtedness that may be incurred. Accordingly, the
Board of Trustees could alter or eliminate this policy and would do so, for
example, if it were necessary for the Company to continue to qualify as a REIT.
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 Funds from Operations and, consequently, the amount of Cash Available
for Distribution to

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<PAGE> 21

shareholders and could increase the risk of default on the Company's
indebtedness. The Company will limit its debt based on total market
capitalization because it believes that the book value of its assets does not
accurately reflect its ability to borrow and to meet debt service requirements.
The market capitalization of the Company, however, is expected to be more
variable than book value and will not necessarily reflect the fair market value
of the underlying assets of the Company.

Risk of Rising Interest Rates and Variable Rate Debt. Upon consummation of
the Offering, the Company, through the Operating Partnership, expects to enter
into the Line of Credit. Advances under the Line of Credit are expected to bear
interest at a variable rate based upon LIBOR. With the exception of the Line of
Credit, the Company expects to enter into interest rate hedging agreements for,
or refinance, a substantial portion of its floating rate debt prior to or within
120 days after consummation of the Offering. The Company, which expects to incur
indebtedness through the Operating Partnership, may incur other variable rate
indebtedness in the future. Increases in interest rates on such indebtedness
could increase the Company's interest expense, which would adversely affect the
Company's cash flow and its ability to pay expected distributions to Investors.
Accordingly, the Company may in the future engage in other transactions to
further limit its exposure to rising interest rates as appropriate and cost
effective. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

INFLUENCE OF TRUSTEES, OFFICERS AND SIGNIFICANT SHAREHOLDERS

Upon consummation of the Offering, through the Equity Group and the ZML
Partners, Mr. Zell will be deemed to beneficially own approximately % of the
outstanding Common Shares (on a fully diluted basis, i.e., including Common
Shares issuable upon exchange of Units). In addition, the ZML Partners may
receive distributions of up to additional Units from the ZML
Opportunity Partnerships during the two-year period following the Offering. All
such Units will be exchangeable for Common Shares (subject to the Ownership
Limit) or, at the option of the Company, for the cash equivalent of that number
of Common Shares, beginning on the first anniversary of the Closing for Units
issued to the Equity Group for the Management Business and beginning on the
second anniversary of the Closing for the Units issued to the ZML Partners in
liquidation of the ZML Opportunity Partnerships. See "Structure and Formation of
the Company -- Formation Transactions." In addition, Mr. Zell, Ms. Rosenberg and
certain executive officers of the Company will receive options to purchase
Common Shares exercisable at the initial offering price. The trustees
and executive officers affiliated with the Equity Group Owners will have
influence on the management and operation of the Company and, as shareholders,
on the outcome of any matters submitted to a vote of the shareholders, and such
influence might be exercised in a manner that is inconsistent with the interests
of other shareholders. Although there is no understanding or arrangement for
these trustees, officers and shareholders and their affiliates to act in
concert, such parties would be in a position to exercise significant influence
over the Company's affairs should they choose to do so. If all or a substantial
portion of the Units were exchanged for Common Shares and such Common Shares
were retained and not sold, subject to the Ownership Limit described under
"-- Risks of Ownership of Units and Common Shares -- Possible Adverse
Consequences of Ownership Limit," the influence of the holders thereof over the
affairs of the Company would increase, and the influence of the remaining
shareholders would be diminished, accordingly. See "Management -- Trustees and
Executive Officers" and "Principal Shareholders."

FEDERAL INCOME TAX RISKS

Adverse Consequences of the Company's Failure to Qualify as a REIT. The
Company intends to operate so as to qualify as a REIT under the Code, commencing
with its taxable year ending December 31, 1997. Although management believes
that the Company will be organized and will operate in such a manner, no
assurance can be given that the Company will be organized or will be able to
operate in a manner so as to qualify or remain so qualified. Qualification as a
REIT involves the satisfaction of numerous requirements (some on an annual and
quarterly basis) established under highly technical and complex Code provisions
for which there are only limited judicial and administrative interpretations,
and involves the determination of various factual matters and circumstances not
entirely within the Company's control. For example, in order to qualify as a
REIT, at least 95% of the Company's gross income in any year must be derived
from qualifying

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<PAGE> 22

sources, and the Company must pay distributions to shareholders 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, such as
the Company, 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 tax legislation
that would adversely affect the Company's ability to operate as a REIT.

Hogan & Hartson L.L.P., special tax counsel to the Company, has rendered an
opinion to the effect that the Company is organized in conformity with the
requirements for qualification as a REIT and its proposed method of operation
will enable it to meet the requirements for qualification and taxation as a
REIT. See "Federal Income Tax Considerations -- Taxation of the Company." Such
legal opinion, however, is based on various assumptions and factual
representations by the Company regarding the Company's ability to meet the
various requirements for qualification as a REIT, and no assurance can be given
that actual operating results will meet these requirements. Such legal opinion
is not binding on the Internal Revenue Service ("IRS") or any court. Moreover,
the Company's qualification and taxation as a REIT will depend upon the
Company's ability to meet (through actual annual operating results, distribution
levels and diversity of stock ownership) the various qualification tests imposed
under the Code, the result of which will not be reviewed by special 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 shareholders because of the additional tax
liability to the Company for the years involved. In addition, distributions to
shareholders would no longer be required to be made. See "Federal Income Tax
Considerations -- Taxation of the Company -- Failure of the Company to Qualify
as a REIT."

Other Tax Liabilities. Even if the Company qualifies as a REIT, it will be
subject to certain Federal, state and local taxes on its income and property. In
addition, the net taxable income, if any, from the activities conducted through
the Management Corp. will be subject to Federal and state income tax. See
"Federal Income Tax Considerations -- Other Tax Consequences for the Company,
Its Shareholders and the Management Corp."

Adverse Consequences if ZML REITs are Not Qualified as REITs. If one or
more of the ZML REITs has failed to qualify as a REIT throughout the duration of
its existence, then it might have undistributed "C corporation earnings and
profits" that, if not distributed by the Company prior to the end of its first
taxable year, could prevent the Company from qualifying as a REIT. The Company
and the ZML REITs believe that each of the ZML REITs has qualified as a REIT
throughout the duration of its existence and that, in any event, no ZML REIT
should be considered to have any undistributed "C corporation earnings and
profits" at the time of the Merger. In addition, if a ZML REIT has failed to
qualify as a REIT throughout the duration of its existence, that ZML REIT would
recognize taxable gain on the Merger (and the Company would be liable for the
tax thereon), even though the Merger otherwise qualifies as a "tax-free
reorganization" for tax purposes, unless the Company makes a special election
that is available under current law. The Company intends to make such an
election as a protective matter with respect to each of the ZML REITs, which
would have the effect of requiring the Company to pay corporate income tax with
respect to the existing gain on assets acquired from a ZML REIT that has not
qualified as a REIT if such assets are sold within 10 years after the
Consolidation. Finally, if one or more of the ZML REITs were to fail to qualify
as a REIT, the Company could be precluded from electing REIT status for up to
five years after the year in which the ZML REIT lost its REIT status if the
Company were determined to be a "successor" to that ZML REIT. See "Federal
Income Tax Considerations -- Taxation of the Company" and "-- Requirements for
Qualification."

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<PAGE> 23

RISKS OF LIMITATIONS ON CHANGES IN CONTROL AND OF OWNERSHIP LIMIT

Limitations on Changes in Control Contained in the Declaration of Trust and
Bylaws. Certain provisions of the Company's Declaration of Trust and Bylaws may
have the effect of delaying, deferring or preventing a change in control of the
Company or other transaction that could provide the holders of Common Shares
with the opportunity to realize a premium over the then-prevailing market price
of such Common Shares. The Ownership Limit (described under "-- Possible Adverse
Consequences of Ownership Limit") also may have the effect of delaying,
deferring or preventing a change in control of the Company or other transaction
even if such a change in control or transaction were in the best interests of
some, or a majority, of the Company's shareholders. The Board of Trustees will
consist of nine members as of the Closing of the Offering who will be classified
into three classes with each class serving a three-year term. The staggered
terms of the members of the Board of Trustees may adversely affect the
shareholders' ability to effect a change in control of the Company, even if a
change in control were in the best interests of some, or a majority, of the
Company's shareholders. See "Management -- Trustees and Executive Officers." The
Declaration of Trust authorizes the Board of Trustees to cause the Company to
issue up to 100,000 preferred shares of beneficial interest, $0.01 par value per
share ("Preferred Shares"), in series, and to establish the preferences, rights
and other terms of any series of Preferred Shares so issued. See "Shares of
Beneficial Interest." Although the Board of Trustees has no such intention at
the present time, it could establish a series of Preferred Shares that could
delay, defer or prevent a change in control of the Company or other transaction
that might involve a premium price for the Common Shares or otherwise be in the
best interest of the shareholders. The Declaration of Trust and Bylaws of the
Company also contain other provisions that may delay, defer or prevent a change
in control of the Company or other transaction that might involve a premium
price for the Common Shares or otherwise be in the best interest of the
shareholders.

Possible Limitations on Changes in Control Pursuant to Maryland Law. Under
provisions (which are not currently applicable to the Company) of the Maryland
General Corporation Law, as amended ("MGCL"), as applicable to real estate
investment trusts, certain "business combinations" (including certain issuances
of equity securities) between a Maryland real estate investment trust and any
person who beneficially owns ten percent or more of the voting power of the
trust's then outstanding shares or an affiliate of the trust 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
shares of beneficial interest of the trust (an "Interested Shareholder"), or an
affiliate of the Interested Shareholder, are prohibited for five years after the
most recent date on which the Interested Shareholder becomes an Interested
Shareholder. Thereafter, any such business combination must be approved by two
super-majority shareholder votes unless, among other conditions, the trust's
common shareholders receive a minimum price (as defined in the MGCL) for their
shares and the consideration is received in cash or in the same form as
previously paid by the Interested Shareholder for its common shares. As
permitted by the MGCL, the Board of Trustees of the Company has opted out of the
business combination provisions of the MGCL. Consequently, the five-year
prohibition and the super-majority vote requirements will not apply to a
business combination involving the Company; however, the Company's Board of
Trustees may repeal (except with respect to a shareholder who becomes an
Interested Shareholder as a result of Common Shares received in the Merger) this
opt-out and cause the Company to become subject to these provisions in the
future.

Possible Adverse Consequences of Ownership Limit. To maintain its
qualification as a REIT for Federal income tax purposes, not more than 50% in
value of the outstanding shares of beneficial interest of the Company may be
owned, directly or indirectly, by five or fewer individuals (as defined in the
Code, to include certain entities). See "Federal Income Tax
Considerations -- Taxation of the Company -- Requirements for Qualification." To
facilitate maintenance of its qualification as a REIT for Federal income tax
purposes, the Company generally will prohibit ownership, directly or by virtue
of the attribution provisions of the Code, by any single shareholder of more
than 9.9% of the issued and outstanding Common Shares and generally will
prohibit ownership, directly or by virtue of the attribution provisions of the
Code, by any single shareholder of more than 9.9% of the issued and outstanding
shares of any class or series of the Company's Preferred Shares (collectively,
the "Ownership Limit"). The Board of Trustees is required to waive or modify the
Ownership Limit with respect to one or more persons who would not be treated as
"individuals" for purposes of the Code

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<PAGE> 24

if it is satisfied, based upon information required to be provided by the party
seeking the waiver, that ownership in excess of this limit will not cause a
person who is an individual to be treated as owning Common Shares or Preferred
Shares in excess of the Ownership Limit, applying the applicable constructive
ownership rules, and will not otherwise jeopardize the Company's status as a
REIT for Federal income tax purposes. The Board of Trustees has granted such an
exception for the sole ZML Investor that is not an "individual" that would own
more than 9.9% of the Common Shares immediately following the Consolidation as a
result of receiving such Common Shares in the Consolidation. Absent any such
exemption or waiver, Common Shares or Preferred Shares acquired or held in
violation of the Ownership Limit will be transferred to a trust for the benefit
of a designated charitable beneficiary, with the person who acquired such Common
Shares and/or Preferred Shares in violation of the Ownership Limit not entitled
to receive any distributions thereon, to vote such Common Shares or Preferred
Shares, or to receive any proceeds from the subsequent sale thereof in excess of
the lesser of the price paid therefor or the amount realized from such sale. A
transfer of Common Shares and/or Preferred Shares to a person who, as a result
of the transfer, violates the Ownership Limit may be void under certain
circumstances. See "Shares of Beneficial Interest -- Restrictions on Ownership
and Transfer." The Ownership Limit may have the effect of delaying, deferring or
preventing a change in control and, therefore, could adversely affect the
shareholder's ability to realize a premium over the then-prevailing market price
for the Common Shares in connection with such transaction.

IMMEDIATE AND SUBSTANTIAL DILUTION

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

RISKS OF THIRD-PARTY MANAGEMENT

Risk of Contract Termination. Risks associated with the management of
properties which are not controlled by the Operating Partnership and properties
owned by third parties include the risk that management contracts will be
terminated by the entity controlling the property or in connection with sale of
such property, that contracts may not be renewed upon expiration or may not be
renewed on terms consistent with current terms, and that the rental revenues
upon which management fees are based will decline as a result of general real
estate market conditions or specific market factors resulting in decreased
management fee income. Although the Management Corp. will have third-party
property management contracts with respect to the Managed Properties, there can
be no assurance that these management contracts will not be terminated in the
future. The management contracts are terminable by the owner on either 30 or 60
days notice.

Lack of Control Over Management Corp. To facilitate maintenance of the
Company's qualification as a REIT for Federal income tax purposes, management of
any properties that are not wholly owned by the Operating Partnership and its
subsidiaries will be conducted through the Management Corp. The Operating
Partnership will own all of the non-voting stock (representing a 95% equity
interest) and the Equity Group will own all of the voting stock (representing a
5% equity interest) of the Management Corp. The initial board of directors of
the Management Corp. will consist of Messrs. Zell and Callahan and Ms.
Rosenberg. The Equity Group will retain the ability to elect the directors of
the Management Corp. The Company will not control the timing or amount of
dividends paid by the Management Corp. nor will the Company have the authority
to control the management and operation of the Management Corp. As a result,
decisions relating to the declaration and payment of dividends and the business
policies and operations of the Management Corp. could be adverse to the
interests of the Company or could lead to adverse financial results, which could
adversely affect the Company's financial condition and results of operations.

CONFLICTS OF INTEREST IN BUSINESS DECISIONS REGARDING THE COMPANY

Management Corp. Conflicts. Equity Office Properties Management Corp. (the
"Management Corp.") will provide property and asset management services to
properties not owned by the Company but that are

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<PAGE> 25

owned or controlled by affiliates of the Equity Group Owners and to the Joint
Venture Properties. These management contracts were not negotiated on an arm's
length basis. Although the Company believes that the management fees to be
charged by Management Corp. are at current market rates, there is no assurance
that these management fees will equal at all times those fees that would be
charged by an unaffiliated third-party. In this regard, through the Equity Group
Owners, Mr. Zell has a substantial interest in EOP which will own the voting
stock of the Management Corp.

Conflicts Relating to the Operating Partnership. After the Offering, the
Company, as the managing general partner of the Operating Partnership, will have
fiduciary obligations to the other limited partners in the Operating
Partnership, the discharge of which may conflict with the interests of the
Company's shareholders. In addition, those persons holding Units (including the
Equity Group), as limited partners, will have the right to vote on amendments to
the Operating Partnership Agreement (most of which require approval by a
majority in interest of the limited partners, including the Company) and
individually to approve certain amendments that would adversely affect their
rights, which may be exercised in a manner that conflicts with the interests of
the Company's shareholders.

POSSIBLE ENVIRONMENTAL LIABILITIES

Under federal, state and local laws and regulations relating to protection
of the environment ("Environmental Laws"), 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 or operator 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. In addition, the owner or operator of a
site may be subject to claims by third parties based on damages and costs
resulting from environmental contamination emanating from a site.

Environmental Laws also govern the presence, maintenance and removal of
asbestos-containing building materials ("ACBM"). Such laws require that ACBM be
properly managed and maintained, that those who may come into contact with ACBM
be adequately apprised or trained and that special precautions, including
removal or other abatement, be undertaken in the event ACBM would be disturbed
during renovation or demolition of a building. Such laws may impose fines and
penalties on building owners or operators for failure to comply with these
requirements and may allow third parties to seek recovery from owners or
operators for personal injury associated with exposure to asbestos fibers.

Independent environmental consultants have conducted or updated
comprehensive environmental assessments at the Properties. These assessments
have included, at a minimum, a visual inspection of the Properties and the
surrounding areas, an examination of current and historical uses of the
Properties and the surrounding areas and a review of relevant state, federal and
historical documents. Where appropriate, on a property by property basis,
additional testing has been conducted, including sampling for asbestos, for lead
in drinking water, for soil contamination where underground storage tanks are or
were located or where other past site usages create a potential for site impact,
and for contamination in groundwater.

These environmental assessments have not revealed any environmental
liabilities 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. ACBM has been
detected through sampling in approximately half of the Office Properties. Most
of these buildings contain only minor amounts of ACBM in good condition and
nearly all of it is non-friable. All ACBM is currently being properly managed
and maintained and other requirements relating to ACBM are being followed. The
presence of ACBM should not present a significant risk as long as compliance
with these requirements continues. For a few of the Properties, potential
offsite sources of contamination, such as underground storage tanks ("USTs"),
are noted. For some of the Properties, previous uses, such as the former
presence of USTs, have been noted; in these cases, follow-up soil and/or
groundwater sampling has not identified evidence of significant contamination.

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<PAGE> 26

The Company believes that the Properties are in compliance in all material
respects with applicable Environmental Laws. The Company believes that the
issues identified in the environmental reports will not have a material adverse
effect on the Company if it continues to comply with Environmental Laws and with
the recommendations set forth in these reports.

ABSENCE OF PRIOR PUBLIC MARKET FOR COMMON SHARES

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

OTHER CONFLICTS OF INTEREST

Continued Involvement in Other Investment Activities. Although Mr. Zell
has agreed to enter into a non-competition agreement with the Company upon
consummation of the Offering, the Equity Group Owners and their affiliates have
and will continue to have a broad and varied range of investment interests, and
companies directly or indirectly involved in real estate investment activities
in which one or more of them has or may acquire an interest will be owners of
real property and will acquire real property in the future. In addition, Mr.
Zell may not have management control over companies in which he or the Equity
Group Owners have or may have an investment interest and, therefore, he may not
be able to control whether any such company engages in activities that are in
competition with activities of the Company.

Conflicts Relating to Merrill Lynch. Certain affiliates of Merrill Lynch &
Co. currently are limited partners of the ZML Partners and will receive less
than 1% of the ownership interest in the Company (on a fully diluted basis) upon
consummation of the Offering. Merrill Lynch, Pierce, Fenner & Smith
Incorporated, an affiliate of Merrill Lynch & Co. is the lead managing
underwriter of the Offering and will receive its share of the underwriting
discounts and commissions set forth on the cover of this Prospectus. In
connection with the Offering, Merrill Lynch & Co. may have interests which
conflict with those of the purchasers of Common Shares in the Offering.

Monetary Loss to Company Upon Failure to Enforce Terms of
Contributions. Through the Equity Group Owners, Mr. Zell has a substantial
economic interest in the Equity Group and controls and has substantial economic
interest in the ZML Partners. Consequently, Mr. Zell has a conflict of interest
with respect to his obligation as an officer and trustee of the Company to
enforce the terms of the Contribution Agreement. The failure to enforce the
material terms of the Contribution Agreement, particularly the indemnification
provisions and the remedy provisions for breaches of representations and
warranties, could result in a monetary loss to the Company.

Conflicts of Interest in Connection with Properties Owned or Controlled by
the Equity Group Owners or their Affiliates. The Equity Group Owners or their
affiliates control or share control and have substantial economic interest in
the Managed Properties (as defined below) not being contributed to the Company.
The Company believes that none of these Managed Properties directly competes
with any of the Properties; however, it is possible that these Managed
Properties may compete with the Company in the future if the Company were to
invest in an Office Property in close proximity to any such property. Following
the Offering, the Company will be prohibited by the terms of its Bylaws from
acquiring any properties from the Equity Group Owners or their affiliates
without the approval of a majority of its disinterested trustees. See "Policies
With Respect to Certain Activities -- Conflict of Interest Policies."

Conflicts of Interest in Connection with Lease Agreement with an Affiliate
of Equity Group Owners. The Company leases office space from an entity
controlled by an affiliate of the Equity Group Owners, at Two

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<PAGE> 27

North Riverside Plaza, Chicago, Illinois 60606. The Company believes that the
rental rates and other terms of such lease are at current market rates. See
"Certain Relationships and Transactions."

RISKS OF OWNERSHIP OF COMMON SHARES

Effect on Price of Common Shares Available for Future Sale. Sales of a
substantial number of Restricted Common Shares, or the perception that such
sales could occur, could adversely affect prevailing market prices of the Common
Shares. Subsequent to the Offering, a substantial majority of the Common Shares
will be Restricted Common Shares or Units which may be converted into Restricted
Common Shares. Common Shares issued upon redemption of Units may be sold in the
public market pursuant to registration rights (subject to the terms and
conditions thereof) that the Company has granted to certain ZML Investors, the
ZML Partners and the Equity Group, pursuant to Rule 144 under the Securities Act
of 1933, as amended, or other available exemptions from registration. In
addition, the Company intends to reserve a number of Common Shares for issuance
pursuant to the Company's Employee Plan, and these Common Shares will be
available for sale from time to time pursuant to exemptions from registration
requirements or upon registration. Options to purchase additional Common Shares
are expected to be granted to certain executive officers, employees and trustees
upon the completion of the Offering. See "Management." No prediction can be made
about the effect that future sales of Common Shares will have on the market
prices of the Common Shares. See "Shares Available for Future Sale."

Effect on Common Share Price of Market Conditions. As with other publicly
traded equity securities, the value of the Common Shares will depend upon
various market conditions, which may change from time to time. Among the market
conditions that may affect the value of the Common Shares are the following: the
extent to which a secondary market develops for the Common Shares following the
completion of the Offering; the extent of institutional investor interest in the
Company; the general reputation of REITs and the attractiveness of their equity
securities in comparison to other equity securities (including securities issued
by other real estate-based companies); the Company's financial performance; and
general stock and bond market conditions. Although the offering price of the
Common Shares will be determined by the Company in consultation with the
Underwriters, there can be no assurance that the Common Shares will not trade
below the offering price following the completion of the Offering.

Effect on Common Share Price of Earnings and Cash Distributions. It is
generally believed that the market value of the equity securities of a REIT is
based primarily upon the market's perception of the REIT's growth potential and
its current and potential future cash distributions, whether from operations,
sales or refinancings, and is secondarily based upon the real estate market
value of the underlying assets. For that reason, Common Shares may trade at
prices that are higher or lower than the net asset value per Common Share. To
the extent the Company retains operating cash flow for investment purposes,
working capital reserves or other purposes, these retained funds, while
increasing the value of the Company's underlying assets, may not correspondingly
increase the market price of the Common Shares. The failure of the Company to
meet the market's expectation with regard to future earnings and cash
distributions likely would adversely affect the market price of the Common
Shares. If the market price of the Common Shares declined significantly, the
Company might breach certain covenants with respect to future debt obligations
which breach might adversely affect the Company's liquidity and the Company's
ability to make future acquisitions.

Effect on Common Share Price of Market Interest Rates. One of the factors
that will influence the price of the Common Shares will be the dividend yield on
the Common Shares (as a percentage of the price of the Common Shares) relative
to market interest rates. Thus, an increase in market interest rates may lead
prospective purchasers of Common Shares to expect a higher dividend yield, which
would adversely affect the market price of the Common Shares.

Dependence on External Sources of Capital. In order to qualify as a REIT
under the Code, the Company generally is required each year to distribute to its
shareholders at least 95% of its net taxable income (excluding any net capital
gain). See "Federal Income Tax Considerations -- Taxation of the Company --
Annual Distribution Requirements." Because of these distribution requirements,
it is unlikely that the Company will be able to fund all future capital needs,
including capital needs in connection with acquisitions,

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from cash retained from operations. As a result, to fund future capital needs,
the Company likely will have to rely on third-party sources of capital, which
may or may not be available on favorable terms or at all. The Company's access
to third-party sources of capital will depend upon a number of factors,
including the market's perception of the Company's growth potential and its
current and potential future earnings and cash distributions and the market
price of the Common Shares. Moreover, additional equity offerings may result in
substantial dilution of shareholders interests in the Company, and additional
debt financing may substantially increase the Company's leverage. See "Policies
with Respect to Certain Activities -- Financing Policies."

POTENTIAL LITIGATION RELATED TO THE CONSOLIDATION

Over the last several years, business reorganizations involving the
conversion of partnerships into REITs, the combination of several partnerships
into a single entity and the combination of multiple finite life REITs into a
single REIT occasionally have given rise to investor lawsuits. These lawsuits
have involved claims against the general partners of the participating
partnerships, the partnerships themselves, and related persons involved in the
structuring of, or benefiting from, the conversion or reorganization, as well as
claims against the surviving entity and its directors and officers. If any
lawsuits were filed in connection with the Consolidation, such lawsuits could
delay the closing of the Offering and result in substantial damage claims
against the Operating Partnership, the Company, the Equity Group, the ZML Funds,
the ZML Partners and the boards of trustees and directors of the ZML REITs. The
Operating Partnership will be acquiring the assets, subject to the liabilities,
of the ZML Opportunity Partnerships and the Equity Group pursuant to the
Consolidation and the Company will succeed to the assets and liabilities of the
ZML REITs. The Company, therefore, may become liable with respect to
indemnification obligations of the ZML Opportunity Partnerships to the ZML
Partners or the ZML REITs to their boards of trustees and directors of the ZML
REITs, and of the Equity Group to its directors and officers.

DEPENDENCE ON KEY PERSONNEL

The Company is dependent on the efforts of its executive officers,
particularly Messrs. Zell and Callahan. The loss of their services could have an
adverse effect on the operations of the Company. Neither of these officers will
enter into employment agreements with the Company.

CONTINGENT OR UNDISCLOSED LIABILITIES

Under the Contribution Agreement, the Company (through the Operating
Partnership) will acquire all assets of the ZML Opportunity Partnerships and
certain assets of the Equity Group subject to existing liabilities. Each of the
ZML Opportunity Partnerships and the Equity Group will deliver to the Company
financial statements or schedules for such entity disclosing, to the
transferring entity's knowledge, all existing liabilities and reserves, if any,
set aside for contingent liabilities as of the Closing date. Such liabilities
will become the obligations of the Company because the Company will be acquiring
the assets, subject to the liabilities, of the ZML Opportunity Partnerships,
each of which will liquidate over a two-year period following the Offering, and
the Units and other assets (including cash from distributions), net of
liabilities, will be distributed to the ZML Partners and the limited partners of
the ZML Opportunity Partnerships during such time period. The Company's recourse
against the Equity Group with respect to liabilities in connection with the
Management Business existing at the time of the Consolidation will be limited to
$15 million, and the Company will have no recourse against the ZML Opportunity
Partnerships, the ZML Partners and limited partners, or others, with respect to
any unknown liabilities in connection with the contribution of the Properties,
except as described under "Structure and Formation of the Company -- Indemnity
Escrow." Unknown liabilities might include liabilities for cleanup or
remediation of undisclosed environmental conditions, claims of tenants, vendors
or other persons dealing with the entities prior to the Offering (that had not
been asserted prior to the Offering), accrued but unpaid liabilities incurred in
the ordinary course of business, and claims for indemnification by ZML Partners
of the ZML Opportunity Partnerships, the Equity Group, its directors and
officers, and others indemnified by such entities. See "Possible Environmental
Liabilities" as to the possibility of undisclosed environmental conditions
potentially affecting the value of the Properties. Similarly, the Company will
succeed to any liabilities that the ZML REITs may have for periods prior to the
Closing.

22
<PAGE> 29

THE COMPANY

GENERAL

Upon completion of the Offering, the Company expects to be the largest
publicly traded full service office company in the United States. As of December
31, 1996, the Company owned and operated 82 institutional quality Office
Properties containing 29.1 million rentable square feet, and owned ten
stand-alone Parking Facilities containing 7,321 parking spaces. The Office
Properties owned as of December 31, 1996, were located throughout the United
States in 47 markets in 20 states and the District of Columbia. Through the
Management Corp., the Company will manage an additional 37 office properties,
containing 4.3 million rentable square feet comprising the office properties of
certain affiliates of the Equity Group.

The Company's portfolio of Office Properties includes what management
believes are some of the more prominent office assets in the United States,
including 580 California and One Market in downtown San Francisco, Promenade II
in midtown Atlanta, 161 North Clark in Chicago's "Loop," San Felipe Plaza in
Houston's Galleria area, The Plaza at La Jolla Village in suburban San Diego,
SunTrust Center in downtown Orlando, Reston Town Center in Reston, Virginia (a
suburb of Washington, D.C.) and Two California Plaza in downtown Los Angeles.

During the past several years, the Company has been among the most active
buyers of institutional quality office properties throughout the United States,
investing in excess of $3.1 billion during the period from 1988 through 1996 and
averaging $627 million annually in acquisitions (calculated on a cost basis) for
the three years ended December 31, 1996.

The Company has demonstrated the ability to lease up the space it has
acquired. At the time of acquisition, the Office Properties were, on a weighted
average basis, 77% occupied. During the period from 1988 through 1996, the
Company leased (net of expiring leases) in excess of an additional 3.9 million
rentable square feet of office space. As of December 31, 1996, the Office
Properties were 90% occupied by a total of 2,873 tenants.

As of December 31, 1996, the Office Properties had an average age of 12
years and contained an average of 355,000 rentable square feet. Of the 2,873
tenants for the Office Properties, none accounted for more than 2.7% of the
Portfolio's annualized rent.

Management believes that larger Properties allow for a higher quality of
tenant services, justify on-site management and facilitate economies of scale.
The Company, therefore, generally will not acquire Office Properties with less
than 200,000 rentable square feet except in connection with a merger, portfolio
acquisition or geographic assemblage of Properties. The Company's view is that,
over the long term, its return on investment in large, institutional quality
Properties will be enhanced where tenants are provided with superior tenant
services, physical improvements and locations. The average size of the Office
Properties is 358,000 (calculated as of the date of this Prospectus) rentable
square feet, compared to an estimated average of 144,000 rentable square feet
for all office buildings owned by publicly traded REITs focusing primarily on
office assets.

Management believes that a geographically diverse portfolio minimizes risk
and stabilizes earnings. As a result of its ownership presence in 47 markets,
the Company has local market expertise and knowledge throughout the United
States. The Office Properties and the Managed Properties are located in suburban
areas as well as CBDs. Some office tenants are attracted to suburban locations
that may offer proximity to residential housing and the availability of
inexpensive parking. Other tenants, however, have requirements for
transportation, labor, or close physical access to governmental or institutional
offices that attract them to CBDs. The Office Properties, by number of
buildings, are located 39% in CBDs and 61% in suburban markets and, by rentable
square feet, 56% in CBDs and 44% in suburban markets. The Managed Properties, by
number

23
<PAGE> 30

of buildings, are located 15% in CBDs and 85% in suburban markets and, by
rentable square feet, 32% in CBDs and 68% in suburban markets.

DISTRIBUTION OF OFFICE PROPERTIES AND MANAGED PROPERTIES BY REGION
AS OF DECEMBER 31, 1996

<TABLE>
<CAPTION>
OFFICE PROPERTIES MANAGED PROPERTIES
-------------------- --------------------
RENTABLE RENTABLE NUMBER OF
REGION OFFICE NUMBER SQUARE FEET NUMBER SQUARE FEET EMPLOYEES
- ------ ------ ------ ----------- ------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Pacific Los Angeles
CBD.................................... 4 3,226,332 1 139,228
Suburban............................... 12 2,736,305 5 320,468 70
Southeast Atlanta
CBD.................................... 6 2,887,795 2 388,510
Suburban............................... 8 2,120,652 3 335,940 107
Northeast Washington, D.C.
CBD.................................... 12 4,089,741 -- --
Suburban............................... 4 884,893 3 598,576 67
Central Chicago
CBD.................................... 6 4,335,605 3 971,499
Suburban............................... 3 513,628 19 1,246,907 322(1)
Southwest Houston
CBD.................................... 3 1,423,948 -- --
Suburban............................... 9 3,157,522 4 456,110 82
West Denver
CBD.................................... 1 230,022 -- --
Suburban............................... 14 3,520,846 1 157,311 55
-- ---------- -- --------- ---
Total.......................... 82 29,127,289 41 4,614,549 703
== ========== == ========= ===
</TABLE>

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

(1) 183 of these employees are located at the Company's headquarters.

RECENT DEVELOPMENTS

As of December 31, 1996, the Company owned (exclusive of Barton Oaks Plaza
II, which was sold in January 1997) 82 Office Properties and ten Parking
Facilities. Since December 31, 1996, the Company has (i) acquired eight
additional Office Properties containing an aggregate of 2,572,930 rentable
square feet and 50% ownership of four Parking Facilities containing 7,464
spaces, and (ii) disposed of the Barton Oaks Plaza II Office Property.

In January 1997, the Company acquired an Office Property containing 187,573
rentable square feet located at 177 Broad Street in Stamford, Connecticut. At
its date of acquisition this Office Property had annualized rent per square foot
of $21.65. The market rent per square foot for this Property is $27.26, and the
estimated replacement cost rent per square foot is $38.45. As part of the
acquisition of this Office Property, the Company also acquired an appurtenant
540-space Parking Facility and a 17-story, 161-unit residential tower. With the
addition of this Property, the Company's Office Property portfolio in Stamford
now includes seven separate Office Properties with an aggregate of approximately
1.7 million rentable square feet.

24
<PAGE> 31

In April 1997, the Company purchased Oakbrook Terrace Tower in Oakbrook,
Illinois, a 31-story Office Property containing 772,928 rentable square feet. As
of the date of acquisition, the office portion of this Property was 94%
occupied, had annualized rent per occupied square foot of $20.86, market rent
per square foot of $19.68, and estimated replacement cost rent per square foot
of $36.44.

In April 1997, the Company acquired 201 Mission Street in San Francisco,
California, an Office Property containing 483,289 rentable square feet. This
Office Property is 100% occupied. At its date of acquisition this Office
Property had annualized rent per occupied square foot of $18.80, market rent per
square foot of $29.08, and estimated replacement cost rent per square foot of
$48.89.

In April 1997, the Company purchased the Smith Barney Tower in The Plaza at
La Jolla Village in San Diego, California. With this purchase, the Company owns
interests in all six of the office buildings containing an aggregate of 822,026
rentable square feet within this complex. The Smith Barney Tower contains
186,607 rentable square feet. At its date of acquisition this Office Property
had annualized rent per occupied square foot of $19.40, market rent per square
foot of $21.82, and estimated replacement cost rent per occupied square foot of
$39.50.

In April 1997, the Company acquired an Office Property located at One
Maritime Plaza in San Francisco, California containing 523,929 rentable square
feet. At its date of acquisition, this Office Property was 97% occupied, had
annualized rent per occupied square foot of $29.81, market rent per square foot
of $29.08, and estimated replacement cost rent per square foot of $47.65.

The Company is actively negotiating the purchase of three institutional
quality Office Properties containing approximately 1.7 million rentable square
feet for an aggregate purchase price of approximately $218.8 million and the
purchase of a Parking Facility containing approximately 700 spaces and 15,000
square feet of retail space for a total purchase price of $25.0 million. There
can be no assurance that any of these properties will be successfully acquired.
The Company has also entered into an agreement to dispose of an Office Property
at 8383 Wilshire in Los Angeles, California.

The table below summarizes the leasing activity for the first three months
of 1997:

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

(1) 826,905 square feet upon renewal due to expansion or remeasurement.

OPERATIONS

The operation of the Properties is under the direction of five regional
managers, each of whom has oversight responsibility for all of the Properties in
his respective region. Each region has strategic and budget planning
responsibility combined with due diligence, property management,
engineering/construction, leasing/marketing, and information systems expertise.
Each regional manager reports to one of two divisional managers at the Company's
headquarters in Chicago who, in turn, report to the Company's Executive Vice
President -- Real Estate Operations.

25
<PAGE> 32

OPERATIONAL STRUCTURE

The Operating Partnership is the vehicle through which the Company will own
the Properties. The ownership and management structure of the Company is
intended to (i) enable the Company to acquire assets in transactions that may
defer some or all of the sellers' tax consequences, including in connection with
the Company's formation and (ii) enable the Company to comply with certain
technical and complex requirements under the Federal tax rules and regulations
relating to the assets and income permitted for a REIT.

The Management Corp. will provide office property and asset management
services (the "Third-Party Management Business") to the Managed Properties
(which properties will not be acquired by the Operating Partnership in the
Consolidation) and to the Joint Venture Properties described below. The
Management Corp. will collect a property management fee for the performance of
such services. To maintain the Company's qualification as a REIT, the Operating
Partnership will own 100% of the non-voting stock of the Management Corp.,
representing a 95% economic interest, and Equity Office Properties, L.L.C.
("EOP"), an entity owned by the Equity Group Owners, will own 100% of the voting
stock of the Management Corp., representing a 5% economic interest.

Nineteen of the Properties (the "Joint Venture Properties") are held in
partnerships or are subject to participation agreements with unaffiliated third
parties, 12 of which are Office Properties and seven of which are Parking
Facilities. The Operating Partnership or a Subsidiary will be the managing
general partner of each of the Joint Venture Properties (except for Civic
Parking L.L.C., where a subsidiary of the Operating Partnership will be one of
two managing members), subject to various consent requirements of the
third-party partners.

The Company's acquisition and oversight of its Parking Facilities is
administered through a wholly owned subsidiary, Equity Capital Holdings, L.P.
All but one of the Parking Facilities are leased to and operated by third-party
parking garage service companies (the "Service Companies") under leases where
the Service Companies bear the operating expenses. The arrangements with the
Service Companies may be modified in the future if the Company receives a
favorable ruling from the IRS. See "Federal Income Tax Consequences -- Taxation
of the Company -- Income Tests Applicable to REITs."

* * * * *

The principal executive offices of the Company and the Operating
Partnership are located at Two North Riverside Plaza, 22nd Floor, Chicago,
Illinois 60606, and its telephone number is (312) 466-3300. The Company
maintains regional offices in Los Angeles, Denver, Houston, Chicago, Atlanta and
Washington, D.C.

26
<PAGE> 33

BUSINESS AND GROWTH STRATEGIES

The Company's primary business objective is to achieve sustainable
long-term growth in cash flow per share and to maximize long-term shareholder
value. The Company intends to achieve this objective by owning and operating
institutional quality office buildings and providing a superior level of service
to tenants in CBDs and suburban markets across the United States. The Company
intends to supplement this strategy by the strategic acquisition of Parking
Facilities.

Internal Growth. Management believes the Company's future internal growth
will come from (i) lease up of vacant space, (ii) tenant roll-over at increased
rents where market conditions permit, (iii) repositioning of certain Properties
which have not yet achieved stabilization, and (iv) increasing economies of
scale.

As of December 31, 1996, 2.8 million rentable square feet of Office
Property space was vacant. Of this amount, 672,000 square feet was leased, with
occupancy to commence in whole or in part during 1997. The Company believes that
the current average market rent for this space is $25.00 per square foot. The
Company's average operating expenses for this space are $9.89 per square foot.
The following five Properties account for 56% of the total vacant space as of
December 31, 1996:

<TABLE>
<CAPTION>
VACANT VACANT/LEASED
SQUARE FOOTAGE SQUARE FOOTAGE
-------------- --------------
<S> <C> <C>
28 State Street, Boston, MA........................... 570,040 198,230
Two California Plaza, Los Angeles, CA................. 412,666 204,702
161 North Clark, Chicago, IL.......................... 382,227 62,250
Bank One Center, Indianapolis, IN..................... 125,422 48,475
One Market, San Francisco, CA......................... 101,139 51,521
--------- -------
1,591,494 565,178
</TABLE>

During the period from December 31, 1996, through December 31, 2001, 2,331
leases for 14.7 million rentable square feet of space are scheduled to expire.
As of December 31, 1996, the average rent for this space was $19.31 per square
foot, the current market rent for such space averaged $21.04 per square foot,
and the weighted average operating expenses were $8.03 per square foot. The
Company estimates that average replacement cost rents for this space are $33.22
per square foot.

Examples of the Company's history of repositioning Office Properties
include the following:

1100 Executive Tower in Orange, California (367,000 rentable square
feet) was purchased in U.S. Bankruptcy Court in December 1994 and, at the
time of acquisition, was 57% leased and in a state of disrepair. As of
December 31, 1996, the Property was 96% leased, $5.2 million had been spent
in capital and tenant improvements, and the net operating income before
depreciation had increased $1.5 million (91%) for the calendar year 1996
compared to the calendar year 1995.

9400 NCX in Dallas, Texas (380,000 rentable square feet) was acquired
in June, 1994 from a major insurance company. At the time of acquisition,
the Property was 62% leased and the common areas were functionally
obsolete. As of December 31, 1996, the Company had spent $6.0 million in
capital and tenant improvements, the Property was 92% leased, and the net
operating income before depreciation had increased $.3 million (22%) for
the calendar year 1996 compared to the calendar year 1995.

Four Stamford Plaza in Stamford, Connecticut (261,000 rentable square
feet) was purchased in August 1994 from a major financial institution. At
the time of acquisition, the Property was 58% leased and the common areas
were functionally obsolete. As of December 31, 1996, the Property was 96%
leased, $7.0 million had been spent in capital and tenant improvements, and
the net operating income before depreciation had increased $1.3 million
(175%) for the calendar year 1996 compared to the calendar year 1995.

As the largest full service office company (based on revenue and square
footage) in the United States, the Company expects to benefit from certain
economies of scale. Management intends to maximize the benefits attributable to
its large scale operations by aggressive cash management, bulk purchasing,
national and regional service agreements and utilization of state-of-the-art
information technology (which provides the

27
<PAGE> 34

Company with extensive operational data, including daily leasing, occupancy and
other property and financial data). Historically, as the portfolio has increased
in size, the Company's general and administrative costs as a percentage of total
revenue have decreased.

External Growth. Management believes that significant opportunities for
external growth will continue to be available through strategic acquisitions of
institutional quality office properties. Management believes that such
properties may be acquired for less than replacement cost in many markets and
that current rents generally do not justify new construction in these markets.
Properties may be acquired separately or as part of a portfolio, and may be
acquired for cash and/or in exchange for equity or debt securities of the
Company, and such acquisitions may be customary real estate transactions and/or
mergers or other business combinations.

The real estate industry is in the early stages of a major consolidation
which the Company believes will continue as institutional owners gain increasing
confidence in indirect rather than direct ownership of real estate. The Company
generally has acquired the Office Properties from institutional sellers.
Emerging Trends in Real Estate 1997 estimates that institutions currently have
direct investments of approximately $1.3 trillion in commercial real estate in
the United States. The Company believes that given its size, its UPREIT
structure (which enables it to acquire properties in transactions that may
permit sellers to defer tax consequences) and its historic relationship with
many of the major institutional owners of real estate in the United States, it
will be well positioned to benefit from the consolidation that is occurring in
the real estate industry.

Parking Facilities. Management believes that Parking Facilities offer the
Company attractive investment opportunities which will be complementary to
investments in Office Properties. Because the parking industry is highly
fragmented, would benefit from economies of scale and is in the early stages of
consolidation and privatization, management expects there to be future
opportunities to acquire parking facilities from smaller owners who lack capital
for expansion, technological upgrades or repairs. Management also expects
municipalities and other government entities to be a significant source of
properties for acquisition as budget constraints force such entities to consider
nontraditional sources of capital such as privatization of parking facilities.
The Company will focus its acquisition efforts solely on municipal or private
parking facilities that have limited competition, no (or minimal) rental rate
restrictions and/or a superior location proximate to or affiliated with
airports, CBDs, entertainment projects or healthcare facilities.

USE OF PROCEEDS

The net cash proceeds to the Company from the Offering, after deducting the
estimated underwriting discount and estimated Offering expenses of $
million, are estimated to be approximately $ million (approximately $
million if the Underwriters' overallotment option is exercised in full), based
on an assumed initial public offering price of $20.00 per share.

The net cash proceeds of the Offering along with cash reserves will be used
by the Company to repay approximately $338.9 million of indebtedness bearing a
weighted average interest rate of 8.45%, as of December 31, 1996, with a
weighted average life to maturity of 3.8 years.

If the Underwriters' overallotment option to purchase 2,250,000 Common
Shares is exercised in full, the Company expects to use the additional net cash
proceeds (which will be approximately $ million, based on the assumed initial
public offering price) to acquire interests in additional Office Properties
and/or Parking Facilities and for general corporate purposes.

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

28
<PAGE> 35

The table below summarizes the debt anticipated to be repaid with a
combination of the net proceeds from the Offering and cash on hand:

<TABLE>
<CAPTION>
DEBT BALANCE YEARS TO
PROPERTY AT 12/31/96(1) INTEREST RATE MATURITY DATE MATURITY
- -------- -------------- ------------- ------------- --------
<S> <C> <C> <C> <C>
60 Spear Street...................... $ 9,302,600 9.01% 12/01/99 2.9
500 Marquette Building............... 11,329,500 9.01% 12/01/99 2.9
1111 19th Street..................... 18,752,200 9.01% 12/01/99 2.9
Atrium Towers........................ 1,611,500 9.01% 12/01/99 2.9
Cigna Center......................... 732,500 9.01% 12/01/99 2.9
Dominion Tower....................... 23,440,300 9.01% 12/01/99 2.9
First Union.......................... 16,603,500 9.01% 12/01/99 2.9
Four Forest.......................... 17,067,400 9.01% 12/01/99 2.9
Intercontinental..................... 6,226,300 9.01% 12/01/99 2.9
Northborough......................... 7,032,100 9.01% 12/01/99 2.9
Sarasota............................. 11,720,100 9.01% 12/01/99 2.9
Summit............................... 5,860,100 9.01% 12/01/99 2.9
Tampa................................ 14,957,100 9.01% 12/01/99 2.9
University Towers.................... 11,207,400 9.01% 12/01/99 2.9
One & Two Stamford Plaza............. 45,791,600 7.63%(2) 03/01/00 3.2
300 Atlantic......................... 28,309,800 7.63%(2) 03/01/00 3.2
850 Third Ave........................ 54,200,000 8.79% 03/01/02 5.2
Two California Plaza................. 54,766,300 7.62%(2) 03/01/03 6.0
------------ ---- ---
Total/Weighted Average..... $338,910,300 8.45% 3.8
============
</TABLE>

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

(1) The actual amounts repaid will differ to the extent of any amortization of
the principal balance of the loans occurring subsequent to December 31,
1996.
(2) These loans bear interest at a floating rate based on the 30-day LIBOR. The
rates shown are the interest rates in effect at December 31, 1996.

DISTRIBUTIONS

The Company and the Operating Partnership intend to pay regular quarterly
distributions to holders of Common Shares and Units. The initial distribution,
covering a partial quarter commencing on the date of the closing of the Offering
(the "Closing") and ending on , 1997, is expected to be $
per share, which represents a pro rata distribution based upon a full quarterly
distribution of $ per share and an annual distribution of $
per share (or an annual distribution rate of approximately %, based upon an
assumed initial public offering price of $ ). The actual distributions
made by the Company will be affected by a number of factors, including the gross
revenues received from its Properties, the operating expenses of the Company,
and the interest expense incurred in borrowing and unanticipated capital
expenditures. No assurance can be given that the Company's estimates will prove
accurate or that any level of distributions will be made or sustained. The
Company anticipates that distributions will exceed net income determined in
accordance with generally accepted accounting principles due to non-cash
expenses, primarily depreciation and amortization.

The Company intends initially to distribute annually approximately %
of estimated Cash Available for Distribution. The estimate of Cash Available for
Distribution for the 12 months ending December 31, 1997 is based upon pro forma
Funds from Operations for the 12 months ended December 31, 1996, adjusted (i)
for certain known events and/or contractual commitments that either have
occurred or will occur subsequent to December 31, 1996 or during the 12 months
ended December 31, 1996, but were not effective for the full 12 months or will
not recur, and (ii) for certain non-GAAP adjustments consisting of (A) revisions
to historical rent on a straight-line, GAAP basis to amounts currently being
paid or due from tenants based on contractual rents, (B) pro forma amortization
of loan discount, which is not a cash expense, and

29
<PAGE> 36

(C) estimates of amounts anticipated for recurring tenant improvements, leasing
commissions and capital expenditures. No effect was given to any changes in
working capital resulting from changes in current assets and current liabilities
(which changes are not anticipated to be material) or the amount of cash
estimated to be used for (i) investing activities for acquisition and other
activities (other than a reserve for capital expenditures, tenant improvements
for renewing space and working capital) and (ii) financing activities. The
estimate of Cash Available for Distribution is being made solely for the purpose
of setting the initial distribution and is not intended to be a projection or
forecast of the Company's results of operations or its liquidity, nor is the
methodology upon which such adjustments were made necessarily intended to be a
basis for determining future distributions.

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

The Code generally requires that a REIT distribute annually at least 95% of
its net taxable income. See "Federal Income Tax Consequences -- Taxation of the
Company." The amount of distributions on an annual basis necessary to maintain
the Company's REIT status based on pro forma taxable income of the Company for
the 12 months ended December 31, 1996, as adjusted for certain items in the
following table, would have been approximately $ million. The estimated Cash
Available for Distribution is anticipated to be in excess of the annual
distribution requirements applicable to REITs under the Code. Under certain
circumstances, the Company may be required to make distributions in excess of
Cash Available for Distribution in order to meet such distribution requirements.
For a discussion of the tax treatment of distributions to holders of Common
Shares, see "Federal Income Tax Consequences -- Taxation of Taxable U.S.
Shareholders of the Company Generally."

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

30
<PAGE> 37

The following table describes the calculation of pro forma Funds From
Operations for the 12 months ended December 31, 1996 and the adjustments to pro
forma Funds From Operations for the 12 months ended December 31, 1996 used in
estimating initial Cash Available for Distribution for the 12 months ending
December 31, 1997:

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE
AMOUNTS)
---------------------
<S> <C>
Pro forma income before minority interests, investments in limited
partnership and LLC and gain on sale of real estate for the year
ended December 31, 1996.......................................... $141,484
Plus: Income from investments in limited partnership and LLC for the
year ended December 31, 1996..................................... 4,726
Plus: Pro forma real estate related depreciation for the year ended
December 31, 1996................................................ 105,943
Plus: Pro forma real estate depreciation component of investment in
limited partnership and LLC for the year ended December 31,
1996............................................................. 1,759
Less: Income allocated to minority interest owners in Office
Properties, Parking Facilities and Management Business........... (2,142)
--------
Pro forma Funds from Operations for the 12 months ended December 31,
1996(1)............................................................. 251,770
Adjustments:
Net change in contractual rental revenue(2)......................... 28,502
Eliminate other income related to litigation settlement(3).......... (8,807)
--------
Estimated adjusted pro forma Funds from Operations for the year ending
December 31, 1997................................................... 271,465
Adjustments:
Net effect of straight-line rents(4)................................ (32,444)
Pro forma amortization of loan discount(5).......................... 3,209
Estimated recurring non-revenue enhancing tenant improvements and
leasing commissions(6)........................................... (28,962)
Estimated recurring capital expenditures(7)......................... (6,120)
--------
Estimated Cash Available for Distribution for the year ending December
31, 1997(8)......................................................... $207,148
========
The Company's share of estimated Cash Available for
Distribution(9)........................................ $
========
Minority interests' share of estimated Cash Available
Distribution........................................... $
========
Total estimated initial annual cash distributions to shareholders of
the Company......................................................... $
========
Estimated initial annual cash distributions per share(10)........... $
========
Payout ratio based on estimated Cash Available for
Distribution(11)................................................. %
========
</TABLE>

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

(1) The Company considers Funds from Operations to be an appropriate measure of
performance of an equity REIT because it is predicated on cash flow
analyses. Funds from Operations as defined by NAREIT means 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. The Company computes Funds from Operations
in accordance with standards established by NAREIT which may not be
comparable to Funds from Operations reported by other REITs that do not
define the term in accordance with the current NAREIT definition or that
interpret the current NAREIT definition differently than does the Company.
The Company believes that in order to facilitate a clear understanding of
the combined historical operating results of the Equity Office Predecessors
and the Company, Funds from Operations should be examined in conjunction
with net income as presented in the combined financial statements and
information included elsewhere in this Prospectus. Funds from Operations
does not represent cash generated from operating activities in accordance
with GAAP and should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indication of the Company's

31
<PAGE> 38

financial performance or to cash flow from operating activities (determined in
accordance with GAAP) as a measure of the Company's liquidity, nor is it
indicative of funds available to fund the Company's cash needs, including its
ability to make cash distributions.

(2) The net change in contractual rental revenue represents the difference
between the contractual rental revenues due under existing leases in effect
on March 31, 1997 for the 12 months ending December 31, 1997 and the pro
forma rental revenues for the 12 months ended December 31, 1996 (calculated
on a cash basis, excluding the portion attributable to the adjustment to
reflect the effect of straight-line rents). For leases in effect throughout
1996 and 1997 and leases expiring in 1996 or 1997 which were renewed or
released prior to March 31, 1997, the net change reflects the contractual
rent increases or decreases in 1997 compared to 1996. However, this
calculation does not include the effect of any leases executed subsequent
to March 31, 1997. For leases in effect for only part of 1996 or 1997, the
calculations reflect the contractual rent only for the portion of each such
year in which the lease was in effect. The 1997 contractual rental revenue
was calculated for each tenant by taking the total of the base rent,
including any contractual rent increases or decreases, plus the annualized
estimated monthly operating expense reimbursement currently being paid by
the tenant as of March 31, 1997, for the 12 months ending December 31, 1997
or a partial year in cases where the lease expires during 1997. All
calculations assume that no extension options or lease renewals (except for
month to month leases) were exercised and that no new leases are entered
into after March 31, 1997. Below is a summary of the calculation.

<TABLE>
<S> <C>
Contractual rental revenues for the year ending December 31,
1997...................................................... $582,377,000
Pro forma contractual rental revenues for the year ended
December 31, 1996......................................... (553,875,000)
------------
Net change in contractual rental revenues................... $ 28,502,000
============
</TABLE>

(3) Represents payment in settlement of litigation received and recorded as
other income in 1996.

(4) Represents the effect of adjusting straight-line rental income and ground
rent expense included in estimated pro forma adjusted Funds from Operations
for the year ending December 31, 1997 to a cash basis.

(5) Represents amortization of the discount anticipated to be required to
record mortgage debt at fair value based upon the issuance of Common Shares
and Units in the Offering and the Consolidation.

(6) Reflects recurring non-revenue enhancing tenant improvements and leasing
commissions anticipated for the 12 months ending December 31, 1997 based on
the weighted average tenant improvements and leasing commissions for
renewed and re-tenanted space at the Properties for the years ended
December 31, 1994, 1995 and 1996 multiplied by the average annual square
feet of space for which leases expire during the years ending December 31,
1997 through December 31, 1999 (calculated on a regional basis). The
weighted average annual per square foot costs of tenant improvements and
leasing commissions by region and the calculation of estimated next
12-months recurring non-revenue enhancing tenant improvements and leasing
commissions are presented below:

<TABLE>
<CAPTION>
HISTORICAL NON-REVENUE ENHANCING TOTAL WEIGHTED
WEIGHTED AVERAGE TENANT IMPROVEMENTS RENEWALS RE-TENANTED AVERAGE
AND LEASING COSTS BY REGION 1994-1996 1994-1996 1994-1996
------------------------------------ --------- ----------- --------------
<S> <C> <C> <C>
Pacific........................................ $ 5.84 $26.35 $15.60
Southeast...................................... 7.94 14.71 9.28
Northeast...................................... 5.34 22.07 8.75
Central........................................ 7.55 9.28 7.88
Southwest...................................... 7.74 14.55 9.80
West........................................... 5.47 13.29 7.90
------ ------ ------
Total/Weighted Average......................... $ 6.50 $19.12 $10.43
====== ====== ======
</TABLE>

32
<PAGE> 39

<TABLE>
<CAPTION>
RENEWAL RE-TENANTED
AVERAGE SQUARE SQUARE ESTIMATED ESTIMATED TOTAL
ROLLOVER FOOTAGE FOOTAGE RENEWAL RE-TENANT RENEWAL AND
REGION 1997-99 (69%) (31%) COSTS COSTS RE-TENANT
------ --------- --------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Pacific................ 730,830 504,273 226,557 $ 2,944,954 $ 5,969,777 $ 8,914,731
Southeast.............. 385,938 266,297 119,641 2,114,398 1,759,919 3,874,317
Northeast.............. 358,882 247,629 111,253 1,322,339 2,455,354 3,777,693
Central................ 328,938 226,967 101,971 1,713,601 946,291 2,659,892
Southwest.............. 524,535 361,929 162,606 2,801,331 2,365,917 5,167,248
West................... 578,619 399,247 179,372 2,183,881 2,383,854 4,567,735
--------- --------- ------- ----------- ----------- -----------
Total/Weighted
Average..... 2,907,742 2,006,342 901,400 $13,080,504 $15,881,112 $28,961,616
========= ========= ======= =========== =========== ===========
</TABLE>

(7) Represents estimated recurring capital expenditures for the 12 months
ending December 31, 1997 based upon an annual cost of $0.19 per square
foot. The Company has calculated this reserve based on the weighted average
historical recurring capital expenditures for the years ended December 31,
1994, 1995 and 1996.

<TABLE>
<S> <C>
Pro forma total square feet................................. 32,208,706
Times $.19 per square foot.................................. $ .19
----------
Estimated recurring capital expenditures.................... $6,119,654
==========
</TABLE>

(8) The Company expects to fund nonrecurring capital expenditures, tenant
improvements and leasing commissions and debt principal amortization from
cash reserves (initially expected to be approximately $55.5 million),
borrowings, cash flow from operating activities or other working capital
sources.

(9) The Company's share of estimated Cash Available for Distribution and
estimated initial annual cash distributions to shareholders of the Company
is based on its approximate % aggregate partnership interest in the
Operating Partnership.

(10) Based on a total of Common Shares to be outstanding after the Offering
(15,000,000 shares to be sold in the Offering, assuming no exercise of the
Underwriter's overallotment option, and shares to be issued in the
Consolidation).

(11) Calculated as estimated initial annual cash distributions to shareholders
of the Company divided by the Company's share of estimated Cash Available
for Distribution for the year ending December 31, 1997. The payout ratio
based on estimated pro forma adjusted Funds from Operations is %.

33
<PAGE> 40

CAPITALIZATION

The following table sets forth the combined historical capitalization of
Equity Office Predecessors as of December 31, 1996 and as adjusted to give
effect to the Consolidation, the Offering and use of the net proceeds from the
Offering as set forth under "Use of Proceeds." The information set forth in the
table should be read in conjunction with the financial statements and notes
thereto, the pro forma financial information and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" included elsewhere in this
Prospectus.

<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------
COMBINED PRO FORMA
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Mortgage Debt(1).......................................... $1,837,767 $1,575,964
Line of Credit(1)......................................... 127,125 234,625
Minority Interests in Operating Partnership................. --
Shareholder's equity:
Preferred Shares, $.01 par value per share, 100,000,000
shares authorized;
none issued and outstanding............................ -- --
Common Shares, $.01 par value per share, 750,000,000
shares authorized;
1,000 issued and outstanding; issued and
outstanding, as adjusted............................... -- --(2)
Additional Paid-In Capital................................ --
Owners' Equity............................................ 1,727,002 --
---------- ----------
Total Owners' Equity/Stockholders' Equity......... 1,727,002 --
---------- ----------
Total Capitalization.............................. $3,691,894 $
========== ==========
</TABLE>

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

(1) See Note 3 of the notes to the combined financial statements of Equity
Office Predecessors for information relating to the indebtedness.
(2) Includes Common Shares currently owned by Mr. Zell, Common Shares to be
issued in the Offering and Common Shares to be issued in the Consolidation.
Does not include (i) Common Shares that may be issued upon the
exchange of Units issued in connection with the Consolidation, (ii)
Common Shares subject to the Underwriters' overallotment option,
or (iii) Common Shares subject to options granted under the
Company's Employee Plan.

34
<PAGE> 41

DILUTION

At December 31, 1996, as adjusted for capital contributions made subsequent
to that date, the Company had net tangible book value attributable to continuing
investors of approximately $ million. After giving effect to (i) the sale of
the Common Shares offered hereby (at an assumed initial public offering price of
$ per Common Share) and the receipt by the Company of approximately
$ million in net proceeds from the Offering after deducting the
Underwriters' discounts and commissions and other estimated expenses of the
Offering, (ii) the repayment of approximately $ million of mortgage
indebtedness secured by certain of the Properties, and (iii) other Consolidation
expenses, the pro forma net tangible book value at December 31, 1996 prior to
any adjustment would have been approximately $ million, or $ per
Common Share. This amount represents an immediate increase in net tangible book
value of $ per Common Share to the continuing investors and an
immediate dilution in pro forma net tangible book value of $ per Common
Share to new investors. The following table illustrates this dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Net tangible book value per share prior to the
Offering(1)............................................... $
Increase in net tangible book value per share attributable
to the Offering(2)........................................ $
--------
Pro forma net tangible book value after the Offering(3)..... $
--------
Dilution in net tangible book value per Common Share to
purchasers in the Offering(4)............................. $
</TABLE>

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

(1) Tangible book value per share prior to the Offering attributable to
continuing investors is determined by dividing net tangible book value of
the Company attributable to continuing investors (based on the December 31,
1996 net book value of the tangible assets, net of liabilities to be assumed
and increased to reflect subsequent capital contributions) by the sum of the
number of Common Shares (i) issued and outstanding, and (ii) issuable
(including upon the exchange of all Units to be issued) to continuing
investors in the Consolidation.
(2) Based on an assumed initial public offering price of $20.00 per Common Share
and after deducting Underwriters' discounts and commissions and estimated
expenses of the Offering and the Consolidation.
(3) Based on total pro forma net tangible book value of $ million divided by
the total number of Common Shares outstanding after the completion of the
Offering ( Common Shares), and excluding Common Shares that may be
issuable upon exercise of share options. There is no impact on dilution
attributable to the issuance of Common Shares in exchange for Units to be
issued to the continuing investors in the Consolidation because such Units
would be exchanged for Common Shares on a one-for-one basis.
(4) Dilution is determined by subtracting net tangible book value per Common
Share after the Offering from an assumed initial public offering price of
$20.00.

35
<PAGE> 42

The following table summarizes, on a pro forma basis giving effect to the
Offering and the Consolidation, the number of Common Shares to be sold by the
Company in the Offering and the number of Common Shares and Units to be issued
to the continuing investors in the Consolidation, the adjusted net tangible book
value as of December 31, 1996 of the assets contributed by the continuing
investors in the Consolidation and the net tangible book value of the average
contribution per share based on total contributions.

<TABLE>
<CAPTION>
COMMON SHARES/ CASH/BOOK VALUE
UNITS ISSUED OF CONTRIBUTIONS BOOK VALUE
------------------ ----------------------- OF AVERAGE
COMMON CONTRIBUTION
SHARES/ PER SHARE/
UNITS PERCENT $ PERCENT UNIT
------- ------- -------- ------- ------------
(IN THOUSANDS EXCEPT PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
Purchasers in the Offering........... % $ (1) % (1)
Common Shares issued to continuing
investors.......................... (2) (2)
Units issued to continuing
investors..........................
------- ----- -------- ----- -------
Total...................... % $ %
======= ===== ======== ===== =======
</TABLE>

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

(1) Before deducting Underwriters' discounts and commissions and other estimated
expenses of the Offering and the Consolidation.
(2) Based on the December 31, 1996 net book value of the assets, adjusted for
the Consolidation and capital contributions made subsequent to December 31,
1996.

36
<PAGE> 43

SELECTED COMBINED FINANCIAL DATA

The following sets forth selected combined financial and operating
information on a pro forma basis for Equity Office Properties Trust and on an
historical basis for the Equity Office Predecessors. The following information
should be read in conjunction with the combined financial statements and notes
thereto of Equity Office Predecessors included elsewhere in this Prospectus. The
selected combined historical financial and operating information of Equity
Office Predecessors at December 31, 1995 and 1996, and for each of the three
years in the period ended December 31, 1996, has been derived from the
historical combined financial statements of the Equity Office Predecessors
audited by Ernst & Young LLP, independent auditors, whose report with respect
thereto is included elsewhere in this Prospectus. The selected combined
historical financial and operating information of Equity Office Predecessors at
December 31, 1992, 1993 and 1994, and for each of the two years in the period
ended December 31, 1993, has been derived from the historical unaudited combined
financial statements of the Equity Office Predecessors.

<TABLE>
<CAPTION>
EQUITY OFFICE PREDECESSORS (COMBINED HISTORICAL)
COMPANY YEARS ENDED DECEMBER 31,
PRO FORMA ------------------------------------------------------------
1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenue:
Rental, parking and other.......... $ 650,423 $ 493,396 $ 356,959 $ 230,428 $ 150,315 $ 96,787
========== ========== ========== ========== ========== ========
Total Revenue............... $ 665,144 $ 508,124 $ 371,457 $ 240,878 $ 159,246 $107,154
========== ========== ========== ========== ========== ========
Expenses:
Interest........................... $ 129,771 $ 119,595 $ 100,566 $ 59,316 $ 36,755 $ 25,775
Depreciation and amortization...... 109,571 96,237 74,156 46,905 29,752 19,266
Property operating expenses(1)..... 258,773 201,067 151,488 107,412 74,028 48,856
General and administrative......... 25,545 23,145 21,987 15,603 12,012 8,720
Provision for value impairment..... 0 0 20,248 0 0 0
---------- ---------- ---------- ---------- ---------- --------
Total Expenses.............. $ 523,660 $ 440,044 $ 368,445 $ 229,236 $ 152,547 $102,617
========== ========== ========== ========== ========== ========
Income before (income) loss allocated
to minority interests, income from
investments in limited partnership
and LLC, gain on sale of real
estate, and extraordinary items.... $ 141,484 $ 68,080 $ 3,012 $ 11,642 $ 6,699 $ 4,537
Minority interests allocation........ (2,086) (2,129) 1,437 1,772 1,793
Income from investments in limited
partnership and LLC................ 4,726 2,093 2,305 1,778 0 0
Gain on sale of real estate and
extraordinary items................ 5,338 5,338 31,271 1,705 0 0
---------- ---------- ---------- ---------- ---------- --------
Net income.................. $ $ 73,425 $ 34,459 $ 16,562 $ 8,471 $ 6,330
========== ========== ========== ========== ========== ========
BALANCE SHEET DATA: (AT END OF
PERIOD)
Investment in real estate after
accumulated depreciation........... $ $3,291,815 $2,393,403 $1,815,160 $1,220,268 $820,805
Total assets................ 3,912,565 2,650,890 2,090,933 1,318,644 912,631
Mortgage debt and revolving line of
credit............................. 1,810,589 1,964,892 1,434,827 1,261,156 798,897 526,830
Total liabilities........... 1,922,043 2,174,483 1,529,334 1,350,552 845,315 552,666
Minority interests................... 11,080 31,587 9,283 (15,298) (14,133)
Owners'/Shareholders equity.......... 1,727,002 1,089,969 731,098 488,627 374,098
</TABLE>

37
<PAGE> 44
<TABLE>
<CAPTION>
EQUITY OFFICE PREDECESSORS (COMBINED HISTORICAL)
COMPANY YEARS ENDED DECEMBER 31,
PRO FORMA ------------------------------------------------------------
1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OTHER DATA:
General and administrative expenses
as a percentage of total
revenues........................... 3.8% 4.6% 5.9% 6.5% 7.5% 8.1%
Property operating margin............ 60.2% 59.2% 57.6% 53.4% 50.8% 49.5%
Number of office properties owned at
period end(2)(3)(4)................ 90 83 73 63 48 33
Net rentable square feet of Office
Properties owned at period end (in
millions)(2)....................... 32.2 29.2 23.1 18.5 13.6 9.1
Occupancy of Office Properties owned
at period end(2)................... 91% 90% 86% 88% 80% 73%
Number of Parking Facilities owned at
period end(5)...................... 14 10 3 0 0 0
Number of spaces at Parking
Facilities owned at period
end(5)............................. 14,785 7,321 3,323 0 0 0
Funds from Operations(6)............. $ 251,770 $ 160,460 $ 96,104 $ 60,372 -- --
Weighted average number of shares
outstanding........................
Cash flow from operating
activities......................... -- $ 165,975 $ 93,878 $ 73,821 -- --
Cash flow from investing
activities......................... -- $ (924,227) $ (380,615) $ (513,965) -- --
Cash flow from financing
activities......................... -- $1,057,551 $ 276,513 $ 514,923 -- --
</TABLE>

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

(1) Includes Property operating expenses, real estate taxes, insurance, as well
as repair and maintenance expenses.
(2) The data at the periods ended December 31, 1996 and 1995 includes 28 State
Street, a 570,040 square foot Office Property which is undergoing major
redevelopment and is vacant. The weighted average occupancy, excluding 28
State Street, as of December 31, 1996 and 1995 was approximately 92% and
88%, respectively.
(3) The pro forma number of Office Properties includes Preston Commons, 177
Broad Street, Oakbrook Terrace Tower, One Maritime Plaza, 201 Mission
Street, Smith Barney Tower and 30 North La Salle, each of which is described
as a 1997 acquisition under "The Company -- Recent Developments," and
excludes Barton Oaks Plaza II and 8383 Wilshire, each of which is a 1997
disposition.
(4) The number of Office Properties owned as of December 31, 1996, as reflected
in the combined historical financial statements, includes Barton Oaks Plaza
II, an Office Property which was sold in January, 1997.
(5) The pro forma number of Parking Facilities and number of spaces include the
50% ownership in a portfolio of four Parking Facilities in St. Louis,
Missouri containing 7,464 spaces, which is characterized as a 1997
acquisition under "The Company -- Recent Developments."
(6) 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 properties, plus real estate related
depreciation and amortization and after adjustments for unconsolidated
partnerships and joint ventures. Management considers Funds from Operations
an appropriate measure of performance of an equity REIT because it is
predicated on cash flow analyses. The Company computes Funds from Operations
in accordance with standards established by the White Paper which may differ
from the methodology for calculating Funds from Operations utilized by other
REITs and, accordingly, may not be comparable to such other REITs. Funds
from Operations should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indicator of the Company's
financial performance or to cash flow from operating activities (determined
in accordance with GAAP) as a measure of the Company's liquidity, nor is it
indicative of funds available to fund the Company's cash needs, including
its ability to make distributions. For a reconciliation of net income and
Funds from Operations, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Funds from Operations."

38
<PAGE> 45

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the combined financial condition
and results of operations should be read in conjunction with the Combined
Financial Statements of the Equity Office Predecessors and Notes thereto
contained in this Prospectus. All references to the historical activities of the
Company contained in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" refer to the activities of the Equity
Office Predecessors. Statements contained in this "Management's Discussion and
Analysis of Financial Conditions and Results of Operations," which are not
historical facts may be forward-looking statements. Such statements are subject
to certain risks and uncertainties which could cause actual results to differ
materially from those projected. Readers are cautioned not to place undue
reliance on these forward looking statements that speak only as of the date
hereof.

GENERAL

The following discussion is based primarily on the Combined Financial
Statements of the Equity Office Predecessors as of December 31, 1996 and
December 31, 1995 and the years ended December 31, 1996, 1995 and 1994.

The Company receives income primarily from rental revenue from Office
Properties (including reimbursements from tenants for certain operating costs),
parking revenue from Office Properties and stand alone Parking Facilities, and,
to a lesser extent, fees for management of the Managed Properties.

As of December 31, 1996 the Company owned 82 Office Properties totaling
approximately 29.1 million square feet (excluding one office building with a
total of 118,529 square feet which was sold in January 1997) and ten stand alone
Parking Facilities with approximately 7,321 spaces. Forty-eight of these Office
Properties totaling approximately 13.5 million square feet were owned prior to
January 1, 1994; 15 Office Properties totaling approximately five million square
feet were acquired in 1994; ten Office Properties totaling approximately 4.6
million square feet and three Parking Facilities were acquired in 1995; and ten
Office Properties totaling approximately 6.1 million square feet and seven
Parking Facilities were acquired in 1996. As a result of this rapid growth in
the size of the Portfolio, the financial data presented show large increases in
revenues and expenses from year to year. For the foregoing reasons, the Company
does not believe its year to year financial data are comparable. Therefore, the
analysis below shows changes resulting from Properties that were held during the
entire period for both years being compared, (the "Core Portfolio") and changes
due to acquisition activity. The Core Portfolio for the comparison between the
years ended December 31, 1996 and 1995 consists of the 63 Office Properties
acquired prior to January 1, 1995, while the Core Portfolio for the comparison
between the years ended December 31, 1995 and 1994 consists of the 48 Office
Properties acquired prior to January 1, 1994.

RESULTS OF OPERATIONS

Years Ended December 31, 1996 and 1995

Property Income: Rental income, tenant reimbursements, parking income and
other income ("Property Income") increased by $136.4 million for the year ended
December 31, 1996, or 38.2%, to $493.4 million as compared to $357 million for
the year ended 1995. Approximately $23.3 million, or 17.1%, of this increase was
related to the Core Portfolio with the remaining $113.1 million (82.9%) being
attributable to Properties acquired in 1995 and 1996. The 7.1% growth in
Property Income in the Core Portfolio resulted from a combination of occupancy
and rental rate increases. The weighted average occupancy of the Core Portfolio
increased from 87.5% to 91% in the year ended December 31, 1995 and to 94.3% as
of December 31, 1996. This increase represents approximately 1.3 million square
feet of additional occupancy in the Core Portfolio between January 1, 1995 and
December 31, 1996. Approximately $5.8 million of the total increase in Property
Income was related to an increase in the adjustment to reflect rental income on
a straight line basis. The straight line rent adjustment for new acquisitions
created a $9.7 million increase offset by a decrease related to the Core
Portfolio of approximately $3.9 million. Other income for 1996 also includes
$8.8 million relating to the Company's share of a litigation settlement.

39
<PAGE> 46

Property Operating Expenses: Real estate taxes and insurance, repairs and
maintenance and property operating expenses ("Property Operating Expenses")
increased by $49.6 million in total, or 32.7%, to $201.1 million for the year
ended December 31, 1996, as compared to $151.5 million for the year ended
December 31, 1995. Approximately $7.5 million of this increase was attributable
to the Core Portfolio, with the remaining $42.1 million attributable to
Properties acquired in 1995 and 1996. The Core Portfolio had an increase of
approximately $2.9 million in real estate tax and insurance expense. A
significant portion of this increase was due to tax refunds received in 1995,
with $1.8 million being related to a single Property, reducing the tax expense
in 1995. The other Property Operating Expenses (excluding real estate taxes and
insurance) for the Core Portfolio increased by $4.6 million for the year ended
December 31, 1996 compared to the same period in 1995.

Net Property Operating Income: Net Property Operating Income (Property
Income and Income from Investments in Limited Partnerships minus Property
Operating Expenses) increased by $86.6 million, or 41.7%, to $294.4 million for
the year ended December 31, 1996, compared to $207.8 million for the year ended
December 31, 1995. Approximately $15.6 million, or 18%, of this increase was
related to the Core Portfolio, representing an 8.4% increase compared to the
prior year. The remaining $71.0 million was related to Properties acquired in
1995 and 1996.

Interest Expense: Interest expense increased by $19.0 million, or 18.9%,
to $119.6 for the year ended December 31, 1996, compared to $100.6 million for
the year ended December 31, 1995. Interest expense related to the Core Portfolio
increased by $0.1 million, while financing related to Properties acquired in
1995 and 1996 added $18.9 million to interest expense.

Depreciation and Amortization: Depreciation and amortization increased by
$22.0 million, or 29.6%, to $96.2 million for the year ended December 31, 1996,
compared to $74.2 million for the year ended December 31, 1995. Approximately
$4.4 million of this increase relates to the Core Portfolio and $17.6 million
was related to Properties acquired after January 1, 1995. The increase in these
expenses in the Core Portfolio was related to depreciation of capital and tenant
improvements made at the Core Portfolio Properties in 1995 and 1996 and
amortization of leasing commissions and loan fees paid during that time period.

Interest Income: Interest income increased by $1.0 million, or 11.6%, to
$9.6 million for the year ended December 31, 1996, compared to $8.6 million for
the year ended December 31, 1995.

Fee Income from Non-Combined Affiliates: Fee income from the Managed
Properties decreased by approximately $0.8 million, or 13.6%, to $5.1 million
for the year ended December 31, 1996, compared to $5.9 million for the year
ended December 31, 1995. This decrease was primarily the result of disposition
activities in 1995 and 1996 which reduced by eight the number of properties
being managed.

General and Administrative Expenses: General and administrative expenses
increased by approximately $1.1 million, or 5.0%, to $23.1 million for the year
ended December 31, 1996, compared to $22.0 million for the year ended December
31, 1995. Approximately $0.6 million of this increase was due to an increase in
payroll expense. The increase in general and administrative expenses was related
to the growth in the size of the Portfolio from 18.5 million square feet at
January 1, 1995 to 29.2 million square feet at December 31, 1996. While general
and administrative expenses have increased in terms of total dollars, they have
decreased as a percentage of total revenues from 5.9% for the year ended
December 31, 1995, to 4.6% for the year ended December 31, 1996.

Years ended December 31, 1995 and 1994

Property Income: Property Income increased by $126.5 million for the year
ended December 31, 1995, or 54.9%, to $357.0 million as compared to $230.5
million for the year ended December 31, 1994. Approximately $28.3 million, or
22.4%, of this increase was related to the Core Portfolio with the remaining
$98.2 million, or 77.6%, increase being attributable to Properties acquired in
1994 and 1995. The 13.6% growth in Property Income in the Core Portfolio from
1994 to 1995 resulted from a combination of occupancy and rental rate increases.
The overall occupancy of the Core Portfolio increased from approximately 79.6%
at January 1, 1994 to approximately 88.9% at December 31, 1994, and to
approximately 92.6% at December 31,

40
<PAGE> 47

1995. This increase represents approximately 1.8 million square feet of
additional occupancy in the Core Portfolio. Approximately $5.8 million of the
total increase in Property Income was related to an increase in the adjustment
to reflect rental income on a straight line basis. Of this amount, approximately
$2.0 million was related to the Core Portfolio.

Property Operating Expenses: Property Operating Expenses increased by
$44.1 million, or 41%, to $151.5 million for the year ended December 31, 1995 as
compared to $107.4 million for the year ended December 31, 1994. Virtually all
of this increase was attributable to Properties acquired in 1994 and 1995. The
Core Portfolio had an increase of approximately $2.0 million in repair and
maintenance expense that was offset by a $1.8 million decrease in real estate
tax and insurance expense while other property operating expenses remained
relatively constant. The decrease in real estate tax expense was the result of
real estate tax refunds received due to successful appeals of the tax bills at
certain of the Core Portfolio Properties. Approximately $1.8 million in tax
refunds related to a single Property. The Company had calculated and billed the
real estate tax reimbursement due from tenants at this Property, assuming that
this refund would be received, so substantially all of the refund was retained
by the Company rather than being refunded to tenants.

Net Property Operating Income: Net property operating income (Property
Income and Income from Investments in Limited Partnerships minus Property
Operating Expenses) increased by $83.0 million or 66.5%, to $207.8 million for
the year ended December 31, 1995 compared to $124.8 million for the year ended
December 31, 1994. Approximately $28.1 million, or 33.9%, of this increase was
related to the Core Portfolio, representing a 26.6% increase compared to the
prior year.

Interest Expense: Interest expense increased by $41.3 million, or 69.6%,
to $100.6 million for the year ended December 31, 1995 as compared to $59.3 for
the year ended December 31, 1994. Approximately $12.5 million of this increase
was related to the Core Portfolio and $28.8 million was related to financing on
Properties acquired in 1994 and 1995.

Depreciation and Amortization: Depreciation and amortization increased by
$27.3 million, or 58.2%, to $74.2 million for the year ended December 31, 1995,
as compared to $46.9 million for the year ended December 31, 1994. Approximately
$11.3 million of this increase relates to the Core Portfolio with the remainder
of $16.0 million being related to Properties acquired after January 1, 1994. The
increase in these expenses in the Core Portfolio was related to depreciation of
capital and tenant improvements made at the Core Portfolio Properties in 1994
and 1995 as well as amortization of leasing commissions and loan fees paid
during that time period.

Interest Income: Interest income increased by $4.2 million, or 95%, to
$8.6 million for the year ended December 31, 1995 compared to $4.4 million for
the year ended December 31, 1994. This increase was primarily attributable to
higher amounts being invested in short term investments in 1995 as well as
higher interest rates.

Fee Income from Non-Combined Affiliates: Management fee income from the
Managed Properties decreased by approximately $0.1 million, or 2% to $5.9
million for the year ended December 31, 1995 as compared to $6.0 million for the
year ended December 31, 1994.

General and Administrative Expenses: General and administrative expenses
increased by approximately $6.4 million, or 41.0%, to $22.0 million for the year
ended December 31, 1995, as compared to $15.6 million for the year ended
December 31, 1994. Approximately $4.2 million of this increase was due to an
increase in payroll expense. The increase in these expenses was related to the
growth in the size of the Portfolio from 13.6 million square feet at January 1,
1994 to 23.1 million square feet at December 31, 1995. While general and
administrative expenses increased in terms of total dollars, they decreased as a
percentage of total revenues from 6.4% for the year ended December 31, 1994, to
5.9% for the year ended December 31, 1995.

41
<PAGE> 48

LIQUIDITY AND CAPITAL RESOURCES

Mortgage Financing: The table below summarizes the mortgage debt
outstanding at December 31, 1996 and 1995:

<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
AVERAGE AVERAGE
INTEREST PERCENTAGE INTEREST PERCENTAGE
BALANCE AT RATE AT OF TOTAL BALANCE AT RATE AT OF TOTAL
12/31/96 12/31/96 DEBT 12/31/95 12/31/95 DEBT
-------------- -------- ---------- -------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
DEBT SUMMARY:
Fixed Rate Debt........... $1,304,075,400.. 7.89% 66.4% $ 900,912,800 8.01% 62.8%
Variable Rate Debt........ 660,816,500 7.33 33.6 533,914,000 7.58 37.2
-------------- ---- ------ -------------- ---- ------
Total............ $1,964,891,900 7.70% 100.00% $1,434,826,800 7.85% 100.00%
</TABLE>

The variable rate debt shown above bore interest at the 30-day LIBOR-based
floating interest rate. The 30-day LIBOR at December 31, 1996 was 5.5%,
resulting in a weighted average spread over LIBOR at December 31, 1996 of 1.83%.

In order to limit market risk associated with the variable interest rate
debt, the Company entered into two interest rate cap agreements in August, 1993,
a $100 million, 7% interest rate cap based on the 3-month LIBOR which expires in
August, 1998 and a $73 million, 8% interest rate cap based on the 3-month LIBOR
which expires in August, 2000. The effect of these agreements is to effectively
cap the interest rate on $100 million of the variable rate debt at a maximum
rate of approximately 9.2% through August, 1998, and to cap an additional $73
million at a maximum rate of approximately 10.2% through August, 2000. In
addition, the Company entered into an interest rate swap agreement in October
1995, which effectively fixed the interest rate on a $93.6 million loan at 6.94%
through the maturity of the loan on June 30, 2000. This loan is therefore
reflected as part of the fixed rate debt in the table above.

Lines of Credit: ZML Fund IV entered into an acquisition/term loan
facility (the "ZML IV Credit Facility") in September 1996 with a group of banks,
for which NationsBank of Texas, N.A. acts as Administrative Agent, that provides
for borrowings of up to $275 million on both a secured and unsecured basis. As
of December 31, 1996, there were $127.1 million of outstanding six-month
borrowings under this line of credit, all of which was unsecured. Current
borrowings bear interest at a rate equal to 30-day LIBOR plus 1.65%, which was
equal to 7.25% as of December 31, 1996. The ZML IV Credit Facility expires in
September 1999, may be assumable by the Company upon the Closing and is included
in the variable rate debt in the table above.

Liquidity: Cash and cash equivalents increased by approximately $299.3
million, to approximately $410.4 million at December 31, 1996, compared to
$111.1 million at December 31, 1995. This increase was the result of $166
million of cash generated by operations, and $1,057.5 million generated from
financing activities reduced by $924.2 million invested in new acquisitions,
capital and tenant improvements, and payment of leasing commissions.

Net cash provided by operations totaled $166.0 million, $93.9 million and
$73.8 million for the years ended December 31, 1996, 1995 and 1994,
respectively. Net cash provided from operations represents the primary source of
liquidity to fund distributions, debt service, recurring capital costs and
non-revenue enhancing tenant improvements. Historically the Company made annual
distributions equal to approximately 100% of taxable income. Cash generated in
excess of taxable income (resulting primarily from non cash items such as
depreciation and amortization) was retained for working capital and to fund
capital improvements and non revenue-enhancing tenant improvements. Upon
completion of the Offering, the Company intends to make regular quarterly
distributions to holders of Common Shares and Units. The Company will establish
its initial distribution based upon its estimate of annualized cash flow that
will be available after the Offering.

The Company intends to maintain sufficient cash from operations to cover
recurring capital costs and non-revenue enhancing tenant improvements. The
Company also intends to maintain the proposed Line of Credit to provide in part
for temporary working capital and unanticipated cash needs.

42
<PAGE> 49

The anticipated size of the Company's distributions will not allow the
Company, using only cash from operations, to retire all of its debt as it comes
due, and therefore, the Company will be required to repay maturing debt with
funds from debt and/or equity financing.

Net cash provided by financing activities totaled $1,057.5 million, $276.5
million and $514.9 million for the years ended December 31, 1996, 1995, and
1994, respectively. Net cash used for investing activities totaled $924.2,
million, $380.6 million and $514.0 million for the years ended December 31,
1996, 1995, and 1994, respectively.

A large portion of the funds generated from financing activities, and the
funds used for investment activities in 1996, relate to the acquisition of ten
Office Properties and seven Parking Facilities. The purchase of these Properties
required approximately $868.0 million of funds during the year. Approximately
$433.0 million of the funds required to purchase these Properties was obtained
through mortgage financing, including $127.1 million under the ZML Fund IV
Credit Facility, with the remainder being funded with a portion of the $661.0
million of capital contributed during the year. In addition to the financing
related to these acquisitions, 14 Properties were refinanced for a total of
$252.0 million during 1996.

INFLATION

Substantially all of the office leases require the tenant to pay, as
additional rent, a portion of any increases in real estate taxes and operating
expenses over a base amount. In addition, many of the office leases provide for
fixed increases in base rent or indexed escalations (based on the Consumer Price
Index or other measures). The Company believes that inflationary increases in
expenses will be offset, in part, by the expense reimbursements and contractual
rent increases described above.

FUNDS FROM OPERATIONS

Management of the Company believes Funds from Operations ("FFO"), as
defined by NAREIT, to be an appropriate measure of performance for an equity
REIT. While FFO is a relevant and widely used measure of operating performance
of REITs, it does not represent cash flow from operations or net income as
defined by generally accepted accounting principles, and it should not be
considered as an alternative to these indicators in evaluating liquidity or
operating performance of the Company.

43
<PAGE> 50

The following table reflects the calculation of the Company's FFO for the
years ended December 31, 1996, 1995 and 1994:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Income before income from investment in limited
partnership, gain on sale of real estate,
extraordinary items and minority interest..... $ 68,080 $ 3,012 $ 11,642
Add back (deduct):
(Income) loss allocated to minority
interests.................................. (2,086) (2,129) 1,437
Income from investment in limited
partnership................................ 2,093 2,305 1,778
Provision for value impairment................ 20,248
Depreciation and amortization (real estate
related)................................... 92,373 72,668 45,515
---------- --------- ---------
Funds from Operations(1):....................... $ 160,460 $ 96,104 $ 60,372
========== ========= =========
Effect of adjusting straight-line rental
income and ground rent expense included in
the Funds from Operations to a cash
basis...................................... (17,639) (12,663) (6,883)
---------- --------- ---------
Funds from Operations excluding straight-line
rent adjustment............................ $ 142,821 $ 83,441 $ 53,489
========== ========= =========
Cash Flow Provided By (Used For):
Operating Activities.......................... $ 165,975 $ 93,878 $ 73,821
Investing Activities.......................... $ (924,227) $(380,615) $(513,965)
Financing Activities.......................... $1,057,551 $ 276,513 $ 514,923
</TABLE>

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

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

44
<PAGE> 51

THE PROPERTIES

GENERAL

Upon completion of the Offering, the Company expects to control the largest
portfolio of office properties of any publicly traded, full service office
company in the United States. The Properties are generally well located in
markets that exhibit strong growth characteristics, are well maintained and
professionally managed, and are generally capable of attracting and retaining
high quality tenants while maintaining high rent, occupancy and tenant retention
rates.

45
<PAGE> 52

OFFICE PROPERTIES BY REGION
AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
OFFICE PERCENTAGE
PORTFOLIO OF
NUMBER RENTABLE RENTABLE ANNUALIZED PORTFOLIO NUMBER
OF SQUARE SQUARE PERCENTAGE RENT ANNUALIZED OF
REGION PROPERTIES FEET FEET OCCUPIED ($00S)(1) RENT LEASES
------ ---------- ----------- ---------- ---------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Pacific...................... 16 5,962,637 20.5% 87.0% $118,402 23.4% 613
Southeast.................... 14 5,008,447 17.2 95.3 89,545 17.7 397
Northeast.................... 16 4,974,634 17.1 84.9 100,373 19.9 384
Central...................... 9 4,849,233 16.6 85.8 75,896 15.0 318
Southwest.................... 12 4,581,470 15.7 93.9 68,208 13.5 581
West......................... 15 3,750,868 12.9 96.9 52,653 10.4 580
-- ---------- ----- -------- ----- -----
Total/Weighted Average... 82 29,127,289 100.0% 90.2% $505,077 100.0% 2,873
== ========== ===== ======== ===== =====

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

(1) Annualized Rent is the monthly contractual rent under existing leases as of
December 31, 1996, multiplied by 12. This amount reflects total rent before
any rent abatements and includes expense reimbursements. Total rent
abatements for leases in effect as of January 1, 1997, for the 12 months
ending December 31, 1997 are approximately $4.7 million.
(2) Annualized Net Effective Rent is calculated for leases in effect as of
December 31, 1996 as follows: Annualized Rent, calculated as described
above, was reduced to reflect the annualized costs of tenant improvements
and leasing commissions, if any, paid or payable by the Company with respect
to leases entered into subsequent to the later of 1991 or the date of
acquisition of the relevant Property (calculated by dividing the total
tenant improvements and leasing commissions for a given lease by the term of
that lease in months and multiply the result by 12). Finally, the result of
this calculation was reduced by the estimated operating expenses per square
foot, based on 1996 actual operating expense for Properties owned as of
January 1, 1996 and based on the Company's estimate of annual operating
expense for Properties acquired subsequent to January 1, 1996.
(3) Represents the gross rental rate per occupied square foot as of the later of
January 1, 1993, or the date of acquisition (for properties acquired after
January 1, 1993) calculated by annualizing the rent under existing leases as
of that date.
(4) Represents the average asking gross rental rate per rentable square foot for
buildings of comparable size, class and age based upon information obtained
from CB Commercial/Torto Wheaton Research or REIS Reports, Inc. as of
December 31, 1996.
(5) Represents the Company's weighted average estimate of the gross rent that
would be required to justify construction of a building which would be
competitive with the respective Office Properties. An estimate of the
replacement cost to build a property similar to the subject Property was
calculated utilizing the Marshall and Swift (June 1996) Commercial Estimator
5.0 Software Program. The replacement cost rent is calculated under the
assumption that a net effective return of 12% would be required to justify
new construction and that occupancy would stabilize at 95% as follows:
Replacement Cost Rent equals (estimated replacement cost per square foot
times 12% plus the estimated operating expenses per square foot of the
subject Property) divided by 95%. The estimated replacement costs and the
estimated replacement cost rents are based on constructing a building
similar to the subject Property in terms of the quality of construction and
amenities. The actual cost to construct a building that would be competitive
with the subject Property and required investor returns, could be more or
less than these estimates.

46
<PAGE> 53

OFFICE PROPERTY MARKET SECTORS AND SUBMARKETS
OFFICE PROPERTY STATISTICS
AT DECEMBER 31, 1996
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
OFFICE PERCENTAGE
PORTFOLIO OF
NUMBER RENTABLE RENTABLE ANNUALIZED PORTFOLIO NUMBER
OFFICE PROPERTIES OF SQUARE SQUARE PERCENTAGE RENT ANNUALIZED OF
(MARKET, SUBMARKET) PROPERTIES FEET FEET OCCUPIED ($000S)(1) RENT LEASES
- ------------------- ---------- ---------- ---------- ---------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
PACIFIC REGION
Los Angeles
Beverly Hills....................... 1 417,463 1.4% 84.2% $ 6,807 1.3% 133
Downtown............................ 1 1,329,809 4.6 69.0 20,574 4.1 24
Pasadena............................ 2 439,367 1.5 86.5 10,420 2.1 28
Orange County
Central Orange...................... 2 657,512 2.3 92.4 10,837 2.1 75
Irvine/Airport...................... 2 586,544 2.0 89.0 10,786 2.1 78
San Diego
La Jolla............................ 5 635,419 2.2 97.2 14,268 2.8 89
San Francisco
Downtown............................ 3 1,896,523 6.5 94.3 44,710 8.9 186
-- ---------- ----- ----- -------- ----- -----
Pacific Region
Total/Weighted Average........ 16 5,962,637 20.5% 87.0% $118,402 23.4% 613
SOUTHEAST REGION
Ft. Lauderdale
Downtown............................ 1 225,500 0.8% 99.0% $ 5,788 1.1% 21
Orlando
Downtown............................ 1 640,385 2.2 91.6 14,060 2.8 43
Palm Beach County, FL
West Palm Beach..................... 1 215,104 0.7 96.0 4,000 0.8 36
Sarasota
Downtown............................ 1 247,891 0.9 90.7 3,868 0.8 33
Tampa
Westshore........................... 2 470,331 1.6 99.3 7,828 1.5 61
Atlanta
Midtown............................. 1 770,840 2.6 89.6 15,250 3.0 22
North Central....................... 2 612,733 2.1 95.6 11,063 2.2 72
Northwest........................... 2 641,263 2.2 96.7 12,544 2.5 38
Charlotte
Downtown............................ 1 581,666 2.0 100.0 6,614 1.3 11
Raleigh/Durham
Downtown............................ 1 181,221 0.6 97.7 3,190 0.6 37
Nashville
Downtown............................ 1 421,513 1.4 97.1 5,340 1.1 23
-- ---------- ----- ----- -------- ----- -----
Southeast Region/Total
Weighted Average............ 14 5,008,447 17.2% 95.3% $ 89,545 17.7% 397

<CAPTION>
ANNUALIZED
ANNUALIZED RENT PER
NET EFFECTIVE OCCUPIED ANNUALIZED MARKET ESTIMATED
RENT PER SQUARE FOOT RENT PER RENT REPLACEMENT
OCCUPIED AS OF 1/1/93 OR OCCUPIED PER COST RENT
OFFICE PROPERTIES SQUARE ACQUISITION SQUARE SQUARE PER SQUARE
(MARKET, SUBMARKET) FOOT(2) DATE(3) FOOT(1) FOOT(4) FOOT(5)
- ------------------- ------------- --------------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C>
PACIFIC REGION
Los Angeles
Beverly Hills....................... $ 8.47 $22.20 $19.35 $23.52 $33.57
Downtown............................ 12.56 22.08 22.43 26.11 82.30
Pasadena............................ 17.84 27.79 27.41 24.99 33.99
Orange County
Central Orange...................... 9.12 20.95 17.83 19.63 32.62
Irvine/Airport...................... 12.70 20.64 28.65 22.71 37.19
San Diego
La Jolla............................ 13.99 19.71 23.10 21.82 37.60
San Francisco
Downtown............................ 12.40 23.83 25.00 28.32 48.02
------ ------ ------ ------ ------
Pacific Region
Total/Weighted Average........ $12.40 $22.55 $22.83 $25.04 $40.82
SOUTHEAST REGION
Ft. Lauderdale
Downtown............................ $13.24 $17.45 $25.92 $25.22 $41.89
Orlando
Downtown............................ 14.62 23.99 23.98 22.14 37.67
Palm Beach County, FL
West Palm Beach..................... 6.92 18.90 19.38 25.48 30.97
Sarasota
Downtown............................ 8.34 17.47 17.21 18.50 27.08
Tampa
Westshore........................... 8.11 18.15 16.76 20.19 26.90
Atlanta
Midtown............................. 13.71 22.07 22.07 21.84 34.91
North Central....................... 11.09 19.07 18.88 23.76 29.80
Northwest........................... 13.59 18.76 20.23 21.86 26.80
Charlotte
Downtown............................ 6.15 11.04 11.37 17.50 24.42
Raleigh/Durham
Downtown............................ 9.70 12.38 18.02 19.62 29.59
Nashville
Downtown............................ 5.90 8.58 13.05 17.74 22.54
------ ------ ------ ------ ------
Southeast Region/Total
Weighted Average............ $10.63 $17.82 $18.76 $21.17 $30.15
</TABLE>

47
<PAGE> 54
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
OFFICE PERCENTAGE
PORTFOLIO OF
NUMBER RENTABLE RENTABLE ANNUALIZED PORTFOLIO NUMBER
OFFICE PROPERTIES OF SQUARE SQUARE PERCENTAGE RENT ANNUALIZED OF
(MARKET, SUBMARKET) PROPERTIES FEET FEET OCCUPIED ($000S)(1) RENT LEASES
- ------------------- ---------- ---------- ---------- ---------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
NORTHEAST REGION
Fairfield County, CT
Shelton............................. 1 159,848 0.5% 96.2% $ 2,084 0.4% 13
Stamford............................ 6 1,464,283 5.0 96.9 34,709 6.9 102
Washington, D.C.
Downtown............................ 2 408,286 1.4 93.1 10,907 2.2 45
Boston
Downtown............................ 1 570,040 2.0 0.0 -- -- 0
New York
Midtown............................. 1 562,567 1.9 97.9 15,123 3.0 29
Philadelphia
Downtown............................ 1 681,289 2.3 91.7 12,988 2.6 65
Norfolk
Downtown............................ 1 403,276 1.4 98.0 6,209 1.2 53
Northern Virginia
Reston.............................. 3 725,045 2.5 96.4 18,353 3.6 77
-- ---------- ----- ----- -------- ----- -----
Northeast Region
Total/Weighted Average........ 16 4,974,634 17.1% 84.9% $100,373 19.9% 384
CENTRAL REGION
Chicago
Downtown............................ 2 1,628,112 5.6% 75.5% $ 26,364 5.2% 96
O'Hare.............................. 1 133,876 0.5 98.1 2,125 0.4 15
Indianapolis
Downtown............................ 2 1,057,877 3.6 88.1 17,285 3.4 75
Cleveland
Downtown............................ 1 1,242,144 4.3 92.8 15,183 3.0 35
Columbus
Downtown............................ 1 407,472 1.4 87.5 8,257 1.6 30
Worthington......................... 2 379,752 1.3 94.5 6,681 1.3 67
-- ---------- ----- ----- -------- ----- -----
Central Region
Total/Weighted Average........ 9 4,849,233 16.6% 85.8% $ 75,896 15.0% 318
SOUTHWEST REGION
New Orleans
Metairie............................ 3 1,191,064 4.1% 93.2% $ 16,017 3.2% 194
Austin
Downtown............................ 3 1,423,948 4.9 93.1 25,239 5.0 137
Houston
Galleria............................ 1 959,466 3.3 94.1 14,259 2.8 137
North/Airport....................... 2 402,709 1.4 96.8 5,219 1.0 27

<CAPTION>
ANNUALIZED
ANNUALIZED RENT PER
NET EFFECTIVE OCCUPIED ANNUALIZED MARKET ESTIMATED
RENT PER SQUARE FOOT RENT PER RENT REPLACEMENT
OCCUPIED AS OF 1/1/93 OR OCCUPIED PER COST RENT
OFFICE PROPERTIES SQUARE ACQUISITION SQUARE SQUARE PER SQUARE
(MARKET, SUBMARKET) FOOT(2) DATE(3) FOOT(1) FOOT(4) FOOT(5)
- ------------------- ------------- --------------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C>
NORTHEAST REGION
Fairfield County, CT
Shelton............................. $ 4.95 $14.11 $13.55 $23.99 $26.25
Stamford............................ 12.23 24.82 24.47 27.26 43.18
Washington, D.C.
Downtown............................ 15.97 23.24 28.71 29.59 41.19
Boston
Downtown............................ -- -- -- 35.42 48.68
New York
Midtown............................. 12.90 26.84 27.45 25.86 43.01
Philadelphia
Downtown............................ 12.17 20.14 20.80 16.87 34.24
Norfolk
Downtown............................ 6.39 14.23 15.71 16.40 33.03
Northern Virginia
Reston.............................. 16.14 24.29 26.25 23.79 44.35
------ ------ ------ ------ ------
Northeast Region
Total/Weighted Average........ $12.48 $20.15 $23.77 $25.31 $41.21
CENTRAL REGION
Chicago
Downtown............................ $ 6.31 $18.40 $21.46 $23.38 $41.54
O'Hare.............................. 5.84 18.19 16.18 18.74 32.83
Indianapolis
Downtown............................ 8.30 15.24 18.54 18.11 37.73
Cleveland
Downtown............................ 5.42 13.23 13.17 20.85 39.72
Columbus
Downtown............................ 14.87 22.96 23.15 22.73 31.41
Worthington......................... 9.21 17.45 18.62 18.89 25.90
------ ------ ------ ------ ------
Central Region
Total/Weighted Average........ $ 7.48 $16.69 $18.24 $21.05 $37.93
SOUTHWEST REGION
New Orleans
Metairie............................ $ 7.54 $12.96 $14.42 $17.64 $25.13
Austin
Downtown............................ 8.75 17.84 19.05 20.20 32.69
Houston
Galleria............................ 6.86 16.92 15.80 14.54 32.63
North/Airport....................... 4.94 12.86 13.39 12.53 24.38
</TABLE>

48
<PAGE> 55
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
OFFICE PERCENTAGE
PORTFOLIO OF
NUMBER RENTABLE RENTABLE ANNUALIZED PORTFOLIO NUMBER
OFFICE PROPERTIES OF SQUARE SQUARE PERCENTAGE RENT ANNUALIZED OF
(MARKET, SUBMARKET) PROPERTIES FEET FEET OCCUPIED ($000S)(1) RENT LEASES
- ------------------- ---------- ---------- ---------- ---------- ---------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
San Antonio
Airport............................. 1 194,398 0.7 99.4 2,511 0.5 22
Northwest........................... 2 409,885 1.4 93.3 4,963 1.0 64
- ---------- ----- ----- -------- ----- -----
Southwest Region
Total/Weighted Average........ 12 4,581,470 15.7% 93.9% $ 68,208 13.5% 581
WEST REGION
Phoenix
Midtown............................. 1 586,403 2.0% 100.0% $ 7,258 1.4% 1
Denver
Southeast/Denver Tech Center........ 3 671,659 2.3 96.8 10,710 2.1 64
St. Louis
Clayton............................. 1 339,163 1.2 97.8 7,116 1.4 34
Albuquerque
Downtown............................ 1 230,022 0.8 98.8 3,377 0.7 32
Oklahoma City
Northwest........................... 3 261,324 0.9 97.3 2,204 0.4 119
Dallas
LBJ Corridor........................ 2 740,899 2.5 98.8 10,391 2.1 107
North Central....................... 1 379,556 1.3 90.7 4,386 0.9 84
Preston Center...................... 1 302,747 1.0 93.7 4,549 0.9 73
Ft. Worth
CBD Annex........................... 2 239,095 0.8 94.1 2,663 0.5 66
- ---------- ----- ----- -------- ----- -----
West Region
Total/Weighted Average........ 15 3,750,868 12.9% 96.9% 52,653 10.4% 580
- ---------- ----- ----- -------- ----- -----
Total......................... 82 29,127,289 100.0% 90.2% $505,077 100.0% 2,873
=
========== ===== ======== ===== =====

<CAPTION>
ANNUALIZED
ANNUALIZED RENT PER
NET EFFECTIVE OCCUPIED ANNUALIZED MARKET ESTIMATED
RENT PER SQUARE FOOT RENT PER RENT REPLACEMENT
OCCUPIED AS OF 1/1/93 OR OCCUPIED PER COST RENT
OFFICE PROPERTIES SQUARE ACQUISITION SQUARE SQUARE PER SQUARE
(MARKET, SUBMARKET) FOOT(2) DATE(3) FOOT(1) FOOT(4) FOOT(5)
- ------------------- ------------- --------------- ---------- ------- -----------
<S> <C> <C> <C> <C> <C>
San Antonio
Airport............................. 5.02 11.55 12.99 15.51 25.04
Northwest........................... 5.71 12.98 12.97 15.51 25.39
------ ------ ------ ------ ------
Southwest Region
Total/Weighted Average........ $ 7.26 $15.24 $15.85 $17.06 $29.00
WEST REGION
Phoenix
Midtown............................. $ 9.35 $12.38 $12.38 $18.51 $20.63
Denver
Southeast/Denver Tech Center........ 7.48 15.41 16.47 22.85 29.44
St. Louis
Clayton............................. 12.31 19.81 21.46 24.19 31.31
Albuquerque
Downtown............................ 5.38 16.40 14.87 17.19 29.92
Oklahoma City
Northwest........................... 2.46 8.41 8.67 11.35 21.99
Dallas
LBJ Corridor........................ 5.34 14.24 14.19 19.84 26.71
North Central....................... 4.19 11.74 12.74 17.16 22.76
Preston Center...................... 7.45 13.72 16.04 22.06 28.51
Ft. Worth
CBD Annex........................... 4.13 10.27 11.84 11.48 23.81
------ ------ ------ ------ ------
West Region
Total/Weighted Average........ $ 6.79 $13.84 $14.49 $19.19 $26.09
------ ------ ------ ------ ------
Total......................... $ 9.69 $18.08 $19.22 $21.75 $34.82
</TABLE>

49
<PAGE> 56

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

(1) Annualized Rent is the monthly contractual rent under existing leases as of
December 31, 1996 multiplied by 12. This amount reflects total rent before
any rent abatements and includes expense reimbursements. Total rent
abatements for leases in effect as of December 31, 1996 for the 12 months
ending December 31, 1997 are approximately $4.7 million.
(2) Annualized Net Effective Rent is calculated for leases in effect as of
December 31, 1996 as follows: Annualized Rent, calculated as described
above, was reduced to reflect the annualized costs of tenant improvements
and leasing commissions, if any, paid or payable by the Company with respect
to leases entered into subsequent to the later of 1991 or the date of
acquisition of the relevant Property (calculated by dividing the total
tenant improvements and leasing commissions for a given lease by the term of
that lease in months and multiplying the result by 12). Finally, the result
of this calculation was reduced by the estimated operating expenses per
square foot, based on 1996 actual operating expense for Properties owned as
of January 1, 1996 and based on the Company's estimate of annual operating
expense for Properties acquired subsequent to January 1, 1996.
(3) Represents the gross rental rate per occupied square foot as of the later of
January 1, 1993 or the date of acquisition, for Properties acquired after
January 1, 1993, calculated by annualizing the rent under existing leases as
of that date.
(4) Represents the average asking gross rental rate per rentable square foot for
buildings of comparable size, class and age based upon information obtained
from CB Commercial/Torto Wheaton Research or REIS Reports, Inc., as of
December 31, 1996.
(5) Represents the Company's weighted average estimate of the gross rent that
would be required to justify construction of a building which would be
competitive with the respective Office Properties. An estimate of the
replacement cost to build a Property similar to the subject property was
calculated utilizing the Marshall and Swift (June 1996) Commercial Estimator
5.0 Software Program. The replacement cost rent is calculated under the
assumption that a net effective return of 12% would be required to justify
new construction and that occupancy would stabilize at 95% as follows:
replacement cost rent equals (estimated replacement cost per square foot
times 12% plus the estimated operating expenses per square foot of the
subject Property) divided by 95%. The estimated replacement costs and the
estimated replacement cost rents are based on constructing a building
similar to the subject Property in terms of the quality of construction and
amenities. The actual cost to construct a building that would be competitive
with the subject Property and required investor returns, could be more or
less than these estimates.

50
<PAGE> 57

The following table sets forth certain information relating to each Office
Property as of December 31, 1996. For a discussion of the Office Properties
acquired since December 31, 1996, see "The Company -- Recent Developments."
<TABLE>
<CAPTION>

PERCENTAGE PERCENTAGE
OF TOTAL OF
NUMBER PORTFOLIO ANNUALIZED PORTFOLIO
OF YEAR BUILT/ RENTABLE RENTABLE PERCENTAGE RENT ANNUALIZED
PROPERTY PROPERTIES RENOVATED SQUARE FEET SQUARE FEET OCCUPIED ($000S)(1) RENT
-------- ---------- ----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
PACIFIC REGION
Los Angeles
Beverly Hills
8383 Wilshire(6)......... 1 1971/93 417,463 1.4% 84.2% $ 6,807 1.3%
Downtown
Two California
Plaza(7)............... 1 1992 1,329,809 4.6 69.0 20,574 4.1
Pasadena
Pasadena Towers.......... 2 1990-91 439,367 1.5 86.5 10,420 2.1
Orange County
Central Orange
500 Orange Tower(8)...... 1 1988 290,765 1.0 87.5 4,777 0.9
1100 Executive Tower..... 1 1987 366,747 1.3 96.3 6,060 1.2
Irvine/Airport
1920 Main Plaza.......... 1 1988 305,662 1.0 86.0 5,324 1.1
2010 Main Plaza.......... 1 1988 280,882 1.0 92.3 5,461 1.1
San Diego
La Jolla
The Plaza at La Jolla
Village(6)............. 5 1987-90 635,419 2.2 97.2 14,268 2.8
San Francisco
Downtown
580 California........... 1 1984 313,012 1.1 97.8 7,858 1.6
60 Spear Street
Building............... 1 1967/87 128,511 0.4 100.0 3,085 0.6
One Market............... 1 1976/95 1,455,000 5.0 93.0 33,766 6.7
-- ---------- ----- ----- -------- -----
Pacific Region Total/
Weighted Average... 16 5,962,637 20.5% 87.0% $118,402 23.4%
SOUTHEAST REGION
Ft. Lauderdale
Downtown
First Union Center(6).... 1 1991 225,500 0.8% 99.0% $ 5,788 1.1
Orlando
Downtown
SunTrust Center.......... 1 1988 640,385 2.2 91.6 14,060 2.8

<CAPTION>
ANNUALIZED
RENT PER
ANNUALIZED OCCUPIED
NET EFFECTIVE SQUARE FOOT
RENT PER AS ANNUALIZED MARKET ESTIMATED
OCCUPIED OF 1/1/93 OR RENT PER RENT PER REPLACEMENT
NUMBER SQUARE ACQUISITION OCCUPIED SQUARE COST
PROPERTY OF LEASES FOOT(2) DATE(3) SQUARE FEET(1) FOOT(4) RENT(5)
-------- --------- ------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
PACIFIC REGION
Los Angeles
Beverly Hills
8383 Wilshire(6)......... 133 $ 8.47 $22.20 $19.35 $23.52 $33.57
Downtown
Two California
Plaza(7)............... 24 12.56 22.08 22.43 26.11 42.30
Pasadena
Pasadena Towers.......... 28 17.84 27.79 27.41 24.99 33.99
Orange County
Central Orange
500 Orange Tower(8)...... 49 9.43 23.97 18.77 19.63 33.13
1100 Executive Tower..... 26 8.90 18.56 17.16 15.63 32.22
Irvine/Airport
1920 Main Plaza.......... 39 12.75 20.08 20.25 21.71 36.43
2010 Main Plaza.......... 39 12.65 21.24 21.06 21.71 38.01
San Diego
La Jolla
The Plaza at La Jolla
Village(6)............. 89 13.99 19.71 23.10 21.82 37.60
San Francisco
Downtown
580 California........... 32 15.41 23.02 25.67 29.08 44.10
60 Spear Street
Building............... 10 10.81 23.12 24.01 17.83 45.85
One Market............... 144 11.87 24.07 24.94 29.08 49.05
----- ------ ------ ------ ------ ------
Pacific Region Total/
Weighted Average... 613 $12.40 $22.55 $22.83 $25.04 $40.82
SOUTHEAST REGION
Ft. Lauderdale
Downtown
First Union Center(6).... 21 $13.24 $17.45 $25.92 $25.22 $41.89
Orlando
Downtown
SunTrust Center.......... 43 14.62 23.99 23.98 22.14 37.67
</TABLE>

51
<PAGE> 58
<TABLE>
<CAPTION>

PERCENTAGE PERCENTAGE
OF TOTAL OF
NUMBER PORTFOLIO ANNUALIZED PORTFOLIO
OF YEAR BUILT/ RENTABLE RENTABLE PERCENTAGE RENT ANNUALIZED
PROPERTY PROPERTIES RENOVATED SQUARE FEET SQUARE FEET OCCUPIED ($000S)(1) RENT
-------- ---------- ----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Palm Beach County, FL
West Palm Beach
One Clearlake Centre..... 1 1987 215,104 0.7 96.0 4,000 0.8
Sarasota
Downtown
Sarasota City Center..... 1 1989 247,891 0.9 90.7 3,868 0.8
Tampa
Westshore
Tampa Commons............ 1 1985 254,808 0.9 100.0 4,592 0.9
Westshore Center......... 1 1984 215,523 0.7 98.5 3,237 0.6
Atlanta
Midtown
Promenade II............. 1 1990 770,840 2.6 89.6 15,250 3.0
North Central
Central Park............. 2 1986 612,733 2.1 95.6 11,063 2.2
Northwest
One Paces West........... 1 1987 271,586 0.9 98.2 5,331 1.1
Two Paces West........... 1 1990 369,677 1.3 95.6 7,213 1.4
Charlotte
Downtown
Wachovia Center.......... 1 1972/94 581,666 2.0 100.0 6,614 1.3
Raleigh/Durham
Durham
University Tower......... 1 1987/92 181,221 0.6 97.7 3,190 0.6
Nashville
Downtown
Nations Bank Plaza....... 1 1977/95 421,513 1.4 97.1 5,340 1.1
-- ---------- ----- ----- -------- -----
Southeast Region
Total/ Weighted
Average............ 14 5,008,447 17.2% 95.3% $ 89,545 17.7%

<CAPTION>
ANNUALIZED
RENT PER
ANNUALIZED OCCUPIED
NET EFFECTIVE SQUARE FOOT
RENT PER AS ANNUALIZED MARKET ESTIMATED
OCCUPIED OF 1/1/93 OR RENT PER RENT PER REPLACEMENT
NUMBER SQUARE ACQUISITION OCCUPIED SQUARE COST
PROPERTY OF LEASES FOOT(2) DATE(3) SQUARE FEET(1) FOOT(4) RENT(5)
-------- --------- ------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Palm Beach County, FL
West Palm Beach
One Clearlake Centre..... 36 6.92 18.90 19.38 25.48 30.97
Sarasota
Downtown
Sarasota City Center..... 33 8.34 17.47 17.21 18.50 27.08
Tampa
Westshore
Tampa Commons............ 22 9.69 21.66 18.02 20.19 27.47
Westshore Center......... 39 6.21 14.00 15.25 20.19 26.24
Atlanta
Midtown
Promenade II............. 22 13.71 22.07 22.07 21.84 34.91
North Central
Central Park............. 72 11.09 19.07 18.88 23.76 29.80
Northwest
One Paces West........... 22 13.02 17.05 19.99 21.86 27.59
Two Paces West........... 16 14.02 20.01 20.41 21.86 26.22
Charlotte
Downtown
Wachovia Center.......... 11 6.15 11.04 11.37 17.50 24.42
Raleigh/Durham
Durham
University Tower......... 37 9.70 12.38 18.02 19.62 29.59
Nashville
Downtown
Nations Bank Plaza....... 23 5.90 8.58 13.05 17.74 22.54
----- ------ ------ ------ ------ ------
Southeast Region
Total/ Weighted
Average............ 397 $10.63 $17.82 $18.76 $21.17 $30.15
</TABLE>

52
<PAGE> 59
<TABLE>
<CAPTION>

PERCENTAGE PERCENTAGE
OF TOTAL OF
NUMBER PORTFOLIO ANNUALIZED PORTFOLIO
OF YEAR BUILT/ RENTABLE RENTABLE PERCENTAGE RENT ANNUALIZED
PROPERTY PROPERTIES RENOVATED SQUARE FEET SQUARE FEET OCCUPIED ($000S)(1) RENT
-------- ---------- ----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
NORTHEAST REGION
Fairfield County, CT
Shelton
Shelton Point............ 1 1985/93 159,848 0.5% 96.2% $ 2,084 0.4%
Stamford
One Stamford Plaza....... 1 1986/94 212,244 0.7 97.6 5,075 1.0
Two Samford Plaza........ 1 1986/94 253,020 0.9 98.2 7,152 1.4
Three Stamford Plaza..... 1 1980/94 241,575 0.8 98.4 4,672 0.9
Four Stamford Plaza...... 1 1979/94 260,581 0.9 95.9 4,774 0.9
300 Atlantic Street...... 1 1987/96 272,458 0.9 93.2 6,212 1.2
Canterbury Green(7)...... 1 1987 224,405 0.8 98.6 6,823 1.4
WASHINGTON, D.C.
Downtown
1111 19th Street........... 1 1979/93 252,014 0.9 98.5 7,151 1.4
1620 L Street.............. 1 1989 156,272 0.5 84.4 3,756 0.7
Boston
Downtown
28 State Street(9)....... 1 1968/97 570,040 2.0 0.0 -- --
New York
Midtown
850 Third Avenue......... 1 1960/96 562,567 1.9 97.9 15,123 3.0
Philadelphia
Downtown
1601 Market Street....... 1 1970 681,289 2.3 91.7 12,988 2.6
Norfolk
Downtown
Dominion Tower(6)........ 1 1987 403,276 1.4 98.0 6,209 1.2
Northern Virginia
Reston
Reston Town Center....... 3 1990 725,045 2.5 96.4 18,353 3.6
-- ---------- ----- ----- -------- -----
Northeast Region
Total/ Weighted
Average............ 16 4,974,634 17.1% 84.9% 100,373 19.9%

<CAPTION>
ANNUALIZED
RENT PER
ANNUALIZED OCCUPIED
NET EFFECTIVE SQUARE FOOT
RENT PER AS ANNUALIZED MARKET ESTIMATED
OCCUPIED OF 1/1/93 OR RENT PER RENT PER REPLACEMENT
NUMBER SQUARE ACQUISITION OCCUPIED SQUARE COST
PROPERTY OF LEASES FOOT(2) DATE(3) SQUARE FEET(1) FOOT(4) RENT(5)
-------- --------- ------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
NORTHEAST REGION
Fairfield County, CT
Shelton
Shelton Point............ 13 $ 4.95 $14.11 $13.55 $23.99 $26.25
Stamford
One Stamford Plaza....... 13 12.15 26.47 24.51 27.26 39.27
Two Samford Plaza........ 20 16.17 32.27 28.78 27.26 39.25
Three Stamford Plaza..... 17 6.55 18.66 19.66 27.26 39.87
Four Stamford Plaza...... 9 6.82 19.19 19.11 27.26 40.04
300 Atlantic Street...... 23 12.50 22.71 24.46 27.26 49.40
Canterbury Green(7)...... 20 19.79 30.59 30.84 27.26 50.99
WASHINGTON, D.C.
Downtown
1111 19th Street........... 31 15.62 20.88 28.82 30.76 40.38
1620 L Street.............. 14 16.64 27.05 28.49 27.70 42.48
Boston
Downtown
28 State Street(9)....... * -- -- -- 35.42 48.68
New York
Midtown
850 Third Avenue......... 29 12.90 26.84 27.45 25.86 43.01
Philadelphia
Downtown
1601 Market Street....... 65 12.17 20.14 20.80 16.87 34.24
Norfolk
Downtown
Dominion Tower(6)........ 53 6.39 14.23 15.71 16.40 33.03
Northern Virginia
Reston
Reston Town Center....... 77 16.14 24.29 26.25 23.79 44.35
----- ------ ------ ------ ------ ------
Northeast Region
Total/ Weighted
Average............ 384 $12.48 $20.15 $23.77 $25.31 $41.21
</TABLE>

53
<PAGE> 60
<TABLE>
<CAPTION>

PERCENTAGE PERCENTAGE
OF TOTAL OF
NUMBER PORTFOLIO ANNUALIZED PORTFOLIO
OF YEAR BUILT/ RENTABLE RENTABLE PERCENTAGE RENT ANNUALIZED
PROPERTY PROPERTIES RENOVATED SQUARE FEET SQUARE FEET OCCUPIED ($000S)(1) RENT
-------- ---------- ----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
CENTRAL REGION
Chicago
Downtown
161 N. Clark............. 1 1992 1,010,520 3.5% 62.2% $ 13,406 2.7
One North Franklin....... 1 1991 617,592 2.1 97.2 12,958 2.6
O'Hare
1700 Higgins............. 1 1986 133,876 0.5 98.1 2,125 0.4
Indianapolis
Downtown
Bank One Center/Tower.... 2 1990 1,057,877 3.6 88.1 17,285 3.4
Cleveland
Downtown
BP Tower................. 1 1985 1,242,144 4.3 92.8 15,183 3.0
Columbus
Downtown
One Columbus Building.... 1 1987 407,472 1.4 87.5 8,257 1.6
Worthington
Community Corporate
Center................. 1 1987 250,169 0.9 93.8 4,718 0.9
One Crosswoods Center.... 1 1984 129,583 0.4 95.8 1,963 0.4
-- ---------- ----- ----- -------- -----
Central Region Total/
Weighted Average... 9 4,849,233 16.6% 85.8% $ 75,896 15.0%
SOUTHWEST REGION
New Orleans
Metairie
One Lakeway Center....... 1 1981/96 289,112 1.0% 98.2% $ 3,829 0.8%
Two Lakeway Center....... 1 1984/96 440,826 1.5 95.9 6,060 1.2
Three Lakeway Center..... 1 1987/96 461,126 1.6 87.6 6,129 1.2
Austin
Downtown
Franklin Plaza........... 1 1987 517,849 1.8 89.7 9,440 1.9
One American Center(7)... 1 1984 505,770 1.7 97.4 9,098 1.8
San Jacinto Center....... 1 1987 400,329 1.4 91.9 6,702 1.3

<CAPTION>
ANNUALIZED
RENT PER
ANNUALIZED OCCUPIED
NET EFFECTIVE SQUARE FOOT
RENT PER AS ANNUALIZED MARKET ESTIMATED
OCCUPIED OF 1/1/93 OR RENT PER RENT PER REPLACEMENT
NUMBER SQUARE ACQUISITION OCCUPIED SQUARE COST
PROPERTY OF LEASES FOOT(2) DATE(3) SQUARE FEET(1) FOOT(4) RENT(5)
-------- --------- ------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
CENTRAL REGION
Chicago
Downtown
161 N. Clark............. 45 $ 6.01 $21.91 $21.34 $23.00 $43.43
One North Franklin....... 51 6.63 12.65 21.58 24.01 38.44
O'Hare
1700 Higgins............. 15 5.84 18.19 16.18 18.74 32.83
Indianapolis
Downtown
Bank One Center/Tower.... 75 8.30 15.24 18.54 18.11 37.73
Cleveland
Downtown
BP Tower................. 35 5.42 13.23 13.17 20.85 39.72
Columbus
Downtown
One Columbus Building.... 30 14.87 22.96 23.15 22.73 31.41
Worthington
Community Corporate
Center................. 43 9.84 19.53 20.11 21.02 27.74
One Crosswoods Center.... 24 8.03 13.42 15.82 14.79 22.35
----- ------ ------ ------ ------ ------
Central Region Total/
Weighted Average... 318 $ 7.48 $ 6.69 $18.24 $21.05 $37.93
SOUTHWEST REGION
New Orleans
Metairie
One Lakeway Center....... 52 $ 6.24 $13.56 $13.49 $17.64 $25.02
Two Lakeway Center....... 91 7.69 13.03 14.34 17.64 25.42
Three Lakeway Center..... 51 8.29 12.52 15.17 17.64 24.92
Austin
Downtown
Franklin Plaza........... 40 10.78 18.43 20.33 19.81 30.74
One American Center(7)... 47 8.66 18.05 18.47 20.41 36.74
San Jacinto Center....... 50 6.31 16.80 18.22 20.43 30.10
</TABLE>

54
<PAGE> 61
<TABLE>
<CAPTION>

PERCENTAGE PERCENTAGE
OF TOTAL OF
NUMBER PORTFOLIO ANNUALIZED PORTFOLIO
OF YEAR BUILT/ RENTABLE RENTABLE PERCENTAGE RENT ANNUALIZED
PROPERTY PROPERTIES RENOVATED SQUARE FEET SQUARE FEET OCCUPIED ($000S)(1) RENT
-------- ---------- ----------- ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Houston
Galleria
San Felipe Plaza(6)...... 1 1984 959,466 3.3 94.1 14,259 2.8
North/Airport
Intercontinental
Center................. 1 1983 194,801 0.7 100.0 2,609 0.5
Northborough Tower(6).... 1 1983 207,908 0.7 93.8 2,610 0.5
San Antonio
Airport
Union Square............. 1 1986 194,398 0.7 99.4 2,511 0.5
Northwest
Colonnade I.............. 1 1983 168,637 0.6 89.9 2,086 0.4
Northwest Center......... 1 1984/94 241,248 0.8 95.7 2,877 0.6
-- ---------- ----- ----- -------- -----
Southwest Region
Total/Weighted
Average............ 12 4,581,470 15.7% 93.9% $ 68,208 13.5%
WEST REGION
Phoenix
Midtown
One Phoenix(10).......... 1 1989 586,403 2.0% 100.0% $ 7,258 1.4%
Denver
Southeast/Denver Tech
Center
Denver Corporate Center
II & III............... 2 1981-82 358,357 1.2 100.0 5,730 1.1
The Quadrant............. 1 1985/93 313,302 1.1 93.2 4,980 1.0
St. Louis
Clayton
Interco Corporate
Center................. 1 1986 339,163 1.2 97.8 7,116 1.4
Albuquerque
Downtown
500 Marquette Building... 1 1985 230,022 0.8 98.8 3,377 0.7
Oklahoma City
Northwest
Atrium Towers............ 2 1980/95 155,865 0.5 97.3 1,264 0.3
Cigna Center(6).......... 1 1974 105,459 0.4 97.3 940 0.2

<CAPTION>
ANNUALIZED
RENT PER
ANNUALIZED OCCUPIED
NET EFFECTIVE SQUARE FOOT
RENT PER AS ANNUALIZED MARKET ESTIMATED
OCCUPIED OF 1/1/93 OR RENT PER RENT PER REPLACEMENT
NUMBER SQUARE ACQUISITION OCCUPIED SQUARE COST
PROPERTY OF LEASES FOOT(2) DATE(3) SQUARE FEET(1) FOOT(4) RENT(5)
-------- --------- ------------- -------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Houston
Galleria
San Felipe Plaza(6)...... 137 6.86 16.92 15.80 14.54 32.63
North/Airport
Intercontinental
Center................. 14 4.85 13.35 13.39 13.38 24.10
Northborough Tower(6).... 13 5.03 12.40 13.39 11.73 24.64
San Antonio
Airport
Union Square............. 22 5.02 11.55 12.99 15.51 25.04
Northwest
Colonnade I.............. 29 7.42 13.99 13.76 15.51 25.77
Northwest Center......... 35 4.60 12.27 12.45 15.51 25.12
----- ------ ------ ------ ------ ------
Southwest Region
Total/Weighted
Average............ 581 $ 7.26 $15.24 $15.85 $17.06 $29.00
WEST REGION
Phoenix
Midtown
One Phoenix(10).......... 1 $ 9.35 $12.38 $12.38 $18.51 $20.63
Denver
Southeast/Denver Tech
Center
Denver Corporate Center
II & III............... 27 7.89 15.24 15.99 22.85 27.07
The Quadrant............. 37 6.98 15.60 17.06 22.85 32.15
St. Louis
Clayton
Interco Corporate
Center................. 34 12.31 19.81 21.46 24.19 31.31
Albuquerque
Downtown
500 Marquette Building... 32 5.38 16.40 14.87 17.19 29.92
Oklahoma City
Northwest
Atrium Towers............ 54 2.19 8.03 8.33 11.35 19.69
Cigna Center(6).......... 65 2.87 8.96 9.16 11.35 25.39
</TABLE>

55
<PAGE> 62
<TABLE>
<CAPTION>

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

(1) Annualized Rent is the monthly contractual rent under existing leases as of
December 31, 1996, multiplied by 12. This amount reflects total base rent
before any rent abatements, but includes expense reimbursements, which may
be estimates as of such date. Total rent abatements for leases in effect as
of December 31, 1996, for the 12 months from January 1, 1997 to December
31, 1997 are approximately $4.7 million.

(2) Annualized Net Effective Rent is calculated for leases in effect as of
December 31, 1996 as follows: Annualized Rent, calculated as described
above, was reduced to reflect the annualized costs of tenant improvements
and leasing commissions, if any, paid or payable by the Company with
respect to leases entered into subsequent to the later of 1991 or the date
of acquisition of the relevant Property (calculated by dividing the total
tenant improvements and leasing commissions for a given lease by the term
of that lease in months and multiplying the result by 12). Finally, the
result of this calculation was reduced by the estimated operating expenses
per square foot, based on 1996 actual operating expense for Properties
owned as of January 1, 1996 and based on the Company's estimate of annual
operating expense for Properties acquired subsequent to January 1, 1996.

(3) Represents the gross rental rate per occupied square foot as of the later
of January 1, 1993, or the date of acquisition (for Properties acquired
after January 1, 1993) calculated by annualizing the base rent and expense
reimbursements under existing leases as of that date.

(4) Represents the average asking gross rental rate per rentable square foot
for buildings of comparable size, class and age based upon information
obtained from CB Commercial/Torto Wheaton Research or REIS Reports, Inc.,
as of December 31, 1996.

(5) Represents the Company's estimate of the gross rent that would be required
to justify construction of a building which would be competitive with the
respective Office Properties. An estimate of the replacement cost to build
a property similar to the subject Property was calculated utilizing the
Marshall and Swift (June 1996) Commercial Estimator 5.0 Software Program.
The replacement cost rent is calculated under the assumptions that a net
effective return of 12% would be required to justify new construction and
that occupancy would stabilize at 95% as follows:

56
<PAGE> 63

replacement cost rent equals (estimated replacement cost per square foot times
12% plus the estimated operating expenses per square foot at the subject
Property) divided by 95%. The estimated replacement costs and the estimated
replacement cost rents are based on constructing a building similar to the
subject Property in terms of the quality of construction and amenities. The
actual cost to construct a building that would be competitive with the
subject Property, and required investor returns, could be more or less than
these estimates.

(6) This Office Property is held in a partnership with an unaffiliated
third-party (and in the case of San Felipe Plaza, the Property is held in a
partnership with an affiliated third-party also).

(7) This Office Property is held subject to a ground lease. See Note 10 to the
Combined Financial Statements of Equity Office Predecessors included
herein.

(8) This Office Property is held subject to an interest in the improvements at
the Property held by an unaffiliated third-party. In addition, the Company
has a mortgage interest in such improvements. See Note 5 to the Combined
Financial Statements of Equity Office Predecessors included herein.

(9) This Office Property is undergoing major redevelopment and is currently
vacant.

(10) This Office Property is 100% leased to a single tenant on a triple net
basis, whereby the tenant pays for certain operating expenses directly
rather than reimbursing the Company. The amounts shown above for annualized
rent include the amounts for reimbursement of expenses paid by the Company
but do not make any adjustments for expenses paid directly by the tenant.

57
<PAGE> 64

OFFICE PROPERTY MARKET INFORMATION

The Company operates in most of the top office markets in the United
States. Emerging Trends in Real Estate 1997, Cognetics Real Estate, Inc. in
December 1996, and 1997 Landauer Real Estate Market Forecast have each ranked
the top office markets. Of the 20 markets listed below, the Company owns Office
Properties in 16 of such markets as highlighted in bold, capitalized text.

<TABLE>
<CAPTION>
LEADING MARKETS FOR PRIMARY OFFICE TOP 15 CITIES -- LANDAUER MOMENTUM
MARKETS TO WATCH IN 1997 EMPLOYMENT GROWTH -- 1996 TO 2005 INDEX FOR OFFICE MARKETS -- 1997
- --------------------------------- ---------------------------------- ----------------------------------
<S> <C> <C>
1. SAN FRANCISCO, CA 1. LOS ANGELES, CA 1. PHOENIX, AZ
2. Seattle, WA 2. SAN FRANCISCO/OAKLAND, CA 2. ORLANDO, FL
3. BOSTON, MA 3. ATLANTA, GA 3. Minneapolis, MN
4. CHICAGO, IL 4. DALLAS/FORT WORTH, TX 4. ATLANTA, GA
5. DENVER, CO 5. WASHINGTON, DC 5. DENVER, CO
6. SAN DIEGO, CA 6. CHICAGO, IL 6. CHARLOTTE, NC
7. ATLANTA, GA 7. PHOENIX, AZ 7. NASHVILLE, TN
8. LOS ANGELES, CA 8. NEW YORK, NY 8. TAMPA, FL
9. DALLAS/FORT WORTH, TX 9. HOUSTON/GALVESTON, TX 9. Kansas City, KS
10. WASHINGTON, DC 10. TAMPA/ST. PETERSBURG, FL 10. Miami, FL
11. Minneapolis, MN 11. Minneapolis, MN 11. DALLAS, TX
12. NEW YORK, NY 12. BOSTON, MA 12. Seattle, WA
13. PHOENIX, AZ 13. DENVER/BOULDER, CO 13. CHICAGO, IL
14. Miami, FL 14. Seattle, WA 14. SAN FRANCISCO, CA
15. HOUSTON, TX 15. MIAMI/FT LAUDERDALE, FL 15. BOSTON, MA
Source: Emerging Trends in Real Source: Cognetics Real Estate, Source: 1997 Landauer Real Estate
Estate 1997 (Equitable Real Inc. Market Forecast
Estate Management)
</TABLE>

The Company's largest 16 markets, based on percentage of annualized rent
and on percentage of rentable square feet are set forth below.

<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
MARKET ANNUALIZED RENT RENTABLE AREA
- ------ --------------- -------------
<S> <C> <C>
San Francisco, CA......................................... 8.9% 6.8%
Los Angeles, CA........................................... 8.4 7.9
Atlanta, GA............................................... 8.0 7.3
Fairfield County, CT...................................... 7.6 5.9
Austin, TX................................................ 5.6 5.5
Chicago, IL............................................... 5.4 6.3
Orange County, CA......................................... 4.6 4.4
Houston, TX............................................... 4.1 4.9
Dallas, TX................................................ 3.9 3.8
Indianapolis, IN.......................................... 3.9 5.1
New Orleans, LA........................................... 3.3 2.9
Cleveland, OH............................................. 3.3 4.5
Columbus, OH.............................................. 3.3 4.3
New York, NY.............................................. 3.2 2.0
Orlando, FL............................................... 3.0 2.3
San Diego, CA............................................. 2.9 2.3
---- ----
Total........................................... 79.4% 76.2%
==== ====
</TABLE>

58
<PAGE> 65

The Company believes that the current economic environment and lack of new
office space are allowing the office building industry to gradually reestablish
favorable supply and demand fundamentals. Continued office employment growth,
when combined with the continuing disparity between current rental rates and the
rental rates required to support new development, is expected to result in
continuing increases in occupancy, rental rates and profitability.

TOTAL U.S. OFFICE SPACE COMPLETIONS -- SQUARE FEET AND AS A PERCENTAGE OF
INVENTORY
- ---------------

Source: The REIS Reports, Inc.

59
<PAGE> 66

In the Company's 16 largest office markets, rental rates have begun to
trend upwards as vacancies have decreased. Commercial office buildings in many
markets are experiencing increasing demand for office space accompanied by a
shift in bargaining power in favor of landlords and positive trends in effective
rental rates and vacancies.

THE COMPANY'S 16 LARGEST MARKETS -- VACANCY RATE AND EFFECTIVE RENT(1)

<TABLE>
<CAPTION>
MEASUREMENT PERIOD VACANCY RATE EFFECTIVE RENT
(FISCAL YEAR COVERED)
<S> <C> <C>
1988 19.7 19.53
1989 18.9 19.24
1990 19.0 19.14
1991 19.4 18.87
1992 19.9 17.99
1993 19.8 17.36
1994 18.7 17.06
1995 17.2 17.20
1996 15.6 17.64
</TABLE>

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

Source: The REIS Reports, Inc.
(1) The REIS Reports, Inc. defines effective rent as average rent less free rent
and above market concessions.

Since the early 1990s, the real estate office market has been characterized
by declining new construction completions and continued moderate demand from
tenants. These dynamics have brought about improved rental rates, occupancies
and values. Since the early 1990s, when vacancy for all office space in the
Company's 16 largest office markets peaked at nearly 20%, it has steadily
declined. For these 16 markets, the overall vacancy rate for all office space is
currently approximately 14.2%, and the vacancy rate for office buildings built
since 1984 is 10.4%. The Company believes that over the long term the demand and
rental rates for well located, institutional quality office space will continue
to increase and will remain competitive with new construction.

60
<PAGE> 67

THE COMPANY'S 16 LARGEST MARKETS -- NET ABSORPTION (1) , COMPLETIONS AND VACANCY
RATES

<TABLE>
<CAPTION>
MEASUREMENT PERIOD NET COMPLETIONS VACANCY RATE
(FISCAL YEAR COVERED) ABSORPTION IN IN SQ FT
SQ FT
<S> <C> <C> <C>
1980 41437000 45517000 6.3
1981 44660000 60134000 6.7
1982 31296000 84445000 7.9
1983 47943000 89365000 12.7
1984 56092000 67394000 15.5
1985 44169000 84957000 15.6
1986 41052000 81143000 17.9
1987 50643000 60698000 19.8
1988 42224000 39586000 19.7
1989 34252000 44000000 18.9
1990 24563000 36688000 19.0
1991 9393000 21101000 19.4
1992 9629000 10891000 19.9
1993 17887000 1687000 19.8
1994 24798000 2063000 18.7
1995 26922000 1959000 17.2
1996 24939000 4907000 15.6
</TABLE>

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

Source: The REIS Reports, Inc.
(1) The REIS Reports, Inc. defines net absorption as the net change in occupied
space during the calendar year.

61
<PAGE> 68

FOR THE COMPANY'S 16 LARGEST MARKETS
VACANCY RATE OF OFFICE SPACE COMPLETED SINCE 1984
COMPARED TO VACANCY RATE FOR ALL OFFICE SPACE

<TABLE>
<CAPTION>
VACANCY RATE FOR SPACE VACANCY RATE FOR
MARKET COMPLETED SINCE 1984 ALL OFFICE SPACE
- ------ ---------------------- ----------------
<S> <C> <C>
Houston, TX................................................ 15.3% 17.4%
Los Angeles, CA............................................ 15.0 17.8
Orange County, CA.......................................... 13.4 15.2
Fairfield County, CT....................................... 13.1 14.1
San Diego, CA.............................................. 12.7 15.5
Indianapolis, IN........................................... 11.6 12.9
Chicago, IL................................................ 10.1 14.6
New Orleans, LA............................................ 10.1 16.8
Dallas, TX................................................. 9.5 16.2
New York, NY............................................... 9.1 13.5
Columbus, OH............................................... 8.2 8.5
Orlando, FL................................................ 8.1 8.7
Austin, TX................................................. 6.2 9.4
Atlanta, GA................................................ 6.0 8.7
Cleveland, OH.............................................. 5.9 14.4
San Francisco, CA.......................................... 5.1 7.8
----- -----
All 16 Markets............................................. 10.4% 14.2%
</TABLE>

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

Source: The REIS Reports, Inc.

The Company believes that office markets across the country are in the
early stages of a recovery. Given prospects for limited new development and
continued growth in office demand, the Company believes that the office market
recovery will continue for the foreseeable future and will lead to increased
rental rates and reduced concessions in most office markets across the country.
Based upon information obtained from Regional Financial Associates, it is
estimated that finance, insurance and real estate and office-based employment
account for approximately 70% of the total U.S. primary office employment.
Additionally, employment projections for the years 1996 through 2000 anticipate
continued growth in U.S. employment with office-based employment growing at
approximately 2.2% compared to total U.S. employment growth of approximately
1.4% per annum.

PARKING FACILITIES

Information concerning the Company's Parking Facilities as of December 31,
1996 is set forth below.

<TABLE>
<CAPTION>
MANAGEMENT
NUMBER OF COMPANY
PROPERTY NAME SPACES CITY OR LESSEE(1)
- ------------- --------- ------------ ----------------
<S> <C> <C> <C>
Boston Harbor Garage................................. 1,380 Boston Standard Parking
1602-34 Chancellor Garage............................ 416 Philadelphia Central Parking
15th & Sansom St. Garage............................. 313 Philadelphia Central Parking
Juniper/Locust St. Garage............................ 541 Philadelphia Central Parking
1111 Sansom St. Garage............................... 250 Philadelphia Central Parking
1616 Sansom St. Garage............................... 240 Philadelphia Central Parking
Milwaukee Center(2).................................. 858 Milwaukee Standard Parking
Capitol Commons Garage(2)(3)......................... 943 Indianapolis Central Parking
North Loop Transportation Center(3).................. 1,374 Chicago Standard Parking
Theater District Garage(3)........................... 1,006 Chicago Standard Parking
-----
Total...................................... 7,321
=====
</TABLE>

62
<PAGE> 69

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

(1) With the exception of Capital Commons Garage, all of the foregoing Parking
Facilities are operated by the designated third-party Service Company under
a lease agreement whereby the Company and the Service Company share the
gross receipts from the parking operation or the Company receives a fixed
payment from the Service Company, and the Company bears none of the
operational expenses. In the case of the Capital Commons Garage, the
operating agreement provides for the Company's receipt of a percentage of
net receipts and, therefore, results in an insignificant amount of
non-qualifying gross income relative to the total gross income of the
Company. See "Federal Income Tax Considerations -- Taxation of the Company."
(2) This Parking Facility is held subject to a ground lease. See Note 10 to the
Combined Financial Statements of Equity Office Predecessors included herein.
(3) Each of these Parking Facilities is held in a partnership with an
unaffiliated third-party. The Operating Partnership or a Subsidiary will be
the managing general partner of each such partnership. See Note 6 to the
Combined Financial Statements of Equity Office Predecessors included herein.

Twenty-five Largest Tenants. The Office Properties are leased to over
2,800 tenants. The following table sets forth the 25 largest tenants based on
annualized rent at the Office Properties as of December 31, 1996:

<TABLE>
<CAPTION>
REMAINING PERCENTAGE OF AGGREGATE PERCENTAGE
NUMBER LEASE AGGREGATE RENTABLE OF AGGREGATE
OF TERM IN ANNUALIZED SQUARE OCCUPIED
TENANT NAME(1) BUILDINGS MONTHS RENT(2) FEET SQUARE FEET
- -------------- --------- --------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C>
Andersen Worldwide................ 5 71 2.7% 502,085 1.9%
AT&T.............................. 4 153 2.1 501,066 1.9
California Metropolitan Water
District........................ 1 26 1.7 402,194 1.5
Bank One (Indianapolis)........... 2 279 1.6 353,364 1.3
General Services Administration... 11 88 1.5 357,524 1.4
Mountain States Telephone......... 1 89 1.4 586,403 2.2
Chicago Title and Trust........... 4 181 1.4 284,455 1.1
Coopers & Lybrand................. 4 85 1.4 235,415 0.9
SunBank, National Association..... 1 139 1.3 250,000 1.0
Home Depot USA, Inc. ............. 2 39 1.2 275,373 1.0
Citibank.......................... 2 54 1.0 166,278 0.6
AON Risk Services................. 3 92 1.0 177,057 0.7
Brobeck, Phleger, and Harrison.... 1 95 0.8 154,079 0.6
Merrill Lynch..................... 8 71 0.8 196,817 0.7
BP America, Inc. ................. 1 144 0.8 322,546 1.2
First Union Bank.................. 6 76 0.7 204,283 0.8
Price Waterhouse.................. 3 32 0.7 128,279 0.5
American Hospital Association..... 1 99 0.6 150,289 0.6
Duke Power Company................ 1 108 0.6 233,415 0.9
Maxxam Inc. ...................... 1 48 0.5 102,709 0.4
Time Customer Service, Inc. ...... 1 65 0.5 128,477 0.5
NationsBank....................... 2 155 0.5 227,372 0.9
Invesco Funds Group, Inc. ........ 1 27 0.5 140,459 0.5
IBM............................... 3 39 0.5 200,737 0.8
Ruden McClosky.................... 1 53 0.5 81,036 0.3
---- --------- ----
Total/Weighted
Average(3)............ 102 26.0% 6,361,712 24.2%
==== ========= ====
</TABLE>

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

(1) Actual tenant may be a subsidiary of or an entity affiliated with the named
tenant.
(2) Annualized Rent is the monthly contractual base rent under existing leases
as of December 31, 1996 multiplied by 12. This amount reflects the total
rent before any rent abatements and includes expense reimbursements.
(3) Weighted Average calculation based on aggregate rentable square footage
occupied by each tenant.

63
<PAGE> 70

LEASE EXPIRATION BY REGION

The following table sets forth a schedule of lease expirations by region for
leases in place as of December 31, 1996, for each of the 10 years beginning with
1997, for the Office Properties, on an aggregate basis, assuming that none of
the tenants exercise renewal options and excluding an aggregate of 2,848,277
square feet of unleased space.
<TABLE>
<CAPTION>

1997 1998 1999 2000 2001 2002
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Pacific Region Square Feet(1)............... 400,136 448,265 969,284 608,561 695,099 408,947
Totals % Square Feet(2)............. 6.7% 7.5% 16.3% 10.2% 11.7% 6.9%
Annualized Rent(3)........... 9,590,079 10,533,235 21,686,085 13,810,354 14,935,227 9,672,643
Number of Leases............. 149 103 100 73 73 29
Rent Per Square Foot......... $ 23.97 $ 23.54 $ 22.37 $ 22.69 $ 21.49 $ 23.65
Market Rent(4)............... $ 25.04
Replacement Cost Rent(5)..... $ 40.82
Southeast Region Square Feet(1)............... 316,343 365,337 476,135 888,878 457,963 280,226
Totals % Square Feet(2)............. 6.3% 7.3% 9.5% 17.7% 9.1% 5.6%
Annualized Rent(3)........... 5,631,856 6,601,610 8,346,878 17,577,756 9,844,235 4,966,334
Number of Leases............. 66 71 73 72 55 25
Rent Per Square Foot......... $ 17.80 $ 18.07 $ 17.53 $ 19.78 $ 21.50 $ 17.72
Market Rent(4)............... $ 21.17
Replacement Cost Rent(5)..... $ 30.15
Northeast Region Square Feet(1)............... 201,886 432,996 437,365 550,605 624,902 484,954
Totals % Square Feet(2)............. 4.1% 8.7% 8.8% 11.1% 12.6% 9.7%
Annualized Rent(3)........... 4,241,979 10,579,287 11,223,431 14,473,159 15,310,037 11,228,499
Number of Leases............. 45 43 56 54 52 27
Rent Per Square Foot......... $ 21.01 $ 24.43 $ 25.66 $ 26.29 $ 24.50 $ 23.15
Market Rent(4)............... $ 25.31
Replacement Cost Rent(5)..... $ 41.21
Central Region Square Feet(1)............... 226,531 139,934 194,256 389,532 215,504 113,357
Totals % Square Feet(2)............. 4.7% 2.9% 4.0% 8.0% 4.4% 2.3%
Annualized Rent(3)........... 4,036,597 3,018,564 3,603,851 7,284,106 3,756,452 2,215,853
Number of Leases............. 41 34 41 31 40 24
Rent Per Square Foot......... $ 17.82 $ 21.57 $ 18.55 $ 18.70 $ 17.43 $ 19.55
Market Rent(4)............... $ 21.05
Replacement Cost Rent(5)..... $ 37.93
Southwest Region Square Feet(1)............... 514,385 583,896 475,323 969,822 617,574 410,644
Totals % Square Feet(2)............. 11.2% 12.7% 10.4% 21.2% 13.5% 9.0%
Annualized Rent(3)........... 7,878,804 8,913,162 7,153,964 16,334,424 9,821,001 6,817,700
Number of Leases............. 164 100 89 103 67 26
Rent Per Square Foot......... $ 15.32 $ 15.26 $ 15.05 $ 16.84 $ 15.90 $ 16.60
Market Rent(4)............... $ 17.06
Replacement Cost Rent(5)..... $ 29.00
West Region Square Feet(1)............... 569,005 508,836 536,209 576,704 332,768 240,195
Totals % Square Feet(2)............. 15.25% 13.6% 14.3% 15.4% 8.9% 6.4%
Annualized Rent(3)........... 7,831,222 8,170,701 7,824,002 8,717,402 5,554,856 3,632,413
Number of Leases............. 187 112 113 74 50 23
Rent Per Square Foot......... $ 13.76 $ 16.06 $ 14.59 $ 15.12 $ 16.69 $ 15.12
Market Rent(4)............... $ 19.19
Replacement Cost Rent(5)..... $ 26.09
Portfolio Totals Square Feet(1)............... 2,228,286 2,479,264 3,088,572 3,984,102 2,943,810 1,938,323
% Square Feet(2)............. 7.7% 8.5% 10.6% 13.7% 10.1% 6.7%
Annualized Rent(3)........... 39,210,538 47,836,560 59,838,210 78,197,202 59,221,807 38,533,442
Number of Leases............. 652 463 472 407 337 154
Rent Per Square Foot......... $ 17.60 $ 19.29 $ 19.37 $ 19.63 $ 20.12 $ 19.88
Market Rent(4)............... $ 21.25
Replacement Cost Rent(5)..... $ 34.82

<CAPTION>
2007 AND
2003 2004 2005 2006 BEYOND TOTALS
----------- ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Pacific Region Square Feet(1)............... 304,889 191,568 121,702 187,368 849,471 5,185,290
Totals % Square Feet(2)............. 5.1% 3.2% 2.0% 3.1% 14.2% 87.0%
Annualized Rent(3)........... 7,457,716 3,391,890 2,694,100 4,593,469 20,016,703 118,401,502
Number of Leases............. 20 15 12 12 27 613
Rent Per Square Foot......... $ 24.46 $ 17.71 $ 22.14 $ 22.14 $ 23.56 $ 22.83
Market Rent(4)...............
Replacement Cost Rent(5).....
Southeast Region Square Feet(1)............... 195,168 262,452 301,086 171,920 1,057,461 4,772,969
Totals % Square Feet(2)............. 3.9% 5.2% 6.0% 3.4% 21.1% 95.3%
Annualized Rent(3)........... 4,605,862 3,357,265 3,950,186 4,224,769 20,438,607 89,545,359
Number of Leases............. 7 7 5 7 9 397
Rent Per Square Foot......... $ 23.60 $ 12.79 $ 13.12 $ 24.57 $ 19.33 $ 18.76
Market Rent(4)...............
Replacement Cost Rent(5).....
Northeast Region Square Feet(1)............... 358,536 401,320 298,169 257,385 173,756 4,221,874
Totals % Square Feet(2)............. 7.2% 8.1% 6.0% 5.2% 3.5% 84.9%
Annualized Rent(3)........... 8,113,966 9,294,172 7,567,334 5,448,479 2,892,683 100,373,026
Number of Leases............. 35 22 22 19 9 384
Rent Per Square Foot......... $ 22.63 $ 23.16 $ 25.38 $ 23.17 $ 16.65 $ 23.77
Market Rent(4)...............
Replacement Cost Rent(5).....
Central Region Square Feet(1)............... 143,946 371,729 505,672 276,398 1,583,793 4,160,652
Totals % Square Feet(2)............. 3.0% 7.7% 10.4% 5.7% 32.7% 85.8%
Annualized Rent(3)........... 2,871,619 7,313,447 10,197,601 5,880,237 25,717,211 75,895,537
Number of Leases............. 13 41 22 10 21 318
Rent Per Square Foot......... $ 19.95 $ 19.67 $ 20.17 $ 21.27 $ 16.24 $ 18.24
Market Rent(4)...............
Replacement Cost Rent(5).....
Southwest Region Square Feet(1)............... 248,412 223,388 72,924 88,165 99,102 4,303,635
Totals % Square Feet(2)............. 5.4% 4.9% 1.6% 1.9% 2.2% 93.9%
Annualized Rent(3)........... 3,803,771 4,203,122 1,288,157 1,607,086 387,303 68,208,494
Number of Leases............. 14 9 5 3 1 581
Rent Per Square Foot......... $ 15.31 $ 18.82 $ 17.66 $ 18.23 $ 3.91 $ 15.85
Market Rent(4)...............
Replacement Cost Rent(5).....
West Region Square Feet(1)............... 142,969 663,776 2,088 23,033 39,009 3,634,592
Totals % Square Feet(2)............. 3.8% 17.7% 0.1% 0.6% 1.0% 96.9%
Annualized Rent(3)........... 2,034,051 8,545,417 35,898 307,075 -- 52,653,037
Number of Leases............. 14 4 1 2 -- 580
Rent Per Square Foot......... $ 14.23 $ 12.87 $ 17.19 $ 13.33 $ -- $ 14.49
Market Rent(4)...............
Replacement Cost Rent(5).....
Portfolio Totals Square Feet(1)............... 1,393,920 2,114,233 1,301,641 1,004,269 3,802,592 26,279,012
% Square Feet(2)............. 4.8% 7.3% 4.5% 3.4% 13.1% 90.2%
Annualized Rent(3)........... 28,886,984 36,105,312 25,733,277 22,061,116 69,452,506 505,076,955
Number of Leases............. 103 98 67 53 67 2,873
Rent Per Square Foot......... $ 20.72 $ 17.00 $ 19.77 $ 21.97 $ 18.26 $ 19.22
Market Rent(4)...............
Replacement Cost Rent(5).....

</TABLE>

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

(1) Total net rentable square feet represented by expiring leases.
(2) Percentage of total net rentable feet represented by expiring leases.
(3) Annualized Rent is the monthly contractual rent under existing leases as of
December 31, 1996, multiplied by 12. This amount reflects total base rent
before any rent abatements and includes expense reimbursements which may be
estimates as of such date. Total rent abatements for leases in effect as of
December 31, 1996, for the 12 months ended December 31, 1997, are
approximately $4.7 million.
(4) Represents the average asking gross rent per rentable square feet for
buildings of comparable size, class and age, based upon information obtained
from CB Commercial/Torto Wheaton Research or REIS Reports, Inc. as of
December 31, 1996.
(5) Represents the Company's estimate of the gross rent that would be required
to justify construction of a building which would be competitive with the
subject Property. As estimate of the replacement cost to build a property
similar to the subject Property was calculated utilizing the Marshall and
Swift (June 1996) Commercial Estimator 5.0 Software Program. The replacement
cost rent is calculated under the assumptions that a net effective return of
12% would be required to justify new construction and that occupancy would
stabilize at 95% as follows: Replacement Cost Rent equals (estimated
replacement cost per square foot times 12% plus the estimated operating
expenses per square foot at the subject Property) divided by 95%. The
estimated replacement cost and the estimated replacement cost rent are based
on constructing a building similar to the subject Property in terms of the
quality of construction and amenities. The actual cost to construct a
building that would be competitive with the subject Property and the
required investor returns could be more or less than this estimate.

64
<PAGE> 71

LEASE EXPIRATIONS -- PORTFOLIO TOTAL

The following table sets forth a summary schedule of the lease expirations
for the Office Properties for leases in place as of December 31, 1996, assuming
that none of the tenants exercise renewal options or termination rights, if any,
at or prior to the scheduled expirations:

<TABLE>
<CAPTION>
PERCENTAGE
SQUARE OF TOTAL ANNUALIZED ANNUALIZED PERCENTAGE OF
NUMBER OF FOOTAGE OF OCCUPIED RENT OF RENT OF ANNUALIZED RENT
LEASES EXPIRING SQUARE EXPIRING EXPIRING LEASES OF EXPIRING
YEAR OF LEASE EXPIRATION EXPIRING LEASES FEET LEASES ($000S) PER SQUARE FOOT LEASES(1)
- ------------------------ --------- ---------- ---------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1997(2).................. 652 2,228,286 8.5% $ 39,211 $17.60 7.8%
1998..................... 463 2,479,264 9.4 47,837 19.29 9.5
1999..................... 472 3,088,572 11.8 59,838 19.37 11.8
2000..................... 407 3,984,102 15.2 78,197 19.63 15.5
2001..................... 337 2,943,810 11.2 59,222 20.12 11.7
2002..................... 154 1,938,323 7.4 38,533 19.88 7.6
2003..................... 103 1,393,920 5.3 28,887 20.72 5.7
2004..................... 98 2,114,233 8.0 36,105 17.08 7.1
2005..................... 67 1,301,641 5.0 25,733 19.77 5.1
2006..................... 53 1,004,269 3.8 22,061 21.97 4.4
2007..................... 24 697,321 2.7 19,063 27.34 3.8
2008..................... 18 785,095 3.0 14,872 18.94 2.9
2009..................... 6 181,278 .7 3,540 19.53 .7
2010 and beyond.......... 19 1,800,676 6.9 31,977 17.76 6.3
----- ---------- ----- -------- ------ -----
Total/Weighted
Average........ 2,873 25,940,790(3) 100.0%(3) $505,076 $19.22 100.0%
===== ========== ===== ======== ====== =====
</TABLE>

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

(1) Based on currently payable rent.
(2) Represents lease expirations from January 1, 1997 to December 31, 1997 and
month to month leases.
(3) Reconciliation of total net rentable square footage is as follows:

<TABLE>
<CAPTION>
SQUARE FOOTAGE PERCENTAGE OF TOTAL
-------------- -------------------
<S> <C> <C>
Square footage occupied by tenants................. 25,940,790 89.0%
Square footage used for management offices and
building use, and remeasurement adjustments...... 338,222 1.2%
Square footage vacant.............................. 2,848,277 9.8%
---------- ------
Total net rentable square footage........ 29,127,289 100.0%
========== ======
</TABLE>

LEASE DISTRIBUTIONS

The following table sets forth information relating to the distribution of
the Office Property leases, based on rentable square feet under lease, as of
December 31, 1996:

<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
TOTAL OF AGGREGATE ANNUALIZED OF AGGREGATE
PERCENT OCCUPIED PORTFOLIO RENT PORTFOLIO
NUMBER OF ALL SQUARE OCCUPIED ANNUALIZED PER SQUARE ANNUALIZED
SQUARE FEET UNDER LEASE OF LEASES LEASES FEET SQUARE FEET RENT FOOT RENT
----------------------- --------- ------- ----------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
2,500 or Less.............. 1,179 41.0% 1,869,698 7.1% $ 26,470,659 $14.16 5.2%
2,501-5,000................ 600 20.9 2,125,525 8.1 38,552,957 18.14 7.6
5,001-7,500................ 337 11.7 2,069,650 7.9 38,614,603 18.66 7.6
7,501-10,000............... 157 5.5 1,361,708 5.2 26,161,548 19.21 5.2
10,001-20,000.............. 332 11.6 4,765,801 18.1 92,218,576 19.35 18.3
20,001-40,000.............. 165 5.7 4,594,665 17.5 92,509,432 20.13 18.3
40,001-60,000.............. 52 1.8 2,522,529 9.6 55,433,227 21.98 11.0
60,001-100,000............. 25 0.9 1,834,965 7.0 40,114,590 21.86 7.9
100,001 or Greater......... 26 0.9 5,134,471 19.5 95,001,363 18.50 18.8
----- ----- ----------- ----- ------------ ------ -----
Total/Weighted
Average.............. 2,873 100.0% $26,279,012 100.0% $505,076,955 $19.22 100.0%
===== ===== =========== ===== ============ ====== =====
</TABLE>

65
<PAGE> 72

TENANT RETENTION AND EXPANSIONS; NATIONAL MARKETING PROGRAM

The Company believes its ability to deliver consistent service to, and
develop relationships with, tenants contribute to its success in attracting,
expanding and retaining a high quality and diverse tenant base. The Company
services tenants primarily through its on-site and regional professional leasing
and management staff.

Management believes that tenant satisfaction fosters long-term tenant
relationships and creates renewal and expansion opportunities, which, in turn,
enhance the Company's ability to maintain and increase occupancy rates. The
Company's success in this area is demonstrated in part by the number of existing
tenants who have re-leased their space, leased additional space to support their
expansion needs or moved to other space within the Company's Portfolio. During
1994 and 1995, the Company expanded leased space for 510 tenants by a total of
over 1.67 million square feet and during 1996, 292 tenants expanded their leased
space by 951,000 square feet. Examples include Reuters America, which expanded
its space in Stamford Plaza from 12,000 square feet to over 106,000 square feet;
Long Beach Mortgage's expansion in Orange County, California from 22,500 square
feet to almost 100,000 square feet in two buildings; BellSouth's increase from
31,950 square feet to 56,400 square feet at Lakeway Center in New Orleans; and
Encore Media's expansion from 26,285 square feet to over 63,000 square feet at
the Quadrant in Denver.

The Company has developed a National Accounts Program which focuses on
leasing space to the Company's largest tenants. Fast growing companies with
national real estate requirements have embraced the Company's concept of being
the "single point of contact" for their rapidly changing real estate needs. One
of the most important benefits has been the use of a standardized lease for a
multi-site tenant, reducing the expense and time to complete lease transactions.
Through the aggressive implementation of this program, the Company has
accommodated tenants in multiple Office Properties across the country. For
example, Andersen Worldwide has expanded from 111,698 square feet in two
locations to 502,085 square feet in five locations; Coopers & Lybrand has
expanded from 87,351 square feet in two locations to 235,415 square feet in four
locations; Marsh & McLennan has expanded from 14,324 square feet in one location
to 72,325 square feet in four locations; and Price Waterhouse has expanded from
67,020 square feet in one location to 128,279 square feet in three locations.

As part of its initial repositioning of an Office Property after an
acquisition, the Company frequently pursues a policy of replacing some existing
tenants with more creditworthy tenants with a higher probability of expansion
and renewal. While this may adversely affect tenant retention rates in the early
years of ownership of an Office Property, management believes it is beneficial
to the Company in the long run. The Company's retention rate at the Office
Properties typically continues to increase as each Property is repositioned and
stabilized. The Company s experience is that the net present value of renewed
leases substantially exceeds the net present value of leases with new tenants.
The Company expects this difference to continue as demand outpaces supply.

CAPITAL IMPROVEMENTS

The Company has a history of acquiring and repositioning undercapitalized
and poorly managed properties, many of which have required significant capital
improvements due to deferred maintenance and/or required substantial renovation
to enable them to compete effectively. A number of the Properties also have had
significant amounts of shell space requiring build out at the time of
acquisition. The Company takes these capital improvements and revenue enhancing
tenant improvements into consideration at the time of acquisition in determining
the amount of equity and debt financing required to purchase the Property and
fund the improvements. Therefore, capital improvements up to the first five
years after acquisition of these Properties are treated separately from typical
recurring capital expenditures and non-revenue enhancing tenant improvements and
leasing commissions required once these Properties have reached stabilized
occupancy and deferred maintenance and renovations planned at the time of
acquisition have been completed. Capital improvements (including tenant
improvements and leasing commissions for shell space) for the years ended
December 31, 1994, 1995 and 1996 were $49,867,000, $48,756,000 and $93,465,000,
respectively, or $2.71,

66
<PAGE> 73

$2.12 and $3.21 per square foot, respectively. These amounts include $16,762,000
and $41,020,000 for the years ended December 31, 1995 and 1996, respectively,
for the redevelopment of the 28 State Street Building.

The Company considers capital expenditures to be recurring expenditures
relating to the daily maintenance of the Office Properties. The table below
summarizes capital expenditures for the years ended December 31, 1994, 1995 and
1996. The capital expenditures set forth below are not necessarily indicative of
future capital expenditures.

<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Number of Office Properties................................. 62 72 82
Rentable Square Feet (in millions).......................... 18.4 23.0 29.1
Capital expenditures
Annual per square foot.................................... $.30 $.14 $.15
</TABLE>

TENANT IMPROVEMENT AND LEASING COMMISSION COSTS

The Company distinguishes its tenant improvements and leasing commissions
between those that are revenue enhancing (which are required for vacant space at
the time of acquisition or that has been vacant for nine months or more) and
non-revenue enhancing (which are required to maintain the revenue being
generated from currently leased space). The table below summarizes the revenue
enhancing and non-revenue enhancing tenant improvements and leasing commissions
for the years ended December 31, 1994, 1995 and 1996. The tenant improvement and
leasing commission costs set forth below are presented on an aggregate basis and
do not reflect significant regional variations and, in any event, are not
necessarily indicative of future tenant improvement and leasing commission
costs:

<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Number of Office Properties..................... 62 72 82
Rentable Square Feet (in millions).............. 18.4 23.0 29.1
Revenue enhancing tenant improvements and
leasing commissions
Annual (in thousands)......................... $17,996,000 $21,485,000 $31,815,000
Per square foot improved...................... 14.40 22.97 30.22(1)
Per square foot total......................... .98 .93 1.09(1)
Non-revenue enhancing tenant improvements and
leasing commissions
Renewal space
Annual (in thousands)...................... 11,455,000 10,444,000 15,698,000
Per square foot improved................... 5.36 7.92 6.75(1)
Per square foot total...................... .62 .45 .54(1)
Re-tenanted space
Annual (in thousands)...................... 9,239,000 8,528,000 32,130,000
Per square foot improved................... 15.15 19.49 20.56(1)
Per square foot total...................... .50 .37 1.10(1)
----------- ----------- -----------
Total Non-Revenue Enhancing..................... $20,694,000 $18,972,000 $47,828,000
Per square foot improved........................ 7.53 10.80 12.30
Per square foot total........................... 1.12 .82 1.64
</TABLE>

- ---------------
(1) The per square foot calculations as of December 31, 1996 are calculated
taking the total dollars anticipated to be expended on tenant improvements
in process as of December 31, 1996, divided by the total square footage
being improved or total building square footage. The actual amounts expended
as of December 31, 1996 for revenue enhancing and non-revenue enhancing
renewal and re-tenanted space were $30,869,000, $14,814,000 and $20,906,000,
respectively.

67
<PAGE> 74

OCCUPANCY

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

<TABLE>
<CAPTION>
AGGREGATE PERCENTAGE OF RENTABLE
DATE RENTABLE SQUARE FEET SQUARE FEET OCCUPIED
- ---- -------------------- ----------------------
<S> <C> <C>
December 31, 1992.............................. 9,095,684 73%
December 31, 1993.............................. 13,550,553 80
December 31, 1994.............................. 18,505,591 88
December 31, 1995.............................. 23,097,222 86
December 31, 1996.............................. 29,127,289 90
</TABLE>

DEBT FINANCING

As of December 31, 1996, the Company had outstanding existing long-term
indebtedness in an aggregate principal amount of $1.965 billion, of which $660.8
million or 33.6% had a floating interest rate. The Company's fixed rate debt had
a weighted average interest rate of 7.89% and a weighted average maturity of 74
months. As of such date, the Company's floating rate debt bore interest at a
weighted average rate of 7.33% and had a weighted average maturity of 36 months.
The Company's overall weighted average interest rate as of December 31, 1996 was
7.70%.

At or prior to the Closing, the Company plans to either refinance its
outstanding floating rate debt with fixed rate loans or enter into interest rate
hedging arrangements for some or all of such debt in order to protect the
Company from rising interest rates. Therefore, excluding the Line of Credit that
the Company expects to enter into upon consummation of the Consolidation, the
Company's total debt subsequent to the Offering will largely consist of (i)
fixed rate loans or (ii) floating rate loans subject to interest rate hedging
arrangements that will limit the Company's exposure to rising interest rates.

LEGAL PROCEEDINGS

Two consolidated subsidiaries of Equity Office Predecessors have been named
as defendants in an action brought by an investor in an unaffiliated entity
owning an interest in one of the subsidiaries. The plaintiff demands rescission
of certain transactions related to the acquisition by one of the subsidiaries of
the Theatre District Garage. A sustained judgment in favor of the plaintiff
could result in the loss of the Company's interest in the Theatre District
Garage. This action is in its discovery stage. Although the outcome cannot be
predicted with any certainty, the Company believes that the subsidiaries have
substantial meritorious defenses to all asserted claims and that the Company
will not incur a loss in connection with this action. In addition, the Company
has the benefit of a title insurance policy insuring the Equity Office
Predecessors' ownership interest in this Property and covering the costs of
defense.

Except as described above, neither the Company nor any of the Properties is
presently subject to any material litigation nor, to the Company's knowledge, is
any litigation threatened against the Company, or any of the Properties, other
than routine actions for negligence and other claims and administrative
proceedings arising in the ordinary course of business, some of which are
expected to be covered by liability insurance and all of which collectively are
not expected to have a material adverse effect on the liquidity, results of
operations, or business or financial condition of the Company.

68
<PAGE> 75

MANAGEMENT

TRUSTEES, TRUSTEE NOMINEES AND EXECUTIVE AND SENIOR OFFICERS

The Board of Trustees of the Company will be expanded immediately following
the completion of the Offering to include the trustee nominees named below, each
of whom has been nominated for election and has consented to serve. Upon
election of the trustee nominees, a majority of trustees will not be employees
or affiliates of the Company or the Equity Group. Pursuant to the Company's
Declaration of Trust, the Board of Trustees is divided into three classes of
trustees. The initial terms of the first, second and third classes will expire
in 1998, 1999 and 2000, respectively. Beginning in 1998, trustees of each class
will be chosen for three-year terms upon the expiration of their current terms
and each year one class of trustees will be elected by the shareholders. The
Company believes that classification of the Board of Trustees will help to
assure the continuity and stability of the Company's business strategies and
policies as determined by the Board of Trustees. Holders of Common Shares will
have no right to cumulative voting in the election of trustees. Consequently, at
each annual meeting of shareholders, the holders of a majority of the Common
Shares will be able to elect all of the successors of the class of trustees
whose terms expire at that meeting.

Information concerning the current trustees, trustee nominees and executive
and senior officers of the Company is set forth below.

<TABLE>
<CAPTION>
NAME AGE OFFICES HELD
- ---- --- ------------
<S> <C> <C>
Samuel Zell.......................... 55 Chairman of the Board, Trustee
Timothy H. Callahan.................. 46 President, Chief Executive Officer, Trustee
Gary A. Beller....................... 50 Executive Vice President -- Parking Facilities
Richard D. Kincaid................... 35 Executive Vice President, Chief Financial Officer
Michael A. Steele.................... 50 Executive Vice President -- Real Estate Operations
Stanley M. Stevens................... 48 Executive Vice President, Chief Legal Counsel and
Secretary
Thomas Q. Bakke...................... 42 Senior Vice President/Divisional Manager
David H. Crawford.................... 40 Senior Vice President -- Administration and General
Counsel for Property Operations
Sybil J. Ellis....................... 43 Senior Vice President -- Acquisitions
Frank Frankini....................... 42 Senior Vice President -- Design & Construction
Jeffrey L. Johnson................... 37 Senior Vice President -- Investment Management
Peter D. Johnston.................... 39 Senior Vice President -- National Accounts
David H. Naus........................ 42 Senior Vice President -- Acquisitions
Michael E. Sheinkop.................. 34 Senior Vice President/Divisional Manager
Sheli Z. Rosenberg................... 55 Trustee
Thomas E. Dobrowski.................. 53 Trustee Nominee
James D. Harper, Jr.................. 63 Trustee Nominee
Peter Linneman....................... 46 Trustee Nominee
................. Trustee Nominee
................. Trustee Nominee
................. Trustee Nominee
</TABLE>

Samuel Zell has been a Trustee and Chairman of the Board of the Company
since October, 1996. Mr. Zell is Chairman of the Board of Directors of Equity
Group Investments, Inc. ("EGI"), an owner, manager and financier of real estate
and corporations. Mr. Zell serves as Chairman of the Board of Directors of
Anixter International Inc., a provider of integrated network and cabling
solutions ("Anixter"), American Classic Voyages Co., an owner and operator of
cruise lines ("ACV"), Manufactured Home Communities, Inc. ("MHC"), a real estate
investment trust specializing in the ownership and management of manufactured
home communities, and Jacor Communications, Inc., an owner of radio stations
("Jacor"), and as Chairman of the Board of Directors and Chief Executive Officer
of Capsure Holdings Corp., a holding company whose principal subsidiaries are
specialty property and casualty insurers ("Capsure"). Mr. Zell also serves as
Chairman of the Board of Trustees of Equity Residential Properties Trust
("EQR"), an owner and operator of

69
<PAGE> 76

multifamily residential properties, and as Co-Chairman of the Board of Revco
D.S., Inc., a drug store chain ("Revco"). Mr. Zell is a director of Quality Food
Centers, Inc., an independent supermarket chain ("QFC"), Sealy Corporation, a
maker of bedding and related products ("Sealy"), Ramco Energy plc, an
independent oil company based in the United Kingdom, TeleTech Holdings, Inc., a
provider of telephone and computer based customer care solutions and Chart House
Enterprises, Inc., an owner and operator of restaurants.

Timothy H. Callahan has been a Trustee and Chief Executive Officer and
President of the Company since October 1996. Mr. Callahan has served on the
Board of Managers and has been the Chief Executive Officer of Equity Office
Holdings, L.L.C. ("EOH") and Equity Office Properties, L.L.C. ("EOP") since
August 1996. Mr. Callahan was Executive Vice President and Chief Financial
Officer of EGI from January 1995 until August 1996, was Executive Vice President
of EGI from November 1994, through January 1995 and was Senior Vice President of
EGI from July 1992, until November 1994. Mr. Callahan has been a Director of MHC
since May 1996. Mr. Callahan was Vice President -- Finance of the Edward J.
DeBartolo Corporation in Youngstown, Ohio from July 1988 until July 1992. Mr.
Callahan was employed by Chemical Bank in New York City, from July 1973 until
March 1987.

Gary A. Beller has been Executive Vice President of the Company since March
1997. Mr. Beller has been President of Equity Capital Holdings, L.P. since June
1995. Mr. Beller has been President of Equity Hotel Properties, Inc. since
November 1993. Mr. Beller was Senior Vice President -- Redevelopment of Equity
Assets Management, Inc. ("EAM") from October 1987 until March 1997.

Richard D. Kincaid has been Executive Vice President and Chief Financial
Officer of the Company since March 1997 and was Senior Vice President and Chief
Financial Officer of the Company from October 1996 until March 1997. Mr. Kincaid
has been Senior Vice President and Chief Financial Officer of EOH since July
1995. Mr. Kincaid was Senior Vice President of EGI from February 1995 until July
1995. Mr. Kincaid was Senior Vice President of the Yarmouth Group in New York,
New York from August 1994 until February 1995. Mr. Kincaid was Senior Vice
President-Finance for EGI from December 1993 until July 1994. Mr. Kincaid was
Vice President -- Finance for EGI from August 1990 until December 1993. Mr.
Kincaid was Vice President for Barclays Bank PLC in Chicago, Illinois from
August 1987 until August 1990.

Michael A. Steele has been Executive Vice President-Real Estate Operations
for the Company since October 1996. Mr. Steele has served on the Board of
Managers of EOH and EOP since July 1995. Mr. Steele has been President and Chief
Operating Officer of EOP since July 1995. Mr. Steele has been Executive Vice
President of EOH since July 1995. Mr. Steele was President and Chief Operating
Officer of Equity Office Properties, Inc. ("EOP Inc.") from November 1993
through October 1995. Mr. Steele was President and Chief Executive Officer of
First Office Management, a division of Equity Property Management, Inc. ("FOM")
from June 1992 until October 1993. Mr. Steele was Senior Vice President and
regional director for Rubloff, Inc. in Chicago, Illinois from April 1987 until
June 1992.

Stanley M. Stevens has been Executive Vice President, Chief Legal Counsel
and Secretary of the Company since October 1996. Mr. Stevens has been Executive
Vice President and General Counsel of EOH since September 1996. Mr. Stevens was
a vice president of Rosenberg & Liebentritt, P.C., a law firm in Chicago,
Illinois, from December 1993 until September 1996. Mr. Stevens was a partner at
Rudnick & Wolfe, a national law firm based in Chicago, Illinois, from October
1987 until December 1993.

Thomas Q. Bakke has been Senior Vice President/Divisional Manager of the
Company since March 1997. Mr. Bakke has been Senior Vice President/Division
Manager of EOH since February 1997. Mr. Bakke has been Senior Vice
President -- Field Operations of EOP since July 1995. Mr. Bakke was Senior Vice
President -- Marketing and Leasing of EOP Inc. from March 1993 until July 1995.
Mr. Bakke was Vice President -- Marketing and Leasing of EOP Inc. from November
1993 until February 1993. Mr. Bakke was Vice President -- Marketing and Leasing
of FOM from January 1991 until November 1993. Mr. Bakke was a senior associate
with The Staubach Company in Washington, D.C. from January 1990 until January
1991. Mr. Bakke was an office leasing specialist with Coldwell Banker Commercial
Real Estate in Norfolk, Virginia from August 1987 until January 1990.

70
<PAGE> 77

David H. Crawford has been Senior Vice President -- Administration, General
Counsel for Property Operations and Assistant Secretary of the Company since
March 1997. Mr. Crawford has been Senior Vice President and Associate General
Counsel of EOH since September 1996. Mr. Crawford has been Senior Vice President
and General Counsel of EOH from July 1995 until September 1996 and of EOP since
September 1996. Mr. Crawford was Of Counsel to Rosenberg & Liebentritt, P.C.
from February 1991 until December 1996. Mr. Crawford was Senior Vice President
and General Counsel of EOP Inc. from November 1993 until July 1995. Mr. Crawford
was Vice President and General Counsel of FOM from February 1991 until November
1993. Mr. Crawford was an associate at Kirkland & Ellis, a national law firm
based in Chicago, Illinois, from June 1988 until February 1991.

Sybil J. Ellis has been Senior Vice President -- Acquisitions of the
Company since March 1997. Ms. Ellis has been Senior Vice
President -- Acquisitions of EOH since July 1995. Ms. Ellis served on the Board
of Managers for EOH and EOP from July 1995 until December 1996. Ms. Ellis was
Senior Vice President -- Acquisitions of EOP Inc. from July 1994 through July
1995 and was Vice President -- Acquisitions of EOP, Inc. from November 1993
until July 1994. Ms. Ellis was Vice President -- Acquisitions of EAM from March
1990 with October 1993.

Frank Frankini has been Senior Vice President -- Design and Construction of
the Company since March 1997. Mr. Frankini has been Senior Vice
President -- Design and Construction of EOP since October 1995. Mr. Frankini was
Senior Vice President -- Engineering and Operations of EOP Inc. from November
1993 until July 1995. Mr. Frankini was Senior Vice President -- Engineering and
Operations of FOM from October 1990 until October 1993. Mr. Frankini was
National Director of Engineering and Operations for Rubloff, Inc. in Chicago,
Illinois from October 1984 until October 1990.

Jeffrey L. Johnson has been Senior Vice President -- Investment Management
for the Company since March 1997. Mr. Johnson has been Senior Vice
President -- Asset Management for EOH since July 1996. Mr. Johnson was Senior
Vice President -- Acquisitions for EOH from July 1995 until July 1996. Mr.
Johnson was Senior Vice President -- Acquisitions of EOP Inc. from December 1994
until July 1995 and was Vice President -- Acquisitions of EOP, Inc. from
November 1993 until December 1994. Mr. Johnson was Vice
President -- Acquisitions of EAM from September 1990 until October 1993. Mr.
Johnson was an Investor and Asset Manager for Aldrich, Eastman & Waltch, Inc. in
Boston, Massachusetts from August 1987 until August 1990. Mr. Johnson was Senior
Project Manager in the real estate investment group for First Wachovia, Inc. in
Winston-Salem, North Carolina from July 1983 until August 1987.

Peter D. Johnston has been Senior Vice President -- National Accounts of
the Company since March 1997. Mr. Johnston has been Senior Vice
President -- National Leasing Director of EOP since July 1995. Mr. Johnston was
Senior Vice President -- Marketing and Leasing of EOP Inc. from November 1993
until July 1995. Mr. Johnston was Senior Vice President -- Marketing and Leasing
of FOM from April 1993 until November 1993. Mr. Johnston was a Vice President of
EAM from October 1991 until April 1993. Mr. Johnston was a partner with Trammell
Crow Company in Cincinnati, Ohio from January 1991 until July 1991. Mr. Johnston
was a partner with Trammell Crow Company in Columbus, Ohio from January 1990
until December 1990.

David H. Naus has been Senior Vice President -- Acquisitions of the Company
since March 1997. Mr. Naus has been Senior Vice President -- Acquisitions for
EOH since December 1995. Mr. Naus was Vice President -- Acquisitions of EOH from
July 1995 until December 1995. Mr. Naus was Vice President -- Acquisitions of
EOP Inc. from November 1993 until July 1995. Mr. Naus was Vice
President -- Acquisitions of EAM from November 1992 until November 1993. Mr.
Naus was Vice President of EAM from October 1988 until November 1992.

Michael E. Sheinkop has been Senior Vice President/Divisional Manager for
the Company since March 1997. Mr. Sheinkop has been Senior Vice
President/Divisional Manager of EOH since March 1997. Mr. Sheinkop was Senior
Vice President -- Asset Management of EOH from December 1995 until February
1997. Mr. Sheinkop was Vice President -- Asset Management of EOH from July 1995
until December 1995. Mr. Sheinkop was a Vice President -- Asset Management of
EOP Inc. from November 1993 until July 1995. Mr. Sheinkop was Vice President of
EAM from March 1990 until November 1993.

71
<PAGE> 78

Sheli Z. Rosenberg has been a Trustee of the Company since March 1997. Ms.
Rosenberg has been a director of Jacor Communications, Inc., an owner of radio
stations, since 1994 and was the Chairman of its Board of Directors from
February 1996 until April 1997. She has been a principal of the law firm of
Rosenberg & Liebentritt, P.C. since 1980. Ms. Rosenberg is Chief Executive
Officer, President and a director of EGI. Ms. Rosenberg is a director of Capsure
and Falcon Building Products, Inc., a manufacturer and distributor of building
products and air distribution products, and a trustee of EQR. Ms. Rosenberg is a
director of ACV, MHC, QFC, Anixter, Sealy and Revco. Since April 1997, Ms.
Rosenberg has been a director of Illinois Power Co., a supplier of electricity
and natural gas in Illinois, the holding company of which is Illinova Corp., of
which Ms. Rosenberg is also a director. Ms. Rosenberg was also a Vice President
of First Capital Benefits Administrators, Inc., ("FCBA") a wholly owned indirect
subsidiary of Great American Management and Investment, Inc., which filed a
Chapter 7 bankruptcy petition on January 3, 1995, resulting in FCBA's
liquidation. On November 15, 1995, an order closing the FCBA bankruptcy case was
entered by the Bankruptcy Court for the Central District of California.

Thomas E. Dobrowski is a Trustee Nominee of the Company. Mr. Dobrowski is
the managing director of real estate and alternative investments of General
Motors Investment Management Corporation ("GMIMCo."). Mr. Dobrowski is a
director of Red Roof Inns, Inc., an owner and operator of hotels. Mr. Dobrowski
serves on the partnership committee of Taubman Realty Group Limited Partnership,
the operating partnership of Taubman Centers Inc., an equity REIT focused on
regional shopping centers. Mr. Dobrowski is a director of MHC.

James D. Harper, Jr. is a Trustee Nominee of the Company. Since 1982, Mr.
Harper has been president of JDH Realty Co., a real estate development and
investment company. Since 1988 he has been a co-managing partner in AH
Development, S.E. and AH HA Investments, S.E., special limited partnerships
formed to develop over 400 acres of land in Puerto Rico. Mr. Harper is a trustee
of EQR.

Peter Linneman is a Trustee Nominee of the Company. Dr. Linneman has been a
Professor of Finance and Public Policy at the Wharton School of the University
of Pennsylvania since 1979, the Albert Sussman Professor of Real Estate at the
Wharton School since 1989 and a director of the Wharton Real Estate Center since
1986. In addition, he is an Urban Land Institute Research Fellow and a member of
the National Association of Real Estate Investment Trusts. Dr. Linneman is a
trustee of Kranzco Realty Trust, a trustee of Universal Health Realty Trust and
trustee of Gables Residential Properties Trust. Dr. Linneman also serves as a
Director of Nevada Investment Holdings. Dr. Linneman was formerly Chairman and a
director of Rockefeller Center Properties, Inc.

COMMITTEES OF THE BOARD OF TRUSTEES

Audit Committee. The Audit Committee will make recommendations concerning
the engagement of independent public accountants, review with the independent
public accountants the plans and results of the audit engagement, approve
professional services provided by the independent public accountants, review the
independence of the independent public accountants, consider the range of audit
and non-audit fees and review the adequacy of the Company's internal accounting
controls.

Executive Committee. The Executive Committee will have the authority
within certain parameters to acquire, dispose of and finance investments for the
Company (including the issuance by the Operating Partnership of additional Units
or other equity interests) and approve the execution of contracts and
agreements, including those related to the borrowing of money by the Company,
and generally exercise all other powers of the Board of Trustees except as
prohibited by law.

Compensation Committee. The Compensation Committee will determine
compensation for the Company's executive officers. The Compensation Committee
will review and make recommendations concerning proposals by management with
respect to compensation, bonus, employment agreements and other benefits and
policies respecting such matters for the executive officers of the Company.

The Board of Trustees will not have a nominating committee and the entire
Board of Trustees will perform the function of such a committee.

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COMPENSATION OF THE BOARD OF TRUSTEES; PAYMENT IN COMMON SHARES

The Company will pay its non-employee trustees an annual fee of $40,000. In
addition, non-employee trustees who serve on the Audit Committee, Executive
Committee or Compensation Committee will receive an additional $1,000 per annum
for each committee on which they serve. Committee chairs will receive an
additional $500 per annum. The Company expects that these fees will be paid in
Common Shares payable immediately or, at the option of the Trustee, paid in
Units on a deferred basis. Trustees who are employees of the Company will not be
paid any trustees' or committee fees. The Company will reimburse the trustees
for travel expenses incurred in connection with their activities on behalf of
the Company. Each non-employee trustee will also receive a grant of options to
purchase 10,000 Common Shares (at the offering price). Under the Company's 1997
Employee Share Option Plan and Restricted Share Plan (the "Employee Plan"), each
non-employee trustee then in office will receive an annual grant of options to
purchase 10,000 Common Shares at the then current market price on the date of
the meeting of the Board of Trustees held immediately after the annual meeting
of the Company's shareholders. These grants of options to purchase 10,000 shares
will vest as follows: options for 3,334 Common Shares will vest six months after
the grant date, options for an additional 3,334 Common Shares will vest one year
after the grant date, and options for the remaining 3,333 Common Shares will
vest on the second anniversary of the grant date. Trustees who perform other
functions for the Company may receive additional options under the Company's
benefit plans.

EXECUTIVE COMPENSATION

The following table sets forth the annual base salary levels and options
expected to be granted in 1997 to the Company's Chief Executive Officer and the
Company's four other most highly paid executive officers (the "Named Executive
Officers").

<TABLE>
<CAPTION>
1997 BASE OPTIONS
NAME TITLE SALARY(1) ALLOCATED(2)
- ---- ----- --------- ------------
<S> <C> <C> <C>
Timothy H. Callahan.......... President and Chief Executive Officer $600,000 200,000
Gary A. Beller............... Executive Vice President -- Parking Facilities 300,000 100,000
Richard D. Kincaid........... Executive Vice President, Chief Financial 235,000 150,000
Officer
Michael A. Steele............ Executive Vice President -- Real Estate 265,000 150,000
Operations
Stanley M. Stevens........... Executive Vice President, Chief Legal Counsel 325,000 150,000
</TABLE>

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

(1) Does not include bonuses that may be paid to the above individuals. See
"-- Incentive Compensation" below.
(2) Upon the effective date of the Offering, options to purchase Common Shares
equal to approximately 2.56% of the Company's outstanding Common Shares
(calculated on a fully diluted basis) will be granted to officers, employees
and consultants of the Company under the Company's Employee Plan at a price
equal to the offering price. Such grants will include grants to Mr. Zell and
Ms. Rosenberg of options to purchase 200,000 and 50,000 Common Shares,
respectively, at the offering price. See "-- Option and Restricted Share
Plans" below.

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OPTION GRANTS IN FISCAL YEAR 1997

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE OF ASSUMED
NUMBER OF ANNUAL RATE OF
SECURITIES PERCENT OF TOTAL COMMON SHARE PRICE
UNDERLYING OPTIONS TO BE APPRECIATION FOR
OPTIONS GRANTED TO EXERCISE PRICE OPTION TERM(1)
TO BE EMPLOYEES IN PER COMMON EXPIRATION ---------------------
NAME GRANTED(2) FISCAL YEAR SHARE(3) DATE 5%(4) 10%(5)
- ---- ---------- ---------------- -------------- --------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Timothy H. Callahan...... 200,000 % $ $ $
Gary A. Beller........... 100,000
Richard D. Kincaid....... 150,000
Michael A. Steele........ 150,000
Stanley M. Stevens....... 150,000
</TABLE>

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

(1) In accordance with the rules of the Securities and Exchange Commission,
these amounts are the hypothetical gains or "option spreads" that would
exist for the respective options based on assumed rates of annual compound
share price appreciation of 5% and 10% from the date the options were
granted over the full option term. No gain to the optionee is possible
without an increase in the price of Common Shares, which would benefit all
shareholders.
(2) All options are granted at the fair market value of the Common Shares at the
date of grant. Options granted are for a term of not more than ten years
from the date of grant and vest in three equal installments (rounded to the
nearest whole Common Share) over three years.
(3) Based on the assumed initial public offering price. The exercise price per
share will be the initial public offering price.
(4) An annual compound share price appreciation of 5% from the assumed Offering
price of $20.00 per Common Share yields a price of $ per Common
Share.
(5) An annual compound share price appreciation of 10% from the assumed Offering
price of $20.00 per Common Share yields a price of $ per Common
Share.

OPTION AND RESTRICTED SHARE PLANS

Prior to the completion of the Offering, the Company intends to adopt the
Employee Plan for the purpose of attracting and retaining highly qualified
executive officers, trustees and employees. The Company will reserve Common
Shares for issuance pursuant to the Employee Plan. In connection with the
establishment of the Employee Plan, the Company will grant additional options to
purchase Common Shares to certain officers, trustees, employees and consultants
of the Company at the offering price.

The Employee Plan will be qualified under Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Employee Plan will be
administered by the Compensation Committee and provide for the granting of share
options, share appreciation rights or restricted shares with respect to up to
6.4% of the Company's outstanding Common Shares (calculated on a fully diluted
basis) to executive or other employees of the Company. Share options may be
granted in the form of "incentive stock options" (as defined in Section 422 of
the Code), or non-statutory share options, and are exercisable for up to 10
years following the date of the 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 Shares on
the grant date.

The Employee Plan also provides for the issuance of share appreciation
rights which will generally entitle a holder to receive cash or shares, 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
Shares. In addition, the Employee Plan permits the Company to issue restricted
Common Shares to executive or other key employees upon such terms and conditions
as shall be determined by the Compensation Committee in its sole discretion.

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<PAGE> 81

401(K) PLAN

Effective upon completion of the Offering, the Company intends to establish
the Equity Office Properties Trust Section 401(k) Savings/Retirement Plan (the
"401(k) Plan") to cover eligible employees of the Company and any designated
affiliate.

The 401(k) Plan will permit eligible employees of the Company to defer up
to 15% of their annual compensation, subject to certain limitations imposed by
the Code. The employees' elective deferrals are immediately vested and
nonforfeitable upon contribution to the 401(k) Plan.

INCENTIVE COMPENSATION

The Company intends to establish an incentive compensation plan for key
officers of the Company and its subsidiaries and affiliates. This plan will
provide for payment of cash bonuses to participating officers after evaluating
the officer's performance and the overall performance of the Company. The Chief
Executive Officer will make recommendations to the Compensation Committee of the
Board of Trustees, which will make the final determination for the award of
bonuses. The Compensation Committee will determine such bonuses, if any, for the
Chief Executive Officer.

LIMITATION OF LIABILITY AND INDEMNIFICATION

The Maryland REIT Law permits a Maryland real estate investment trust to
include in its Declaration of Trust a provision limiting the liability of its
trustees and officers to the trust and its shareholders 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
Declaration of Trust of the Company contains such a provision that eliminates
such liability to the maximum extent permitted by Maryland law.

The Declaration of Trust 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 trustee or officer or (b) any individual who, while a
trustee of the Company and at the request of the Company, serves or has served
as a director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise from and against any claim or liability to which such person
may become subject or which such person may incur by reason of his or her status
as a present or former trustee 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 trustee or officer who
is made party to the proceeding by reason of his service in that capacity or (b)
any individual who, while a trustee or officer 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 trustee,
director, officer or partner of such real estate investment trust, 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
status. The Declaration of Trust and Bylaws also permit the Company to indemnify
and advance expenses to any person who served as 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 Bylaws require the Company to
indemnify a trustee or officer (or any former trustee 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.

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<PAGE> 82

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, under the MGCL, a
Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation. In accordance with the MGCL, the Bylaws of the
Company require it, as a condition to advancing expenses, to obtain (a) a
written affirmation by the director or officer of his good faith belief that he
has met the standard of conduct necessary for indemnification by the Company as
authorized by the Bylaws and (b) a written statement by or on his behalf to
repay the amount paid or reimbursed by the Company if it shall ultimately be
determined that the standard of conduct was not met.

The Operating Partnership Agreement also provides for indemnification of
the Company and its officers and trustees to the same extent that
indemnification is provided to officers and trustees of the Company in its
Declaration of Trust, and limits the liability of the Company and its officers
and trustees to the Operating Partnership and its respective partners to the
same extent that the liability of the officers and trustees of the Company to
the Company and its shareholders is limited under the Company's Declaration of
Trust.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to trustees, officers or persons controlling the registrant
pursuant to the foregoing provisions, the registrant has been informed that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.

STRUCTURE AND FORMATION OF THE COMPANY

OPERATING ENTITIES OF THE COMPANY

The Management Corp. will provide office property and asset management
services to the Managed Properties (which properties will not be acquired by the
Operating Partnership in the Consolidation) and to the Joint Venture Properties
described below. The Management Corp. will collect a property management fee for
the performance of such services. To maintain the Company's qualification as a
REIT, the Operating Partnership will own 100% of the non-voting stock of the
Management Corp., representing a 95% economic interest, and EOP will own 100% of
the voting stock of the Management Corp., representing a 5% economic interest.

The Joint Venture Properties are held in partnerships or are subject to
participation agreements with unaffiliated third parties, 12 of which are Office
Properties and seven of which are Parking Facilities. The Operating Partnership
or a Subsidiary will be the managing general partner of each of the Joint
Venture Properties (except for Civic Parking L.L.C., where a subsidiary will be
one of the two managing members), subject to various consent requirements of the
third-party partners. The Company's acquisition and oversight of parking
properties is administered through a wholly owned subsidiary, Equity Capital
Holdings, L.P.

FORMATION TRANSACTIONS

Background. The Company will be formed pursuant to the consolidation of
the ownership of the Properties owned by four institutional real estate
investment funds (each a "ZML Fund" and collectively, the "ZML Funds") and the
Management Business owned by the Equity Group. The ZML Funds were formed during
the period 1988 to 1996 to acquire, improve, own, manage, operate and dispose of
primarily office properties.

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<PAGE> 83

Each ZML Fund consists of (i) a limited partnership organized under the
laws of the State of Illinois (each a "ZML Opportunity Partnership"), (ii) a
general partner of such ZML Opportunity Partnership (each a "ZML Partner") which
is controlled by Mr. Zell and in which Merrill Lynch & Co. ("Merrill Lynch") is
a limited partner and (iii) a Delaware corporation or Maryland real estate
investment trust (each a "ZML REIT"), as the case may be, that serves as the
majority limited partner in ZML Opportunity Partnerships I and II and the sole
limited partner in ZML Opportunity Partnerships III and IV. There are several
institutional investor limited partners in ZML Opportunity Partnerships I and II
(collectively, "Investor Limited Partners") in addition to ZML REITs I and II.
All of the Investor Limited Partners were given an opportunity to convert their
interest into an interest in the corresponding ZML REIT in connection with the
Consolidation, and all but one Investor Limited Partner (in ZML Opportunity
Partnership II) have elected to do so.

Pre-Formation Transactions:

- The Company filed its Declaration of Trust with the State Department of
Assessments and Taxation of Maryland on October 9, 1996.

- The Operating Partnership was formed as of November 11, 1996 with the
Company as its managing general partner and majority limited partner and
ZML Opportunity Partnership II as its non-managing general partner.

- The ZML Opportunity Partnerships and the Equity Group have entered into
the Contribution Agreement with the Operating Partnership pursuant to
which the ZML Opportunity Partnerships' assets and liabilities and the
Equity Group's assets and liabilities related to the Management Business
will be contributed to the Operating Partnership in exchange for Units.

- Each of the ZML REITs has entered into the merger agreement pursuant to
which each ZML REIT will merge with and into the Company and the Company
will be the survivor (the "Merger Agreement").

Formation Transactions

Concurrently with the consummation of the Offering, the Company, the
Operating Partnership, the ZML Funds and the Equity Group will engage in the
following formation transactions.

- The Company will sell Common Shares in the Offering.

- The Company will contribute the net proceeds of the Offering to the
Operating Partnership in exchange for a % interest therein
represented by a number of Units equal to the number of Common Shares
sold in the Offering.

- Pursuant to the Contribution Agreement, (i) each ZML Opportunity
Partnership will contribute to the Operating Partnership substantially
all of its assets and liabilities in exchange for an aggregate of
Units and (ii) EOP, EOH and EGI, each of which are owned by certain
affiliates of Mr. Zell (the "Equity Group Owners") and which are referred
to collectively herein as the "Equity Group," will contribute their
interest in the Management Business that relates to the Properties (i.e.,
exclusive of the Third-Party Management Business), and EOP will
contribute 95% of the economic value of that portion of the Management
Business that relates to the Third-Party Management Business, to the
Operating Partnership in exchange for Units. EOP and the Operating
Partnership then will jointly contribute the Third-Party Management
Business to the Management Corp., with EOP receiving voting stock
representing 5% of the economic value of the Management Corp. and the
Operating Partnership receiving non-voting stock representing 95% of the
economic value of the Management Corp. As a part of its contribution of
the Management Business, EOP will also contribute its asset management
contracts relating to the Office Properties and the Parking Facilities to
the Operating Partnership in exchange for Units.

- Pursuant to the Merger Agreement, each ZML REIT will merge with and into
the Company and the Company will issue Common Shares to the ZML
REIT shareholders, of which

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Common Shares will be deposited into the corresponding ZML REIT Escrows,
as described below. As part of the Consolidation, each ZML Opportunity
Partnership will admit the Company as its sole managing general partner
and each ZML Partner will become a non-managing general partner of its
ZML Opportunity Partnership. As a result, the Company will become the 1%
managing general partner in each ZML Opportunity Partnership, the sole
limited partner in ZML Opportunity Partnerships I, III and IV, and the
majority limited partner (owning % of the capital interests) in ZML
Opportunity Partnership II.

- Each ZML Opportunity Partnership will adopt a plan of liquidation ("Plan
of Liquidation") whereby it will liquidate over a two-year liquidation
period (the "Liquidation Period"), during which period the Units received
by the ZML Opportunity Partnership in the Consolidation will be
distributed as described below.

Consequences of the Offering and Consolidation. Following the consummation
of the Offering and the Consolidation, the Operating Partnership will directly
or indirectly own interests in all of the Properties by virtue of the Operating
Partnership's acquisition of 100% of the interests in the Properties held by the
ZML Opportunity Partnerships. The purchasers of the Common Shares in the
Offering, the investors in the ZML Funds (the "ZML Investors") and Mr. Zell and
the ZML Partners will own all of the outstanding Common Shares of the Company.
As a consequence of the Consolidation, the Company will be the managing general
partner of, and will own % of the ownership interests in, the Operating
Partnership.

Escrow of Common Shares; GP Incentive Distributions; ZML Opportunity
Partnership Liquidation

The liquidation of the ZML Opportunity Partnerships and related escrows of
the Escrowed Shares described below have been structured to assure that
obligations for the GP Incentive Distributions and indemnification by the ZML
Funds for representations and warranties made in connection with the
Consolidation (subject to the limitations described below) will be borne by the
current ZML Investors and the ZML Partners and not by the Company or the
purchasers of Common Shares in the Offering.

Pursuant to the Plan of Liquidation, each ZML Opportunity Partnership
initially will retain 100% of the Units received in the Consolidation and then
will distribute those Units in 25% increments within 15 days after the 15-month,
18-month, 21-month and 24-month anniversaries of the Offering (each a "Partial
Liquidation Date"), with such distributions being made in accordance with the
distribution provisions of the applicable ZML Opportunity Partnership
partnership agreement.

GP Incentive Distributions. Under each of the ZML Opportunity Partnership
partnership agreements, the ZML Partner is entitled to certain preferred
distributions ("GP Incentive Distributions") once the ZML Investors in that ZML
Fund have received a return of their capital plus a specified return thereon.

Escrow of Shares. Pursuant to the Merger Agreement, each shareholder in
the ZML REITs will deposit into an escrow established for that ZML REIT (a "ZML
REIT Escrow") 5%, in the case of ZML REIT I, and 10%, in the case of ZML REIT
II, III and IV, of the total Common Shares received by such shareholder in the
Consolidation (the "Escrowed Shares"). The Escrowed Shares will be available for
GP Incentive Distributions as described below, and to provide for claims for
indemnification, subject to a limitation for this purpose of 1% of the Common
Shares issued to ZML Investors in the Consolidation, as described in
"-- Indemnity Escrow" below. A former ZML REIT shareholder will be entitled to
receive all distributions with respect to its Escrowed Shares and to vote its
Escrowed Shares unless and until such Escrowed Shares are required to be
transferred to the Company, as described below. Within 15 days following the
second anniversary of the Offering, any Escrowed Shares not required to be
returned to the Company (or, with respect to the Indemnity Escrow, held pending
resolution of any claims then asserted) will be released from the ZML REIT
Escrow to the former ZML REIT shareholders who received such Common Shares in
the Consolidation.

Determination of GP Incentive Distributions; Liquidation of the ZML
Opportunity Partnerships; Distributions from the ZML REIT Escrows. On each of
the four Partial Liquidation Dates each ZML Opportunity Partnership will
determine the value of 25% of the Units that it received in the Consolidation
and will, within 15 days following such Partial Liquidation Date, distribute
those Units (subject to the Indemnity Escrow) to

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its partners in accordance with the distribution provisions of the applicable
ZML Opportunity Partnership partnership agreement. In the case of ZML
Opportunity Partnerships I, III and IV, the distribution of Units would be made
to the Company, as the sole limited partner of such ZML Opportunity
Partnerships, and the applicable ZML Partner. In the case of ZML Opportunity
Partnership II, an Investor Limited Partner will participate in the distribution
together with the Company and the applicable ZML Partner.

If a ZML Partner is not entitled to a GP Incentive Distribution on a
particular Partial Liquidation Date, then none of the Escrowed Shares for that
ZML Fund would be returned to the Company on that Partial Liquidation Date.
Within 15 days after the fourth Partial Liquidation Date (two years after the
Closing of the Offering), any Escrowed Shares held in a ZML REIT Escrow that
have not been transferred to the Company under the arrangements described above
(or, with respect to the Indemnity Escrow, held pending resolution of any
asserted claims) will be distributed to the former ZML REIT shareholders that
deposited such Shares into that ZML REIT Escrow.

If a ZML Partner is entitled to a GP Incentive Distribution on a particular
Partial Liquidation Date, the Company will compute the number of Units that it
would have received if all of the Units had been distributed in accordance with
the partners' capital interests, rather than some of the Units being distributed
in satisfaction of the GP Incentive Distribution. The ZML REIT Escrow for the
ZML Fund with respect to which the GP Incentive Distribution is made then will
transfer to the Company a number of Escrowed Shares equal to the number of Units
that is the difference between the number it would have received had there been
no GP Incentive Distribution and the number it actually received. For example,
assume that the Company has a 95% capital interest in a particular ZML
Opportunity Partnership and that 100,000 of the Units are distributed to the ZML
Partner as a GP Incentive Distribution. In that case, the Company did not
receive 95,000 Units that it would have received but for the GP Incentive
Distribution (95% times the 100,000 Units distributed as the GP Incentive
Distribution). Accordingly, the ZML REIT Escrow for the ZML Fund with respect to
which that GP Incentive Distribution is made would transfer 95,000 Escrowed
Shares to the Company to compensate the Company for the 95,000 Units that it did
not receive as a result of the GP Incentive Distribution.

Through this structure, if and to the extent the Company bears the cost of
a GP Incentive Distribution (by receiving a distribution of Units from a
liquidating ZML Opportunity Partnership that is less than it would receive based
solely on its capital interest), that cost is passed on only to the ZML REIT
Escrow (and the former ZML REIT shareholders) for the particular ZML Fund as to
which the GP Incentive Distribution is made. None of the other shareholders of
the Company (for example, the purchasers of Common Shares in the Offering or the
former ZML REIT shareholders of other ZML REITs) are diluted because Units are
distributed in payment of a GP Incentive Distribution. Each ZML REIT Escrow in
all events will have enough Escrowed Shares to transfer to the Company to match,
on a Common Share-per-Unit basis, the maximum number of Units that the Company
could be required to forego with respect to the corresponding ZML Fund as a
result of GP Incentive Distributions for that ZML Fund.

Effect of Class B Shares. In the case of ZML Funds II and III, the ZML
Partners previously agreed that certain amounts that they otherwise would be
entitled to receive as GP Incentive Distributions would be distributable to
certain Investors (referred to as a "Class B Distribution"). In the case of ZML
Investors who are shareholders in ZML REIT II or ZML REIT III, that entitlement
is evidenced by "Class B" shares, which entitle such shareholders to a pro rata
portion of any such Class B Distribution received by the applicable ZML REIT. In
the Merger, the Company will succeed to such ZML REIT's right to Class B
Distributions. If, but only to the extent that, the Company receives additional
Units from ZML Opportunity Partnership II or ZML Opportunity Partnership III
that are attributable to a Class B Distribution, the Company will issue a
corresponding number of Common Shares to the former holders of Class B shares in
the applicable ZML REIT. These Common Shares in effect will be funded from the
corresponding ZML REIT Escrow by delivery to the Company from such ZML REIT
Escrow of an equivalent number of Common Shares.

Indemnity Escrow. Each ZML Opportunity Partnership will make certain
representations and warranties regarding its Properties in connection with the
contribution of such Properties to the Operating Partnership. These
representations and warranties will include such matters as the maintenance of
adequate casualty and liability insurance at the Properties, the existence of
material leases and other contracts with

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respect to the Properties and certain other matters. Each ZML Opportunity
Partnership's liability for any losses incurred by the Operating Partnership as
a result of a breach of any such representations or warranties, however, will be
limited to an amount equal to 1% of the Units received by such ZML Opportunity
Partnership in the Consolidation. If a ZML Opportunity Partnership is liable in
respect of its indemnity to the Operating Partnership, such liability will be
satisfied by delivery to the Operating Partnership of Units equal in value (on
the basis of the then current market value of a corresponding number of Shares)
to the amount of the liability (subject to the 1% cap). Each ZML REIT will also
make certain representations and warranties as to certain corporate and tax
matters in connection with the Merger, and will indemnify the Company for any
breach thereof, also subject to a maximum liability equal to the value of 1% of
the Common Shares received in the Merger by the ZML Investors in the ZML REIT
responsible for the indemnification, less any amount of an indemnification
obligation of the ZML Opportunity Partnership borne by such ZML REIT. To assure
that any indemnification obligation of a ZML REIT, and the Company's portion of
any indemnification obligation of a ZML Opportunity Partnership (as a partner in
such ZML Opportunity Partnership satisfying any such liability) is borne only by
the shareholders of the Company who were ZML Investors in the corresponding ZML
Fund, rather than shareholders who were ZML Investors in another ZML Fund or the
public shareholders of the Company, the Company will receive, out of the
Indemnity Escrows, a number of Common Shares equal to the number of Units it did
not receive in the liquidation of the ZML Opportunity Partnership because of an
indemnification liability of the ZML Opportunity Partnership as well as Common
Shares equal in value to the amount of any indemnification liability of the ZML
REIT. The Indemnity Escrow for each ZML REIT will equal 1% of the Common Shares
issued to shareholders of that ZML REIT in the Merger. The representations and
warranties will survive for a period of one year after the Closing. If any claim
of a breach of any such representation or warranty has been made within one year
after the Closing, or if any third-party claim against a ZML Fund for a
liability not assumed by the Company in the Consolidation has been made within
two years after the Closing, all or a portion of the Indemnity Shares will be
held in the Indemnity Escrow until resolution of such claims, at which time any
Indemnity Shares not utilized in connection with satisfaction of any such claims
will be returned to the former ZML REIT shareholders who would have received
such Common Shares at the time of the Merger.

Benefits of the Consolidation and the Offering to Affiliates of the
Company. Certain affiliates of the Company will realize certain material
benefits in connection with the Consolidation, including the following:

- The Equity Group Owners and the ZML Partners will realize an immediate
accretion in the net tangible book value of their investment in the
Company of $ per Common Share representing an aggregate
accretion amount of $ .

- Commencing on the first anniversary of the Offering, the Equity Group
Owners and the ZML Partners will have registration rights with respect to
a portion of the Common Shares received in the

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Consolidation as well as the Common Shares that may be issued in exchange for
Units received in the Consolidation or in liquidation of the ZML Opportunity
Partnerships.

POLICIES WITH RESPECT TO CERTAIN ACTIVITIES

The following is a discussion of the anticipated policies with respect to
investments, financing and certain other activities of the Operating Partnership
and the Company. Upon consummation of the Offering, these policies will be
determined by the Board of Trustees of the Company and may be amended or revised
from time to time at the discretion of the Board of Trustees without notice to
or a vote of the shareholders of the Company, or the limited partners of the
Operating Partnership, except that changes in certain policies with respect to
conflicts of interest must be consistent with legal requirements.

INVESTMENT POLICIES

Investments in Real Estate or Interests in Real Estate. The Company
currently plans to conduct all of its investment activities through the
Operating Partnership. The Company's investment objectives are to increase cash
flow and the value of the Properties, and to acquire established
income-producing office and parking properties with cash flow growth potential.
Additionally, where prudent and possible, the Company will seek to upgrade the
existing Properties and any newly acquired office properties. The Company's
business will be focused on Office Properties, and will include Parking
Facilities. Where appropriate, and subject to REIT qualification rules, the
Operating Partnership may sell certain of its Properties.

The Company expects to pursue its investment objectives through the direct
and indirect ownership of properties and the ownership of interests in other
entities. The Company will focus on properties in those markets where the
Company currently has operations and in new markets targeted by management. See
"Business and Growth Strategies." The Company anticipates that newly acquired
properties will be located in the United States. However, future investments,
including the activities described below, will not be limited to any geographic
area or to a specified percentage of the Company's assets.

The Company also may participate with other entities in property ownership
through joint ventures or other types of co-ownership. Equity investments may be
subject to existing mortgage financing and other indebtedness or such financing
or indebtedness may be incurred in connection with acquiring investments. Any
such financing or indebtedness will have priority over the Company's equity
interest in such property.

Investments in Real Estate Mortgages. While the Company's emphasis will be
on equity real estate investments, it may, in its discretion, invest in
mortgages and other similar interests. The Company does not intend to invest to
a significant extent in mortgages or deeds of trust, but may acquire mortgages
as a strategy for acquiring ownership of a property or the economic equivalent
thereof, subject to the investment restrictions applicable to REITs. See
"Federal Income Tax Considerations -- Taxation of the Company -- Income Tests
Applicable to REITs" and "-- Asset Tests Applicable to REITs." In addition, the
Company may invest in mortgage-related securities and/or may seek to issue
securities representing interests in such mortgage-related securities as a
method of raising additional funds.

Securities of or Interests in Persons Primarily Engaged in Real Estate
Activities and Other Issuers. Subject to the gross income and asset tests
necessary for REIT qualification, the Company also may invest in securities of
entities engaged in real estate activities or securities of other issuers,
including for the purpose of exercising control over such entities. The Company
may acquire all or substantially all of the securities or assets of other REITs
or similar entities where such investments would be consistent with the
Company's investment policies. In any event, the Company does not intend that
its investments in securities will require it or the Operating Partnership to
register as an "investment company" under the Investment Company Act of 1940, as
amended.

FINANCING POLICIES

In addition to the limitations on indebtedness which are likely to be
imposed on the Company under the Line of Credit, upon the consummation of the
Offering, the Company intends to maintain a Debt to Market

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Capitalization Ratio of approximately 50% or less. This policy differs from
conventional mortgage debt-to-equity ratios which are asset-based ratios. The
Company's Debt-to-Market Capitalization Ratio is equal to the total consolidated
and unconsolidated debt of the Company as a percentage of the market value of
outstanding Common Shares and Units (not owned by the Company) plus total
consolidated and unconsolidated debt, but excluding (i) all nonrecourse
consolidated debt in excess of the Company's proportionate share of such debt
and (ii) all nonrecourse unconsolidated debt of partnerships in which the
Company is a limited partner. The Company, however, may from time to time
re-evaluate this policy and decrease or increase such ratio in light of then
current economic conditions, relative costs to the Company of debt and equity
capital, market values of its Properties, growth and acquisition opportunities
and other factors. There is no limit on the Debt to Market Capitalization Ratio
imposed by either the Company's Declaration of Trust or Bylaws or the Operating
Partnership Agreement. To the extent that the Board of Trustees of the Company
determines to obtain additional capital, the Company may issue equity
securities, or cause the Operating Partnership to issue additional Units or debt
securities, or retain earnings (subject to provisions in the Code requiring
distributions of taxable income to maintain REIT status), or a combination of
these methods. As long as the Operating Partnership is in existence, the net
proceeds of all equity capital raised by the Company will be contributed to the
Operating Partnership in exchange for additional interests in the Operating
Partnership, which will dilute the ownership interest, if any, of the Equity
Group and any other holders of Units.

It is the Company's policy that Equity Office Properties Trust shall not
incur indebtedness other than short-term trade, employee compensation, dividends
payable or similar indebtedness that will be paid in the ordinary course of
business, and that indebtedness shall instead be incurred by the Operating
Partnership to the extent necessary to fund the business activities conducted by
the Operating Partnership and its subsidiaries. To the extent that the Board of
Trustees determines to obtain debt financing in addition to the existing
mortgage indebtedness, the Company intends to do so generally through mortgages
on its Properties and the Line of Credit; however, the Company may also issue or
cause the Operating Partnership to issue additional debt securities in the
future. Such indebtedness may be recourse, non-recourse or cross-collateralized
and may contain cross-default provisions. The net proceeds of any debt
securities issued by the Company will be lent to the Operating Partnership on
substantially the same terms and conditions as are incurred by the Company. The
Company does not have a policy limiting the number or amount of mortgages that
may be placed on any particular property, but mortgage financing instruments
usually limit additional indebtedness on such properties. In the future, the
Company may seek to extend, expand, reduce or renew the Line of Credit, or
obtain new credit facilities or lines of credit, subject to its general policy
on debt capitalization, for the purpose of making acquisitions or capital
improvements or providing working capital or meeting the taxable income
distribution requirements for REITs under the Code.

LENDING POLICIES

The Company may consider offering purchase money financing in connection
with the sale of Properties where the provision of such financing will increase
the value received by the Company for the property sold.

CONFLICT OF INTEREST POLICIES

Officers and Trustees of the Company. Mr. Zell, the Chairman of the Board
of Trustees, through affiliated entities is engaged in certain office real
estate activities, both inside and outside the markets in which the Properties
are located. Mr. Zell, therefore, may be subject to certain conflicts of
interest in fulfilling his responsibilities to the Company and its shareholders.
See "Risk Factors -- Conflicts of Interest." Under Maryland law, transactions
between the Company and a trustee or officer (or an entity in which a trustee or
officer has a material financial interest) may be void or voidable unless
approved by a majority of the disinterested trustees. The Company believes that
this procedure and Mr. Zell's non-competition agreement will help to eliminate
or minimize certain potential conflicts of interest. Without the approval of a
majority of the disinterested trustees, the Company and its subsidiaries will
not (i) acquire from or sell to any trustee, officer or employee of the Company,
or any entity in which a trustee, officer or employee of the Company owns more
than a 1% interest, or acquire from or sell to any affiliate of any of the
foregoing, any assets or other property of the Company or its subsidiaries, (ii)
make any loan to or borrow from any of the foregoing persons,

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or (iii) engage in any other material transaction with any of the foregoing
persons. Each transaction of the type described above will be in all respects on
such terms as are, at the time of the transaction and under the circumstances
then prevailing, fair and reasonable to the Company and its subsidiaries. The
foregoing will not apply to the Management Corp.

Policies Applicable to All Trustees. Under Maryland law, each trustee will
be obligated to offer to the Company any opportunity (with certain limited
exceptions) which comes to him and which the Company could reasonably be
expected to have an interest in developing or acquiring. In addition, under
Maryland law, any contract or other transaction between a corporation and any
director or any other corporation, firm or other entity in which the director is
a director or has a material financial interest may be void or voidable.
However, the MGCL provides that any such contract or transaction will not be
void or voidable if (a) it is authorized, approved or ratified, after disclosure
of, or with knowledge 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 the affirmative
vote of a majority of the votes cast by disinterested shareholders, or (b) it is
fair and reasonable to the corporation. While the Maryland REIT Law does not
have a comparable provision for trustees, a court may apply the principles of
the MGCL to contracts or transactions between the Company and its trustees.

Leased Office Space. The Company leases office space at Two North
Riverside Plaza, Chicago, Illinois 60606, a building that is owned by a single
purpose entity affiliated with the Equity Group Owners. The Company expects to
pay in the aggregate approximately $1.13 million in base rent and escalations
during 1997. The Company believes it is paying fair market rent for this space.
The disinterested members of the Board of Trustees will annually review and
approve the rates charged to the Company for such office space.

POLICIES WITH RESPECT TO OTHER ACTIVITIES

The Company may, but does not presently intend to, make investments other
than as previously described. All investments will be related to the office
property and parking facility business. The Company will make investments only
through the Operating Partnership. The Company will have authority to offer its
Common Shares or other equity or debt securities of the Operating Partnership in
exchange for property and to repurchase or otherwise reacquire its Common Shares
or any other securities and may engage in such activities in the future.
Similarly, the Operating Partnership may offer additional Units or other equity
interests in the Operating Partnership that are exchangeable into Common Shares
or Preferred Shares, in exchange for property. The Operating Partnership also
may make loans to joint ventures in which it may participate in the future.
Neither the Company nor the Operating Partnership will engage in trading,
underwriting or the agency distribution or sale of securities of other issuers.
At all times, the Company intends to cause the Operating Partnership to make
investments in such a manner as to be consistent with the requirements of the
Code to qualify as a REIT unless, because of circumstances or changes in the
Code (or the regulations promulgated thereunder), the Board of Trustees
determines that it is no longer in the best interests of the Company to continue
to qualify as a REIT. The Company's policies with respect to such activities may
be reviewed and modified from time to time by the Company's trustees without
notice to or the vote of its shareholders.

CERTAIN RELATIONSHIPS AND TRANSACTIONS

In addition to the transactions that occurred in connection with the
organization of the Company, which are described in the section entitled
"Structure and Formation of the Company -- Formation Transactions" above, the
following transactions have occurred or will occur simultaneously with the
Closing of the Offering.

SALE OF COMMON SHARES TO MR. ZELL

Prior to the Offering, the Company sold 1,000 unregistered Common Shares to
Mr. Zell for a purchase price of $25.00 per Common Share. In addition, pursuant
to certain option agreements, an affiliate of the Equity Group Owners will
acquire for cash from certain unaccredited investors in the ZML REITs the

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interests owned by them in such ZML REITs. Such affiliate will pay approximately
$ for such interests which, upon consummation of the Offering, will
represent approximately Common Shares.

LEASES AND PARKING OPERATIONS

The Company leases office space owned by an affiliate of the Equity Group
Owners, at Two North Riverside Plaza, Chicago, Illinois 60606. In addition, EGI,
an entity owned by the Equity Group Owners, and its affiliates have in the past
provided the Company and its predecessors with certain administrative, office
facility services and other services with respect to certain aspects of the
Company's business, including, but not limited to, financial and accounting
services, tax services, investor relations, and other services. The Company paid
approximately $12,786,000 during the year ended December 31, 1996 and expects to
pay in the aggregate approximately $9,600,000 to EGI and its affiliates during
1997 for such office space and services, which amount is calculated to
approximate a market rental rate for the office space and the actual cost of
providing these services. See Note 7 of the Notes to Combined Financial
Statements of Equity Office Predecessors included elsewhere in this Prospectus.
The independent members of the Board of Trustees will annually review and
approve the rates charged by EGI for services rendered to the Company.

Affiliates of the Company lease space in certain of the Office Properties.
The terms of the leases are consistent with terms of unaffiliated tenants'
leases. Total rents and other amounts paid by affiliates under their respective
leases were approximately $3,471,500 and $2,657,500 for the years ended December
31, 1996 and 1995, respectively.

An affiliate of the Equity Group Owners has an indirect interest in
Standard Parking Limited Partnership ("SPLP") which manages the parking
operations of certain Office Properties. Management believes amounts paid to
SPLP are equivalent to market rates for such services.

The Company has entered into a lease agreement with SPLP whereby SPLP
leased the North Loop Transportation Center Parking Facility ("North Loop") from
the Company, on terms believed by the Company to be equivalent to market rate
terms for similar transactions. The lease provides SPLP with annual successive
options to extend the term of the lease through 2033. The rent paid in 1996 and
1995 was approximately $3,161,500 and $1,691,600, respectively. In addition, the
Company may receive additional rent based upon actual gross revenues generated
by North Loop. In accordance with the lease, the Company may be obligated to
make an early termination payment if agreement is not reached as to rent amounts
to be paid.

In addition, the Company is negotiating lease agreements with SPLP for two
additional Parking Facilities that were acquired in December 1996, Boston Harbor
Garage and Milwaukee Center Parking Garage. These lease agreements are expected
to be executed in 1997.

GENERAL PARTNER INTERESTS

Affiliates of the Equity Group Owners have received distributions and fees
from the Company through their ownership interests in the ZML Partners of
approximately $22.5 million for the year ended December 31, 1996 and are
expected to receive fees of approximately $28.8 million for the year ended
December 31, 1997.

In addition, the ZML Partners hold indirect nominal interests in a number
of limited partnerships and limited liability companies serving as the title
holding subsidiaries of the ZML Opportunity Partnerships. Such affiliates
received $ in distributions from such entities for the year ended
December 31, 1996. Such interests will be eliminated immediately following the
Consolidation pursuant to transactions in which such affiliates will receive
approximately Common Shares.

OTHER

As described under "Federal Income Tax Considerations -- Taxation of the
Company -- Closing Agreements with the IRS with Respect to ZML REITs I and II,"
in March 1997 the ZML Partners of ZML Opportunity Partnerships I and II made
certain payments to the IRS in connection with closing agreements pursuant to
which the IRS agreed that neither ZML REIT I nor ZML REIT II would be
disqualified as a

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REIT as a result of certain technical violations of the REIT provisions of the
Code. The amounts of such payments were $15,000 and $5,270,000, respectively,
for ZML REITs I and II.

Management Corp. will enter into third-party management contracts, on terms
equivalent to third-party transactions, with respect to properties not owned by
the Company but that are owned or controlled by the Equity Group. See "Risk
Factors -- Conflicts of Interest." Amounts incurred for similar services
rendered as of December 31, 1996 and 1995 were approximately $816,900 and
$1,363,300, respectively.

Rosenberg & Liebentritt, P.C., a law firm in which Ms. Rosenberg, a trustee
of the Company, is a principal, received legal fees from the Company of
$3,480,500 and $3,230,100 for the years ended December 31, 1996 and 1995,
respectively.

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of Common Shares (or Common Shares for which Units are exchangeable)
by (i) each trustee (and trustee nominee) of the Company, (ii) each executive
officer of the Company, (iii) all trustees (including trustee nominees) and
officers of the Company as a group, and (iv) each person or entity which is
expected to be the beneficial owner of 5% or more of the outstanding Common
Shares immediately following the completion of the Offering. Except as indicated
below, all of such Common Shares are owned directly, and the indicated person or
entity has sole voting and investment power. The extent to which a person will
hold Common Shares as opposed to Units is set forth in the footnotes below.

<TABLE>
<CAPTION>
NUMBER OF COMMON
SHARES AND UNITS PERCENTAGE OF ALL PERCENTAGE OF ALL
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED COMMON SHARES(1) COMMON SHARES(2)
- ------------------------ ------------------ ----------------- -----------------
<S> <C> <C> <C>
Allstate(3)................................. % %
State Street Bank & Trust Co., as
trustee(4)................................
Minnesota State Investment Board(5).........
Samuel Zell(6)(7)...........................
ANDA Partnership(6)(8)......................
Timothy H. Callahan(6)......................
Gary A. Beller(6)...........................
Richard D. Kincaid(6).......................
Michael A. Steele(6)........................
Stanley M. Stevens(6).......................
Sheli Z. Rosenberg(6).......................
Thomas E. Dobrowski(9)......................
James D. Harper(10).........................
Peter Linneman(11)..........................
......................
......................
......................
All trustees, trustee nominees and executive
officers as a group (14 persons)..........
</TABLE>

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

(1) Assumes Common Shares outstanding immediately following completion
of the Offering. Assumes that all Units held by the identified person (and
no other person) are redeemed for Common Shares.
(2) Assumes a total of Common Shares and Units Outstanding immediately
following completion of the Offering ( Common Shares and
Units). Assumes that all outstanding Units are redeemed for Common Shares.
(3) Includes Common Shares held by Allstate Insurance Company,
Common Shares held by CTC Illinois Trust Company as Trustee for the Agents'
Pension Plan and Common Shares held by CTC Illinois Trust Company as
Trustee for the Allstate Retirement Plan. The business address

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of these shareholders is Allstate Insurance Company, 3075 Sanders Road, Suite
G5B, Northbrook, Illinois 60062.
(4) Includes Common Shares held as trustee of three BellSouth
Corporation employee benefit plans. The business address of this
shareholder is Master Trust Dept., Solomon Willard Bldg., W5C, One
Enterprise Drive, North Quincy, MA 02171.
(5) The business address of this shareholder is MEA Building, Suite 105, 55
Sherburne Avenue, St. Paul, MN 55155.
(6) The business address for this shareholder is Two North Riverside Plaza,
Chicago, Illinois 60606.
(7) Includes Common Shares (assuming exchange of Units) held by
EOP, EOH and EGI which may be deemed to be beneficially owned by Mr. Zell;
however Mr. Zell disclaims beneficial ownership of Units, which are
exchangeable for Common Shares.
(8) Includes Common Shares (assuming exchange of Units) held by
EOP, EOH and EGI which may be deemed to be beneficially owned by ANDA
Partnership; however ANDA Partnership disclaims beneficial ownership of
Units, which are exchangeable for Common Shares.
(9) The business address for this shareholder is General Motors Investment
Corp., 767 5th Avenue, 16th Floor, New York, New York 10153.
(10) The business address for this shareholder is J.D.H. Realty Company, 3250
Mary Street, Suite 206, Coconut Grove, Florida 33133.
(11) The business address for this shareholder is The Wharton School of The
University of Pennsylvania, 56 South 37th Street, Lauder-Fischer Hall,
Philadelphia, Pennsylvania 19104.

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SHARES OF BENEFICIAL INTEREST

The summary of the terms of the shares of beneficial interest of the
Company set forth below does not purport to be complete and is subject to and
qualified in its entirety by reference to the Declaration of Trust and Bylaws of
the Company, copies of which are exhibits to the Registration Statement of which
this Prospectus is a part.

GENERAL

The Declaration of Trust of the Company provides that the Company may issue
750 million Common Shares, and 100 million Preferred Shares. As of April 30,
1997, 1,000 Common Shares were issued and outstanding.

Under the Maryland REIT Law, a shareholder is not liable for obligations of
the Company. The Declaration of Trust provides that no shareholder shall be
liable for any debt or obligation of the Company by reason of being a
shareholder nor shall any shareholder be subject to any personal liability in
tort, contract or otherwise to any person in connection with the property or
affairs of the Company by reason of being a shareholder. The Company's Bylaws
further provide that the Company shall indemnify each present or former
shareholder against any claim or liability to which the shareholder may become
subject by reason of being or having been a shareholder and that the Company
shall reimburse each shareholder for all reasonable expenses incurred by him in
connection with any such claim or liability. However, with respect to tort
claims, contractual claims where shareholder liability is not so negated, claims
for taxes and certain statutory liability, the shareholders may, in some
jurisdictions, be personally liable to the extent that such claims are not
satisfied by the Company. Inasmuch as the Company carries public liability
insurance which it considers adequate, any risk of personal liability to
shareholders is limited to situations in which the Company's assets plus its
insurance coverage would be insufficient to satisfy the claims against the
Company and its shareholders.

COMMON SHARES

All Common Shares offered hereby will be duly authorized, fully paid and
nonassessable. Subject to the preferential rights of any other shares of
beneficial interest and to the provisions of the Declaration of Trust regarding
restrictions on transfers of shares of beneficial interest, holders of Common
Shares are entitled to receive distributions if, as and when authorized and
declared by the Board of Trustees out of assets legally available therefor and
to share ratably in the assets of the Company legally available for distribution
to its shareholders 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. The Company currently intends to pay regular quarterly
distributions.

Subject to the provisions of the Company's Declaration of Trust regarding
restrictions on transfer of shares of beneficial interest, each outstanding
Common Share entitles the holder to one vote on all matters submitted to a vote
of shareholders, including the election of trustees, and, except as provided
with respect to any other class or series of shares of beneficial interest, the
holders of Common Shares will possess the exclusive voting power. There is no
cumulative voting in the election of trustees, which means that the holders of a
majority of the outstanding Common Shares can elect all of the trustees then
standing for election and the holders of the remaining shares of beneficial
interest, if any, will not be able to elect any trustees.

Holders of Common Shares have no preferences, conversion, sinking fund,
redemption rights or preemptive rights to subscribe for any securities of the
Company. Subject to the exchange provisions of the Company's Declaration of
Trust regarding restrictions on transfer, Common Shares have equal distribution,
liquidation and other rights.

Pursuant to the Maryland REIT Law, a Maryland real estate investment trust
generally cannot dissolve, amend its declaration of trust or merge, unless
approved by the affirmative vote or written consent of shareholders holding at
least two-thirds of the shares entitled to vote on the matter unless a lesser
percentage (but not less than a majority of all of the votes entitled to be cast
on the matter) is set forth in the trust's Declaration of Trust. The Company's
Declaration of Trust provides for an amendment to increase the number

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of authorized shares and provides that a merger transaction may be approved by
majority vote. Under the Maryland REIT Law, a declaration of trust may permit
the trustees by a two-thirds vote to amend the declaration of trust from time to
time to qualify as a REIT under the Code or the Maryland REIT Law without the
affirmative vote or written consent of the Shareholders. The Company's
Declaration of Trust permits such action by the Board of Trustees.

PREFERRED SHARES

The Declaration of Trust authorizes the Board of Trustees to issue 100
million Preferred Shares, to classify any unissued Preferred Shares and to
reclassify any previously classified but unissued Preferred Shares of any series
from time to time, in one or more series, as authorized by the Board of
Trustees. Prior to issuance of shares of each series, the Board of Trustees is
required by the Maryland REIT Law and the Declaration of Trust of the Company to
set, subject to the provisions of the Declaration of Trust regarding the
restriction on transfer of shares of beneficial interest, 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 Preferred Shares 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 Shares
or otherwise be in their best interest. As of the date hereof, no Preferred
Shares are outstanding and the Company has no present plans to issue any
Preferred Shares.

POWER TO ISSUE ADDITIONAL COMMON SHARES AND PREFERRED SHARES

The Company believes that the power of the Board of Trustees to issue
additional authorized but unissued Common Shares or Preferred Shares and to
classify or reclassify unissued Common Shares or Preferred Shares and thereafter
to cause the Company to issue such classified or reclassified shares of
beneficial interest 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
Shares, will be available for issuance without further action by the Company's
shareholders, 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 Trustees 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 Shares or
otherwise be in their best interest.

RESTRICTIONS ON OWNERSHIP AND TRANSFER

For the Company to qualify as a REIT under the Code, no more than 50% in
value of its outstanding shares of beneficial interest 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) or during a
proportionate part of a shorter taxable year. 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 shares also must 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 Board of Trustees believes it is desirable for the Company to
qualify as a REIT, the Declaration of Trust, subject to certain exceptions,
provides that no holder may own, or be deemed to own by virtue of the
attribution provisions of the Code, more than the Ownership Limit. The ownership
attribution rules under the Code are complex and may cause Common Shares 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

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acquisition of less than 9.9% of the Common Shares (or the acquisition of an
interest in an entity that owns, actually or constructively, Common Shares) by
an individual or entity, could, nevertheless cause that individual or entity, or
another individual or entity, to own constructively in excess of 9.9% of the
outstanding Common Shares and thus subject such Common Shares to the Ownership
Limit. The Board of Trustees shall grant an exemption from the Ownership Limit
with respect to one or more persons who would not be treated as "individuals"
for purposes of the Code if it is satisfied, based upon the advice of counsel or
a ruling from the IRS, that such ownership will not cause a person who is an
individual to be treated as owning Common Shares in excess of the Ownership
Limit, applying the applicable constructive ownership rules, and will not
otherwise jeopardize the Company's status as a REIT. As a condition of such
waiver, the Board of Trustees may require undertakings or representations from
the applicant with respect to preserving the REIT status of the Company. Under
certain circumstances, the Board of Trustees may, in its sole and absolute
discretion, grant an exemption for individuals to acquire Preferred Shares in
excess of the Ownership Limit, provided that certain conditions are met and any
representations and undertakings that may be required by the Board of Trustees
are made.

The Board of Trustees of the Company will have the authority to increase
the Ownership Limit from time to time, but will not have the authority to do so
to the extent that after giving effect to such increase, five beneficial owners
of Common Shares could beneficially own in the aggregate more than 49.5% of the
outstanding Common Shares.

The Declaration of Trust further prohibits (a) any person from actually or
constructively owning shares of beneficial interest 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 beneficial interest of the Company if such transfer would
result in shares of beneficial interest 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 beneficial interest 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.

If any purported transfer of shares of beneficial interest of the Company
or any other event would otherwise result in any person violating the Ownership
Limit or the other restrictions in the Declaration of the Trust, 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
that exceeds the Ownership Limit (referred to as "excess shares") and the
Prohibited Transferee shall acquire no right or interest (or, in the case of any
event other than a purported transfer, the person or entity holding record title
to any such shares in excess of the Ownership Limit (the "Prohibited Owner")
shall cease to own any right or interest) in such excess shares. Any such excess
shares described above will be transferred automatically, by operation of law,
to a trust, the beneficiary of which will be a qualified charitable organization
selected by the Company (the "Beneficiary"). Such automatic transfer shall be
deemed to be effective as of the close of business on the Business Day (as
defined in the Declaration of Trust) prior to the date of such violating
transfer. Within 20 days of receiving notice from the Company of the transfer of
shares to the trust, the trustee of the trust (who shall be designated by the
Company and be unaffiliated with the Company and any Prohibited Transferee or
Prohibited Owner) will be required to sell such excess shares to a person or
entity who could own such shares without violating the Ownership Limit, and
distribute to the Prohibited Transferee an amount equal to the lesser of the
price paid by the Prohibited Transferee for such excess shares or the sales
proceeds received by the trust for such excess shares. In the case of any excess
shares resulting from any event other than a transfer, or from a transfer for no
consideration (such as a gift), the trustee will be required to sell such excess
shares to a qualified person or entity and distribute to the Prohibited Owner an
amount equal to the lesser of the fair market value of such excess shares as of
the date of such event or the sales proceeds received by the trust for such
excess shares. In either case, any proceeds in excess of the amount
distributable to the Prohibited Transferee or Prohibited Owner, as applicable,
will be distributed to the Beneficiary. Prior to a sale of any such excess
shares by the trust, the trustee will be entitled to receive, in trust for the
Beneficiary, all

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dividends and other distributions paid by the Company with respect to such
excess shares, and also will be entitled to exercise all voting rights with
respect to such excess shares. Subject to Maryland law, effective as of the date
that such shares have been transferred to the trust, the trustee shall have the
authority (at the trustee's sole discretion and subject to applicable law) (i)
to rescind as void any vote cast by a Prohibited Transferee prior to the
discovery by the Company that such shares have been transferred to the trust and
(ii) to recast such vote in accordance with the desires of the trustee acting
for the benefit of the Beneficiary. However, if the Company has already taken
irreversible corporate action, then the trustee shall not have the authority to
rescind and recast such vote. Any dividend or other distribution paid to the
Prohibited Transferee or Prohibited Owner (prior to the discovery by the Company
that such shares had been automatically transferred to a trust as described
above) will be required to be repaid to the trustee upon demand for distribution
to the Beneficiary. If the transfer to the trust as described above is not
automatically effective (for any reason) to prevent violation of the Ownership
Limit, then the Declaration of Trust provides that the transfer of the excess
shares will be void.

In addition, shares of beneficial interest 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 value at the time of such devise or gift) and (ii)
the market value of such shares on the date of 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 beneficial interest 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 Owner.

The foregoing restrictions on transferability and ownership will not apply
if the Board of Trustees determines that it is no longer in the best interests
of the Company to attempt to qualify, or to continue to qualify, as a REIT.

All certificates representing shares of beneficial interest shall bear a
legend referring to the restrictions described above.

All persons who own, directly or by virtue of the attribution provisions of
the Code, more than 5% (or such other percentage between 1/2 of 1% and 5% as
provided in the rules and regulations promulgated under the Code) of the lesser
of the number or value of the outstanding shares of beneficial interest of the
Company must give a written notice to the Company by January 31 of each year. In
addition, each shareholder will, upon demand, be required to disclose to the
Company in writing such information with respect to the direct, indirect and
constructive ownership of shares of beneficial interest as the Board of Trustees
deems reasonably necessary to comply with the provisions of the Code applicable
to a REIT, to comply with the requirements of any taxing authority or
governmental agency or to determine any such compliance.

These ownership limitations could have the effect of delaying, deferring or
preventing a takeover or other transaction in which holders of some, or a
majority, of Common Shares might receive a premium for their Common Shares over
the then prevailing market price or which such holders might believe to be
otherwise in their best interest.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Shares is Boston EquiServe
LLP, an affiliate of First National Bank of Boston.

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CERTAIN PROVISIONS OF MARYLAND LAW AND THE COMPANY'S
DECLARATION OF TRUST AND BYLAWS

The following summary of certain provisions of Maryland law and of the
Declaration of Trust 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 Declaration of Trust and Bylaws of the Company, copies of which are exhibits
to the Registration Statement of which this Prospectus is a part.

The Declaration of Trust and Bylaws of the Company (the "Bylaws") contain
certain provisions that could make more difficult an acquisition or change in
control 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 Trustees.
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. See also "Shares of Beneficial Interest -- Restrictions on Ownership and
Transfer."

CLASSIFICATION AND REMOVAL OF BOARD OF TRUSTEES; OTHER PROVISIONS

The Company's Declaration of Trust provides for the Board of Trustees to be
divided into three classes of trustees, with each class to consist as nearly as
possible of an equal number of trustees. The term of office of the first class
of trustees will expire at the 1998 annual meeting of shareholders; the term of
the second class of trustees will expire at the 1999 annual meeting of
shareholders; and the term of the third class will expire at the 2000 annual
meeting of shareholders. At each annual meeting of shareholders, the class of
trustees to be elected at such meeting will be elected for a three-year term,
and the trustees in the other two classes will continue in office. Because
shareholders will have no right to cumulative voting for the election of
trustees, at each annual meeting of shareholders the holders of a majority of
the Common Shares will be able to elect all of the successors to the class of
trustees whose term expires at that meeting.

The Company's Declaration of Trust also provides that, except for any
trustees who may be elected by holders of a class or series of shares of
beneficial interest other than the Common Shares, trustees may be removed only
for cause and only by the affirmative vote of shareholders holding at least a
majority of all the votes entitled to be cast for the election of trustees.
Vacancies on the Board of Trustees may be filled by the affirmative vote of the
remaining trustees and, in the case of a vacancy resulting from the removal of a
trustee by the shareholders, by a majority of the votes entitled to be cast for
the election of trustees. A vote of shareholders holding at least two-thirds of
all the votes entitled to be cast thereon is required to amend, alter, change,
repeal or adopt any provisions inconsistent with the foregoing classified board
and trustee removal provisions. These provisions may make it more difficult and
time-consuming to change majority control of the Board of Trustees of the
Company and, thus, may reduce the vulnerability of the Company to an unsolicited
proposal for the takeover of the Company or the removal of incumbent management.

Because the Board of Trustees will have the power to establish the
preferences and rights of additional series of shares of beneficial interest
without a shareholder vote, the Board of Trustees may afford the holders of any
series of senior shares of beneficial interest preferences, powers and rights,
voting or otherwise, senior to the rights of holders of Common Shares. The
issuance of any such senior shares of beneficial interest could have the effect
of delaying, deferring or preventing a change in control of the Company. The
Board of Trustees, however, currently does not contemplate the issuance of any
shares of beneficial interest other than Common Shares.

See "Management -- Limitation of Liability and Indemnification" for a
description of the limitations on liability of trustees and officers of the
Company and the provisions for indemnification of trustees and officers provided
for under applicable Maryland law and the Declaration of Trust.

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CHANGES IN CONTROL PURSUANT TO MARYLAND LAW

Maryland Business Combination Law. Under the MGCL, as applicable to real
estate investment trusts, certain "business combinations" (including certain
issuances of equity securities) between a Maryland real estate investment trust
and any Interested Shareholder or an affiliate of the Interested Shareholder are
prohibited for five years after the most recent date on which the Interested
Shareholder becomes an Interested Shareholder. Thereafter, any such business
combination must be recommended by the Board of Trustees of such Trust and
approved by two super-majority shareholder votes unless, among other conditions,
the trust's common shareholders receive a minimum price (as defined in the MGCL)
for their shares and the consideration is received in cash or in the same form
as previously paid by the Interested Shareholder for its common shares. As
permitted by the MGCL, the Board of Trustees of the Company has opted out of the
business combination provisions of the MGCL. Consequently, the five-year
prohibition and the super-majority vote requirements will not apply to a
business combination involving the Company; however, the Company's Board of
Trustees may repeal this opt-out and cause the Company to become subject to
these provisions in the future.

Maryland Control Share Acquisition Law. In addition, also under the MGCL,
as applicable to real estate investments trusts, "control shares" 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 owned by the acquiror, by officers or by trustees who are
employees of the trust. "Control shares" are voting shares which, if aggregated
with all other such shares 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 trustees 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 a result of having previously obtained shareholder 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 trustees of the trust to call a special meeting of
shareholders 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 trust may itself present
the question at any shareholders 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 trust 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 shareholders at which the
voting rights of such shares are considered and not approved. If voting rights
for control shares are approved at a shareholders meeting and the acquiror
becomes entitled to vote a majority of the shares entitled to vote, all other
shareholders 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 trust is a party to the
transaction or (b) to acquisitions approved or exempted by the declaration of
trust or bylaws of the trust. As permitted by the MGCL, the Board of Trustees of
the Company has opted out of the control share provisions of the MGCL, but may
elect to adopt these provisions in the future.

AMENDMENTS TO THE DECLARATION OF TRUST

The Declaration of Trust, including its provisions on classification of the
Board of Trustees, restrictions on transferability of Common Shares and removal
of trustees, 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, amendments

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relating to changes in the number of authorized shares of beneficial interest of
the Company require the approval of holders of a majority of all votes cast at a
meeting of shareholders at which a quorum is present.

ADVANCE NOTICE OF TRUSTEE NOMINATIONS AND NEW BUSINESS

The Bylaws of the Company provide that (i) with respect to an annual
meeting of shareholders, nominations of persons for election to the Board of
Trustees and the proposal of business to be considered by shareholders may be
made only (A) pursuant to the Company's notice of the meeting, (B) by the Board
of Trustees or (C) by a shareholder who is entitled to vote at the meeting and
has complied with the advance notice procedures set forth in the Bylaws and (ii)
with respect to special meetings of the shareholders, only the business
specified in the Company's notice of meeting may be brought before the meeting
of shareholders and nominations of persons for election to the Board of Trustees
may be made only (A) pursuant to the Company's notice of the meeting, (B) by the
Board of Trustees or (C) provided that the Board of Trustees has determined that
trustees shall be elected at such meeting, by a shareholder 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
DECLARATION OF TRUST 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 Declaration of Trust on classification of the
Board of Trustees and removal of trustees 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 Shares or
otherwise be in their best interests. The Declaration of Trust, as in effect,
provides that a merger, consolidation or sale of all or substantially all of the
assets of the Company must be approved by the affirmative vote of not less than
a majority of all votes entitled to be cast on the matter.

MARYLAND ASSET REQUIREMENTS

To maintain its qualification as a Maryland real estate investment trust,
the Maryland REIT Law requires that the Company hold, either directly or
indirectly, at least 75% of the value of its assets in real estate assets,
mortgages or mortgage related securities, government securities, cash and cash
equivalent items, including high-grade short-term securities and receivables.
The Maryland REIT Law also prohibits using or applying land for farming,
agricultural, horticultural or similar purposes.

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PARTNERSHIP AGREEMENT

The following summary of the Operating Partnership Agreement, including the
descriptions of certain provisions thereof set forth elsewhere in this
Prospectus, is qualified in its entirety by reference to the Operating
Partnership Agreement, which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part.

MANAGEMENT

The Operating Partnership was formed on November 11, 1996, as a limited
partnership under the Delaware Revised Uniform Limited Partnership Act (the
"Partnership Act"). The Company is the managing general partner of the Operating
Partnership and expects at all times to own a majority interest in the Operating
Partnership. ZML Opportunity Partnership II will be an additional general
partner in the Operating Partnership, but the right and power to manage the
Operating Partnership will be vested exclusively in the Company, as managing
general partner.

The Company, as the managing general partner of the Operating Partnership,
has the exclusive power and authority to conduct the business of the Operating
Partnership, subject to the consent of the limited partners in certain limited
circumstances. Limited partners will have no right or authority to act for or to
bind the Operating Partnership. No limited partner may take part in the conduct
or control of the business or affairs of the Operating Partnership by virtue of
being a holder of Units. In particular, the limited partners expressly
acknowledge in the Operating Partnership Agreement that the Company, as managing
general partner, is acting on behalf of the Operating Partnership's limited
partners and the Company's shareholders collectively, and is under no obligation
to consider the tax consequences to limited partners when making decisions for
the benefit of the Operating Partnership.

SALES OF ASSETS

Under the Operating Partnership Agreement, the Company, as managing general
partner, has the exclusive authority to determine whether, when and on what
terms the assets of the Operating Partnership (including the Properties) will be
sold. A sale of all or substantially all of the assets of the Operating
Partnership (or a merger of the Operating Partnership with another entity)
generally requires an affirmative vote of the holders of a majority of the
outstanding Units (including Units held directly or indirectly by the Company).
The Company expects to own, directly or indirectly, a majority of the Units and
thus to control the outcome of such a vote.

REMOVAL OF THE MANAGING GENERAL PARTNER; TRANSFER OF THE COMPANY'S INTERESTS

The Operating Partnership Agreement provides that the limited partners may
not remove the Company as managing general partner of the Operating Partnership
with or without cause (unless neither the general partner nor its parent entity
is a "public company," in which case the general partner may be removed for
cause). In addition, the Company may not transfer any of its interests as
general or limited partner in the Operating Partnership, except in connection
with a merger or sale of all or substantially all of the Company's assets
(subject to certain conditions).

Although the Company cannot transfer its partnership interests except in a
transaction in which substantially all of the assets of the surviving entity
consist of Units, the Operating Partnership Agreement does not prevent a
transaction in which another entity acquires control (or all of the outstanding
Common Shares) of the Company and that other entity owns assets and conducts
businesses outside of the Operating Partnership.

REIMBURSEMENT OF THE COMPANY; TRANSACTIONS WITH THE COMPANY AND ITS AFFILIATES

The Company will not receive any compensation for its services as general
partner of the Operating Partnership. The Company, however, as a partner in the
Operating Partnership, has the same right to allocations and distributions as
other partners of the Operating Partnership. In addition, the Operating

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Partnership will reimburse the Company for all expenses it incurs relating to
its activities as general partner, its continued existence and qualification as
a REIT and all other liabilities incurred by the Company in connection with the
pursuit of its business and affairs (including expenses incurred by the Company
in connection with the issuance of Common Shares or other securities of the
Company). Except as expressly permitted by the Operating Partnership Agreement,
affiliates of the Company will not engage in any transactions with the Operating
Partnership except on terms that are fair and reasonable and no less favorable
to the Operating Partnership than would be obtained from an unaffiliated
third-party.

REDEMPTION OF UNITS

Subject to certain limitations in the Operating Partnership Agreement,
holders of Units generally will have the right to require the redemption of
their Units at any time one year after the Closing (or on such date prior to the
expiration of such one-year period as the Company, as managing general partner,
designates with respect to any or all Units); provided, however, that the
Investor Limited Partner who will receive Units in the Consolidation will only
have the right to require the redemption of its Units at any time commencing two
years after the Closing (the "Unit Redemption Right"). Unless the Company elects
to assume and perform the Operating Partnership's obligation with respect to the
Unit Redemption Right, as described below, the limited partner will receive cash
from the Operating Partnership in an amount equal to the market value of the
Units to be redeemed. The market value of a Unit for this purpose will be equal
to the average of the closing trading price of a Common Share on the NYSE for
the ten trading days before the day on which the redemption notice was given. In
lieu of the Operating Partnership's acquiring the Units for cash, the Company
will have the right to elect to acquire the Units directly from a limited
partner exercising the Unit Redemption Right, in exchange for either cash or
Common Shares, and, upon such acquisition, the Company will become the owner of
such Units. Upon exercise of the Unit Redemption Right, the limited partner's
right to receive distributions for the Units so redeemed or exchanged will
cease. At least 1,000 Units (or all remaining Units owned by the limited partner
if less than 1,000 Units) must be redeemed each time the Unit Redemption Right
is exercised. No redemption or exchange can occur if delivery of Common Shares
would be prohibited either under the provisions of the Company's Declaration of
Trust designed to protect the Company's qualification as a REIT or under
applicable Federal or state securities laws as long as the Common Shares are
publicly traded. See "Shares of Beneficial Interest." The Company will at all
times reserve and keep available out of its authorized but unissued Common
Shares, solely for the purpose of effecting the issuance of Common Shares
pursuant to the Unit Redemption Right, a sufficient number of Common Shares as
shall from time to time be sufficient for the redemption of all outstanding
Units not owned by the Company.

RESTRICTIONS ON TRANSFER OF UNITS BY LIMITED PARTNERS

The Operating Partnership Agreement imposes certain restrictions on the
transfer of Units. The Operating Partnership Agreement provides that no limited
partner shall, without the prior written consent of the Company (which may be
withheld in the sole discretion of the Company), sell, assign, distribute or
otherwise transfer all or any part of his or its interest in the Operating
Partnership except by operation of law, by gift (outright or in trust) or by
sale, in each case to or for the benefit of his spouse or descendants, except
for pledges or other collateral transfers effected by a limited partner to
secure the repayment of a loan, the redemption of Units in accordance with the
Operating Partnership Agreement, and the distribution of Units by a ZML
Opportunity Partnership to its partners in compliance with any applicable
securities laws. See "Shares of Beneficial Interest -- Restrictions on Ownership
and Transfer."

ISSUANCE OF ADDITIONAL UNITS AND/OR PREFERENCE UNITS

The Company is authorized at any time, without the consent of the limited
partners, to cause the Operating Partnership to issue additional Units to the
Company, to the limited partners or to other persons for such consideration and
on such terms and conditions as the Company deems appropriate. If Units are
issued to the Company, then the Company must issue a corresponding number of
Common Shares and must contribute to the Operating Partnership the proceeds, if
any, received by the Company from such issuance. In addition, the Operating
Partnership Agreement provides that the Operating Partnership may also issue

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preferred units and other partnership interests of different classes and series
(collectively, "Preference Units") having such rights, preferences and other
privileges, variations and designations as may be determined by the Company. Any
such Preference Units may have terms, provisions and rights which are
preferential to the terms, provisions and rights of the Units. Preference Units,
however, may be issued to the Company only in connection with an offering of
securities of the Company having substantially similar rights and the
contribution of the proceeds therefrom to the Operating Partnership. No limited
partner has preemptive, preferential or similar rights with respect to capital
contributions to the Operating Partnership or the issuance or sale of any
partnership interests therein.

CAPITAL CONTRIBUTIONS

No partner of the Operating Partnership will be required to make additional
capital contributions to the Operating Partnership, except that the Company is
generally required to contribute net proceeds of the sale of Common Shares (and
other equity interests) of the Company to the Operating Partnership. No limited
or general partner will be required to pay to the Operating Partnership any
deficit or negative balance which may exist in its account.

DISTRIBUTIONS; ALLOCATIONS OF INCOME AND LOSS

The Operating Partnership Agreement generally provides for the quarterly
distribution of "Available Cash" (as defined below), as determined in the manner
provided in the Operating Partnership Agreement, to the partners of the
Operating Partnership in proportion to their percentage interests in the
Operating Partnership (which for any partner is determined by the number of
Units it owns relative to the total number of Units outstanding). "Available
Cash" is generally defined as net cash flow from operations plus any reduction
in reserves and minus interest and principal payments on debt, capital
expenditures, any additions to reserves and other adjustments. Neither the
Company nor the limited partners are entitled to any preferential or
disproportionate distributions of Available Cash with respect to the Units.

EXCULPATION AND INDEMNIFICATION OF THE COMPANY

The Operating Partnership Agreement generally provides that the Company and
ZML Opportunity Partnership II, as general partners of the Operating
Partnership, will incur no liability to the Operating Partnership or any limited
partner for losses sustained, liabilities incurred, or benefits not derived as a
result of errors in judgment or for any mistakes of fact or law or for anything
which it may do or refrain from doing in connection with the business and
affairs of the Operating Partnership if the Company or such other general
partner carried out its duties in good faith. The Company's liability in any
event is limited to its interest in the Operating Partnership. Without limiting
the foregoing, the Company has no liability for the loss of any limited
partner's capital. In addition, the Company is not responsible for any
misconduct, negligent act or omission of any consultant, contractor, or agent of
the Operating Partnership or of the Company and has no obligation other than to
use good faith in the selection of all such contractors, consultants, and
agents.

The Operating Partnership Agreement also requires the Operating Partnership
to indemnify the Company, its other general partners, the trustees and officers
of the Company, and such other persons as the Company may from time to time
designate against any loss or damage, including reasonable legal fees and court
costs incurred by such person by reason of anything it may do or refrain from
doing for or on behalf of the Operating Partnership or in connection with its
business or affairs unless it is established that: (i) the act or omission of
the indemnified person was material to the matter giving rise to the proceeding
and either was committed in bad faith or was the result of active and deliberate
dishonesty; (ii) the indemnified person actually received an improper personal
benefit in money, property or services; or (iii) in the case of any criminal
proceeding, the indemnified person had reasonable cause to believe that the act
or omission was unlawful. Any such indemnification claims must be satisfied
solely out of the assets of the Operating Partnership.

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AMENDMENT OF THE PARTNERSHIP AGREEMENT

Amendments to the Operating Partnership Agreement may be proposed by the
Company or by limited partners owning at least 25% of the then outstanding
Units. Generally, the Operating Partnership Agreement may be amended with the
approval of the Company, as managing general partner, and limited partners
(including the Company) holding a majority of the Units. Certain provisions
regarding, among other things, the rights and duties of the Company as general
partner (e.g., restrictions on the Company's power to conduct businesses other
than owning Units) or the dissolution of the Operating Partnership, may not be
amended without the approval of a majority of the Units not held by the Company.
Certain amendments that would, among other things, (i) convert a limited
partner's interest into a general partner's interest, (ii) modify the limited
liability of a limited partner, (iii) alter the interest of a partner in profits
or losses, or the right to receive any distributions (except as permitted under
the Operating Partnership Agreement with respect to the admission of new
partners or the issuance of additional Units), or (iv) alter the Unit Redemption
Right, must be approved by the Company and each limited partner that would be
adversely affected by such amendment.

TERM

The Operating Partnership will be dissolved and its affairs wound up upon
the earliest of (i) December 31, 2095; (ii) the withdrawal of the Company as
general partner without the permitted transfer of the Company's interest to a
successor general partner (except in certain limited circumstances); (iii) the
sale of all or substantially all of the Operating Partnership's assets and
properties; (iv) the entry of a decree of judicial dissolution of the Operating
Partnership pursuant to the provisions of the Partnership Act; (v) the entry of
a final non-appealable judgment ruling that the last remaining general partner
is bankrupt or insolvent (except that, in either such case, in certain
circumstances the limited partners (other than the Company) may vote to continue
the Operating Partnership and substitute a new general partner in place of the
Company); (vi) prior to January 1, 2046, with the consent of holders (including
the Company) of 90% of the outstanding Units; or (vii) on or after January 1,
2046, on election by the Company, in its sole and absolute discretion.

SHARES AVAILABLE FOR FUTURE SALE

Upon the completion of the Offering, the Company will have outstanding
Common Shares ( shares if the Underwriters' overallotment
option is exercised in full). In addition, Common Shares are reserved
for issuance upon exchange of Units. The Common Shares 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 this Prospectus. See "Shares of Beneficial Interest." The
Common Shares received by the ZML Investors in the Consolidation and any Common
Shares acquired in redemption of Units (the "Restricted Common Shares") will be
"restricted" securities under the meaning of Rule 144 promulgated under the
Securities Act ("Rule 144") and may not be sold in the absence of registration
under the Securities Act unless an exemption from registration is available,
including exemptions contained in Rule 144. As described below under
"-- Registration Rights," the Company has granted certain holders registration
rights with respect to their Common Shares.

In general, under Rule 144 as currently in effect, if one year has elapsed
since the later of the date of acquisition of Restricted Common 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 Common Shares or the average weekly
trading volume of the Common Shares during the four calendar weeks immediately
preceding the date on which notice of the sale is filed with the Securities and
Exchange Commission (the "Commission"). Sales under Rule 144 also are subject to
certain manner of sales 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 Common 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 immediately preceding a sale, such person is entitled to sell such

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shares in the public market under Rule 144(k) without regard to the volume
limitations, manner of sale provisions, public information requirements or
notice requirements.

The Company, the Equity Group, the ZML Partners and the executive officers
and trustees of the Company will be required, as a condition to the
Underwriters' participation in the Offering, to agree that they will not,
without the consent of the Representative, offer, sell, contract to sell or
otherwise dispose of any Common Shares (including any Common Shares acquired
upon redemption of Units) for one year following the Closing. See
"Underwriting." The Company will grant demand registration rights to certain ZML
Investors, the ZML Partners and the Equity Group with respect to Common Shares
or Common Shares obtained by upon the redemption of Units received in the
Consolidation (including in liquidation of the ZML Opportunity Partnerships).
The Company will bear all expenses incident to its registration requirements,
except for any underwriting discounts or commissions or transfer taxes, if any,
relating to the such Common Shares.

The Company will adopt the Employee Plan for the purpose of attracting and
retaining highly qualified directors, executive officers and other key
employees. See "Management -- Option and Restricted Share Plans" and
"-- Compensation of Board of Trustees; Payment in Common Shares." The Company
intends to issue options to purchase approximately Common Shares to
trustees, executive officers, certain key employees and consultants prior to the
completion of the Offering and has reserved additional shares for future
issuance under the Employee Plan. Prior to the expiration of the initial
12-month period following the completion of the Offering, the Company expects to
file a registration statement with the Commission with respect to the Common
Shares issuable under the Employee Plan, which shares may be resold without
restriction, unless held by affiliates.

Prior to the Offering, there has been no public market for the Common
Shares. Trading of the Common Shares on the New York Stock Exchange is expected
to commence immediately following the completion of the Offering. No prediction
can be made as to the effect, if any, that future sales or shares of the
availability of shares for future sale, will have on the market price prevailing
from time to time. Sales of substantial amounts of Common Shares (including
Common Shares issued upon the exercise of options), or the perception that such
sales could occur, could adversely affect prevailing market prices of the Common
Shares. See "Risk Factors -- Risks of Ownership of Common Shares" and
"Partnership Agreement -- Transfer of Interests."

FEDERAL INCOME TAX CONSIDERATIONS

The following discussion summarizes the Federal income tax considerations
reasonably anticipated to be material to a prospective shareholder in the
Company in connection with the ownership of Common Shares. The following
description is for general information only, is not exhaustive of all possible
tax considerations, and is not intended to be (and should not be construed as)
tax advice. For example, this summary does not give a detailed discussion of any
state, local or foreign tax considerations. In addition, the discussion is
intended to address only those Federal income tax considerations that are
generally applicable for all shareholders in the Company. It does not discuss
all aspects of Federal income taxation that might be relevant to a specific
shareholder in light of its particular investment or tax circumstances. The
description does not purport to deal with aspects of taxation that may be
relevant to shareholders subject to special treatment under the Federal income
tax laws, including, without limitation, insurance companies, financial
institutions or broker-dealers, tax-exempt organizations (except to the extent
discussed under the heading "Taxation of Tax-Exempt Shareholders of the
Company") or foreign corporations and persons who are not citizens or residents
of the United States (except to the extent discussed under the heading "Taxation
of Non-U.S. Shareholders of the Company").

The information in this section is based on the Code, current, temporary
and proposed Treasury Regulations thereunder, the legislative history of the
Code, current administrative interpretations and practices of the IRS (including
its practices and policies as endorsed in private letter rulings, which are not
binding on the IRS except with respect to a taxpayer that receives such a
ruling), and court decisions, all as of the date hereof. No assurance can be
given that future legislation, Treasury Regulations, administrative
interpretations and court decisions will not significantly change the current
law or adversely affect existing interpretations of current law. Any such change
could apply retroactively to transactions preceding the date of

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the change. Except as described below in "Taxation of the Company -- Income
Tests Applicable to REITs," the Company has not requested, and does not plan to
request, any rulings from the IRS concerning the tax treatment of the Company,
the ZML Opportunity Partnerships, or the Operating Partnership. Thus, no
assurance can be provided that the statements set forth herein (which do not
bind the IRS or the courts) will not be challenged by the IRS or will be
sustained by a court if so challenged.

As used in this section, the term "Company" refers solely to Equity Office
Properties Trust.

EACH PROSPECTIVE PURCHASER OF SHARES IS URGED TO CONSULT WITH ITS OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO IT OF THE OWNERSHIP AND
DISPOSITION OF SHARES IN AN ENTITY ELECTING TO BE TAXED AS A REIT IN LIGHT OF
ITS SPECIFIC TAX AND INVESTMENT SITUATIONS AND THE SPECIFIC FEDERAL, STATE,
LOCAL AND FOREIGN TAX LAWS APPLICABLE TO IT.

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, 1997. The Company believes that, commencing with its taxable year
ending December 31, 1997, it will be organized and will operate in such a manner
as to qualify for taxation as a REIT under the Code, 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 rules that govern the Federal income tax treatment of a REIT and its
shareholders. This summary is qualified in its entirety by the applicable Code
provisions, rules and regulations promulgated thereunder, and administrative and
judicial interpretations thereof.

Hogan & Hartson L.L.P. has acted as special tax counsel to the Company in
connection with the Consolidation and the Company's election to be taxed as a
REIT. In the opinion of Hogan & Hartson L.L.P., commencing with the Company's
taxable year ending December 31, 1997, the Company will be organized in
conformity with the requirements for qualification as a REIT, and its proposed
method of operation will enable it to meet the requirements for qualification
and taxation as a REIT under the Code. It must be emphasized that this opinion
is conditioned upon certain representations made by the Company and the ZML
REITs as to factual matters relating to the organization and operation of the
Company, the Operating Partnership and the ZML Opportunity Partnerships (and the
previous organization and operation of the ZML REITs and the ZML Opportunity
Partnerships). 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 will assume that the actions described in this
Prospectus are completed in a timely fashion. Moreover, such qualification and
taxation as a REIT depends upon the Company's ability to meet on a ongoing basis
(through actual annual operating results, distribution levels and diversity of
share ownership) the various qualification tests imposed under the Code
discussed below, the results of which will not be reviewed by Hogan & Hartson
L.L.P. Accordingly, no assurance can be given that the actual results of the
Company's operations 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 of the Company to Qualify as a
REIT."

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 shareholders. This treatment substantially eliminates the "double
taxation" (at the corporate and shareholder levels) that generally results from
investment in a regular corporation. However, the Company will be subject to
Federal income tax as follows: First, the Company will be taxed at regular
corporate rates on any undistributed REIT taxable income, including
undistributed net capital gains. Second, under certain circumstances, the
Company may be subject to the "alternative minimum tax" on its items of tax
preference. Third, if the Company has (i) net income from the sale or other
disposition of "foreclosure property" which is held primarily for sale to
customers in the

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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 IRS
regulations that have not yet been promulgated.

The results described above with respect to the recognition of Built-In
Gain assume that the Company will make an election pursuant to IRS Notice 88-19.
In this regard, the Built-In Gain rules would apply with respect to any assets
acquired by the Company from a ZML REIT in connection with the Merger if the ZML
REIT failed to qualify, for any reason, as a REIT throughout the duration of its
existence. If the Company were not to make an election pursuant to IRS Notice
88-19 (or that election no longer were available because of a change in
applicable law), a ZML REIT that failed to qualify as a REIT at the time of the
Merger would recognize taxable gain on the Merger under the Built-In Gain rules,
notwithstanding that the Merger otherwise qualified as a "tax-free
reorganization." As discussed below in "-- Requirements for Qualification and
"-- Failure of the Company to Qualify as a REIT," a ZML REIT would be required
to have qualified as a REIT for its entire existence in order to qualify as a
REIT at the time of the Merger. The Company believes that each of the ZML REITs
has qualified as a REIT throughout its existence, but the Company intends to
make a protective election under Notice 88-19 with respect to the Merger of each
of the ZML REITs in order to avoid the adverse consequences that otherwise could
result.

Requirements for Qualification. The Code defines a REIT as a corporation,
trust or association (i) which is managed by one or more trustees or directors;
(ii) the beneficial ownership of which is evidenced by transferable shares, or
by transferable certificates of beneficial interest; (iii) which would be
taxable as a domestic corporation, but for Sections 856 through 859 of the Code;
(iv) which is neither a financial institution nor an insurance company subject
to certain provisions of the Code; (v) the beneficial ownership of which is held
by 100 or more persons; (vi) during the last half of each taxable year not more
than 50% in value of the outstanding stock of which is owned, actually or
constructively, by five or fewer individuals (as defined in the Code to include
certain entities); and (vii) which meets certain other tests, described below,
regarding the nature of its income and assets. The Code provides that conditions
(i) to (iv), inclusive, must be met during the entire taxable year and that
condition (v) must be met during at least 335 days of a taxable year of twelve
months, or during a proportionate part of a taxable year of less than twelve
months. Conditions (v) and (vi) will not apply until after the first taxable
year for which an election is made to be taxed as a REIT. For purposes of
conditions (v) and (vi), pension funds and certain other tax-exempt entities are
treated as individuals, subject to a "look-through" exception in the case of
condition (vi).

The Company believes that it will have issued sufficient Common Shares with
sufficient diversity of ownership in the Consolidation and this Offering to
allow it to satisfy conditions (v) and (vi). In addition, the Company's
Declaration of Trust provides for restrictions regarding the transfer and
ownership of Common

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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 "Shares of Beneficial
Interest -- Restrictions on Ownership and 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 of the Company to Qualify as a REIT."

In addition, a corporation may not elect to become a REIT unless its
taxable year is the calendar year. The Company will have a calendar taxable
year.

In order to qualify as a REIT, the Company cannot have at the end of any
taxable year any undistributed "earnings and profits" that are attributable to a
"C corporation" taxable year. The Company itself will be a newly formed entity
and will make a REIT election for its first taxable year. Hence, the Company
itself will not have any undistributed "C corporation earnings and profits." In
the Merger, however, the Company will succeed to various tax attributes of the
ZML REITs, including any undistributed "earnings and profits." If the ZML REITs
each have qualified as a REIT throughout the duration of their existence, then
they also would not have any undistributed "C corporation earnings and profits,"
and the Company would satisfy this requirement. If, however, one or more of the
ZML REITs has failed to qualify as a REIT throughout the duration of its
existence, then it might have undistributed "C corporation earnings and profits"
that, if not distributed by the Company prior to the end of its first taxable
year, could prevent the Company from qualifying as a REIT. The Company and the
ZML REITs believe that each of the ZML REITs has qualified as a REIT throughout
the duration of its existence and that, in any event, no ZML REIT should be
considered to have any undistributed "C corporation earnings and profits" at the
time of the Merger. There can be no assurance, however, that the IRS would not
contend otherwise on a subsequent audit of one or more of the ZML REITs.
Although not free from doubt, it appears pursuant to recently finalized Treasury
Regulations that the Company may be able to use certain "deficiency dividend"
procedures to distribute any "earnings and profits" deemed to have been acquired
in the Merger. In order to use this procedure, the Company would have to make an
additional dividend distribution to its shareholders (in addition to
distributions made for purposes of satisfying the normal REIT distribution
requirements), within 90 days of the IRS determination. In addition, the Company
would have to pay to the IRS an interest charge on 50% of the acquired "earnings
and profits" that were not distributed prior to the end of the taxable year in
which the Consolidation occurred. The statute and Treasury Regulations related
to the application of the "earnings and profits distribution" requirement to a
REIT that acquires a "non-REIT" in a reorganization and the availability of the
"deficiency dividend" procedure in those circumstances are not entirely clear,
and there can be no assurance that the IRS would not take the position either
that the procedure is not available at all (in which case the Company would fail
to qualify as a REIT) or, alternatively, that even if the procedure is
available, the Company cannot qualify as a REIT for the taxable year in which
the Consolidation occurs (but it could qualify as a REIT for subsequent years).

Finally, in the event that any ZML REIT were determined not to qualify as a
REIT, the Company would not be eligible to elect REIT status for up to five
years after the year in which such ZML REIT first failed to qualify as a REIT,
if the Company were considered a "successor" to such ZML REIT. The Company would
be considered a "successor" for these purposes, however, only if (i) persons who
own more than 50 percent of the Common Shares of the Company at any time during
the taxable year ending after the Consolidation occurs owned, directly or
indirectly, 50% or more in value of the shares of such ZML REIT during the first
year in which it ceased to qualify as a REIT and (ii) a significant portion of
the Company's assets were assets owned by such ZML REIT.

Closing Agreements with the IRS with Respect to ZML REITs I and II. In
December 1996, the IRS was advised that ZML REIT I and ZML REIT II each had
failed to comply with a technical requirement (but, in the opinion of the
applicable ZML Partners, not the intent) of a provision of the Code which must
be satisfied for a company to qualify as a REIT for federal income tax purposes.
More specifically, in connection with structuring certain real estate
investments made by Opportunity Partnership I and Opportunity Partnership II
during the period 1991-1993, all of the voting stock of certain corporations
formed to serve as general partners of limited partnership subsidiaries of such
ZML Opportunity Partnerships was issued to such

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ZML Opportunity Partnerships. Based upon a Treasury Regulation interpreting the
statutory provision limiting permitted REIT investments, a portion of such ZML
Opportunity Partnerships' ownership of corporate voting stock would be imputed
to ZML REIT I and ZML REIT II and, in so doing, would cause ZML REIT I and ZML
REIT II to violate the prohibition on a REIT owning more than 10% of the voting
stock of a corporation other than a qualified REIT subsidiary.

Pursuant to closing agreements, the IRS has agreed that neither ZML REIT I
nor ZML REIT II will be disqualified as a REIT as a result of the technical
violations disclosed to the IRS. In connection with the agreements, the ZML
Partners of Opportunity Partnership I and Opportunity Partnership II made
certain payments to the IRS. None of ZML REIT I, ZML REIT II, Opportunity
Partnership I, Opportunity Partnership II or the Company will bear the cost of
such payments. As a result of the closing agreements, the technical violations
discussed above will cause no adverse impact on the REIT status of ZML REIT I
and ZML REIT II for the tax years at issue, or the Company's ability to qualify
as a REIT following the Consolidation.

Ownership of Partnership Interests by a REIT. 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 ZML Opportunity Partnerships (including each Opportunity
Partnership's share of such items of the Operating Partnership and any
subsidiaries of the Operating Partnership that are partnerships or LLCs) 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 Company's Ownership of Interests in the ZML Opportunity
Partnerships and the Operating Partnership." The Company will have direct
control of each of the ZML Opportunity Partnerships and the Operating
Partnership and intends to operate them consistent with the requirements for
qualification as a REIT.

Income Tests Applicable to REITs. In order to maintain qualification as a
REIT, the Company annually must satisfy three gross income requirements. First,
at least 75% of the Company's gross income (excluding gross income from
prohibited transactions) for each taxable year must be derived directly or
indirectly from investments relating to real property or mortgages on real
property (including "rents from real property" and, in certain circumstances,
interest) or from certain types of temporary investments. Second, at least 95%
of the Company's gross income (excluding gross income from "prohibited
transactions") for each taxable year must be derived from such real property
investments, dividends, interest and gain from the sale or disposition of stock
or securities (or from any combination of the foregoing). Third, short-term gain
from the sale or other disposition of stock or securities, gain from prohibited
transactions and gain on the sale or other disposition of real property held for
less than four years (apart from involuntary conversions and sales of
foreclosure property) must represent less than 30% of the Company's gross income
(including gross income from "prohibited transactions") for each taxable year.

Rents received by the Company will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if
several conditions are met. First, the amount of rent must not be based in whole
or in part on the income or profits of any person. However, an amount received
or accrued generally will not be excluded from the term "rents from real
property" solely by reason of being based on a fixed percentage or percentages
of receipts or sales. Second, rents received from a tenant will not qualify as
"rents from real property" in satisfying the gross income tests if the REIT, or
an actual or constructive owner of 10% or more of the REIT, actually or
constructively owns 10% or more of such tenant (a "Related Party Tenant").
Third, if rent attributable to personal property, leased in connection with a
lease of real property, is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will not
qualify as "rents from real property." Finally, for rents received to qualify as
"rents from real property," the REIT generally must not operate or manage the
property or furnish or render services to the tenants of such property, other
than through an independent contractor from whom the REIT derives no

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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. To the extent that services (other than those customarily
furnished or rendered in connection with the rental of real property) are
rendered to the tenants of the property by the independent contractor, the cost
of the services must be borne by the independent contractor. The Company,
through the Operating Partnership, will provide certain services to the
Properties. Based upon the experience of the ZML Partners and the Equity Group
in the office rental markets in which the Company's properties are located, the
Company believes that all services provided to tenants by the Company will be
considered "usually or customarily rendered" in connection with the rental of
office space for occupancy, although there can be no assurance that the IRS will
not contend otherwise. 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, or unless the Board of Trustees determines, in its discretion,
that the rent received from a particular tenant under such an arrangement is not
material and will not jeopardize the Company's status as a REIT), (ii) rent any
property to a Related Party Tenant (unless the Board of Trustees 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 requested a ruling from the IRS to the effect that if the
Operating Partnership enters into arrangements with independent contractors to
operate the Company's parking facilities under which the Operating Partnership
will bear the expenses incurred in operating the parking facilities, such an
arrangement will not affect the Company's ability to satisfy the 95% and 75%
gross income tests. Currently, all but one of the stand-alone garages are
operated by third-party Service Companies under lease agreements whereby the
Opportunity Partnership and the Service Company share the gross receipts from
the parking operation or the Opportunity Partnership receives a fixed payment
from the Service Company, and the Opportunity Partnership bears none of the
operational expenses. The income received by the Opportunity Partnership from
the stand-alone garages under such agreements should qualify as "rents from real
properties" for the purpose of the 95% and 75% gross income tests. The Company
will retain the current arrangements with the Service Companies if it is
unsuccessful in obtaining a favorable ruling from the IRS. One stand-alone
garage agreement provides for the receipt of a percentage of net receipts by the
Opportunity Partnership and, therefore, results in an insignificant amount of
non-qualifying gross income relative to the total gross income of the ZML REIT.
The income received under this agreement has not affected the ZML REIT's ability
to satisfy the 95% and 75% gross income tests and should not affect the
Company's ability to satisfy the 95% and 75% gross income tests in future
taxable years. Parking garages which are located within a building, or are
adjacent to, or are part of the same complex as, a building generally are
operated by Service Companies pursuant to parking management agreements under
which the Service Companies receive a management fee which may be a fixed dollar
amount, or a percentage of gross or net revenues. The Company and the ZML
Partners believe that, based on private letter rulings issued to other REITs
that had similar parking management arrangements, the income received pursuant
to such agreements should qualify as "rents from real property" for the purposes
of the 95% and 75% gross income tests.

"Interest" generally will not qualify under the 75% or 95% gross income
tests if it depends in whole or in part on the income or profits of any person.
However, interest will not fail to so qualify solely by reason of being based on
a fixed percentage or percentages of receipts or sales. The Company does not
expect to derive significant amounts of interest that will not qualify under the
75% and 95% gross income tests.

As discussed above in "The Company," the Management Corp. will conduct
third-party management services with respect to properties not owned by the
Operating Partnership and with respect to Joint Venture Properties. The
Operating Partnership will own 100% of the non-voting stock of the Management
Corp., but none of its voting stock. The Company's share of any dividends
received from the Management Corp. should qualify for the purposes of the 95%
gross income test, but not for purposes of the 75% gross income test. The

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Company does not anticipate that it will receive sufficient dividends from the
Management Corp. to cause it to exceed the limit on non-qualifying income under
the 75% gross income test.

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 non-qualifying 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 "-- General," even if
these relief provisions apply, a tax would be imposed with respect to the excess
net income. No similar mitigation provision provides relief if the Company fails
the 30% income test. In such case, the Company would cease to qualify as a REIT.

Any gain realized by the Company on the sale of any property held as
inventory or other property held primarily for sale to customers in the ordinary
course of business (including the Company's share of any such gain realized by
the Operating Partnership) will be treated as income from a "prohibited
transaction" that is subject to a 100% penalty tax. Such prohibited transaction
income may also have an adverse effect upon the Company's ability to satisfy the
income tests for qualification as a REIT. Under existing law, whether property
is held as inventory or primarily for sale to customers in the ordinary course
of a trade or business is a question of fact that depends on all the facts and
circumstances with respect to the particular transaction. The Operating
Partnership intends to hold the Properties for investment with a view to
long-term appreciation, to engage in the business of acquiring, developing,
owning, and operating the Properties (and other properties) and to make such
occasional sales of the Properties as are consistent with the Operating
Partnership's investment objectives. There can be no assurance, however, that
the IRS might not contend that one or more of such sales is subject to the 100%
penalty tax.

Asset Tests Applicable to REITs. 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 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
(including its allocable share of the assets held directly or indirectly through
the Operating Partnership) 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.

The Operating Partnership owns none of the voting stock but 100% of the
non-voting stock of the Management Corp. Thus, none of the Operating
Partnership, any ZML Opportunity Partnership, or the Company owns (either alone
or together) more than 10% of the voting securities of the Management Corp. The
Operating Partnership also may own non-voting stock, representing substantially
all of the equity, in other corporate entities that serve as partners or members
in the various titleholding entities. The Company will represent, however, that
the Operating Partnership will not own more than 10% of the voting securities of
any other entity that would be treated as a corporation for federal income tax
purposes. In addition, the Company and its senior management believe, and the
Company will represent, that the Company's pro rata share of the value of the
securities of the Management Corp. does not exceed 5% of the total value of the
Company's assets. There can be no assurance, however, that the IRS might not
contend either that the value of the securities of the Management Corp. held by
the Company (through the ZML Opportunity Partnerships and the Operating
Partnership) exceeds the 5% value limitation or that nonvoting stock of the
Management Corp.

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or another corporate entity owned by the Operating Partnership should be
considered "voting stock" for this purpose.

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, for example, as a
result of the Company increasing its interest in the Operating Partnership as a
result of the exercise of a Unit Redemption Right or an additional capital
contribution of proceeds of an offering of Common Shares by the Company such as
this Offering), the failure can be cured by disposition of sufficient
nonqualifying assets within 30 days after the close of that quarter. The Company
intends to maintain adequate records of the value of its assets to ensure
compliance with the asset tests and to take such other actions within 30 days
after the close of any quarter as may be required to cure any noncompliance. If
the Company fails to cure noncompliance with the asset tests within such time
period, the Company would cease to qualify as a REIT.

Annual Distribution Requirements Applicable to REITs. The Company, in
order to qualify as a REIT, is required to distribute dividends (other than
capital gain dividends) to its shareholders in an amount at least equal to (i)
the sum of (a) 95% of the Company's "REIT taxable income" (computed without
regard to the dividends paid deduction and the Company's net capital gain) and
(b) 95% of the net income (after tax), if any, from foreclosure property, minus
(ii) the sum of certain items of noncash income. In addition, if the Company
disposes of any Built-In Gain Asset during its Recognition Period, the Company
will be required, pursuant to Treasury Regulations which have not yet been
promulgated, to distribute at least 95% of the Built-In Gain (after tax), if
any, recognized on the disposition of such asset. Such distributions must be
paid in the taxable year to which they relate, or in the following taxable year
if declared before the Company timely files its tax return for such year and if
paid on or before the first regular dividend payment date after such
declaration. To the extent that the Company does not distribute all of its net
capital gain or distributes at least 95%, but less than 100%, of its "REIT
taxable income," as adjusted, it will be subject to tax thereon at regular
ordinary and capital gain corporate tax rates. The Company intends to make
timely distributions sufficient to satisfy these annual distribution
requirements. In this regard, the Operating Partnership Agreement authorizes the
Company, as managing general partner, to take such steps as may be necessary to
cause the Operating Partnership to distribute to its partners an amount
sufficient to permit the Company to meet these distribution requirements.

It is expected that the Company's REIT taxable income will be less than its
cash flow due to the allowance of depreciation and other non-cash charges in
computing REIT taxable income. Accordingly, the Company anticipates that it will
generally have sufficient cash or liquid assets to enable it to satisfy the
distribution requirements described above. It is possible, however, that the
Company, from time to time, may not have sufficient cash or other liquid assets
to meet these distribution requirements due to timing differences between (i)
the actual receipt of income and actual payment of deductible expenses and (ii)
the inclusion of such income and deduction of such expenses in arriving at
taxable income of the Company. If 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 shareholders in a later year, which may be included in the Company's
deduction for dividends paid for the earlier year. Thus, the Company may be able
to avoid being taxed on amounts distributed as deficiency dividends; however,
the Company will be required to pay interest based upon the amount of any
deduction taken for deficiency dividends.

Furthermore, if the Company should fail to distribute during each calendar
year at least the sum of (i) 85% of its REIT ordinary income for such year, (ii)
95% of its REIT capital gain income for such year, and (iii) any undistributed
taxable income from prior periods, the Company would be subject to a 4% excise
tax on the excess of such required distribution over the amounts actually
distributed.

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Failure of the Company to Qualify as a REIT. If the Company fails to
qualify for taxation as a REIT in any taxable year, and if 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 shareholders 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 shareholders. In
addition, if the Company fails to qualify as a REIT, all distributions to
shareholders 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 also will be disqualified from taxation as a REIT for
the four taxable years following the year during which qualification was lost.
It is not possible to state whether in all circumstances the Company would be
entitled to such statutory relief.

TAXATION OF TAXABLE U.S. SHAREHOLDERS OF THE COMPANY GENERALLY

As used herein, the term "U.S. Shareholder" means a holder of Common Shares
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. Shareholders as ordinary income. Such distributions will not be
eligible for the dividends received deduction in the case of U.S. Shareholders
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. Shareholders 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. Shareholder has held his Common Shares.
U.S. Shareholders 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. Shareholder, reducing
the adjusted basis which such U.S. Shareholder has in its Common Shares for tax
purposes by the amount of such distribution (but not below zero), with
distributions in excess of a U.S. Shareholder's adjusted basis in its Common
Shares taxable as capital gains (provided that the Common 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 shareholder of record on a specified date
in any such month shall be treated as both paid by the Company and received by
the shareholder 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. Shareholders 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. Shareholder of Common Shares will not be treated as passive
activity income, and, as a result, U.S. Shareholders generally will not be able
to apply any "passive losses" against such income or gain.

Upon any sale or other disposition of Common Shares, a U.S. Shareholder
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 Common Shares for tax purposes. Such gain or loss will be
capital gain or loss if the Common Shares have been held by the U.S. Shareholder
as a capital asset, and will be long-term gain or loss if such Common Shares
have been held for more than one year. In general, any loss recognized by a U.S.
Shareholder upon the sale or other disposition of Common Shares 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. Shareholder from the Company which were required to be treated as
long-term capital gains.

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BACKUP WITHHOLDING FOR COMPANY DISTRIBUTIONS

The Company will report to its U.S. Shareholders 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 shareholder 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. shareholder 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 shareholder's
income tax liability. In addition, the Company may be required to withhold a
portion of capital gain distributions to any shareholders who fail to certify
their non-foreign status to the Company. See " -- Taxation of Non-U.S.
Shareholders of the Company."

TAXATION OF TAX-EXEMPT SHAREHOLDERS OF THE COMPANY

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 shareholder
(except certain tax-exempt shareholders described below) has not held its Common
Shares as "debt financed property" within the meaning of the Code and such
Common Shares are not otherwise used in a trade or business, the dividend income
from the Company will not be UBTI to a tax-exempt shareholder. Similarly, income
from the sale of Common Shares will not constitute UBTI unless such tax-exempt
shareholder has held such Common Shares as "debt financed property" within the
meaning of the Code or has used the Common Shares in a trade or business.

For tax-exempt shareholders 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 shareholders should consult their own tax advisors concerning these
"set aside" and reserve requirements.

Notwithstanding the above, however, the Omnibus Budget Reconciliation Act
of 1993 (the "1993 Act") provides that, effective for taxable years beginning in
1994, a portion of the dividends paid by a "pension held REIT" shall be treated
as UBTI as to any trust which (i) is described in Section 401(a) of the Code,
(ii) is tax-exempt under Section 501(a) of the Code, and (iii) holds more than
10% (by value) of the interests in the REIT. Tax-exempt pension funds that are
described in Section 401(a) of the Code are referred to below as "qualified
trusts."

A REIT is a "pension held REIT" if (i) it would not have qualified as a
REIT but for the fact that Section 856(h)(3) of the Code (added by the 1993 Act)
provides that stock owned by qualified trusts shall be treated, for purposes of
the "not closely held" requirement, as owned by the beneficiaries of the trust
(rather than by the trust itself), and (ii) either (a) at least one such
qualified trust holds more than 25% (by value) of the interests in the REIT, or
(b) one or more such qualified trusts, each of which owns more than 10% (by
value) of the interests in the REIT, hold in the aggregate more than 50% (by
value) of the interests in the REIT. The percentage of any REIT dividend treated
as UBTI is equal to the ratio of (i) the UBTI earned by the REIT (treating the
REIT as if it were a qualified trust and therefore subject to tax on UBTI) to
(ii) the total gross income of the REIT. A de minimis exception applies where
the percentage is less than 5% for any year. The provisions requiring qualified
trusts to treat a portion of REIT distributions as UBTI will not apply if the
REIT is able to satisfy the "not closely held" requirement without relying upon
the "look-through" exception with respect to qualified trusts.

Based on the anticipated ownership of Common Shares immediately following
the Consolidation and this Offering, and as a result of certain limitations on
transfer and ownership of Common Shares contained in the Declaration of Trust,
the Company does not expect to be classified as a "pension held REIT."

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TAXATION OF NON-U.S. SHAREHOLDERS OF THE COMPANY

The rules governing United States Federal income taxation of the ownership
and disposition of Common Shares 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.
Shareholders") 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. Shareholder in light
of its particular circumstances. In addition, this discussion is based on
current law, which is subject to change, and assumes that the Company qualifies
for taxation as a REIT. Prospective Non-U.S. Shareholders 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 Shares, including
any reporting requirements.

Distributions by the Company. Distributions by the Company to a Non-U.S.
Shareholder that are neither attributable to gain from sales or exchanges by the
Company of United States real property interests nor designated by the Company
as capital gains dividends will be treated as dividends of ordinary income to
the extent that they are made out of current or accumulated earnings and profits
of the Company. Such distributions ordinarily will be subject to withholding of
United States Federal income tax on a gross basis (that is, without allowance of
deductions) at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty, unless the dividends are treated as effectively
connected with the conduct by the Non-U.S. Shareholder of a United States trade
or business. Dividends that are effectively connected with such a trade or
business will be subject to tax on a net basis (that is, after allowance of
deductions) at graduated rates, in the same manner as domestic shareholders are
taxed with respect to such dividends, and are generally not subject to
withholding. Any such dividends received by a Non-U.S. Shareholder 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.
Shareholder who wishes to claim the benefit of an applicable treaty rate would
be required to satisfy certain certification and other requirements. Under
certain treaties, lower withholding rates generally applicable to dividends do
not apply to dividends from a REIT, such as the Company. Certain certification
and disclosure requirements must be satisfied to be exempt from withholding
under the effectively connected income exemption discussed above.

Distributions in excess of current or accumulated earnings and profits of
the Company will not be taxable to a Non-U.S. Shareholder to the extent that
they do not exceed the adjusted basis of the shareholder's Common Shares, but
rather will reduce the adjusted basis of such Common Shares. To the extent that
such distributions exceed the adjusted basis of a Non-U.S. Shareholder's Common
Shares, they will give rise to gain from the sale or exchange of its Common
Shares, 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
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, the Non-U.S. Shareholder
may seek a refund of such amounts from the IRS if it subsequently determined
that such distribution was, in fact, in excess of current or accumulated
earnings and profits of the Company, and the amount withheld exceeded the
Non-U.S. Shareholder's United States tax liability, if any, with respect to the
distribution.

Distributions to a Non-U.S. Shareholder 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 Shares is effectively connected with the Non-U.S. Shareholder's
United States trade or business, in

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which case the Non-U.S. Shareholder will be subject to the same treatment as
domestic shareholders with respect to such gain (except that a shareholder that
is a foreign corporation may also be subject to the 30% branch profits tax, as
discussed above), or (ii) the Non-U.S. Shareholder 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.

Under the Foreign Investment in Real Property Tax Act ("FIRPTA")
distributions to a Non-U.S. Shareholder that are attributable to gain from sales
or exchanges by the Company of United States real property interests will cause
the Non-U.S. Shareholder to be treated as recognizing such gain as income
effectively connected with a United States trade or business. Non-U.S.
Shareholders would thus generally be taxed at the same rates applicable to
domestic shareholders (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. Shareholder that is a corporation,
as discussed above. The Company is required to withhold 35% of any such
distribution. That amount is creditable against the Non-U.S. Shareholder's
United States Federal income tax liability.

Sale of Common Shares. Gain recognized by a Non-U.S. Shareholder upon the
sale or exchange of Common Shares generally will not be subject to United States
taxation unless such shares constitute a "United States real property interest"
within the meaning of FIRPTA. The Common Shares 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. Shareholders. The Company believes that
at the closing of the Consolidation and this Offering it will be a "domestically
controlled REIT," and therefore that the sale of Common Shares will not be
subject to taxation under FIRPTA. However, because the Common Shares are
expected to become 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 Common Shares not otherwise subject
to FIRPTA will be taxable to a Non-U.S. Shareholder if the Non-U.S. Shareholder
is a nonresident alien individual who is present in the United States for 183
days or more during the taxable year and has a "tax home" in the United States.
In such case, the nonresident alien individual will be subject to a 30% United
States withholding tax on the amount of such individual's gain.

If the Company does not qualify as or ceases to be a
"domestically-controlled REIT," whether gain arising from the sale or exchange
by a Non-U.S. Shareholder of Common Shares would be subject to United States
taxation under FIRPTA as a sale of a "United States real property interest" will
depend on whether the Common Shares are "regularly traded" (as defined by
applicable Treasury Regulations) on an established securities market (e.g., the
New York Stock Exchange) and on the size of the selling Non-U.S. Shareholder's
interest in the Company. If gain on the sale or exchange of Common Shares were
subject to taxation under FIRPTA, the Non-U.S. Shareholder would be subject to
regular United States income tax with respect to such gain in the same manner as
a U.S. Shareholder (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 Common Shares 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. Shareholders 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 Shares 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 Shares by a foreign office of a
broker that (a) is a United States person, (b) derives 50% or

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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 shareholders) for
United States tax purposes, unless the broker has documentary evidence in its
records that the holder is a Non-U.S. Shareholder and certain other conditions
are met, or the shareholder otherwise establishes an exemption. Payment to or
through a United States office of a broker of the proceeds of a sale of Common
Shares is subject to both backup withholding and information reporting unless
the shareholder certifies under penalty of perjury that the shareholder is a
Non-U.S. Shareholder, or otherwise establishes an exemption. A Non-U.S.
Shareholder 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 COMPANY'S OWNERSHIP OF INTERESTS IN THE ZML OPPORTUNITY
PARTNERSHIPS AND THE OPERATING PARTNERSHIP

General. Substantially all of the Company's investments will be held
indirectly through the ZML Opportunity Partnerships and 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 through the ZML
Opportunity Partnerships and the Operating Partnership. See "Taxation of the
Company -- Ownership of Partnership Interests by a REIT."

Entity Classification. If any of the ZML Opportunity Partnerships or the
Operating Partnership were treated as an association, the entity would be
taxable as a corporation and therefore would 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 would preclude the Company from
qualifying as a REIT (see "Taxation of the Company -- Asset Tests Applicable to
REITs" and "-- Income Tests Applicable to REITs"). The same result could occur
if any subsidiary partnership failed to qualify for treatment as a partnership.

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. The 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
(1) the entity had a reasonable basis for its claimed classification, (2) 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 (3) 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.

Hogan & Hartson L.L.P., special tax counsel to the Company, is of the
opinion, based upon certain factual assumptions and representations described in
the opinion, that each of the ZML Opportunity

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Partnerships and the Operating Partnership will be treated as a partnership for
Federal income tax purposes (and not as an association taxable as a
corporation).

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 allocations of taxable income and
loss provided for in the ZML Opportunity Partnership and Operating Partnership
partnership agreements are intended to comply with the requirements of Section
704(b) of the Code and the Treasury Regulations promulgated thereunder.

Tax Allocations with Respect to the Properties. Pursuant to Section 704(c)
of the Code, income, gain, loss and deduction attributable to appreciated or
depreciated property (such as the Properties) that is contributed to a
partnership in exchange for an interest in the partnership, must be allocated in
a manner such that the contributing partner is charged with, or benefits from,
respectively, the unrealized gain or unrealized loss associated with the
property at the time of the contribution. The amount of such unrealized gain or
unrealized loss is generally equal to the difference between the fair market
value of contributed property at the time of contribution and the adjusted tax
basis of such property at such time (a "Book-Tax Difference"). Such allocations
are solely for Federal income tax purposes and do not affect the book capital
accounts or other economic or legal arrangements among the partners. The
Operating Partnership will be formed by way of contributions of appreciated
property (including the Properties and the Management Business). Consequently,
the Operating Partnership Agreement requires that such allocations be made in a
manner consistent with Section 704(c) of the Code.

In general, the partners of the Operating Partnership who contributed
depreciable assets having an adjusted tax basis less than their fair market
value at the time of contribution (which includes the ZML Opportunity
Partnerships and the Company as successor to the ZML REITs) will be allocated
depreciation deductions for tax purposes which are lower than such deductions
would be if determined on a pro rata basis. In addition, in the event of the
disposition of any of the contributed assets which have such a Book-Tax
Difference, all income attributable to such Book-Tax Difference generally will
be allocated to such partners. These allocations 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 of 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. Such an
allocation might 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 Applicable to REITs."

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
determined to use the "traditional method" for accounting for Book-Tax
Differences with respect to the properties initially contributed to the
Operating Partnership in connection with the Consolidation. This method is
generally the most favorable method from the perspective of the Equity Group,
the ZML Partners and the Investor Limited Partners at the time of the
Consolidation and will be less favorable from the perspective of the Company to
the extent it subsequently contributes cash (such as the proceeds of this
Offering) to the Operating Partnership.

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With respect to any property purchased by the Operating Partnership
subsequent to this offering, such property will initially have a tax basis equal
to its fair market value, and Section 704(c) of the Code will not apply.

OTHER TAX CONSEQUENCES FOR THE COMPANY, ITS SHAREHOLDERS AND THE MANAGEMENT
CORP.

The Company and its shareholders 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 shareholders may not conform to the Federal income tax consequences
discussed above. Consequently, prospective shareholders should consult their own
tax advisors regarding the effect of state and local tax laws on an investment
in the Company.

A portion of the cash to be used by the Company to fund distributions is
expected to come from the Management Corp. through payments of dividends on the
stock of the Management Corp. held by the Operating Partnership. The Management
Corp. pays Federal and state income tax at the full applicable corporate rates.
To the extent that the Management Corp. is required to pay Federal, state or
local taxes, the cash available for distribution by the Company to shareholders
will be reduced accordingly.

ERISA CONSIDERATIONS

EMPLOYMENT BENEFIT PLANS, TAX-QUALIFIED PENSION, PROFIT SHARING OR STOCK BONUS
PLANS AND IRS

Each fiduciary of an employee benefit plan subject to ERISA (an "ERISA
Plan") should carefully consider whether an investment in the Common Shares 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
investment, inter alia, to be (i) prudent and solely 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 such
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
Shares is prudent for purposes of ERISA, the appropriate fiduciary of an ERISA
Plan should consider all of an ERISA Plan's investment portfolio for which the
fiduciary has responsibility, to meet the objectives of the ERISA Plan, taking
into consideration the risk of loss and opportunity for gain (or other return)
from the investment, the diversification, cash flow and funding requirements of
the ERISA Plan, and the liquidity and current return of the ERISA Plan's
investment portfolio. A fiduciary should also take into account the nature of
the Company's business, the length of the Company's operating history, the terms
of the management agreements, the fact that certain investment properties may
not have been identified yet, other matters described under "Risk Factors" and
the possibility of UBTI. See "Federal Income Tax Considerations -- Taxation of
Securities."

The fiduciary of an ERISA Plan, or of an IRA or a qualified pension, profit
sharing or stock bonus plan which is not subject to ERISA (a "Non-ERISA Plan")
but is subject to Section 4975 of the Code ("Other Plans"), should ensure that
the purchase of Common Shares will not constitute a prohibited transaction under
ERISA or the Code.

STATUS OF THE COMPANY AND THE OPERATING PARTNERSHIP UNDER ERISA

The following section discusses certain principles that apply in
determining whether the fiduciary requirements of ERISA and the prohibited
transaction provisions of ERISA and the Code apply to an entity because one or
more investors in the entity's equity interests is an ERISA Plan or Other Plan.
An ERISA plan fiduciary should also consider the relevance of these principles
to ERISA's prohibition on improper delegation of control over or responsibility
for Plan assets and ERISA's imposition of co-fiduciary liability on a fiduciary
who participates in, permits (by action or inaction) the occurrence of, or fails
to remedy a known breach by another fiduciary.

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If the underlying assets of the Company are deemed to be assets of an ERISA
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 for a fee or other compensation to the Company,
would be (for purposes of ERISA and the Code) fiduciaries of ERISA Plans and
Other Plans that acquire Common Shares. The United States 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 Shares are being sold in an
offering registered under the Securities Act and the Company intends to register
the Common Shares under the Exchange Act within the registration period.

The DOL Regulation provides that a security is "widely-held" only if it is
part of a class of securities that is owned by 100 or more investors independent
of the issuer and of one another. A security will not fail to be "widely held"
because the number of independent investors falls below 100 subsequent to the
initial public offering as a result of events beyond the issuer's control.

The DOL Regulation provides that whether a security is "freely
transferable" is a factual question to be determined on the basis of all
relevant facts and circumstances. The DOL Regulation further provides that where
a security is part of an offering in which the minimum investment is $10,000 or
less, certain restrictions ordinarily will not, alone or in combination, affect
a finding that such securities are "freely transferable." The Offering will not
impose a minimum investment requirement. The restrictions on transfer enumerated
in the DOL Regulation as ordinarily not affecting a finding that the securities
are "freely transferable" include: (i) any restriction on or prohibition against
any transfer or assignment that would result in a termination or
reclassification of the Company for Federal or state tax purposes, or that would
otherwise violate any state or Federal law or court order, (ii) any requirement
that advance notice of a transfer or assignment be given to the Company, (iii)
any requirement that either the transferor or transferee, or both, execute
documentation setting forth representations as to compliance with any
restrictions on transfer that are among those enumerated in the DOL Regulation
as not affecting free transferability, (iv) any administrative procedure that
established an effective date, or an event (such as completion of the Offering)
prior to which a transfer or assignment will not be effective, (v) any
prohibition against transfer or assignment to an ineligible or unsuitable
investor, and (vi) any limitation or restriction on transfer or assignment that
is not imposed by the issuer or a person acting for or on behalf of the issuer.
The Company believes that the restrictions imposed under the Declaration of
Trust on the transfer of Common Shares 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 Shares to be "freely
transferable" within the meaning of the DOL Regulation. See "Shares of
Beneficial Interest -- Restrictions on Transfer." The Company also believes that
certain restrictions on transfer that derive from the securities laws, from
contractual arrangements with the Underwriters in connection with the Offering
and from certain provisions should not result in the failure of the Share to be
"freely transferable." See "Underwriting." Furthermore, the Company is not aware
of any other facts or circumstances limiting the transferability of the Common
Shares that are not included among those enumerated as not affecting their free
transferability under the DOL Regulation, and the Company does not

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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 (i) that the Common Shares are "widely held" within the meaning of
the DOL Regulation and (ii) that no facts and circumstances other than those
referred to in the preceding paragraph exist that restrict transferability of
the Common Shares, the Company believes that, under the DOL Regulation, the
Common Shares should be considered "publicly-offered securities" and, therefore,
that the underlying assets of the Company should not be deemed to be plan assets
of any ERISA Plan or Other Plan that invests in the Common Shares.

The DOL Regulation will also apply in determining whether the underlying
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 Shares constitute 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
Shares will not cause the assets of the Operating Partnership to be treated as
plan assets.

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UNDERWRITING

Subject to the terms and conditions in the purchase agreement (the
"Purchase Agreement"), between the Company and each of the underwriters named
below (the "Underwriters"), the Company has agreed to sell to each of the
Underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated is
acting as representative (the "Representative"), and each of the Underwriters
has severally agreed to purchase from the Company, the respective number of
Common Shares set forth below opposite their respective names.

<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF COMMON SHARES
----------- -----------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................
----------
Total ......................................... 15,000,000
==========
</TABLE>

The Underwriters have agreed, subject to the terms and conditions set forth
in such Purchase Agreement, to purchase all of the Common Shares being sold
pursuant to such Purchase Agreement if any of such Common Shares are purchased.

The Representatives have advised the Company that the Underwriters propose
initially to offer the Common Shares to the public at the public offering price
per share set forth on the cover page of this Prospectus, and to certain dealers
at such price less a concession not in excess of $. per share. The
Underwriters may allow, and such dealers may re-allow, a discount not in excess
of $. per share on sales to certain other dealers. After the date of this
Prospectus, the initial public offering price, concession and discount may be
changed.

The Company has granted to the Underwriters an option, exercisable for 30
days after the date of this Prospectus, to purchase up to 2,250,000 additional
Common Shares to cover over-allotments, if any, at the initial public offering
price, less the underwriting discount set forth on the cover page of this
Prospectus. If the Underwriters exercise this option, each Underwriter will have
a firm commitment, subject to certain conditions, to purchase approximately the
same percentage thereof which the number of Common Shares to be purchased by it
shown in the foregoing table bears to such Common Shares initially offered
hereby.

Until the distribution of the Common Shares 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 the Common Shares. As an
exception to these rules, the Representative is permitted to engage in certain
transactions that stabilize the price of the Common Shares. Such transactions
consist of bids or purchases for the purpose of pegging, fixing or maintaining
the price of the Common Shares.

If the Underwriters create a short position in the Common Shares in
connection with the Offering, i.e., if they sell more Common Shares than are set
forth on the cover page of this Prospectus, the Representative may reduce that
short position by purchasing Common Shares in the open market. The
Representative may also elect to reduce any short position by exercising all or
part of the over-allotment option described above.

The Representatives may also impose a penalty bid on certain Underwriters
and selling group members. This means that if the Representative purchases
Common Shares in the open market to reduce the Underwriters' short position or
to stabilize the price of the Common Shares, it 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 short position could cause the price of the security to be higher than
it might be in the absence of such purchases. The imposition of a penalty bid
might also have an effect on the price of a security to the extent that it were
to discourage resales of the security.

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 Shares. In addition, neither
the Company nor any of the Underwriters makes any representation that

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the Representative will engage in such transactions or that such transactions,
once commenced, will not be discontinued without notice.

In the Purchase Agreement, the Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act. Insofar as indemnification of the Underwriters for liabilities
arising under the Securities Act may be permitted pursuant to the foregoing
provision, the Company has been informed that in the opinion of the Securities
and Exchange Commission (the "Commission") such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.

The Company and the Operating Partnership have agreed, subject to certain
exceptions, not to sell, offer or contract to sell, grant any option for the
sale of, or otherwise dispose of any Common Shares or Units or any securities
convertible into or exchangeable for Common Shares or Units for a period of one
year from the date of the Prospectus, without the prior written consent of
Merrill Lynch.

The Underwriters do not intend to confirm sales to any account over which
they exercise discretionary authority.

Prior to the Offering, there has been no public market for the Common
Shares of the Company. The initial public offering price will be determined
through negotiations between the Company and the Representative. Among the
factors to be considered in such negotiations, in addition to prevailing market
conditions, will be dividend yields and financial characteristics of publicly
traded REITs that the Company and the Representative believe to be comparable to
the Company, the expected results of operations of the Company (which will be
based on the results of operations of the Properties and the management and
leasing businesses in recent periods), estimates of the future business
potential and earnings prospects of the Company as a whole and the current state
of the real estate market in the Company's primary markets and the economy as a
whole.

Affiliates of Merrill Lynch served as placement agent in connection with
the offer and sale of interests in each of the ZML Funds and are limited
partners in each ZML Partner. In addition, affiliates of Merrill Lynch regularly
provide investment banking services to affiliates of the Equity Group Owners.

Affiliates of Merrill Lynch currently are limited partners of the ZML
Partners and in such capacity have received fees in the amount of $3,068,000 for
the year ended December 31, 1996 and expect to receive $777,000 for 1997 from
the Company and its predecessors. Such affiliates will receive less than 1% of
the ownership interest in the Company (on a fully diluted basis) upon
consummation of the Consolidation (without giving effect to the Offering).
Merrill Lynch, Pierce, Fenner & Smith Incorporated, an affiliate of Merrill
Lynch is the lead managing underwriter of the Offering and will receive standard
underwriter's compensation in connection therewith.

EXPERTS

The combined financial statements of Equity Office Predecessors at December
31, 1996 and 1995, and for each of the three years in the period ended December
31, 1996, the statements of revenues and certain expenses for Promenade II, Two
California Plaza, BP Tower, SunTrust Center, Reston Town Center, Colonnade I,
177 Broad Street, Preston Commons and the balance sheet of Equity Office
Properties Trust, a Maryland real estate investment trust as of December 31,
1996, all appearing in this Prospectus and Registration Statement, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon appearing elsewhere herein, and are included in reliance upon
such reports given upon the authority of such firm as experts in accounting and
auditing.

LEGAL MATTERS

The validity of the Common Shares will be passed upon for the Company by
Rosenberg & Liebentritt, P.C., Chicago, Illinois. Certain matters of Maryland
law will be passed upon for the Company by Ballard Spahr Andrews & Ingersoll,
Baltimore, Maryland. Certain tax matters will be passed upon for the Company by
Hogan & Hartson L.L.P., Washington, D.C., special tax counsel for the Company.
In addition, the

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description of Federal income tax consequences under the heading "Federal Income
Tax Consequences" is based upon the opinion of Hogan & Hartson L.L.P. Certain
legal matters will be passed upon for the Underwriters by Hogan & Hartson
L.L.P. Rosenberg & Liebentritt, P.C., Ballard Spahr Andrews & Ingersoll, and
Hogan & Hartson L.L.P. acted as counsel for the Company and the Operating
Partnership in connection with the organization of the Company and the Operating
Partnership and the offering of the Units and the Common Shares in the
Consolidation. Sheli Z. Rosenberg, a trustee of the Company, is a principal in
the law firm of Rosenberg & Liebentritt, P.C.

ADDITIONAL INFORMATION

The Company has filed with the Commission 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 Commission.
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 is qualified in all respects by such
reference and the exhibits and schedules hereto. For further information
regarding the company and the Common Shares offered hereby, reference is hereby
made to the Registration Statement and such exhibits and schedules, which may be
obtained from the Commission at its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of the fees prescribed by the Commission.
The Commission 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 Commission. In
addition, the Company intends to file an application to list the Common Shares
on the NYSE and, if the Common Shares are listed on the NYSE, similar
information concerning the Company can be inspected and copies at the offices of
the New York Stock Exchange, 20 Broad Street, New York, New York 10005.

The Company intends to furnish its shareholders with annual reports
containing audited financial statements and a report thereon by independent
certified public auditors.

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GLOSSARY OF TERMS

For purposes of this Prospectus, the following capitalized terms shall have
the meanings set forth below:

"ACBMs" means asbestos-containing building materials.

"ACV" means American Classic Voyages Co.

"ADA" means the Americans with Disabilities Act, as amended.

"Anixter" means Anixter International Inc.

"Available Cash" means net cash flow from operations plus any reduction in
reserves and minus interest and principal payments on debt, capital
expenditures, any additions to reserves and other adjustments.

"Book-Tax Difference" has the meaning ascribed to it in the section
entitled "Federal Income Tax Considerations -- Tax Aspects of the Company's
Investments in Partnerships -- Tax Allocations with Respect to the Properties."

"Bylaws" means the bylaws adopted by the Board of Trustees of the Company.

"Capsure" means Capsure Holdings Corp.

"Cash Available for Distribution" means Funds from Operations adjusted for
certain non-cash items, less reserves.

"CBD" means central business district.

"Class B Distribution" has the meaning set forth under "Structure and
Formation of the Company -- Formation Transactions."

"Closing" means the closing of the Offering.

"Code" means the Internal Revenue Code of 1986, as amended.

"Commission" means the Securities and Exchange Commission.

"Common Shares" means the common shares of beneficial interest, $0.01 par
value per share, of the Company.

"Company" means either Equity Office Properties Trust, a Maryland real
estate investment trust, alone as an entity, or, as the context may require, the
combined enterprise consisting of Equity Office Properties Trust, the Operating
Partnership and their subsidiaries, and assumes that the Consolidation has been
consummated. All references to the historical activities of the Company refer to
the activities of the Equity Office Predecessors.

"Consolidation" means all of the transactions described under "Structure
and Formation of the Company -- Formation Transactions."

"Contribution Agreement" means the agreement pursuant to which the ZML
Funds and Equity Office will agree to consolidate.

"Core Portfolio" means the Properties that were held by the Equity Office
Predecessors during the entire period for both years being compared.

"Debt to Market Capitalization Ratio" means the total consolidated and
unconsolidated debt of the Company as a percentage of the market value of
outstanding Common Shares and Units plus total consolidated and unconsolidated
debt, but excluding (i) all nonrecourse consolidated debt in excess of the
Company's proportionate share of such debt and (ii) all nonrecourse
unconsolidated debt of partnerships in which the Company is a limited partner.

"Declaration of Trust" means the Company's declaration of trust as filed
with the State Department of Assessments and Taxation of Maryland.

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"DOL" means the United States Department of Labor.

"DOL Regulation" means the regulation issued by the DOL defining Plan
Assets for certain purposes.

"EGI" means Equity Group Investments, Inc., an Illinois corporation.

"Employee Plan" means the Company's 1997 Employee Share Option and
Restricted Share Plan.

"Environmental Laws" means Federal, state and local laws and regulations
relating to protection of the environment.

"EOH" means Equity Office Holdings, L.L.C., a Delaware limited liability
company.

"EOP" means Equity Office Properties, L.L.C., a Delaware limited liability
company.

"EQR" means Equity Residential Properties Trust, a Maryland real estate
investment trust, which is an equity REIT focused solely on multifamily
properties and is affiliated with Mr. Zell.

"Equity Group" means one or more of EGI, EOP and EOH.

"Equity Group Owners" means certain affiliates of Mr. Samuel Zell which own
the Equity Group.

"Equity Office Predecessors" means, on a combined basis, the Office
Properties and Parking Facilities of the ZML Funds and the Management Business
of the Equity Group that will be combined into the Company pursuant to the
Consolidation.

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

"ERISA Plan" means an employee benefit plan subject to Title I of ERISA.

"Escrowed Common Shares" means Common Shares issued to the ZML REIT
shareholders which are deposited into ZML REIT Escrows.

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

"401(k) Plan" means the Equity Office Section 401(k) Savings/Retirement
Plan.

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

"GAAP" means generally accepted accounting principles in the United States.

"GP Incentive Distribution" has the meaning set forth under "Structure and
Formation of the Company -- Formation Transactions."

"Indemnity Common Shares" means the Common Shares deposited into the
Indemnity Escrows for two years following the Consolidation, which will
represent 1% of the Common Shares issued in connection with the Merger of the
ZML REITs into the Company.

"Indemnity Escrow" means the escrow formed to hold the Indemnity Common
Shares.

"Interested Shareholder" means any person who beneficially owns 10% or more
of the voting power of a Maryland real estate investment trust's shares of
beneficial interest or any person who, at any time within the

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two-year period prior to the date in question, was the beneficial owner of ten
percent or more of the voting power of the outstanding voting shares of
beneficial interest of the trust.

"Investor Limited Partners" means, collectively, the ZML Investors who are
limited partners of Opportunity Partnership I and Opportunity Partnership II.

"IRS" means the United States Internal Revenue Service.

"Joint Venture Properties" means 19 of the Properties which are held in
partnerships or subject to participation agreements with unaffiliated third
parties.

"leased" means all space for which leases have been executed, whether or
not the lease term has commenced.

"LIBOR" means the London Interbank Offering Rate.

"LLC" means limited liability company.

"Line of Credit" means the $350 million unsecured revolving credit
agreement into which the Company expects to enter.

"Liquidation Period" means the two-year period following the Consolidation
during which the ZML Opportunity Partnerships will be liquidated.

"Managed Properties" means the properties of the Equity Group to be managed
by the Management Corp.

"Management Business" means the office property management business of EOP,
the office property asset management business and the parking asset management
business of EGI and EOH relating to the Properties.

"Management Corp." means Equity Office Properties Management Corp., a
Delaware corporation.

"Market Interest Rate" means the current market credit spread for each loan
when added to the annualized monthly Treasury rate.

"market rent" represents the gross rental rate per rentable square foot for
buildings of comparable size, class and age based upon information obtained from
CB Commercial/Torto Wheaten Research or REIS Reports, Inc., as of December 31,
1996.

"Maryland REIT Law" means Title 8 of the Corporations and Associations
Article of the Annotated Code of Maryland, as amended from time to time.

"Merger Agreement" means the agreement pursuant to which the ZML REITs have
agreed to merge with the Company.

"Merger" means the proposed merger of the ZML REITs into the Company.

"Merrill Lynch" means Merrill Lynch & Co. or its affiliates.

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

"MHC" means Manufactured Home Communities, Inc., a Maryland corporation,
which is an equity REIT focused solely on manufactured housing communities and
is affiliated with Mr. Zell.

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

"1940 ACT" means the Investment Company Act of 1940, as amended.

"Non-ERISA Plan" means a qualified pension, profit sharing or stock bonus
plan not subject to ERISA.

"Non-U.S. Stockholders" means nonresident alien individuals, foreign
corporations, foreign partnerships and other foreign stockholders.

"NYSE" means the New York Stock Exchange.

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"occupied" means all space which is leased and for which the lease term has
commenced.

"Offering" means this offering of Common Shares of the Company pursuant to
and as described in this Prospectus.

"Office Properties" means the office properties to be owned by the
Operating Partnership.

"Operating Partnership" means EOP Operating Limited Partnership, a Delaware
limited partnership, alone, or as the context may require, together with its
subsidiaries.

"Operating Partnership Agreement" means the limited partnership agreement
of the Operating Partnership.

"Other Plans" means an IRA and a Non-ERISA Plan.

"Ownership Limit" means 9.9% of the lesser of the number or value of the
issued and outstanding Common Shares and 9.9% of the lesser of the number or
value of the outstanding shares of any other class or series of beneficial
interest of the Company.

"Parking Facilities" means the stand-alone parking facilities to be owned
by the Operating Partnership.

"Partial Liquidation Date" means each of the 15-month, 18-month, 21-month
and 24-month anniversaries of the Closing.

"Plan Assets" means the assets of the Company deemed to be assets of an
ERISA Plan.

"Plan of Liquidation" means the two-year plan of liquidation to be adopted
by each of the ZML Opportunity Partnerships.

"Preference Units" means preferred units and other partnership interests of
different classes and series having such rights, preferences, and other
privileges, variations and designations as may be determined by the Company.

"Preferred Shares" means the preferred shares of beneficial interest, $0.01
par value per share, of the Company.

"Properties" means collectively, one or more of the Office Properties and
one or more of the Parking Facilities more particularly described in the section
entitled "Business and Properties -- The Properties."

"Property Operating Expenses" means real estate taxes and insurance,
repairs and maintenance and property operating expenses.

"QFC" means Quality Foods Centers, Inc.

"REIT" means a real estate investment trust as defined under Sections 856
through 860 of the Code and applicable Treasury regulations.

"Related Party Tenant" under the Code means a tenant of the Company's real
property in which the Company or an owner of 10.0% or more of the Company,
directly or constructively owns 10.0% or more of the ownership interests.

"replacement cost rent" represents the Company's estimate of the gross rent
that would be required to justify construction of a building which would be
competitive with the subject Property. An estimate of the replacement cost to
build a property similar to the subject Property was calculated utilizing the
Marshall and Swift (June 1996) Commercial Estimator 5.0 Software Program. The
replacement cost rent is calculated under the assumptions that a net effective
return of 12% would be required to justify new construction and that occupancy
would stabilize at 95% as follows: replacement cost rent equals (estimated
replacement cost per square foot times 12% plus the estimated operating expenses
per square foot at the subject Property) divided by 95%. The estimated
replacement costs and the estimated replacement cost rents are based on
constructing a building similar to the subject Property in terms of the quality
of construction and amenities. The actual cost to construct a building that
would be competitive with the subject Property and the required investor returns
could be more or less than this estimate.

121
<PAGE> 128

"Representatives" means Merrill Lynch, Pierce, Fenner & Smith Incorporated.

"Restricted Common Shares" means the Common Shares received by the ZML
Investors and ZML Partners in the Consolidation or any Common Shares acquired in
redemption of units.

"Revco" means Revco D.S., Inc.

"Sealy" means Sealy Corporation.

"SEC" means the Securities and Exchange Commission.

"Securities Act" means the Securities Act of 1933, as amended.

"Service" means the Internal Revenue Service.

"Stabilized Yield" means, for the year indicated, net operating income over
the Company's undepreciated capitalized cost of investment.

"Subsidiary" or "Subsidiaries" means, collectively, the Operating
Partnership, any other partnerships in which the Company holds a direct or
indirect partnership interest, any wholly owned corporate subsidiaries of the
Company, and, as appropriate, the Management Corp.

"Third-Party Management Business" means that portion of the Management
Business that relates to property management of the Managed Properties and the
Joint Venture Properties, which business will be owned and conducted by the
Management Corp.

"Treasury Regulations" means the regulations promulgated by the IRS under
the Code.

"UBTI" means unrelated business taxable income as defined in Section 512(a)
of the Code.

"Underwriters" means the underwriters of the Offering for whom the
Representatives are acting as representatives.

"Unit" means a unit of partnership interest in the Operating Partnership.

"Unit Redemption Right" means the right of holders of Units to require the
redemption of their Units at any time one year after the Closing; provided,
however, that partners of the ZML Opportunity Partnerships, including the
Investor Limited Partners, who receive Units in the consolidation will only have
the right to require redemption of their Units at any time commencing two years
after the Closing.

"UPREIT" means umbrella partnership REIT.

"USTs" means underground storage tanks.

"ZML Fund I" means Opportunity Partnership I and its general and limited
partners, including ZML REIT I.

"ZML Fund II" means Opportunity Partnership II and its general and limited
partners, including ZML REIT II.

"ZML Fund III" means Opportunity Partnership III and its general and
limited partners, including ZML REIT III.

"ZML Fund IV" means Opportunity Partnership IV and its general and limited
partners, including ZML REIT IV.

"ZML Funds" means, collectively, the ZML Opportunity Partnerships, together
with their limited and general partners, including the ZML REITs.

"ZML Investors" means shareholders in the ZML REITs and limited partners
(other than the ZML REITs) in the ZML Opportunity Partnerships.

"ZML Opportunity Partnership I" means Zell/Merrill Lynch Real Estate
Opportunity Partners Limited Partnership.

122
<PAGE> 129

"ZML Opportunity Partnership II" means Zell/Merrill Lynch Real Estate
Opportunity Partners Limited Partnership II.

"ZML Opportunity Partnership III" means Zell/Merrill Lynch Real Estate
Opportunity Partners Limited Partnership III.

"ZML Opportunity Partnership IV" means Zell/Merrill Lynch Real Estate
Opportunity Partners Limited Partnership IV.

"ZML Opportunity Partnerships" means, collectively, ZML Opportunity
Partnership I, ZML Opportunity Partnership II, ZML Opportunity Partnership III
and ZML Opportunity Partnership IV.

"ZML Partner(s)" means ZML Partners Limited Partnership, ZML Partners
Limited Partnership II, ZML Partners Limited Partnership III and/or ZML Partners
Limited Partnership IV, as applicable, each of which is the current general
partner of, respectively, ZML Opportunity Partnership I, ZML Opportunity
Partnership II, ZML Opportunity Partnership III, ZML Opportunity Partnership IV.

"ZML REIT Escrows" means, collectively, the four separate escrows set up
for the Escrowed Common Shares of the ZML REIT shareholders.

"ZML REIT I" means ZML Investors, Inc., a Delaware corporation.

"ZML REIT II" means ZML Investors II, Inc., a Delaware corporation.

"ZML REIT III" means Zell/Merrill Lynch Real Estate Opportunity Partners
III Trust, a Maryland real estate investment trust.

"ZML REIT IV" means Zell/Merrill Lynch Real Estate Opportunity Partners IV
Trust, a Maryland real estate investment trust.

"ZML REITs" means, collectively, ZML REIT I, ZML REIT II, ZML REIT III and
ZML REIT IV.

123
<PAGE> 130

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
EQUITY OFFICE PROPERTIES TRUST
Pro Forma Condensed Combined Financial Statements
(Unaudited):
Pro Forma Condensed Combined Financial Statements......... F-3
Pro Forma Condensed Combined Balance Sheet as of December
31, 1996............................................... F-4
Pro Forma Condensed Combined Statement of Operations for
the Year Ended December 31, 1996....................... F-5
Notes to Pro Forma Condensed Combined Balance Sheet....... F-6
Historical:
Report of Independent Auditors............................ F-12
Balance Sheet as of December 31, 1996..................... F-13
Notes to Balance Sheet.................................... F-14
EQUITY OFFICE PREDECESSORS
Report of Independent Auditors............................ F-16
Combined Balance Sheets as of December 31, 1996 and
1995................................................... F-17
Combined Statements of Operations for the years ended
December 31, 1996, 1995 and 1994....................... F-18
Combined Statements of Owners' Equity for the years ended
December 31, 1996, 1995 and 1994....................... F-19
Combined Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994....................... F-20
Notes to Combined Financial Statements.................... F-21
Schedule III -- Real Estate and Accumulated Depreciation
as of December 31, 1996................................ F-32
PROMENADE II
Report of Independent Auditors............................ F-36
Statements of Revenue and Certain Expenses for the Period
from January 1, 1996 to June 13, 1996 (Unaudited) and
the Year Ended December 31, 1995....................... F-37
Notes to Statements of Revenue and Certain Expenses....... F-38
TWO CALIFORNIA PLAZA
Report of Independent Auditors............................ F-39
Statements of Revenue and Certain Expenses for the Period
from January 1, 1996 to July 31, 1996 (Unaudited) and
the Year Ended December 31, 1995....................... F-40
Notes to Statements of Revenue and Certain Expenses....... F-41
BP TOWER
Report of Independent Auditors............................ F-42
Statements of Revenue and Certain Expenses for the Period
from January 1, 1996 to August 31, 1996 (Unaudited) and
the Year Ended December 31, 1995....................... F-43
Notes to Statements of Revenue and Certain Expenses....... F-44
SUNTRUST CENTER
Report of Independent Auditors............................ F-45
Statements of Revenue and Certain Expenses for the Period
from January 1, 1996 to August 31, 1996 (Unaudited) and
the Year Ended December 31, 1995....................... F-46
Notes to Statements of Revenue and Certain Expenses....... F-47
</TABLE>

F-1
<PAGE> 131
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RESTON TOWN CENTER
Report of Independent Auditors............................ F-48
Statements of Revenue and Certain Expenses for the Period
from January 1, 1996 to September 30, 1996 (Unaudited)
and the Year Ended December 31, 1995................... F-49
Notes to Statements of Revenue and Certain Expenses....... F-50
COLONNADE I
Report of Independent Auditors............................ F-51
Statement of Revenue and Certain Expenses for the Period
from January 1, 1996 to December 4, 1996............... F-52
Notes to Statement of Revenue and Certain Expenses........ F-53
177 BROAD STREET
Report of Independent Auditors............................ F-54
Statement of Revenue and Certain Expenses for the Year
Ended December 31, 1996................................ F-55
Notes to Statement of Revenue and Certain Expenses........ F-56
PRESTON COMMONS
Report of Independent Auditors............................ F-57
Statement of Revenue and Certain Expenses for the Year
Ended December 31, 1996................................ F-58
Notes to Statement of Revenue and Certain Expenses........ F-59
</TABLE>

F-2
<PAGE> 132

EQUITY OFFICE PROPERTIES TRUST

PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1996
(UNAUDITED)

The accompanying unaudited pro forma condensed combined balance sheet as of
December 31, 1996 reflects: (a) the acquisition and sale of properties and
certain capital contributions, distributions and financing activities that
occurred subsequent to December 31, 1996, as if such transactions had occurred
as of December 31, 1996; (b) the assumed sale of $300 million of Common Shares
as if those shares had been sold and the net proceeds had been used for the
repayment of debt as of December 31, 1996; and (c) certain other transactions
expected to occur in connection with the Offering and the Consolidation.

The accompanying unaudited pro forma condensed combined statement of
operations for the year ended December 31, 1996 reflects: (a) the acquisition of
23 properties acquired between January 1, 1996 and April 30, 1997, the pending
acquisition of one property and the disposition of two properties, as if these
transactions had occurred as of January 1, 1996; (b) the decrease in interest
resulting from debt assumed to be repaid at the time of the Consolidation, as if
this debt repayment had occurred as of January 1, 1996; and (c) certain other
pro forma adjustments to reflect the transactions expected to occur in
connection with the Offering and the Consolidation.

The accompanying unaudited pro forma condensed combined financial
statements have been prepared by management of Equity Office Predecessors and do
not purport to be indicative of the results which would actually have been
obtained had the transactions described above been completed on the dates
indicated or which may be obtained in the future. The pro forma condensed
combined financial statements should be read in conjunction with the combined
financial statements of Equity Office Predecessors included elsewhere herein.

F-3
<PAGE> 133

EQUITY OFFICE PROPERTIES TRUST

PRO FORMA CONDENSED COMBINED BALANCE SHEET

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
(UNAUDITED)
(IN THOUSANDS)
OFFERING AND
EQUITY CASH PROVIDED CONSOLIDATION EQUITY OFFICE
OFFICE BY FINANCING PRO FORMA PROPERTIES TRUST
PREDECESSORS ACQUISITIONS DISPOSITIONS ACTIVITIES ADJUSTMENTS PRO FORMA
------------ ------------ ------------ ------------- ------------- ----------------
(A) (B) (C) (D)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
- -------------------------------
Investment in real estate,
net........................ $3,291,815 $ 532,825 $(58,585) $ -- $ (E) $
Cash and cash equivalents.... 410,420 (578,552) 61,373 262,431 (100,209)(F) 55,463
Rents and other
receivables................ 58,661 -- (309) -- (49,919)(G) 8,433
Escrow deposits and
restricted cash............ 32,593 -- -- -- -- 32,593
Investments in limited
partnership and LLC........ 26,910 45,727 -- -- 2,817 (H) 75,454
Other assets................. 92,166 -- (1,289) -- (71,638)(I) 19,239
---------- --------- -------- -------- ----------- ----------
TOTAL ASSETS............... $3,912,565 $ -- $ 1,190 $262,431 $ $
========== ========= ======== ======== =========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
- -------------------------------
Mortgage debt................ $1,837,767 $ -- $ (8,239) $ 94,636 $ (348,200)(J) $1,575,964
Revolving line of credit..... 127,125 -- -- 107,500 -- 234,625
Distribution payable......... 96,500 -- -- (96,500) -- --
Other liabilities............ 113,091 -- (1,637) -- -- 111,454
---------- --------- -------- -------- ----------- ----------
TOTAL LIABILITIES.......... 2,174,483 -- (9,876) 105,636 (348,200) 1,922,043
---------- --------- -------- -------- ----------- ----------
Commitments and contingencies
Minority interests............. 11,080 -- -- -- (K)
Owners' equity................. 1,727,002 -- 11,066 156,795 (1,894,863)(L)
Common shares of beneficial
interests.................... -- -- -- -- (M)
Paid in capital................ -- -- -- -- (N)
---------- --------- -------- -------- ----------- ----------

TOTAL SHAREHOLDERS'
EQUITY................... 1,727,002 -- 11,066 156,795
---------- --------- -------- -------- ----------- ----------

TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY..... $3,912,565 $ -- $ 1,190 $262,431 $ $
========== ========= ======== ======== =========== ==========
</TABLE>

See accompanying notes.

F-4
<PAGE> 134

EQUITY OFFICE PROPERTIES TRUST

PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
(UNAUDITED)
(IN THOUSANDS)
OFFERING AND
CONSOLIDATION EQUITY OFFICE
EQUITY OFFICE PRO FORMA PROPERTIES TRUST
PREDECESSORS ACQUISITIONS DISPOSITIONS ADJUSTMENTS PRO FORMA
--------------- --------------- --------------- --------------- ----------------
(O) (P)
<S> <C> <C> <C> <C> <C>
Income
Rental............................ $ 448,517 $ 132,176 $ (8,391) $ 16,086 (Q) $ 588,388
Parking........................... 27,253 13,829 (1,461) -- 39,621
Other............................. 17,626 4,888 (100) -- 22,414
Fees from noncombined
affiliates..................... 5,120 -- -- -- 5,120
Interest.......................... 9,608 -- (7) -- 9,601
--------------- --------------- --------------- --------------- ---------------
508,124 150,893 (9,959) 16,086 665,144
--------------- --------------- --------------- --------------- ---------------
Expenses
Property operating................ 201,067 62,752 (5,046) -- 258,773
Interest.......................... 119,595 38,398 (956) (27,266)(R) 129,771
Depreciation...................... 82,905 25,398 (1,941) -- (S) 106,362
Amortization...................... 13,332 -- (346) (9,777)(T) 3,209
General and administrative (U).... 23,145 -- -- 2,400 (V) 25,545
--------------- --------------- --------------- --------------- ---------------
440,044 126,548 (8,289) (34,643) 523,660
--------------- --------------- --------------- --------------- ---------------
Income before (income) allocated to
minority interests, income from
investments in limited partnership
and LLC, and gain on sale of real
estate............................ 68,080 24,345 (1,670) 50,729 141,484
(Income) allocated to minority
interests......................... (2,086) -- -- (56)(W)
Income from investments in limited
partnership and LLC............... 2,093 2,633 -- -- 4,726
Gain on sale of real estate......... 5,338 -- -- -- 5,338
--------------- --------------- --------------- --------------- ---------------
Net income.......................... $ 73,425 $ 26,978 $ (1,670) $ $
=============== =============== =============== =============== ===============
Net income per common share......... $ (X)
===============
</TABLE>

See accompanying notes.

F-5
<PAGE> 135

EQUITY OFFICE PROPERTIES TRUST

NOTES TO PRO FORMA CONDENSED COMBINED BALANCE SHEET

DECEMBER 31, 1996
(Unaudited)

Basis of Presentation. The contribution to the Operating Partnership of
the ZML Partners' interests in the Office Properties and Parking Facilities and
the Equity Group's interest in the Management Business in exchange for Units and
Common Shares typically would be accounted for at the historical cost of those
interests, similar to a pooling of interests. Due to the relatively small
percentage of these interests, however, such interests, together with all
remaining non-affiliated interests, have been accounted for using the purchase
method of accounting, based on the fair value of the Common Shares and Units
issued.

A. To reflect the acquisition of the following properties since December 31,
1996:

177 Broad Street
The Biltmore Apartments
Preston Commons
Oakbrook Terrace Tower
One Maritime Plaza
201 Mission Street
Smith Barney Tower
50% Interest in Civic Parking L.L.C.

This adjustment also reflects the probable acquisition of 30 N. LaSalle
Street.

B. To reflect the sale of Barton Oaks Plaza II for $13.5 million, the
anticipated sale of 8383 Wilshire for $59 million, and the repayment of
$8.2 million in related debt.

C. To reflect $262.4 million of net cash proceeds for events that occurred
subsequent to December 31, 1996, as follows:

<TABLE>
<S> <C>
Capital contributed by capital partners of the ZML Funds.... $186,795,000
Distributions to capital partners of the ZML Funds.......... (126,500,000)
Net proceeds from refinancings.............................. 94,636,000
Net proceeds from draws on the line of credit............... 107,500,000
------------
$262,431,000
============
</TABLE>

D. To record the Offering and the Consolidation based upon the assumed issuance
of million Common Shares, assuming a price of $20.00 per share, in
exchange for % of the ownership interest in the Operating Partnership
that is assumed to be owned by the Company (comprised of 15 million shares
to be sold in the Offering and million shares to be issued in the
Consolidation). It is assumed that million Units in the Operating
Partnership are issued in the Consolidation in exchange for % of the
ownership interest in the Operating Partnership which will not be held by
the Company.

F-6
<PAGE> 136

EQUITY OFFICE PROPERTIES TRUST

NOTES TO PRO FORMA CONDENSED COMBINED BALANCE SHEET -- (CONTINUED)

DECEMBER 31, 1996
(Unaudited)

E. To record the allocation of estimated equity value in excess of book value
("net equity value") to investment in real estate based on the issuance of
Common Shares and Units as follows:

<TABLE>
<S> <C>
Issuance of million shares and Units at $20.00
per share / Unit........................................ $
Less book value of owner's equity before adjustments to
reflect the estimated net equity value of assets........ (2,130,242,000)
--------------
Total share/Unit value in excess of book value:........... $
==============
Allocation of excess value to assets and liabilities based
on relative differences between book value and estimated
net equity value:
Decrease in other assets (see Note I)..................... $ (68,316,000)
Decrease in accounts receivable related to net deferred
rent
(see Note G)............................................ (49,919,000)
Decrease in mortgage debt to mark to market
(see Note J)............................................ 9,290,000
Increase in investments in limited partnership and LLC
(see Note H)............................................ 2,817,000
Adjustment to the basis of the investment in real estate,
net.....................................................
--------------
Total adjustments:........................................ $
==============
</TABLE>

F. To reflect the following:

<TABLE>
<S> <C>
Gross proceeds from the assumed sale of 15 million Common
Shares, $0.01 par value per share, at $20.00 per share.... $ 300,000,000
Transaction, registration and issuance costs................ (23,528,000)
Costs associated with the Consolidation..................... (20,675,000)
Anticipated repayment of mortgage debt and other
indebtedness secured by properties to be owned by the
Company (see Note J)...................................... (338,910,000)
Anticipated prepayment penalties on retired mortgage debt
and other indebtedness (calculated as of December 31,
1996; this amount is subject to change based on the actual
date of repayment and changes in interest rates).......... (17,096,000)
---------------------------
Net decrease in cash at December 31, 1996................... $ (100,209,000)
===========================
</TABLE>

G. To eliminate the deferred rent receivable, which arose from the historical
straight-lining of rents (see Note E).

H. To increase the basis of the investment in limited partnership and LLC
accounted for on the equity method (see Note E).

I. To eliminate the $3.3 million of unamortized deferred financing fees
related to mortgage debt which will be repaid with proceeds of the Offering
(see Note J), and the $68.3 million decrease in other assets, consisting of
lease acquisition costs, deferred financing fees and organization costs
that will be written off as a result of the Consolidation (see Note E).

F-7
<PAGE> 137

EQUITY OFFICE PROPERTIES TRUST

NOTES TO PRO FORMA CONDENSED COMBINED BALANCE SHEET -- (CONTINUED)

DECEMBER 31, 1996
(Unaudited)

J. To reflect the following:

<TABLE>
<S> <C>
Adjustment to reduce the assumed Equity Office Predecessors
debt to its fair value (calculated as of December
31,1996); this amount is subject to change based on the
actual date of repayment and changes in interest rates)
(see Note E).............................................. $ (9,290,000)
Debt to be repaid from net proceeds of the Offering and cash
held by Equity Office Predecessors (see below)............ (338,910,000)
-------------
Net decrease in mortgage debt payable at December 31,
1996...................................................... $(348,200,000)
=============
</TABLE>

Debt to be repaid from net proceeds of the Offering and cash held by Equity
Office Predecessors

<TABLE>
<CAPTION>
AMOUNT TO
PROPERTY MATURITY DATE INTEREST RATE BE REPAID
---------------------------------------- ---------------- -------------- -----------
<S> <C> <C> <C>
60 Spear................................ December 1, 1999 9.01%
CIGNA Center............................ December 1, 1999 9.01%
Summit Office Center.................... December 1, 1999 9.01%
Tampa Commons........................... December 1, 1999 9.01%
First Union Center...................... December 1, 1999 9.01%
Intercontinental Center................. December 1, 1999 9.01%
Four Forest............................. December 1, 1999 9.01%
Dominion Tower.......................... December 1, 1999 9.01%
500 Marquette Building.................. December 1, 1999 9.01%
Atrium Tower............................ December 1, 1999 9.01%
Sarasota City Center.................... December 1, 1999 9.01%
University Tower........................ December 1, 1999 9.01%
1111 19th Street........................ December 1, 1999 9.01% $155,843,000
1 & 2 Stamford/300 Atlantic............. March 1, 2000 LIBOR + 2.25% 74,101,000
850 Third Avenue........................ March 1, 2002 8.79% 54,200,000
Two California Plaza.................... January 1, 2003 LIBOR + 2% 54,766,000
------------
$338,910,000
============
</TABLE>

The amounts reflected above are based on the balances at December 31, 1996.
The actual amounts repaid will be different to the extent of any
amortization of loan balances which occurs prior to the actual date of
repayment.

K. To reflect the recognition of minority interest ownership in the Operating
Partnership, estimated to be %, that will not be owned by the Company.
Minority interests were computed as follows:

<TABLE>
<S> <C>
Pro Forma equity of the Operating Partnership, net of its
historical minority interests of $11,080,000.............. $
Percentage of Units in the Operating Partnership which are
not assumed to be owned by the Company.................... %
-------------------------
Minority interests in the equity of the Operating
Partnership as of December 31, 1996....................... $
=========================
</TABLE>

F-8
<PAGE> 138

EQUITY OFFICE PROPERTIES TRUST

NOTES TO PRO FORMA CONDENSED COMBINED BALANCE SHEET -- (CONTINUED)

DECEMBER 31, 1996
(Unaudited)

L. To reclassify owners' equity.

M. To record par value of million Common Shares anticipated to be issued
in the Offering and the Consolidation with a par value of $0.01 per share.

N. To reflect the net increase to paid in capital associated with the issuance
of Common Shares and certain other transactions related to the
Consolidation, as summarized below:

<TABLE>
<S> <C>
Net proceeds from the sale of 15 million Common Shares, net
of $23.528 million of issuance costs (see Note F)......... $ 276,472,000
Costs associated with the Consolidation (see Note F)........ (20,675,000)
Adjustments to assets and liabilities resulting from
issuance of Common Shares and Units (see Note E)..........
Reclassification of owners' equity (see Note L)............. 1,894,863,000
Elimination of unamortized loan fees on debt to be repaid at
the time of the Consolidation (see Note I)................ (3,322,000)
Prepayment penalties on retired mortgage debt (see Note
F)........................................................ (17,096,000)
Par value of million Common Shares (see Note M)......
Allocation of minority interests in the equity of the
Operating Partnership (see Note K)........................
-------------------------
Net increase to paid in capital at December 31, 1996........ $
=========================
</TABLE>

F-9
<PAGE> 139

EQUITY OFFICE PROPERTIES TRUST

NOTES TO PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1996
(Unaudited)

O. To reflect the operations and the depreciation expense for the period from
January 1, 1996 through the date of acquisition for properties acquired in
1996, or December 31, 1996 for the acquisitions completed or anticipated to
be completed in 1997, for the following properties. Interest expense was
also adjusted where appropriate to reflect a full year.

<TABLE>
<CAPTION>
ACQUIRED PROPERTY
----------------- DATE ACQUIRED
<S> <C>
1601 Market Street.................... January 18, 1996
Promenade II.......................... June 14, 1996
Two California Plaza.................. August 23, 1996
BP Tower.............................. September 4, 1996
SunTrust Center....................... September 18, 1996
Reston Town Center.................... October 22, 1996
One Phoenix Plaza..................... December 4, 1996
Colonnade I........................... December 4, 1996
Boston Harbor Garage.................. December 10, 1996
Milwaukee Center Parking Garage....... December 18, 1996
15th & Sansom Streets Garage.......... December 27, 1996
1616 Chancellor Street Garage......... December 27, 1996
Juniper/Locust Streets Garage......... December 27, 1996
1616 Sansom Street Garage............. December 27, 1996
1111 Sansom Street Garage............. December 27, 1996
177 Broad Street...................... January 29, 1997
Biltmore Apartments................... January 29, 1997
Preston Commons....................... March 21, 1997
Oakbrook Terrace Tower................ April 16, 1997
50% Interest in Civic Parking
L.L.C............................... April 16, 1997
One Maritime Plaza.................... April 21, 1997
Smith Barney Tower.................... April 29, 1997
201 Mission Street.................... April 30, 1997
30 N. LaSalle Street.................. Pending
</TABLE>

The depreciation adjustment of $25.4 million is based on the cost to
acquire the above listed properties, assuming that 10% of the purchase
price is allocated to land and the depreciable lives are 40 years.
Depreciation is computed using the straight-line method, for the period
from January 1, 1996 through the date each property was acquired, or
December 31, 1996, for the acquisitions that were or are anticipated to be
completed in 1997.

P. To eliminate the operations of Barton Oaks Plaza II and 8383 Wilshire for
the year ended December 31, 1996. Barton Oaks Plaza II was sold during
January, 1997, and 8383 Wilshire is currently under contract for sale.

Q. To reflect the adjustment for the straight line effect of scheduled rent
increases.

F-10
<PAGE> 140

EQUITY OFFICE PROPERTIES TRUST

NOTES TO PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS -- (CONTINUED)

FOR THE YEAR ENDED DECEMBER 31, 1996
(Unaudited)

R. To reflect the reduction of interest expense associated with the debt
assumed to be repaid at the time of the Consolidation (see Note J).

S. To reflect depreciation expense related to the adjustment to record the net
equity value of the investment in real estate for the period from January
1, 1996 to December 31, 1996, on a straight-line basis, as follows:

<TABLE>
<S> <C>
Adjustment to the basis of the investment in real estate
(see Note E)........................................... $
Less: portion allocated to land, estimated to be 10%..... ( )
-----------
Depreciation expense based on an estimated useful life of
40 years............................................... $
-----------
</TABLE>

T. To eliminate the $13.0 million of amortization historically recognized by
Equity Office Predecessors as a result of the write-off of deferred loan
costs, lease acquisition costs and organizational costs (see Note I), net
of the $3.2 million amortization of the discount required to record the
mortgage debt at fair value based upon the issuance of Common Shares and
Units.

U. Includes general and administrative expenses associated with services for
noncombined affiliates.

V. To reflect additional general and administrative expenses expected to be
incurred as a result of reporting as a public company, as follows:

<TABLE>
<S> <C>
Directors and officers insurance............................ $ 500,000
Printing and mailing........................................ 500,000
Trustees and directors fees................................. 300,000
Investor relations.......................................... 300,000
Other....................................................... 800,000
----------
Total....................................................... $2,400,000
==========
</TABLE>

W. To reflect the estimated % minority interests ownership in the Operating
Partnership and to reflect the 5% economic interest that the Company will
not own in the Management Corp., as follows:

<TABLE>
<S> <C>
Fees from noncombined affiliates............................ $5,120,000
Management Corp. expenses................................... 4,000,000
----------
Estimated Management Corp. net income....................... 1,120,000
----------
Minority interest 5% economic interest...................... $ 56,000
==========
</TABLE>

X. Pro forma net income per Common Share is based upon million Common
Shares assumed to be outstanding upon completion of the Offering and the
Consolidation.

F-11
<PAGE> 141

REPORT OF INDEPENDENT AUDITORS

The Board of Trustees
of Equity Office Properties Trust

We have audited the accompanying balance sheet of Equity Office Properties
Trust, a Maryland real estate investment trust, as of December 31, 1996. This
balance sheet is the responsibility of the Company's management. Our
responsibility is to express an opinion on this balance sheet based on our
audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.

In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the financial position of Equity Office Properties Trust at
December 31, 1996, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Chicago, Illinois
April 28, 1997

F-12
<PAGE> 142

EQUITY OFFICE PROPERTIES TRUST

BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31,
1996
-------------
<S> <C>
ASSETS
------
Cash........................................................ $ 25,000
-------------
$ 25,000
=============
SHAREHOLDERS' EQUITY
--------------------
Commitments and contingencies
Common Shares, $0.01 par value; 1,000 shares authorized,
issued and outstanding.................................... $ 10
Additional Paid in Capital.................................. 24,990
-------------
$ 25,000
=============
</TABLE>

See accompanying notes.

F-13
<PAGE> 143

EQUITY OFFICE PROPERTIES TRUST

NOTES TO BALANCE SHEET
DECEMBER 31, 1996

1. ORGANIZATION

Unless defined otherwise herein, capitalized terms used in these notes to
the balance sheet have the same meaning as defined elsewhere in this Prospectus.
These footnotes should be read in conjunction with the Prospectus. Equity Office
Properties Trust (together with its subsidiaries, the "Company"), a Maryland
real estate investment trust, was formed on October 9, 1996. The Company will be
the managing general partner and majority owner of a newly formed limited
partnership (the "Operating Partnership"). The Company will conduct
substantially all of its business through the Operating Partnership. The Company
has been formed to continue and expand the national office property business
organized by Mr. Samuel Zell, Chairman of the Board of Trustees of the Company.
The Company will be a fully integrated self-administered and self-managed real
estate company and expects to qualify as a real estate investment trust (a
"REIT") for federal income tax purposes commencing with the year ended December
31, 1997. Upon completion of the Offering, more fully described elsewhere in
this Prospectus, the Company will sell common shares of beneficial interest
("Common Shares") to the public. The ZML Opportunity Partnerships will
contribute Office Properties and Parking Facilities to the Operating Partnership
in exchange for Units and the Shareholders in the ZML REITs will receive Common
Shares in exchange for their interests in the ZML REITs. In addition, the Equity
Group will contribute the Management Business in exchange for Units which will
be exchangeable for Common Shares.

2. COMMITMENTS AND CONTINGENCIES

The Company will become a party to various legal actions resulting from the
operating activities to be transferred to the Operating Partnership. These
actions are incidental to the transferred business and management does not
believe that these actions will have a material adverse effect on the Company.

3. USE OF ESTIMATES

The preparation of the balance sheet in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the balance sheet and accompanying notes. Actual
results could differ from those estimates.

4. OFFERING AND CONSOLIDATION COSTS

In connection with the Offering, the Company will incur legal, accounting
and related costs. These costs will be deducted from the gross proceeds of the
Offering. In addition, the direct costs incurred in connection with the
Consolidation will be included in the costs of the Office Properties and Parking
Facilities contributed to the Operating Partnership.

5. INCOME TAXES

Commencing with the year ending December 31, 1997, the Company intends to
make an election to be taxed as a REIT under Sections 856 through 860 of the
Internal Revenue Code of 1986, as amended (the "Code"). As a REIT, the Company
generally will not be subject to federal income tax if it distributes at least
95% of its taxable income for each tax year to its shareholders. REITs are
subject to a number of organizational and operational requirements. If the
Company fails to qualify as a REIT in any taxable year, the Company will be
subject to federal income tax (including any applicable alternative minimum tax)
on its taxable income at regular corporate tax rates. Even if the Company
qualifies for taxation as a REIT, the Company may be subject to state and local
income taxes and to federal income tax and excise tax on its undistributed
income.

F-14
<PAGE> 144

6. STOCK OPTION AND RESTRICTED SHARE PLANS

Prior to the completion of the Offering, the Company intends to adopt the
Employee Plan for the purpose of attracting and retaining highly qualified
executive officers, trustees and employees. The Company will reserve Common
Shares for issuance pursuant to the Employee Plan in an amount equal to
approximately 2.56% of the total Common Shares outstanding immediately following
the Offering and Consolidation. In connection with the establishment of the
Employee Plan, the Company will grant additional options to purchase Common
Shares to certain officers, trustees, employees and consultants.

The Employee Plan will be qualified under Rule 16b-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Employee Plan will be
administered by the Compensation Committee and provide for the granting of share
options, share appreciation rights or restricted shares with respect to up to
6.4% of the Company's outstanding Common Shares (calculated on a fully diluted
basis) to executive or other key employees of the Company. Share options may be
granted in the form of "incentive stock options" (as defined in Section 422 of
the Code), or non-statutory share options, and are exercisable for up to 10
years following the date of the 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 Shares on
the grant date.

F-15
<PAGE> 145

REPORT OF INDEPENDENT AUDITORS

To the Owners of
the Equity Office Predecessors

We have audited the accompanying combined balance sheets of the Equity
Office Predecessors, as defined in Note 1, as of December 31, 1996 and 1995, and
the related combined statements of operations, owners' equity, and cash flows
for each of the three years in the period ended December 31, 1996. Our audits
also included the financial statement schedule III, Real Estate and Accumulated
Depreciation. These financial statements and schedule are the responsibility of
the management of the Equity Office Predecessors. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Equity Office
Predecessors at December 31, 1996 and 1995, and the combined results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.

ERNST & YOUNG LLP

Chicago, Illinois
March 25, 1997

F-16
<PAGE> 146

EQUITY OFFICE PREDECESSORS

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
- ------------------------------------------------------------
Investment in real estate................................... $3,549,708 $2,571,851
Accumulated depreciation.................................... (257,893) (178,448)
---------- ----------
3,291,815 2,393,403
Cash and cash equivalents................................... 410,420 111,121
Rents and other receivables (net of allowance for doubtful
accounts of $2,724 and $2,075, respectively).............. 58,661 38,974
Escrow deposits and restricted cash......................... 32,593 20,360
Investment in limited partnership........................... 26,910 26,505
Other assets (net of accumulated amortization of $21,806 and
$14,721, respectively).................................... 92,166 60,527
---------- ----------
TOTAL ASSETS......................................... $3,912,565 $2,650,890
========== ==========
LIABILITIES AND OWNERS' EQUITY
- ------------------------------------------------------------
Mortgage debt............................................... $1,837,767 $1,358,827
Revolving line of credit.................................... 127,125 76,000
Accounts payable and accrued expenses....................... 81,995 62,754
Due to affiliates........................................... 2,074 839
Distribution payable........................................ 96,500 12,508
Other liabilities........................................... 29,022 18,406
---------- ----------
TOTAL LIABILITIES.................................... 2,174,483 1,529,334
---------- ----------
Commitments and contingencies (Note 11)
Minority interests.......................................... 11,080 31,587
Owners' equity.............................................. 1,727,002 1,089,969
---------- ----------
TOTAL LIABILITIES AND OWNERS' EQUITY................. $3,912,565 $2,650,890
========== ==========
</TABLE>

See accompanying notes.

F-17
<PAGE> 147

EQUITY OFFICE PREDECESSORS

COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
INCOME:
Rental.............................................. $386,481 $289,320 $193,046
Tenant reimbursements............................... 62,036 41,935 27,200
Parking............................................. 27,253 15,390 6,920
Other............................................... 17,626 10,314 3,262
Fees from noncombined affiliates.................... 5,120 5,899 6,018
Interest............................................ 9,608 8,599 4,432
-------- -------- --------
Total income................................... 508,124 371,457 240,878
-------- -------- --------
EXPENSES:
Interest............................................ 119,595 100,566 59,316
Depreciation........................................ 82,905 64,716 40,812
Amortization........................................ 13,332 9,440 6,093
Real estate taxes and insurance..................... 57,045 41,330 30,014
Repairs and maintenance............................. 71,156 53,618 35,260
Property operating.................................. 72,866 56,540 42,138
General and administrative.......................... 23,145 21,987 15,603
Provision for value impairment...................... 0 20,248 0
-------- -------- --------
Total expenses................................. 440,044 368,445 229,236
-------- -------- --------
Income before (income) loss allocated to minority
interests, income from investment in limited
partnership, gain on sale of real estate, and
extraordinary items................................. 68,080 3,012 11,642
(Income) loss allocated to minority interests, net of
extraordinary gain of $20,035 in 1995............... (2,086) (2,129) 1,437
Income from investment in limited partnership......... 2,093 2,305 1,778
Gain on sale of real estate........................... 5,338 0 0
-------- -------- --------
Income before extraordinary items..................... 73,425 3,188 14,857
Extraordinary items................................... 0 31,271 1,705
-------- -------- --------
Net income............................................ $ 73,425 $ 34,459 $ 16,562
======== ======== ========
</TABLE>

See accompanying notes.

F-18
<PAGE> 148

EQUITY OFFICE PREDECESSORS

COMBINED STATEMENTS OF OWNERS' EQUITY

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31, 1996,
1995 AND 1994
-------------------
(IN THOUSANDS)
<S> <C>
Owners' Equity, January 1, 1994............................. $ 488,627
Contributions............................................... 251,909
Offering expenses........................................... (942)
Distributions............................................... (25,058)
Net income for the year ended December 31, 1994............. 16,562
----------
Owners' Equity, December 31, 1994........................... 731,098
Contributions............................................... 337,048
Offering expenses........................................... (128)
Distributions............................................... (12,508)
Net income for the year ended December 31, 1995............. 34,459
----------
Owners' Equity, December 31, 1995........................... 1,089,969
Contributions............................................... 661,265
Offering expenses........................................... (1,157)
Distributions............................................... (96,500)
Net income for the year ended December 31, 1996............. 73,425
----------
Owners' Equity, December 31, 1996........................... $1,727,002
==========
</TABLE>

See accompanying notes.

F-19
<PAGE> 149

EQUITY OFFICE PREDECESSORS

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1996 1995 1994
--------- ----------------- -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income.......................................... $ 73,425 $ 34,459 $ 16,562
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 96,237 74,156 46,905
(Income) from investment in limited
partnership.................................... (2,093) (2,305) (1,778)
(Gain) on sale of real estate.................... (5,338) 0 0
Provision for value impairment................... 0 20,248 0
Extraordinary (gain) from early extinguishments
of debt........................................ 0 0 (1,705)
Extraordinary (gain) on repurchase of debt....... 0 (31,271) 0
Provision for doubtful accounts.................. 2,284 2,096 572
Income (loss) allocated to minority interests.... 2,086 2,129 (1,437)
Changes in assets and liabilities:
(Increase) in rents receivable................. (21,971) (17,411) (8,552)
(Increase) decrease in other assets............ (9,747) 1,374 (3,124)
Increase in accounts payable and accrued
expenses.................................... 19,241 6,931 19,382
Increase (decrease) in due to Affiliates....... 1,235 (89) 293
Increase in other liabilities.................. 10,616 3,561 6,703
--------- ----------------- -----------------
Net cash provided by operating activities... 165,975 93,878 73,821
--------- ----------------- -----------------
INVESTING ACTIVITIES:
Property acquisitions............................... (768,906) (317,669) (351,489)
Payments for capital and tenant improvements........ (129,485) (76,985) (72,952)
Proceeds from sale of real estate................... 14,502 0 0
Distributions from (investments in) limited
partnership...................................... 1,688 2,300 (24,722)
Payments of lease acquisition costs................. (29,793) (16,106) (22,883)
(Increase) decrease in escrow deposits and
restricted cash.................................. (12,233) 27,845 (41,919)
--------- ----------------- -----------------
Net cash (used for) investing activities.... (924,227) (380,615) (513,965)
--------- ----------------- -----------------
FINANCING ACTIVITIES:
Capital contributions............................... 661,265 337,048 251,909
Capital distributions............................... (12,508) (17,800) (8,458)
Payments for offering expenses...................... (1,157) (128) (942)
Contributions from (distributions to) minority
interest partners................................ (22,593) 141 26,018
Proceeds from mortgage notes........................ 640,953 271,482 240,365
Proceeds from revolving line of credit.............. 216,943 288,000 166,000
Repurchase of debt.................................. 0 (40,078) 0
Principal payments on mortgage notes................ (254,104) (182,244) (152,615)
Principal payments on revolving line of credit...... (165,818) (378,000) 0
Payments of loan costs.............................. (5,430) (1,908) (6,854)
Prepayment penalties on early extinguishments of
debt............................................. 0 0 (500)
--------- ----------------- -----------------
Net cash provided by financing activities... 1,057,551 276,513 514,923
--------- ----------------- -----------------
Net increase (decrease) in cash and cash
equivalents......................................... 299,299 (10,224) 74,779
Cash and cash equivalents at the beginning of the
year................................................ 111,121 121,345 46,566
--------- ----------------- -----------------
Cash and cash equivalents at the end of the year...... $ 410,420 $ 111,121 $ 121,345
========= ================= =================
Supplemental information:
Interest paid during the year, including capitalized
interest of $4,640, $1,682 and $0,
respectively..................................... $ 121,813 $ 100,700 $ 55,832
========= ================= =================
Non-cash financing activities:
Financing assumed upon acquisition of real
estate......................................... $ 92,091 $ 265,816 $ 211,263
========= ================= =================
</TABLE>

See accompanying notes.

F-20
<PAGE> 150

EQUITY OFFICE PREDECESSORS

NOTES TO COMBINED FINANCIAL STATEMENTS

NOTE 1 - BUSINESS AND ORGANIZATION:

Unless defined otherwise herein, capitalized terms used in these notes to
the combined financial statements have the same meanings as defined elsewhere in
this Prospectus. These footnotes should be read in conjunction with the
Prospectus.

Business

Equity Office Predecessors is currently engaged in acquiring, owning,
managing, leasing, and renovating office properties and parking facilities
throughout the United States. The Management Business includes activities
related to both the management of Properties owned by Equity Office Predecessors
as well as properties which are owned by entities affiliated with Equity Office
Predecessors. The Company will continue the business of Equity Office
Predecessors.

Consolidation Transactions

Pursuant to the Consolidation as described in the Prospectus, the
Opportunity Partnerships will contribute all of their assets associated with the
Office Properties and Parking Facilities to the Operating Partnership and the
Operating Partnership will assume all liabilities associated with the Office
Properties and Parking Facilities in exchange for Units in the Operating
Partnership. In addition, the Equity Group will contribute the Management
Business to the Operating Partnership in exchange for Units in the Operating
Partnership. The ZML REITs will be merged into the Company, which will be the
managing general partner and majority owner of the Operating Partnership. The
consummation of these proposed transactions is subject to various conditions as
described in the Prospectus.

Organization

Equity Office Predecessors is not a legal entity, but rather a combination
of the Office Properties and Parking Facilities of the ZML Funds and the
Management Business of the Equity Group that will be combined into the Company
pursuant to the Consolidation. The business of the apartment and retail
properties owned by the ZML Funds (the "Non-Office Properties") have not been
included in these financial statements. Refer to Schedule III for a detailed
listing of the Office Properties and Parking Facilities included in the
financial statements.

Capital Contributions/Distributions

As of December 31, 1996, the capital partners of the four ZML Funds
previously committed to contribute approximately $2,113,947,500, of which
approximately $1,844,490,800 had been cumulatively contributed by capital
partners, approximately $82,661,700 of the commitment had been canceled, and
approximately $186,795,000 remained uncalled. On February 12, 1997, the ZML
Funds received capital contributions from capital partners of approximately
$50,405,000. In March, 1997, the remaining capital commitment of approximately
$136,390,000 has been called and is scheduled to be received in April, 1997.

As of December 31, 1996, the ZML Funds declared or distributed
approximately $139,045,900 to their capital partners.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Combination

The financial statements have been presented on a combined basis, at
historical cost, because the ZML Funds and the Management Business are under the
common control and management of the Equity Group Owners through general
partnership interests in the ZML Funds and through their ownership of the

F-21
<PAGE> 151

Management Business. Minority interests have been recorded for those entities
that are not wholly owned by the ZML Funds. Where controlling interests are not
held by the ZML Funds, the entities are accounted for as investments in limited
partnership utilizing equity accounting. All significant intercompany
transactions and balances have been eliminated in combination.

As of December 31, 1996, the net book value of the Non-Office Properties,
consisting of 14 apartment buildings and two shopping centers, which are not
included in these combined financial statements, was approximately $285,920,700.
All cash deficits incurred by the Non-Office Properties are reflected as
distributions and all excess cash flow generated by the Non-Office Properties,
including net proceeds from the sale of these properties, are reflected as
contributions to Equity Office Predecessors. The net contributions
(distributions) for the years ended December 31, 1996, 1995 and 1994 related to
the Non-Office Properties was approximately $98,780,000, $908,000 and
($7,258,000), respectively.

During 1996, two Non-Office Properties were sold which generated net
proceeds of approximately $96,664,000 which is included in the $98,780,000 net
contributions from Non-Office Properties for the year ended December 31, 1996.
The remaining 14 apartment buildings and one of the shopping centers are
currently held for disposition. On March 24, 1997, one of the apartment
buildings was sold to an affiliate of the Equity Group, which generated net
proceeds of approximately $6,400,000. In addition, contracts have been executed
with unaffiliated parties for the sale of the shopping center and one of the
apartment buildings. Although these transactions are subject to the satisfaction
of certain conditions and contingencies, they are expected to close in 1997.

Investment in Real Estate

Investment in real estate, including Office Properties and Parking
Facilities, was as follows:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Land.......................................... $ 314,370 $ 235,581
Building...................................... 2,871,690 2,099,391
Building improvements......................... 161,497 85,737
Tenant improvements........................... 196,093 146,966
Furniture and fixtures........................ 6,058 4,176
---------- ----------
3,549,708 2,571,851
Accumulated depreciation...................... (257,893) (178,448)
---------- ----------
$3,291,815 $2,393,403
========== ==========
</TABLE>

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

<TABLE>
<CAPTION>
ASSET CATEGORY ESTIMATED USEFUL LIFE
-------------- ---------------------
<S> <C>
Building............................................. 40 years
Building improvements................................ 4 -- 40 years
Tenant improvements.................................. life of lease
Furniture and fixtures............................... 3 -- 12 years
</TABLE>

During 1995, the Financial Accounting Standards Board issued Statement No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" ("Statement No. 121")

F-22
<PAGE> 152

which established accounting standards for the evaluation of the potential
impairment of such assets. This statement was adopted by Equity Office
Predecessors as of January 1, 1995. Rental properties are individually evaluated
for impairment when conditions exist which may indicate that it is probable that
the sum of expected future cash flows (on an undiscounted basis) from a rental
property are less than its historical net cost basis. Upon determination that a
permanent impairment has occurred, rental properties are reduced to their fair
value. During the year ended December 31, 1995, Equity Office Predecessors
recorded a provision for value impairment of approximately $20,248,500, of which
$17,512,000 related to the adjustment of investment in real estate and
approximately $2,736,500 related to unamortized lease acquisition costs.

For properties to be disposed of, an impairment loss is recognized when the
fair value of the property, less the estimated cost to sell, is less than the
carrying amount of the property measured at the time Equity Office Predecessors
has a commitment to sell the property and/or is actively marketing the property
for sale. Property to be disposed of is reported at the lower of its carrying
amount or its estimated fair value, less its cost to sell. Subsequent to the
date that a property is held for disposition, depreciation expense is not
provided for in the statement of operations.

Lease Acquisition Costs

Capitalized lease acquisition costs are recorded at cost and are included
in other assets. These costs are amortized over the respective lives of the
leases. Lease acquisition costs, net of accumulated amortization of $18,455,000
and $12,281,900, as of December 31, 1996 and 1995 were approximately $62,592,700
and $40,913,700, respectively.

Loan Costs

Capitalized loan costs are recorded at cost and are included in other
assets. These costs are amortized over the term of the respective financings on
a straight-line basis, which approximates the effective yield method. Loan
costs, net of accumulated amortization of $3,351,000 and $2,438,700, as of
December 31, 1996 and 1995 were approximately $8,372,300 and $7,217,100,
respectively.

Rental Income

Certain leases of Office Properties provide for tenant occupancy during
periods for which no rent is due or where minimum rent payments increase during
the term of the lease. Equity Office Predecessors records rental income for the
full term of each lease on a straight-line basis. As of December 31, 1996 and
1995, the receivables from tenants, net of reserves, which Equity Office
Predecessors expects to collect over the remaining life of these leases rather
than currently were approximately $49,986,100 and $31,558,700, respectively
("Deferred Rent"). The amounts included in rental income for the years ended
December 31, 1996 and 1995, which are not currently collectible, were
approximately $18,427,400 and $12,662,600, respectively. Deferred Rent is not
recognized for income tax purposes.

Cash Equivalents

Cash equivalents are considered to be all highly liquid investments
purchased with a maturity of three months or less. In addition, cash equivalents
include deposits made to a commingled bank account which is held in an
affiliate's name. Such affiliate provides centralized cash management services
to Equity Office Predecessors.

Escrow Deposits

Escrow deposits mainly consist of amounts held by lenders to provide for
future real estate tax expenditures and tenant improvements and earnest money
deposits on acquisitions.

F-23
<PAGE> 153

Restricted Cash

Restricted cash represents amounts committed for various utility deposits
and security deposits. Certain of these amounts may be reduced upon the
fulfillment of certain obligations.

Fair Value of Financial Instruments

Management believes that the carrying basis of Equity Office Predecessors'
long-term debt, consisting of mortgage loans, revolving bank loans and various
interest rate protection agreements, approximated their respective fair market
values as of December 31, 1996 and 1995. The current value of debt was computed
by discounting the projected debt service payments for each loan based on the
spread between the market rate and the effective rate, including the
amortization of loan origination costs, for each year. In addition, the carrying
values of cash and cash equivalents, restricted cash, escrow deposits, rents
receivable (excluding Deferred Rent), accounts payable and accrued expenses are
reasonable estimates of their fair value.

Interest Rate Protection Agreements

Equity Office Predecessors periodically entered into certain interest rate
protection agreements to effectively convert or cap floating rate debt to a
fixed rate basis, as well as to hedge anticipated finance transactions. Net
amounts paid or received under these agreements are recognized as an adjustment
to interest expense when such amounts are incurred or earned. Settlement amounts
paid or received in connection with terminated interest rate protection
agreements are deferred and amortized over the term of the related financing
transaction on the straight-line method, which approximates the effective yield
method.

Income Taxes

The Office Properties, Parking Facilities and the Management Business are
primarily owned in limited partnerships or limited liability companies, which
are substantially pass-through entities. Some of these pass-through entities
have corporate general partners or members, which are subject to Federal and
state income and franchise taxes. Equity Office Predecessors incurred Federal
and state income and franchise taxes of approximately $1,375,000 and $1,578,100
for the years ended December 31, 1996 and 1995, respectively, which are included
in general and administrative expenses.

The results of Equity Office Predecessors are included in the income tax
returns of the owners and, accordingly, the income tax obligations of the owners
have not been reflected in these financial statements.

Reclassification

Certain reclassifications have been made to the previously reported 1995
and 1994 statements in order to provide comparability with the 1996 statements
reported herein. These reclassifications have not changed the 1995 and 1994
results or Owners' Equity.

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 revenues and expenses during the
reporting periods. Actual results could differ from those estimates.

NOTE 3 - MORTGAGE DEBT AND REVOLVING LINE OF CREDIT:

Fixed Rate Debt

As of December 31, 1996 and 1995, Equity Office Predecessors had
outstanding fixed rate mortgage indebtedness of approximately $1,304,075,400 and
$900,912,800, respectively. Payments on fixed rate mortgage debt are generally
due in monthly installments of principal and interest or interest only. As of

F-24
<PAGE> 154

December 31, 1996 and 1995, fixed interest rates ranged from 6.88% to 10% and
6.75% to 10.25%, respectively. The weighted average fixed interest rate was
approximately 7.89% and 8.01% as of December 31, 1996 and 1995, respectively.

Variable Rate Debt

As of December 31, 1996 and 1995, Equity Office Predecessors had
outstanding variable rate mortgage indebtedness of approximately $533,691,500
and $457,914,100, respectively. Payments on variable rate mortgage debt are
generally due in monthly installments of principal and interest or interest
only. As of December 31, 1996 and 1995, variable interest rates ranged from
6.56% (LIBOR + 1%) to 7.83% (LIBOR + 2.25%) and 6.75% (LIBOR + 1%) to 10.28%
(LIBOR + 4.375%), respectively. The weighted average variable interest rate was
approximately 7.35% and 7.72% as of December 31, 1996 and 1995, respectively.

Lines of Credit

As of December 31, 1996 and 1995, Equity Office Predecessors had amounts
outstanding under lines of credit of approximately $127,125,000 and $76,000,000,
respectively. The $200 million line of credit ("$200 M Line") was obtained in
October 1994 and canceled in September 1996. Interest was payable monthly based
on the LIBOR + .625%. The $200 M line was secured by the capital commitments of
certain investors and was used to finance acquisitions. A $275 million
acquisition and term loan facility was obtained in September 1996 which matures
in September 1999 (the "$275 M Facility"). Under the $275 M Facility, Equity
Office Predecessors may obtain six month unsecured and secured loans ("Facility
A Loans") and secured three year term loans ("Facility B Loans") for office
buildings and parking facilities. Equity Office Predecessors may draw up to 50%
of the purchase price of the property for secured and unsecured Facility A Loans
and up to 65% of the purchase price of the property for Facility B Loans. The
$275 M Facility is full recourse to Equity Office Predecessors. Interest only is
payable monthly with the interest based on various LIBOR options (plus 1.65% on
unsecured Facility A Loans, 1.5% on secured Facility A Loans and 1.375% on
Facility B Loans) or the prime rate. As of December 31, 1996, Equity Office
Predecessors had chosen a LIBOR option.

Draw Facilities

As stated in the respective loan agreements, Equity Office Predecessors has
the ability to draw additional proceeds on certain of its mortgages for
operating deficits, capital and tenant improvements, and lease acquisition
costs. As of December 31, 1996 and 1995, amounts available to draw under these
mortgage notes were approximately $92,577,200 and $134,218,100, respectively.

Interest Rate Protection Agreements

In order to limit the market risk associated with variable rate debt,
Equity Office Predecessors entered into several interest rate protection
agreements. A $73,000,000 8% interest rate protection agreement based on the
three-month LIBOR at a total cost of 2.05% payable in quarterly installments of
approximately $66,600 was entered into in August 1993 and expires on August 14,
2000. A $100,000,000 7% interest rate protection agreement based on a
three-month LIBOR at a total cost of 1.67% payable in quarterly installments of
approximately $97,600 was entered into in August 1993 and expires on August 12,
1998. Equity Office Predecessors entered into an interest rate protection
agreement in October 1995 which fixes the interest rate on a $93,600,000 loan at
6.94% through June 30, 2000. Amounts paid under this interest rate protection
agreement for the years ended December 31, 1996 and 1995 were approximately
$463,400 and $16,200, respectively. The costs associated with these interest
rate protection agreements have been included in interest expense.

In addition, Equity Office Predecessors entered into two interest rate
protection agreements totaling $179,500,000 as a hedge on two mortgages loans.
The interest rate protection agreements were terminated at a net cost to Equity
Office Predecessors of approximately $110,000. This amount will be amortized as
interest expense over the term of the respective mortgage loans.

F-25
<PAGE> 155

Scheduled payments of principal on mortgage debt and the revolving line of
credit for each of the next five years and thereafter as of December 31, 1996
were as follows:

<TABLE>
<S> <C>
1997................. $ 73,000,200
1998................. 97,588,500
1999................. 483,993,300
2000................. 255,470,900
2001................. 222,219,800
Thereafter........... 832,619,200
---------------
$ 1,964,891,900
===============
</TABLE>

NOTE 4 - EXTRAORDINARY ITEMS AND PROVISION FOR VALUE IMPAIRMENT:

As reflected in the Combined Statement of Operations for the year ended
December 31, 1995, Equity Office Predecessors reported an extraordinary gain of
approximately $31,270,800 on the repurchase of debt, which is net of the
$20,034,600 minority partners' share, and a provision for value impairment of
approximately $20,248,500 related to Equity Office Predecessors' investment in
San Felipe Plaza Ltd.

As reflected in the Combined Statement of Operations for the year ended
December 31, 1994, Equity Office Predecessors repaid the mortgage notes relating
to two properties at a 10% discount resulting in a gain on early extinguishment
of debt of approximately $1,704,900, which was net of approximately $499,900 in
prepayment penalties and the write-off of $547,600 of unamortized loan costs
incurred in connection with the refinancing of certain of Equity Office
Predecessors' properties.

NOTE 5 - INVESTMENT IN LIMITED PARTNERSHIP:

Equity Office Predecessors acquired a mortgage receivable secured by the
500 Orange Tower Office Property ("500 Orange") and purchased land underlying
and adjacent to 500 Orange in July 1994. The mortgage note matures on June 30,
2013. The combined initial investment by Equity Office Predecessors'
subsidiaries amounted to $26,874,100, including acquisition expenses and fees.
Based upon the terms of the mortgage note, Equity Office Predecessors, as
lender, participates in residual profits, provides all cash needs required by
the property and can only look to the property to recover the loan. In addition,
100% of the income is allocated to Equity Office Predecessors. Accordingly, the
mortgage is analogous to an investment in a real estate limited partnership and
therefore is accounted for utilizing the equity method. Under such accounting
method, the net equity investment of Equity Office Predecessors is reflected on
the combined balance sheets, and the combined statements of operations include
Equity Office Predecessors' share of net income or loss from 500 Orange.

NOTE 6 - MINORITY INTERESTS:

The following properties are controlled and partially owned by Equity
Office Predecessors but have partners with minority interests. Equity Office
Predecessors has included 100% of the financial condition and results of
operations of these properties in the Combined Financial Statements of Equity
Office Predecessors. The equity interests by the unaffiliated partners are
reflected as minority interests.

<TABLE>
<CAPTION>
EQUITY
OFFICE
PREDECESSOR
PROPERTY OWNERSHIP
- ------------------------- -----------
<S> <C>
CIGNA Center............. 95%(1)
Plaza at La Jolla
Village................ 66.67%(1)
First Union Center....... 97%(2)
San Felipe Plaza......... 35%(3)
Capital Commons Garage... 50%(4)
</TABLE>

F-26
<PAGE> 156

1) Equity Office Predecessors owns a controlling interest and is the managing
general partner.

2) Equity Office Predecessors owns a controlling interest and receives
preferential allocations.

3) An affiliate of Equity Office Predecessors controls the major operating and
financing decisions of the property. Equity Office Predecessors receives
preferential allocations which result in Equity Office Predecessors
receiving 100% of the economic benefits.

4) Equity Office Predecessors owns a controlling interest and receives
preferential allocations. The unaffiliated partner is entitled to receive
50% of the remaining cash flow after Equity Office Predecessors receives
its preferential allocations.

In addition to the properties listed above, Equity Office Predecessors owns
certain other properties, and has a controlling interest in such properties,
subject to minority or participating interests. Equity Office Predecessors is
entitled to 100% of the economic benefits of these properties subject to
diminution after Equity Office Predecessors receives specified preferential
returns. Accordingly, no minority interests are reflected for these unaffiliated
parties.

NOTE 7 - RELATED PARTY TRANSACTIONS:

Affiliates provide various services to Equity Office Predecessors. Fees and
reimbursements paid by Equity Office Predecessors to affiliates for the years
ended December 31, 1996, 1995 and 1994 were as follows:

<TABLE>
<CAPTION>
PAID PAYABLE AS OF
YEARS ENDED DECEMBER 31, DECEMBER 31,
------------------------------------ ---------------------------
1996 1995 1994 1996 1995
---------- ---------- ---------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Acquisition Fees (A)............... $ 3,067,800 $ 1,097,200 $ 5,818,900 $ 586,700 $ --
Accounting and tax related
services......................... 796,600 554,100 457,800 61,500 85,100
Legal fees and expenses (B)........ 3,480,500 3,230,100 2,084,900 1,294,700 652,600
Office rent (C).................... 777,100 668,000 543,300 -- --
Disposition fees................... 124,400 -- -- -- --
Development fees (D)............... 702,100 437,500 -- -- 43,800
Reimbursement of property insurance
premiums......................... 5,032,000 3,735,100 2,498,900 200 24,500
Organizational and Offering
Expenses (E)..................... 777,600 179,700 515,100 105,600 16,200
Administrative services (F)........ 821,600 608,700 1,635,200 20,600 16,800
Consulting......................... 274,000 409,700 204,100 4,700 --
----------- ----------- ----------- ---------- --------
$15,853,700 $10,920,100 $13,758,200 $2,074,000 $839,000
=========== =========== =========== ========== ========
</TABLE>

(A) Represents amounts paid to Merrill Lynch, a limited partner of the general
partner of the ZML Funds.

(B) Represents amounts primarily paid to Rosenberg & Liebentritt, P.C. for legal
fees and expenses in connection with acquisition, corporate, and leasing
activity.

(C) Equity Office Predecessors leases its corporate office space from an
affiliate of the Equity Group Owners. Significant terms of the lease are as
follows:

<TABLE>
<S> <C>
Term:................................... January 1, 1995 -- December 31, 2001
Total space leased:..................... 52,028 square feet
Base rent after December 31, 1996:
1997.................................. $870,900
1998.................................. $896,900
1999.................................. $922,900
2000.................................. $948,900
2001.................................. $974,900
</TABLE>

Additional rent: Tenant's pro rata share of certain additional landlord
costs in excess of 1995 costs.

F-27
<PAGE> 157

(D) The renovation project at the 28 State Street Office Building is being
managed by an affiliate of the Equity Group Owners. In consideration for
their services, the development managers are being paid fees which
management believes are equal to or less than market for such services.

(E) Affiliates of the Equity Group Owners were reimbursed for reasonable costs
incurred in connection with the organization and the offering of units in
the ZML Funds, including legal and accounting fees and expenses, printing
costs and filing fees.

(F) Administrative services include fees paid by Equity Office Predecessors to
EGI for centralized services such as payroll processing, employee benefits,
telecommunications, publications, and consulting services such as economic
and demographics research for possible acquisitions.

An affiliate of the Equity Group Owners has an indirect interest in
Standard Parking Limited Partnership ("SPLP") which manages the parking
operations at certain Office Buildings that are owned by Equity Office
Predecessors. Management believes amounts paid to SPLP are equal to market for
such services.

Amounts received and due from affiliates

Affiliates of Equity Office Predecessors lease space in certain of the
Office Properties owned by Equity Office Predecessors. The provisions of the
leases are consistent with terms of unaffiliated tenants' leases. Total rents
and other amounts paid by affiliates under the terms of their respective leases
were approximately $3,471,500 and $2,657,500 for the years ended December 31,
1996 and 1995, respectively.

Equity Office Predecessors provides asset and property management services
to certain non-combined office and garage properties owned by affiliates of the
Equity Group Owners . Amounts due for these services as of December 31, 1996 and
1995 were approximately $816,900 and $1,363,300, respectively.

Equity Office Predecessors entered into a lease agreement with SPLP whereby
SPLP leased the North Loop Transportation Center Parking Facility ("North Loop")
from Equity Office Predecessors. The lease provides SPLP with annual successive
options to extend the term of the lease through 2033. The rent paid in 1996 and
1995 was approximately $3,161,500 and $1,691,600, respectively. In addition,
Equity Office Predecessors may receive additional rent based upon actual gross
revenues generated by North Loop. In accordance with the lease, Equity Office
Predecessors may be obligated to make an early termination payment if agreement
is not reached as to rent amounts to be paid.

In addition, Equity Office Predecessors is negotiating lease agreements
with SPLP for two additional Parking Facilities that were acquired in December
1996, Boston Harbor Garage and Milwaukee Center Parking Garage. These lease
agreements are expected to be executed in 1997.

NOTE 8 - SALE OF LAKEWAY III HOTEL:

Three Lakeway is a mixed--use property, including a 210 room hotel and an
18-story office complex. In January, 1996, Equity Office Predecessors sold the
condominium portion of the property which comprised the hotel. The gross sale
price attributable to the land and building was approximately $14,800,000 and
the gain realized was approximately $5,338,200. Pursuant to the terms of the
loan collateralizing the property, approximately $10,617,500 of the sales
proceeds were applied to the outstanding note balances.

F-28
<PAGE> 158

NOTE 9 - FUTURE MINIMUM RENTS:

Future minimum rental receipts due on noncancelable operating leases at the
Office Properties and Parking Facilities as of December 31, 1996 were as
follows:

<S> <C>
1997................. $ 452,618,100
1998................. 425,503,500
1999................. 378,930,400
2000................. 324,634,500
2001................. 261,674,200
Thereafter........... 1,069,271,200
---------------
$ 2,912,631,900
===============
</TABLE>

Equity Office Predecessors is subject to the usual business risks
associated with the collection of the above scheduled rents.

Equity Office Predecessors' investment in 500 Orange is accounted for
utilizing the equity method. Future minimum rental receipts for this Office
Property have not been included in the above schedule.

NOTE 10 - FUTURE MINIMUM LEASE PAYMENTS:

Equity Office Predecessors' ownership of three of its Office Properties and
two of its Parking Facilities are subject to ground leases. As disclosed in
their respective ground lease agreements, certain of these leases are subject to
rental increases based upon the appraised value of the property at specified
dates or certain financial calculations of the respective property. As disclosed
in Note 7, Equity Office Predecessors leases its office space from an affiliate.
In addition, Equity Office Predecessors has assumed lease obligations of certain
of their tenants at their former locations. Future minimum lease obligations
under these noncancelable leases, net of sublease rental income, as of December
31, 1996 were as follows:

<TABLE>
<S> <C>
1997............................................. $ 2,554,700
1998............................................. 2,484,100
1999............................................. 2,466,900
2000............................................. 2,381,400
2001............................................. 2,262,700
Thereafter....................................... 369,366,900
------------
$381,516,700
============
</TABLE>

Rental expense, net of sublease rental income of approximately $955,000 and
$712,900 for the years ended December 31, 1996 and 1995, was approximately
$1,671,800 and $1,043,300, respectively.

NOTE 11 - COMMITMENTS AND CONTINGENCIES:

Concentration of Credit Risk

Equity Office Predecessors maintains its cash and cash equivalents at
financial institutions. The combined account balances at each institution
periodically exceeds FDIC insurance coverage, and, as a result, there is a
concentration of credit risk related to amounts on deposit in excess of FDIC
insurance coverage. Management of Equity Office Predecessors believes that the
risk is not significant. In addition, Equity Office Predecessors believes it has
limited exposure to the extent of non-performance by the swap counterparties
since each counterparty is a major U.S. financial institution, and management
does not anticipate their non-performance.

F-29
<PAGE> 159

Environmental

Equity Office Predecessors, as an owner of real estate, is subject to
various environmental laws of Federal and local governments. Compliance by
Equity Office Predecessors with existing laws has not had a material adverse
effect on Equity Office Predecessors' financial condition and results of
operations, and management does not believe it will have such an impact in the
future. However, Equity Office Predecessors cannot predict the impact of new or
changed laws or regulations on its current properties or on properties that it
may acquire in the future.

Litigation

ZML-Chicago Parking Limited Partnership ("ZCP") and ZML-North Loop/Theatre
District Parking Limited Partnership ("NLT"), were named as defendants in an
action (the "Action") brought by an investor (the "Plaintiff") in an
unaffiliated entity owning an interest in NLT. NLT is the owner of two Parking
Facilities, North Loop Transportation Center and Theatre District Self Park
("Theatre District Garage"). The Plaintiff demands rescission of certain
transactions related to the acquisition by NLT of the Theatre District Garage. A
sustained judgment in favor of the Plaintiff could result in the loss of Equity
Office Predecessors' interest in the Theatre District Garage. This action is in
its discovery stage. Although the outcome cannot be predicted with any
certainty, Equity Office Predecessors believes that ZCP and NLT have substantial
meritorious defenses to all asserted claims and that Equity Office Predecessors
will not incur a loss in connection with the Action.

During 1996, Equity Office Predecessors and certain other parties filed
actions (the "Lawsuit") against Rockefeller Center Properties, Inc. ("RCPI")
seeking specific performance of certain agreements between the parties. In
November 1996, the parties settled all matters related to the Lawsuit. The
settlement provided that RCPI pay approximately $10,274,000, of which Equity
Office Predecessors was entitled to and received approximately $8,806,500, net
of expenses, which has been recorded as other income.

Except as described above, management of Equity Office Predecessors does
not believe there is any litigation threatened against Equity Office
Predecessors other than routine litigation arising out of the ordinary course of
business, some of which is expected to be covered by liability insurance, none
of which is expected to have a material adverse effect on the combined financial
statements of Equity Office Predecessors.

NOTE 12 - SUBSEQUENT EVENTS:

Financing Activities (refer to Schedule III for information regarding the
collateralization of these financings)

1) In January 1997, Equity Office Predecessors obtained financing of
approximately $34,450,000 collateralized by the North Loop and Theatre
District Parking Facilities. This loan has a 7.38% fixed interest rate and
a 10-year term. The existing loan on the Theatre District Garage of
approximately $16,276,800 was repaid with a portion of the proceeds from
this financing.

2) In January 1997, Equity Office Predecessors received a commitment for the
financing of the Capital Commons Garage in the amount of $4,500,000. The
term of the loan will be 10 years with a fixed interest rate of 7.83%.
Although this transaction is subject to the satisfaction of certain
conditions and contingencies, it is expected to close in the second quarter
of 1997.

3) In February 1997, Equity Office Predecessors obtained an $87,000,000
mortgage loan collateralized by BP Tower. The term of the loan is seven
years. Interest is payable monthly with the interest rate fixed at 7.34%.

Disposition Activities

1) In January 1997, Equity Office Predecessors sold Barton Oaks Plaza II for a
gross sales price of approximately $13,535,000. Approximately $6,585,400 of
the sales proceeds were used to repay the outstanding note balance of
Barton Oaks Plaza II and an additional $1,646,300 was used to repay a
portion of the outstanding note balance of Tampa Commons.

F-30
<PAGE> 160

Acquisition Activities

1) In January 1997, Equity Office Predecessors, through its subsidiaries,
purchased from an unaffiliated third party 177 Broad Street and the
Biltmore Apartments, a mixed-use property located in Stamford, Connecticut.
The all cash purchase price of approximately $36,200,000 included
acquisition related expenses.

2) In February 1997, Equity Office Predecessors, through its subsidiaries,
entered into a contract to purchase One Maritime Plaza, an office building
located in San Francisco, California. The contract calls for a purchase
price of approximately $99,500,000, which includes acquisition related
expenses. Although this transaction is subject to the satisfaction of
certain conditions and contingencies, it is expected to close in the second
quarter of 1997.

3) On March 21, 1997, Equity Office Predecessors, through its subsidiaries,
purchased from an unaffiliated third party Preston Commons, an office
building located in Dallas, Texas. The all cash purchase price of
approximately $55,100,000 includes acquisition related expenses.

F-31
<PAGE> 161

SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>

INITIAL COST TO COMPANY
-----------------------------
DECEMBER 31, 1996 BUILDINGS AND
DESCRIPTION LOCATION ENCUMBRANCES LAND IMPROVEMENTS
----------- -------- ----------------- ------------ --------------
<S> <C> <C> <C> <C>
Office Properties:
60 Spear Street Building.......................... San Francisco, CA $ 9,302,600(5) $ 4,149,900 $ 12,402,400
San Felipe Plaza (3).............................. Houston, TX 54,265,700 10,032,200 116,545,700
Dominion Tower.................................... Norfolk, VA 23,440,300(5) 3,806,300 38,354,400
Summit Office Park................................ Ft. Worth, TX 5,860,100(5) 865,000 7,785,100
CIGNA Center...................................... Oklahoma City, OK 732,500(5) 206,200 1,855,400
Tampa Commons..................................... Tampa, FL 16,603,500(5) 2,588,600 23,305,900
Intercontinental Center........................... Houston, TX 6,226,300(5) 1,043,100 7,508,000
First Union Center................................ Ft. Lauderdale, FL 16,603,500(5) 4,174,100 31,352,000
Four Forest....................................... Dallas, TX 17,067,400(5) 3,886,900 34,981,500
Northborough Tower................................ Houston, TX 7,032,100(5) 676,500 6,060,700
500 Marquette Building............................ Albuquerque, NM 11,329,500(5) 2,490,600 22,415,300
Atrium Towers..................................... Oklahoma City, OK 1,611,500(5) 433,200 3,898,700
One Clearlake Centre.............................. W. Palm Beach, FL 0 2,606,200 23,455,800
Barton Oaks Plaza II.............................. Austin, TX 6,592,600(5) 779,600 7,016,300
Community Corporate Center........................ Columbus, OH 17,412,700 2,423,200 21,808,900
Sarasota City Center.............................. Sarasota, FL 11,720,100(5) 2,109,500 19,213,200
Denver Corporate Center Towers II and III......... Denver, CO 15,037,100 2,304,400 20,739,200
University Tower.................................. Durham, NC 11,207,400(5) 916,700 8,250,400
8383 Wilshire..................................... Beverly Hills, CA 0 9,362,700 42,206,700
San Jacinto Center................................ Austin, TX 18,212,300 2,753,700 24,783,800
1111 19th Street, N.W............................. Washington D.C. 18,752,200(5) 3,259,400 29,343,200
Shelton Pointe.................................... Shelton, CT 0 522,400 4,702,000
Bank One Center................................... Indianapolis, IN 84,250,000 11,652,700 104,874,400
North Central Plaza Three......................... Dallas, TX 15,035,400 1,775,100 15,976,200
The Quadrant...................................... Englewood, CO 18,000,000 2,579,500 23,215,000
Canterbury Green.................................. Stamford, CT 19,250,000 0 25,983,000
Three Stamford Plaza.............................. Stamford, CT 16,750,000 1,477,900 13,301,100
Union Square...................................... San Antonio, TX 6,750,000 1,023,000 9,206,700
One North Franklin................................ Chicago, IL 65,150,400 4,414,800 39,723,000
1620 L Street..................................... Washington, DC 21,328,400 2,760,900 24,848,400
One and Two Stamford Plaza........................ Stamford, CT 45,791,600 5,932,800 53,395,000
300 Atlantic Street............................... Stamford, CT 28,309,800 3,433,500 30,901,300
Sterling Plaza.................................... Dallas, TX 15,738,700 2,086,600 19,180,800

<CAPTION>
COSTS CAPITALIZED
SUBSEQUENT GROSS AMOUNT CARRIED AT
TO ACQUISITION DECEMBER 31, 1996
------------------------- -----------------------------
BUILDINGS AND BUILDINGS AND
DESCRIPTION LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL(1)
----------- --------- ------------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
Office Properties:
60 Spear Street Building.......................... $ 0 $ 12,301,800 $ 4,149,900 $ 24,704,200 $ 28,854,100
San Felipe Plaza (3).............................. 0 (2,296,200) 10,032,200 114,249,500 124,281,700
Dominion Tower.................................... 0 7,191,600 3,806,300 45,546,000 49,352,300
Summit Office Park................................ 0 4,077,600 865,000 11,862,700 12,727,700
CIGNA Center...................................... 0 768,900 206,200 2,624,300 2,830,500
Tampa Commons..................................... 32,800 2,309,000 2,621,400 25,614,900 28,236,300
Intercontinental Center........................... 0 3,407,300 1,043,100 10,915,300 11,958,400
First Union Center................................ 0 4,898,900 4,174,100 36,250,900 40,425,000
Four Forest....................................... 26,900 4,958,500 3,913,800 39,940,000 43,853,800
Northborough Tower................................ 363,500 4,406,500 1,040,000 10,467,200 11,507,200
500 Marquette Building............................ 0 1,965,400 2,490,600 24,380,700 26,871,300
Atrium Towers..................................... 0 1,889,300 433,200 5,788,000 6,221,200
One Clearlake Centre.............................. 0 4,304,100 2,606,200 27,759,900 30,366,100
Barton Oaks Plaza II.............................. 0 939,100 779,600 7,955,400 8,735,000
Community Corporate Center........................ 0 3,565,700 2,423,200 25,374,600 27,797,800
Sarasota City Center.............................. 0 3,308,300 2,109,500 22,521,500 24,631,000
Denver Corporate Center Towers II and III......... 0 3,829,100 2,304,400 24,568,300 26,872,700
University Tower.................................. 0 1,868,900 916,700 10,119,300 11,036,000
8383 Wilshire..................................... 0 6,462,600 9,362,700 48,669,300 58,032,000
San Jacinto Center................................ 0 5,494,600 2,753,700 30,278,400 33,032,100
1111 19th Street, N.W............................. 0 11,329,100 3,259,400 40,672,300 43,931,700
Shelton Pointe.................................... 0 3,456,600 522,400 8,158,600 8,681,000
Bank One Center................................... 0 9,622,900 11,652,700 114,497,300 126,150,000
North Central Plaza Three......................... 0 3,158,700 1,775,100 19,134,900 20,910,000
The Quadrant...................................... 0 2,406,400 2,579,500 25,621,400 28,200,900
Canterbury Green.................................. 0 1,442,700 0 27,425,700 27,425,700
Three Stamford Plaza.............................. 0 5,534,000 1,477,900 18,835,100 20,313,000
Union Square...................................... 0 1,656,100 1,023,000 10,862,800 11,885,800
One North Franklin................................ 0 27,297,800 4,414,800 67,020,800 71,435,600
1620 L Street..................................... 0 1,419,100 2,760,900 26,267,500 29,028,400
One and Two Stamford Plaza........................ 0 5,958,900 5,932,800 59,353,900 65,286,700
300 Atlantic Street............................... 0 8,146,600 3,433,500 39,047,900 42,481,400
Sterling Plaza.................................... 0 2,239,300 2,086,600 21,420,100 23,506,700

ACCUMULATED DATE DATE DEPRECIABLE
DESCRIPTION DEPRECIATION CONSTRUCTED ACQUIRED LIVES(2)
----------- ------------ ----------- -------- -----------
<S> <C> <C> <C> <C>
Office Properties:
60 Spear Street Building.......................... $ 5,553,000 1967 09/29/87 40
San Felipe Plaza (3).............................. 37,243,000 1984 09/29/87 40
Dominion Tower.................................... 8,142,400 1987 07/25/89 40
Summit Office Park................................ 2,682,900 1974 03/01/89 40
CIGNA Center...................................... 636,700 1974 03/01/89 40
Tampa Commons..................................... 5,598,100 1985 04/25/89 40
Intercontinental Center........................... 2,173,000 1983 06/28/89 40
First Union Center................................ 5,402,000 1991 06/28/89 40
Four Forest....................................... 8,330,500 1985 06/29/89 40
Northborough Tower................................ 1,946,500 1983 08/03/89 40
500 Marquette Building............................ 4,909,000 1985 08/15/89 40
Atrium Towers..................................... 1,324,600 1980 12/15/89 40
One Clearlake Centre.............................. 5,515,600 1987 12/29/89 40
Barton Oaks Plaza II.............................. 1,456,200 1984-85 05/24/90 40
Community Corporate Center........................ 4,956,700 1987 06/14/90 40
Sarasota City Center.............................. 4,091,400 1989 09/28/90 40
Denver Corporate Center Towers II and III......... 5,137,400 1981-82 12/20/90 40
University Tower.................................. 1,940,800 1987 10/16/91 40
8383 Wilshire..................................... 6,731,700 1971 11/27/91 40
San Jacinto Center................................ 4,855,400 1987 12/13/91 40
1111 19th Street, N.W............................. 5,954,900 1979 12/18/91 40
Shelton Pointe.................................... 1,759,200 1985 11/26/91 40
Bank One Center................................... 14,561,100 1990 3/24/92 40
North Central Plaza Three......................... 3,094,800 1986 4/21/92 40
The Quadrant...................................... 3,017,200 1985 12/1/92 40
Canterbury Green.................................. 2,801,100 1987 12/15/92 40
Three Stamford Plaza.............................. 2,421,000 1980 12/15/92 40
Union Square...................................... 1,579,100 1986 12/23/92 40
One North Franklin................................ 8,432,800 1991 12/31/92 40
1620 L Street..................................... 3,087,900 1989 2/5/93 40
One and Two Stamford Plaza........................ 6,165,300 1986 3/30/93 40
300 Atlantic Street............................... 3,869,000 1987 3/30/93 40
Sterling Plaza.................................... 2,359,600 1984 6/25/93 40
</TABLE>

F-32
<PAGE> 162
<TABLE>
<CAPTION>

INITIAL COST TO COMPANY
-----------------------------
DECEMBER 31, 1996 BUILDINGS AND
DESCRIPTION LOCATION ENCUMBRANCES LAND IMPROVEMENTS
----------- -------- ----------------- ------------ --------------
<S> <C> <C> <C> <C>
1700 Higgins Centre............................... Des Plaines, IL 3,535,000(6) 577,800 5,200,400
Northwest Center.................................. San Antonio, TX 6,762,000(6) 1,108,000 9,971,800
Franklin Plaza.................................... Austin, TX 35,657,600(6) 5,805,800 52,252,400
One Crosswoods Center............................. Columbus, OH 3,608,200(6) 523,500 5,432,500
One Columbus...................................... Columbus, OH 30,739,300(6) 5,024,900 45,223,900
Westshore Center.................................. Tampa, FL 7,377,400(6) 1,192,400 10,544,900
One Lakeway....................................... Metairie, LA 10,144,000(6) 1,641,400 14,772,400
Two Lakeway....................................... Metairie, LA 15,369,600(6) 2,510,600 22,601,700
Three Lakeway..................................... Metairie, LA 17,802,800(6) 3,773,600 34,088,800
NationsBank Plaza................................. Nashville, TN 19,008,800 2,543,800 22,894,000
Plaza at La Jolla Village......................... San Diego, CA 59,506,700 9,406,300 66,150,000
Interco Corporate Tower........................... Clayton, MO 22,661,200 3,603,700 32,433,100
9400 NCX.......................................... Dallas, TX 14,301,700 1,416,800 12,750,300
Four Stamford Plaza............................... Stamford, CT 16,000,000 1,367,200 12,303,100
1920 Main Street (Koll Center Irvine North-West
Tower)........................................... Irvine, CA 30,684,900 4,196,700 37,770,200
One Paces West.................................... Atlanta, GA 19,500,000 3,289,500 29,605,800
Two Paces West.................................... Atlanta, GA 28,200,000 6,859,800 42,805,600
One Market Plaza.................................. San Francisco, CA 148,640,500 23,327,000 209,057,500
2010 Main Street (Koll Center Irvine North-East
Tower)........................................... Irvine, CA 25,900,000 3,815,100 33,715,400
1100 Executive Tower.............................. Orange, CA 0 2,887,600 25,960,500
28 State Street (4)............................... Boston, MA 25,808,700 2,539,200 22,925,100
850 Third Avenue.................................. New York, NY 54,200,000 7,044,200 63,398,000
161 North Clark (formerly known as Chicago Title &
Trust Building).................................. Chicago, IL 106,512,000 11,801,700 107,201,800
Wachovia Center................................... Charlotte, NC 27,351,300 4,210,500 37,849,900
Central Park Office Park.......................... Atlanta, GA 57,000,000 7,573,200 68,158,900
One American Center............................... Austin, TX 44,250,000 0 59,037,100
Pasadena Towers................................... Pasadena, CA 47,839,100 8,018,700 72,104,200
580 California Street............................. San Francisco, CA 32,067,000 5,256,400 47,268,600
1601 Market Street................................ Philadelphia, PA 24,379,600 3,521,200 31,656,900
Promenade II...................................... Atlanta, GA 97,288,900 17,994,500 132,102,800
Two California Plaza.............................. Los Angeles, CA 54,766,300 0 99,080,800

<CAPTION>
COSTS CAPITALIZED
SUBSEQUENT GROSS AMOUNT CARRIED AT
TO ACQUISITION DECEMBER 31, 1996
------------------------- -----------------------------
BUILDINGS AND BUILDINGS AND
DESCRIPTION LAND IMPROVEMENTS LAND IMPROVEMENTS TOTAL(1)
----------- --------- ------------- ------------ -------------- --------------
<S> <C> <C> <C> <C> <C>
1700 Higgins Centre............................... 0 2,455,000 577,800 7,655,400 8,233,200
Northwest Center.................................. 0 3,299,500 1,108,000 13,271,300 14,379,300
Franklin Plaza.................................... 0 2,110,300 5,805,800 54,362,700 60,168,500
One Crosswoods Center............................. 0 1,165,900 523,500 6,598,400 7,121,900
One Columbus...................................... 0 2,499,900 5,024,900 47,723,800 52,748,700
Westshore Center.................................. 0 2,087,500 1,192,400 12,632,400 13,824,800
One Lakeway....................................... 0 5,381,900 1,641,400 20,154,300 21,795,700
Two Lakeway....................................... 0 6,917,100 2,510,600 29,518,800 32,029,400
Three Lakeway..................................... (963,300) (4,363,800) 2,810,300 29,725,000 32,535,300
NationsBank Plaza................................. 0 4,049,900 2,543,800 26,943,900 29,487,700
Plaza at La Jolla Village......................... 0 8,002,300 9,406,300 74,152,300 83,558,600
Interco Corporate Tower........................... 0 1,390,500 3,603,700 33,823,600 37,427,300
9400 NCX.......................................... 0 6,050,400 1,416,800 18,800,700 20,217,500
Four Stamford Plaza............................... 0 7,050,200 1,367,200 19,353,300 20,720,500
1920 Main Street (Koll Center Irvine North-West
Tower)........................................... 0 2,221,200 4,196,700 39,991,400 44,188,100
One Paces West.................................... 0 1,043,200 3,289,500 30,649,000 33,938,500
Two Paces West.................................... 0 1,044,700 6,859,800 43,850,300 50,710,100
One Market Plaza.................................. 0 15,115,700 23,327,000 224,173,200 247,500,200
2010 Main Street (Koll Center Irvine North-East
Tower)........................................... 0 842,400 3,815,100 34,557,800 38,372,900
1100 Executive Tower.............................. 0 5,218,200 2,887,600 31,178,700 34,066,300
28 State Street (4)............................... 0 63,029,200 2,539,200 85,954,300 88,493,500
850 Third Avenue.................................. 0 10,857,300 7,044,200 74,255,300 81,299,500
161 North Clark (formerly known as Chicago Title &
Trust Building).................................. 0 7,396,400 11,801,700 114,598,200 126,399,900
Wachovia Center................................... 0 280,500 4,210,500 38,130,400 42,340,900
Central Park Office Park.......................... 0 2,766,500 7,573,200 70,925,400 78,498,600
One American Center............................... 0 1,221,800 0 60,258,900 60,258,900
Pasadena Towers................................... 0 473,400 8,018,700 72,577,600 80,596,300
580 California Street............................. 0 2,479,700 5,256,400 49,748,300 55,004,700
1601 Market Street................................ 0 3,771,100 3,521,200 35,428,000 38,949,200
Promenade II...................................... 0 64,200 17,994,500 132,167,000 150,161,500
Two California Plaza.............................. 0 4,275,100 0 103,355,900 103,355,900

ACCUMULATED DATE DATE DEPRECIABLE
DESCRIPTION DEPRECIATION CONSTRUCTED ACQUIRED LIVES(2)
----------- ------------ ----------- -------- -----------
<S> <C> <C> <C> <C>
1700 Higgins Centre............................... 847,400 1986 11/12/93 40
Northwest Center.................................. 1,454,100 1984 11/12/93 40
Franklin Plaza.................................... 4,332,400 1987 11/12/93 40
One Crosswoods Center............................. 874,600 1984 11/12/93 40
One Columbus...................................... 4,094,700 1987 11/12/93 40
Westshore Center.................................. 1,295,700 1984 11/12/93 40
One Lakeway....................................... 1,720,400 1981 11/12/93 40
Two Lakeway....................................... 2,899,100 1984 11/12/93 40
Three Lakeway..................................... 2,761,500 1987 11/12/93 40
NationsBank Plaza................................. 2,557,400 1977 12/1/93 40
Plaza at La Jolla Village......................... 5,996,200 1987-90 3/10/94 40
Interco Corporate Tower........................... 2,446,900 1986 5/27/94 40
9400 NCX.......................................... 1,345,800 1981 6/24/94 40
Four Stamford Plaza............................... 1,188,100 1979 8/31/94 40
1920 Main Street (Koll Center Irvine North-West
Tower)........................................... 2,586,900 1988 9/29/94 40
One Paces West.................................... 1,680,300 1987 10/31/94 40
Two Paces West.................................... 2,500,400 1990 11/3/94 40
One Market Plaza.................................. 12,071,500 1976 11/22/94 40
2010 Main Street (Koll Center Irvine North-East
Tower)........................................... 1,797,100 1988 12/13/94 40
1100 Executive Tower.............................. 1,692,700 1987 12/15/94 40
28 State Street (4)............................... 0 1968 1/23/95 40
850 Third Avenue.................................. 3,143,300 1960 3/20/95 40
161 North Clark (formerly known as Chicago Title &
Trust Building).................................. 4,171,200 1992 7/26/95 40
Wachovia Center................................... 1,231,400 1972 9/1/95 40
Central Park Office Park.......................... 2,277,400 1986 10/17/95 40
One American Center............................... 1,693,600 1984 11/1/95 40
Pasadena Towers................................... 1,880,400 1990-91 12/14/95 40
580 California Street............................. 1,272,400 1984 12/21/95 40
1601 Market Street................................ 947,100 1970 1/18/96 40
Promenade II...................................... 1,790,700 1990 6/14/96 40
Two California Plaza.............................. 984,300 1992 8/23/96 40
</TABLE>

F-33
<PAGE> 163
<TABLE>
<CAPTION>

INITIAL COST TO COMPANY
-----------------------------
DECEMBER 31, 1996 BUILDINGS AND
DESCRIPTION LOCATION ENCUMBRANCES LAND IMPROVEMENTS
----------- -------- ----------------- ------------ --------------
<S> <C> <C> <C> <C>
BP Tower.......................................... Cleveland, OH 0 14,663,700 131,982,100
Sun Trust Center.................................. Orlando, FL 0 11,043,900 99,394,600
Reston Town Center................................ Reston, VA 92,400,000 15,504,400 139,539,500
Colonnade I....................................... San Antonio, TX 0 1,228,600 11,057,200
One Phoenix Plaza................................. Phoenix, AZ 0 6,727,000 60,542,300
-------------- ------------ --------------
Subtotal Office Properties........................ $1,784,626,300 $300,525,900 $2,777,423,600
-------------- ------------ --------------
Parking Facilities:
North Loop Transportation Center.................. Chicago, IL $ 0 $ 2,994,600 $ 26,959,600
Theatre District Self Park........................ Chicago, IL 16,276,800 2,322,000 20,918,300
Capitol Commons Garage (5)........................ Indianapolis, IN 0 0 5,184,700
Boston Harbor Garage.............................. Boston, MA 36,863,800 5,560,700 50,046,200
Milwaukee Center Parking.......................... Garage Milwaukee, WI 0 0 4,534,800
15th & Sansom Streets............................. Philadelphia, PA 0 650,900 5,857,600
1616 Chancellor Street............................ Philadelphia, PA 0 638,000 5,741,700
Juniper/Locust Streets............................ Philadelphia, PA 0 516,900 4,651,700
1616 Sansom Street................................ Philadelphia, PA 0 382,800 3,445,800
1111 Sansom Street................................ Philadelphia, PA 0 1,318,600 0
-------------- ------------ --------------
Subtotal Parking Facilities....................... $ 53,140,600 $ 14,384,500 $ 127,340,400
-------------- ------------ --------------
Investment in Real Estate......................... $1,837,766,900 $314,910,400 $2,904,764,000
============== ============ ==============

ACCUMULATED DATE DATE DEPRECIABLE
DESCRIPTION DEPRECIATION CONSTRUCTED ACQUIRED LIVES(2)
----------- ------------ ----------- -------- -----------
<S> <C> <C> <C> <C>
BP Tower.......................................... 962,400 1985 9/4/96 40
Sun Trust Center.................................. 724,900 1988 9/18/96 40
Reston Town Center................................ 726,700 1990 10/22/96 40
Colonnade I....................................... 11,500 1983 12/4/96 40
One Phoenix Plaza................................. 63,000 1989 12/4/96 40
------------
Subtotal Office Properties........................ $255,753,400
------------
Parking Facilities:
North Loop Transportation Center.................. $ 1,038,800 1985 6/9/95 40
Theatre District Self Park........................ 819,300 1987 6/9/95 40
Capitol Commons Garage (5)........................ 209,300 1987 6/29/95 40
Boston Harbor Garage.............................. 52,100 1972 12/10/96 40
Milwaukee Center Parking.......................... 0 1988 12/18/96 40
15th & Sansom Streets............................. 6,100 1950/1954 12/27/96 40
1616 Chancellor Street............................ 6,000 c1945/1955 12/27/96 40
Juniper/Locust Streets............................ 4,800 1949/1952 12/27/96 40
1616 Sansom Street................................ 3,500 c1950 12/27/96 40
1111 Sansom Street................................ 0 N/A 12/27/96 N/A
------------
Subtotal Parking Facilities....................... $ 2,139,900
------------
Investment in Real Estate......................... $257,893,300
============
</TABLE>

(1) The aggregate cost for Federal Income Tax purposes as of December 31, 1996
was approximately $3.5 billion.

(2) The life to compute depreciation on building is 40 years. The life to
compute depreciation on building improvements is 4-40 years.

(3) During 1995, concurrent with the restructuring of its mortgage on the
property, Equity Office Predecessors reduced its carrying basis in San
Felipe Plaza by recording a write down for value impairment of $20,248,500.
This write down included adjustments against Investment in Real Estate of
$17,512,000 and against Other Assets of $2,736,500.

(4) The building is currently vacant and is undergoing a major renovation to
re-tenant the entire Property. All operating costs, including real estate
taxes together with interest incurred during the renovation period will be
capitalized. As of December 31, 1996 and 1995 approximately $8,189,000 and
$4,357,100 of operating costs and interest have been capitalized,
respectively. In addition to the amounts paid to acquire the Property,
Equity Office Predecessors expects to incur approximately $100,000,000, of
which approximately, $60,000,000 has been incurred. The renovation is
expected to be completed during 1997.

(5) These loans are subject to cross default and collateralization provisions.

(6) These loans are subject to cross default and collateralization provisions.

F-34
<PAGE> 164

SCHEDULE III (CONTINUED)

(7) Summary of activity of investment in real estate and accumulated
depreciation is as follows:

The changes in the total Equity Office Predecessors investment in real
estate for the years ended December 31, 1996, 1995 and 1994 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
---------------- ---------------- ----------------
<S> <C> <C> <C>
Balance, beginning of year................................. $ 2,571,851,300 $ 1,931,002,400 $ 1,297,304,500
Acquisitions............................................... 860,995,000 583,485,200 562,752,900
Improvements............................................... 129,485,300 76,985,400 72,951,600
Properties disposed of..................................... (9,633,600) 0 0
Write down for value impairment............................ 0 (17,512,000) 0
Write-off of fully depreciated assets which are no longer
in service............................................... (2,990,400) (2,109,700) (2,006,600)
---------------- ---------------- ----------------
Balance, end of year....................................... $ 3,549,707,600 $ 2,571,851,300 $ 1,931,002,400
================ ================ ================
</TABLE>

The changes in accumulated depreciation for the years ended December 31,
1996, 1995 and 1994 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994
---------------- ---------------- ----------------
<S> <C> <C> <C>
Balance, beginning of year................................. $ (178,448,600) $ (115,842,500) $ (77,036,900)
Depreciation............................................... (82,905,300) (64,715,800) (40,812,200)
Properties disposed of..................................... 470,200 0 0
Write-off of fully depreciated assets which are no longer
in service............................................... 2,990,400 2,109,700 2,006,600
---------------- ---------------- ----------------
Balance, end of year....................................... $ (257,893,300) $ (178,448,600) $ (115,842,500)
================ ================ ================
</TABLE>

F-35
<PAGE> 165

REPORT OF INDEPENDENT AUDITORS

The Board of Trustees of
Equity Office Properties Trust

We have audited the accompanying Statement of Revenue and Certain Expenses
of Promenade II (the Property) for the year ended December 31, 1995. The
Statement of Revenue and Certain Expenses is the responsibility of the
Property's management. 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 made in the Statement of Revenue
and Certain Expenses. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of the Statement of Revenue and Certain Expenses. We
believe that our audit provides a reasonable basis for our opinion.

In our opinion, the Statement of Revenue and Certain Expenses referred to
above presents fairly, in all material respects, the revenue and certain
expenses of the Property described in Note 2 for the year ended December 31,
1995, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Chicago, Illinois
December 17, 1996

F-36
<PAGE> 166

PROMENADE II

STATEMENTS OF REVENUE AND CERTAIN EXPENSES

<TABLE>
<CAPTION>
JANUARY 1, 1996 TO
YEAR ENDED JUNE 13, 1996
DECEMBER 31, 1995 (UNAUDITED)
----------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
REVENUE
Base rents................................................ $ 10,315 $ 4,619
Tenant reimbursements..................................... 3,307 1,642
Parking income............................................ 1,701 830
Other income.............................................. 319 447
------------- -------
Total revenue............................................. 15,642 7,538
------------- -------
EXPENSES
Property operating and maintenance........................ 3,325 1,696
Real estate taxes......................................... 1,905 886
Management fees........................................... 426 178
Insurance................................................. 59 27
------------- -------
Total expenses............................................ 5,715 2,787
------------- -------
Revenue in excess of certain expenses....................... $ 9,927 $ 4,751
============= =======
</TABLE>

See accompanying notes.

F-37
<PAGE> 167

PROMENADE II

NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES

1. BUSINESS

The accompanying Statements of Revenue and Certain Expenses relate to the
operations of Promenade II, an office building with approximately 771,000
rentable square feet, located in Atlanta, Georgia (the "Property"). The Property
was acquired on June 14, 1996 by Equity Office Predecessors, as defined
elsewhere in this Prospectus, from an unrelated party.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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 for inclusion in the registration statement on Form S-11
of Equity Office Properties Trust. The statements are not representative of the
actual operations of the Property for the periods presented nor indicative of
future operations as certain expenses, primarily depreciation, amortization and
interest expense, which may not be comparable to the expenses expected to be
incurred by Equity Office Properties Trust in future operations of the Property,
have been excluded.

Revenue and Expense Recognition

Revenue is recognized on a straight-line basis over the terms of the
related leases. Expenses are recognized in the period in which they are
incurred.

Use of Estimates

The preparation of the Statements of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenue and
expenses during the reporting periods. Actual results could differ from these
estimates.

Unaudited Interim Statement

The interim financial statement for the 1996 interim period includes the
revenue and certain expenses for the period prior to acquisition by Equity
Office Predecessors. In the opinion of management, such financial statement
reflects all adjustments necessary for a fair presentation of the results of the
interim period. All such adjustments are of a normal, recurring nature.

3. RENTALS

The Property has entered into tenant leases that provide for tenants to
share in the operating expenses and real estate taxes on a pro rata basis, as
defined.

F-38
<PAGE> 168

REPORT OF INDEPENDENT AUDITORS

The Board of Trustees of
Equity Office Properties Trust

We have audited the accompanying Statement of Revenue and Certain Expenses
of Two California Plaza (the Property) for the year ended December 31, 1995. The
Statement of Revenue and Certain Expenses is the responsibility of the
Property's management. 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 made in the Statement of Revenue
and Certain Expenses. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of the Statement of Revenue and Certain Expenses. We
believe that our audit provides a reasonable basis for our opinion.

ERNST & YOUNG LLP

Chicago, Illinois
January 15, 1997

F-39
<PAGE> 169

TWO CALIFORNIA PLAZA

STATEMENTS OF REVENUE AND CERTAIN EXPENSES

<TABLE>
<CAPTION>
JANUARY 1, 1996
YEAR ENDED TO JULY 31, 1996
DECEMBER 31, 1995 (UNAUDITED)
----------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
REVENUE
Base rents............................................... $10,622 $ 6,328
Tenant reimbursements.................................... 5,845 4,602
Parking income........................................... 2,677 1,606
Other income............................................. 107 209
------- -------
Total revenue............................................ 19,251 12,745
------- -------
EXPENSES
Property operating and maintenance....................... 7,894 4,652
Real estate taxes........................................ 2,053 1,129
Management fees.......................................... 244 113
Insurance................................................ 1,025 613
Ground rent.............................................. 3,696 2,156
------- -------
Total expenses........................................... 14,912 8,663
------- -------
Revenue in excess of certain expenses...................... $ 4,339 $ 4,082
======= =======
</TABLE>

See accompanying notes.

F-40
<PAGE> 170

TWO CALIFORNIA PLAZA

NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES

1. BUSINESS

The accompanying Statements of Revenue and Certain Expenses relate to the
operations of Two California Plaza, an office building with approximately
1,330,000 rentable square feet, located in Los Angeles, California (the
"Property"). The Property was acquired on August 23, 1996, by Equity Office
Predecessors, as defined elsewhere in this Prospectus, from an unrelated party.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Revenue and Expense Recognition

Revenue is recognized on a straight-line basis over the terms of the
related leases. Expenses are recognized in the period in which they are
incurred.

Use of Estimates

Unaudited Interim Statement

3. RENTALS

The Property has entered into tenant leases that provide for tenants to
share in the operating expenses and real estate taxes on a pro rata basis, as
defined.

4. OTHER COMMITMENTS

The Property is encumbered by a ground lease dated July 25, 1989, with
Community Redevelopment Agency of the City of Los Angeles acting as the lessor.
The base rent is an annual amount of $1,500,000. Every ten years beginning in
the year 2005 and ending at maturity, August 25, 2082, rent is increased based
on a defined calculation. The ground rent expense included in the Statements of
Revenue and Certain Expenses includes the effect of straight lining the future
stated increases in rental obligations.

F-41
<PAGE> 171

REPORT OF INDEPENDENT AUDITORS

The Board of Trustees of
Equity Office Properties Trust

We have audited the accompanying Statement of Revenue and Certain Expenses
of the BP Tower (the Property) for the year ended December 31, 1995. The
Statement of Revenue and Certain Expenses is the responsibility of the
Property's management. 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 made in the Statement of Revenue
and Certain Expenses. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of the Statement of Revenue and Certain Expenses. We
believe that our audit provides a reasonable basis for our opinion.

ERNST & YOUNG LLP
Chicago, Illinois
November 8, 1996

F-42
<PAGE> 172

BP TOWER

STATEMENTS OF REVENUE AND CERTAIN EXPENSES

<TABLE>
<CAPTION>
JANUARY 1, 1996 TO
YEAR ENDED AUGUST 31, 1996
DECEMBER 31, 1995 (UNAUDITED)
----------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
REVENUE
Base rents................................................ $ 9,308 $ 8,587
Tenant reimbursements..................................... 764 377
Parking income............................................ 308 205
Percentage rent........................................... 45 45
Other income.............................................. 207 184
------------- -------
Total revenue............................................. 10,632 9,398
------------- -------
EXPENSES
Property operating & maintenance.......................... 5,345 3,591
Real estate taxes......................................... 2,638 2,116
Management fees........................................... 189 126
------------- -------
Total expenses............................................ 8,172 5,833
------------- -------
Revenue in excess of certain expenses....................... $ 2,460 $ 3,565
============= =======
</TABLE>

See accompanying notes.

F-43
<PAGE> 173

BP TOWER

NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES

1. BUSINESS

The accompanying Statements of Revenue and Certain Expenses relate to the
operations of the BP Tower, an office building with approximately 1,242,000
rentable square feet, located in Cleveland, Ohio (the "Property"). The Property
was acquired on September 4, 1996, by Equity Office Predecessors, as defined
elsewhere in this Prospectus, from an unrelated party.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Revenue and Expense Recognition

Revenue is recognized on a straight-line basis over the terms of the
related leases. Expenses are recognized in the period in which they are
incurred.

Use of Estimates

Unaudited Interim Statement

3. RENTALS

The Property has entered into tenant leases that provide for tenants to
share in the operating expenses and real estate taxes on a pro rata basis, as
defined.

For the year ended December 31, 1995 and for the unaudited interim period
from January 1, 1996 to August 31, 1996, the seller occupied approximately
378,000 square feet of space in the Property. The Statements of Revenue and
Certain Expenses do not reflect rental income associated with the seller's
occupancy.

As of September 1, 1996 the seller entered into a lease with Equity Office
Predecessors for approximately 378,000 square feet of space at a monthly base
rent of $344,100.

F-44
<PAGE> 174

REPORT OF INDEPENDENT AUDITORS

The Board of Trustees of
Equity Office Properties Trust

We have audited the accompanying Statement of Revenue and Certain Expenses
of SunTrust Center (the Property) as described in Note 2 for the year ended
December 31, 1995. The Statement of Revenue and Certain Expenses is the
responsibility of the Property's management. 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 made in the Statement of Revenue
and Certain Expenses. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of the Statement of Revenue and Certain Expenses. We
believe that our audit provides a reasonable basis for our opinion.

The accompanying Statement of Revenue and Certain Expenses was prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission, for inclusion in the registration statement on Form S-11 of
Equity Office Properties Trust as described in Note 2 and is not intended to be
a complete presentation of the Property's revenue and expenses.

ERNST & YOUNG LLP

Chicago, Illinois
December 6, 1996

F-45
<PAGE> 175

SUNTRUST CENTER

STATEMENTS OF REVENUE AND CERTAIN EXPENSES

<TABLE>
<CAPTION>
JANUARY 1, 1996 TO
YEAR ENDED AUGUST 31, 1996
DECEMBER 31, 1995 (UNAUDITED)
----------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
REVENUE
Base rents................................................ $ 11,592 $ 8,533
Tenant reimbursements..................................... 1,012 793
Parking income............................................ 1,743 1,175
Other income.............................................. 130 29
------------- -------------
Total revenue............................................. 14,477 10,530
------------- -------------
EXPENSES
Property operating and maintenance........................ 2,974 1,981
Real estate taxes......................................... 1,357 944
Management fees........................................... 366 276
Insurance................................................. 346 237
------------- -------------
Total expenses............................................ 5,043 3,438
------------- -------------
Revenue in excess of certain expenses....................... $ 9,434 $ 7,092
============= =============
</TABLE>

See accompanying notes.

F-46
<PAGE> 176

SUNTRUST CENTER

NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES

1. BUSINESS

The accompanying Statements of Revenue and Certain Expenses relate to the
operations of SunTrust Center, an office building with approximately 640,000
rentable square feet, located in Orlando, Florida (the "Property"). The Property
was acquired on September 18, 1996, by Equity Office Predecessors, as defined
elsewhere in this Prospectus, from an unrelated party.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Revenue and Expense Recognition

Revenue is recognized on a straight-line basis over the terms of the
related leases. Expenses are recognized in the period in which they are
incurred.

Use of Estimates

Unaudited Interim Statement

3. RENTALS

The Property has entered into tenant leases that provide for tenants to
share in the operating expenses and real estate taxes on a pro rata basis, as
defined.

4. RELATED PARTY TRANSACTIONS

During the year ended December 31, 1995, the Property was managed by an
affiliated party to the seller. The management agreement provided for a fee of
3% of gross receipts, as defined, excluding any receipts from the parking
garage.

The parking garage was leased to an affiliate of the seller, which paid
rent based upon 79% of the gross parking receipts, as defined, in excess of
$250,000 per annum. Income from this lease was approximately $1,743,000 in 1995.

F-47
<PAGE> 177

REPORT OF INDEPENDENT AUDITORS

The Board of Trustees of
Equity Office Properties Trust

We have audited the accompanying Statement of Revenue and Certain Expenses
of Reston Town Center (the Property) for the year ended December 31, 1995. The
Statement of Revenue and Certain Expenses is the responsibility of the
Property's management. 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 made in the Statement of Revenue
and Certain Expenses. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of the Statement of Revenue and Certain Expenses. We
believe that our audit provides a reasonable basis for our opinion.

ERNST & YOUNG LLP

Chicago, Illinois
November 19, 1996

F-48
<PAGE> 178

RESTON TOWN CENTER

STATEMENTS OF REVENUE AND CERTAIN EXPENSES

<TABLE>
<CAPTION>
JANUARY 1, 1996 TO
YEAR ENDED SEPTEMBER 30, 1996
DECEMBER 31, 1995 (UNAUDITED)
----------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
REVENUE
Base rents............................ $15,966 $ 12,684
Tenant reimbursements................. 2,518 1,760
Percentage rents...................... 1,046 527
Other income.......................... 265 275
------- ----------
Total revenue......................... 19,795 15,246
------- ----------
EXPENSES
Property operating and maintenance.... 4,832 3,501
Real estate taxes..................... 1,275 1,154
Insurance............................. 97 75
Management fees....................... 200 150
------- ----------
Total expenses........................ 6,404 4,880
------- ----------
Revenue in excess of certain expenses... $13,391 $ 10,366
======= ==========
</TABLE>

See accompanying notes.

F-49
<PAGE> 179

RESTON TOWN CENTER

NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES

1. BUSINESS

The accompanying Statements of Revenue and Certain Expenses relate to the
operations of Reston Town Center, an office building with approximately 725,000
rentable square feet, located in Fairfax, Virginia (the "Property"). The
Property was acquired on October 22, 1996, by Equity Office Predecessors, as
defined elsewhere in this Prospectus, from an unrelated party.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Revenue and Expense Recognition

Revenue is recognized on a straight-line basis over the terms of the
related leases. Expenses are recognized in the period in which they are
incurred. The Property is part of a multi-use and multi-owned development
community and as a result is responsible for its pro-rata share of certain
common area costs, which have been reflected as property operating expenses.

Use of Estimates

Unaudited Interim Statement

3. RENTALS

The Property has entered into tenant leases that provide for tenants to
share in the operating expenses and real estate taxes on a pro rata basis, as
defined.

F-50
<PAGE> 180

REPORT OF INDEPENDENT AUDITORS

The Board of Trustees of
Equity Office Properties Trust

We have audited the accompanying Statement of Revenue and Certain Expenses
of Colonnade I (the Property) for the period from January 1, 1996 to December 4,
1996. The Statement of Revenue and Certain Expenses is the responsibility of the
Property's management. 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 made in the Statement of Revenue
and Certain Expenses. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of the Statement of Revenue and Certain Expenses. We
believe that our audit provides a reasonable basis for our opinion.

In our opinion, the Statement of Revenue and Certain Expenses referred to
above presents fairly, in all material respects, the revenue and certain
expenses of the Property described in Note 2 for the period from January 1, 1996
to December 4, 1996, in conformity with generally accepted accounting
principles.

ERNST & YOUNG LLP
Chicago, Illinois
April 16, 1997

F-51
<PAGE> 181

COLONNADE I

STATEMENT OF REVENUE AND CERTAIN EXPENSES

<TABLE>
<CAPTION>
JANUARY 1, 1996 TO
DECEMBER 4, 1996
------------------
(IN THOUSANDS)
<S> <C>
REVENUE
Base rent................................................. $ 1,850
Tenant reimbursements..................................... 44
Parking income............................................ 25
Other income.............................................. 11
-------
Total revenue............................................. 1,930
-------
EXPENSES
Property operating and maintenance........................ 650
Real estate taxes......................................... 214
Management fees........................................... 58
Insurance................................................. 25
-------
Total expenses............................................ 947
-------
Revenue in excess of certain expenses....................... $ 983
=======
</TABLE>

See accompanying notes.

F-52
<PAGE> 182

COLONNADE I

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

1. BUSINESS

The accompanying Statement of Revenue and Certain Expenses relates to the
operations of Colonnade I, an office building with approximately 169,000
rentable square feet, located in San Antonio, Texas (the "Property"). The
Property was acquired on December 4, 1996, by Equity Office Predecessors, as
defined elsewhere in this Prospectus, from an unrelated party.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying Statement of Revenue and Certain Expenses was prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in the registration statement on Form S-11 of
Equity Office Properties Trust. The statement is not representative of the
actual operations of the Property for the period presented nor indicative of
future operations as certain expenses, primarily depreciation, amortization and
interest expense, which may not be comparable to the expenses expected to be
incurred by Equity Office Properties Trust in future operations of the Property,
have been excluded.

Revenue and Expense Recognition

Revenue is recognized on a straight-line basis over the terms of the
related leases. Expenses are recognized in the period in which they are
incurred.

Use of Estimates

The preparation of the Statement of Revenue and Certain Expenses in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from these
estimates.

3. RENTALS

The Property has entered into tenant leases that provide for tenants to
share in the operating expenses and real estate taxes on a pro rata basis, as
defined.

4. RELATED PARTY TRANSACTIONS

Insurance premiums are paid to and coverage is provided by an affiliated
party to the seller.

F-53
<PAGE> 183

REPORT OF INDEPENDENT AUDITORS

The Board of Trustees of
Equity Office Properties Trust

We have audited the accompanying Statement of Revenue and Certain Expenses
of 177 Broad Street (the Property) for the year ended December 31, 1996. The
Statement of Revenue and Certain Expenses is the responsibility of the
Property's management. 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 made in the Statement of Revenue
and Certain Expenses. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of the Statement of Revenue and Certain Expenses. We
believe that our audit provides a reasonable basis for our opinion.

In our opinion, the Statement of Revenue and Certain Expenses referred to
above presents fairly, in all material respects, the revenue and certain
expenses of the Property described in Note 2 for the year ended December 31,
1996, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Chicago, Illinois
March 28, 1997

F-54
<PAGE> 184

177 BROAD STREET

STATEMENT OF REVENUE AND CERTAIN EXPENSES

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
-----------------
(IN THOUSANDS)
<S> <C>
REVENUE
Base rents................................................ $ 4,722
Storage and other rental income........................... 52
Tenant reimbursements..................................... 212
Parking income............................................ 322
Other income.............................................. 103
-------
Total revenue............................................. 5,411
-------
EXPENSES
Property operating and maintenance........................ 825
Utilities and telephone................................... 769
Repairs and maintenance................................... 313
Real estate taxes......................................... 864
Management fees........................................... 153
Insurance................................................. 46
Administrative............................................ 118
-------
Total expenses............................................ 3,088
-------
Revenue in excess of certain expenses....................... $ 2,323
=======
</TABLE>

See accompanying notes.

F-55
<PAGE> 185

177 BROAD STREET

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

1. BUSINESS

The accompanying Statement of Revenue and Certain Expenses relates to the
operations of 177 Broad Street located in Stamford, Connecticut (the
"Property"). The Property was acquired on January 28, 1997, by Equity Office
Predecessors, as defined elsewhere in this Prospectus, from an unrelated entity.

The Property consists of a fifteen story office complex with approximately
188,000 rentable square feet, an enclosed 540 space parking structure, and a
161-unit residential apartment building.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Revenue and Expense Recognition

Revenue is recognized on a straight-line basis over the terms of the
related leases. Expenses are recognized in the period in which they are
incurred.

Use of Estimates

3. RENTALS

The Property has entered into tenant leases, in the office portion of the
Property, that provide for tenants to share in the operating expenses and real
estate taxes on a pro rata basis, as defined.

F-56
<PAGE> 186

REPORT OF INDEPENDENT AUDITORS

The Board of Trustees of
Equity Office Properties Trust

We have audited the accompanying Statement of Revenue and Certain Expenses
of Preston Commons (the Property) as described in Note 2 for the year ended
December 31, 1996. The Statement of Revenue and Certain Expenses is the
responsibility of the Property's management. 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 made in the Statement of Revenue
and Certain Expenses. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall presentation of the Statement of Revenue and Certain Expenses. We
believe that our audit provides a reasonable basis for our opinion.

The accompanying Statement of Revenue and Certain Expenses was prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission, for inclusion in the registration statement on Form S-11 of
Equity Offices Properties Trust as described in Note 2 and is not intended to be
a complete presentation of the Property's revenue and expenses.

In our opinion, the Statement of Revenue and Certain Expenses referred to
above presents fairly, in all material respects, the revenue and certain
expenses of the Property described in Note 2 for the year ended December 31,
1996, in conformity with generally accepted accounting principles.

ERNST & YOUNG LLP

Chicago, Illinois
April 16, 1997

F-57
<PAGE> 187

PRESTON COMMONS

STATEMENT OF REVENUE AND CERTAIN EXPENSES

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
--------------------
(IN THOUSANDS)
<S> <C>
REVENUE
Base rents................................................ $ 6,347
Tenant reimbursements..................................... 1,132
Parking income............................................ 216
Other income.............................................. 91
-------
Total revenue............................................. 7,786
-------
EXPENSES
Property operating & maintenance.......................... 2,327
Real estate taxes......................................... 742
Management fees........................................... 226
Insurance................................................. 30
-------
Total expenses............................................ 3,325
-------
Revenue in excess of certain expenses....................... $ 4,461
=======
</TABLE>

See accompanying notes.

F-58
<PAGE> 188

PRESTON COMMONS

NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES

1. BUSINESS

The accompanying Statement of Revenue and Certain Expenses relates to the
operations of the Preston Commons building, an office building with
approximately 303,000 rentable square feet, located in Dallas, Texas (the
"Property"). The Property was acquired on March 21, 1997, by Equity Office
Predecessors, as defined elsewhere in this Prospectus, from an unrelated entity.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

Revenue and Expense Recognition

Revenue is recognized on a straight-line basis over the terms of the
related leases. Expenses are recognized in the period in which they are
incurred.

Use of Estimates

3. RENTALS

The Property has entered into tenant leases that provide for tenants to
share in the operating expenses and real estate taxes on a pro rata basis, as
defined.

F-59
<PAGE> 189

======================================================
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS. 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 TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON SHARES IN ANY
JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF.
------------------
SUMMARY TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary............................... 1
Risk Factors.......................... 13
The Company........................... 23
Business and Growth Strategies........ 27
Use of Proceeds....................... 28
Distributions......................... 29
Capitalization........................ 34
Dilution.............................. 35
Selected Combined Financial Data...... 37
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 39
The Properties........................ 45
Management............................ 69
Structure and Formation of the
Company............................. 76
Policies with Respect to Certain
Activities.......................... 81
Certain Relationships and
Transactions........................ 83
Principal Shareholders................ 85
Shares of Beneficial Interest......... 87
Certain Provisions of Maryland Law and
the Company's Declaration of Trust
and Bylaws.......................... 91
Partnership Agreement................. 94
Shares Available for Future Sale...... 97
Federal Income Tax Considerations..... 98
ERISA Considerations.................. 112
Underwriting.......................... 115
Experts............................... 116
Legal Matters......................... 116
Additional Information................ 117
Glossary of Terms..................... 118
Index to Financial Statements......... F-1
</TABLE>

------------------
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON SHARES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
======================================================

======================================================

15,000,000 COMMON SHARES

EQUITY OFFICE
PROPERTIES TRUST

COMMON SHARES

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

PROSPECTUS
---------------------------
MERRILL LYNCH & CO.
, 1997

======================================================
<PAGE> 190

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 30. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table itemizes the expenses incurred by the Company in
connection with the Offering. All amounts are estimated except for the
Registration Fee and the NASD Fee.

<TABLE>
<S> <C>
Registration Fee............................................ $104,545.50
NASD Fee.................................................... 30,500
New York Stock Exchange Listing Fee......................... *
Printing and Engraving Expenses............................. *
Legal Fees and Expenses..................................... *
Accounting Fees and Expenses................................ *
Blue Sky Fees and Expenses.................................. 15,000
Financial Advisory Fee...................................... *
Environmental and Engineering Expenses...................... *
Miscellaneous............................................... *
-----------
TOTAL............................................. $
===========
Indemnification Insurance Costs (see Item 33)............... *
-----------
</TABLE>

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

* To be completed by amendment.

ITEM 31. SALES TO SPECIAL PARTIES

See Item 32.

ITEM 32. RECENT SALES OF UNREGISTERED SECURITIES

Prior to the Offering, the Company sold 1,000 unregistered Common Shares to
Mr. Zell for a purchase price of $25.00 per Common Share.

Immediately prior to the closing of the Offering, pursuant to the
Contribution Agreement, (i) each ZML Opportunity Partnership will contribute to
the Operating Partnership substantially all of its assets and liabilities in
exchange for an aggregate of Units and (ii) EGI, EOP and EOH, each of which
is owned by affiliates of Mr. Zell and which are referred to collectively as the
"Equity Group," will contribute the Management Business, and EOP will contribute
95% of the economic value of that portion of the Management Business that
relates to the Third-Party Management Business, to the Operating Partnership in
exchange for Units. EOP and the Operating Partnership then will jointly
contribute the Third-Party Management Business to the Management Corp., with EOP
receiving voting stock representing 5% of the economic value of the Management
Corp. and the Operating Partnership receiving non-voting stock representing 95%
of the economic value of the Management Corp. As a part of the contribution of
the Management Business, EGI and EOH will contribute their asset management
contracts relating to the Office Properties and the Parking Facilities to the
Operating Partnership in exchange for Units.

Immediately prior to the closing of the Offering, pursuant to the Merger
Agreement, each ZML REIT will merge with and into the Company and the Company
will issue Common Shares to the ZML REIT shareholders, of
which Common Shares will be deposited into the corresponding ZML REIT Escrows,
as described below. As part of the Consolidation, each ZML Opportunity
Partnership will admit the Company as its sole managing general partner and each
ZML Partner will become a non-managing general partner of its ZML Opportunity
Partnership. As a result, the Company will become the 1% managing general
partner in each ZML Opportunity Partnership, the sole limited partner in ZML
Opportunity Partnerships I, III and IV, and the majority limited partner in ZML
Opportunity Partnerships II, owning % of the capital interests in that
partnership. See "Structure and Formation of the Company -- Formation
Transactions."

II-1
<PAGE> 191

ITEM 33. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's officers and directors are and will be indemnified under
Maryland and Delaware law, the Declaration of Trust and Bylaws of the Company
and the Partnership Agreement of the Operating Partnership against certain
liabilities. The Declaration of Trust of the Company requires it to indemnify
its directors and officers to the fullest extent permitted from time to time
under Maryland law.

The Declaration of Trust 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 trustee or officer or (b) any individual who, while a
trustee of the Company and at the request of the Company, serves or has served
as a director, officer, partner, trustee, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise from and against any claim or liability to which such person
may become subject or which such person may incur by reason of his or her status
as a present or former trustee 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 trustee or officer who
is made party to the proceeding by reason of his service in that capacity or (b)
any individual who, while a trustee or officer of the Company and at the request
of the Company, serves or has served another real estate investment trust,
corporation, partnership, joint venture, trust, employee benefit plan or any
other enterprise as a trustee, director, officer or partner of such real estate
investment trust, 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 status. The Declaration of Trust and
Bylaws also permit the Company to indemnify and advance expenses to any person
who served as 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 Bylaws require the Company to indemnify a trustee 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 Maryland REIT Law permits a Maryland real estate investment trust to
indemnify and advance expenses to its trustees, officers, employees and agents
to the same extent as permitted by the MGCL for directors and officers of
Maryland corporations. 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, under the MGCL,
a Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation. In accordance with the MGCL, the Bylaws of the
Company require it, 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.

II-2
<PAGE> 192

ITEM 35. FINANCIAL STATEMENTS AND EXHIBITS

(a) Financial Statements, all of which are included in the Prospectus:

EQUITY OFFICE PROPERTIES TRUST
Pro Forma Condensed Combined Financial Statements (Unaudited):
Pro Forma Condensed Combined Financial Statements
Pro Forma Condensed Combined Balance Sheet as of December 31, 1996
Pro Forma Condensed Combined Statement of Operations for the Year
Ended
December 31, 1996
Notes to Pro Forma Condensed Combined Financial Statements

Historical:
Report of Independent Auditors
Balance Sheet as of December 31, 1996
Notes to Balance Sheet

EQUITY OFFICE PREDECESSORS
Report of Independent Auditors
Combined Balance Sheets as of December 31, 1996 and 1995
Combined Statements of Operations for the years ended December 31, 1996,
1995 and 1994
Combined Statements of Owners' Equity for the years ended December 31,
1996, 1995 and 1994
Combined Statements of Cash Flows for the years ended December 31, 1996,
1995 and 1994
Notes to Combined Financial Statements
Schedule III -- Real Estate and Accumulated Depreciation as of December
31, 1996

PROMENADE II
Report of Independent Auditors
Statements of Revenue and Certain Expenses for the Period from January 1,
1996 to
June 13, 1996 (Unaudited) and the Year Ended December 31, 1995
Notes to Statements of Revenue and Certain Expenses

TWO CALIFORNIA PLAZA
Report of Independent Auditors
Statements of Revenue and Certain Expenses for the Period from January 1,
1996 to
July 31, 1996 (Unaudited) and the Year Ended December 31, 1995
Notes to Statements of Revenue and Certain Expenses

BP TOWER
Report of Independent Auditors
Statements of Revenue and Certain Expenses for the Period from January 1,
1996 to
August 31, 1996 (Unaudited) and the Year Ended December 31, 1995
Notes to Statements of Revenue and Certain Expenses

SUNTRUST CENTER
Report of Independent Auditors
Statements of Revenue and Certain Expenses for the Period from January 1,
1996 to
August 31, 1996 (Unaudited) and the Year Ended December 31, 1995
Notes to Statements of Revenue and Certain Expenses

RESTON TOWN CENTER
Report of Independent Auditors
Statements of Revenue and Certain Expenses for the Period from January 1,
1996 to
September 30, 1996 (Unaudited) and the Year Ended December 31, 1995
Notes to Statements of Revenue and Certain Expenses

II-3
<PAGE> 193

COLONNADE I
Report of Independent Auditors
Statement of Revenue and Certain Expenses for the Period from January 1,
1996 to
December 4, 1996
Notes to Statement of Revenue and Certain Expenses

177 BROAD STREET
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

PRESTON COMMONS
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

(b) Exhibits

<TABLE>
<C> <C> <S>
1.1* -- Form of Purchase Agreement
3.1* -- Amended and Restated Declaration of Trust of the Company
3.2* -- Form of Bylaws of the Company
5.1* -- Opinion of Rosenberg & Liebentritt, P.C. regarding the
validity of the securities being registered
8.1* -- Opinion of Hogan & Hartson L.L.P. regarding tax matters
10.1* -- Form of Agreement of Limited Partnership of the Operating
Partnership
10.2* -- Form of Registration Rights Agreement between the Company
and the persons named therein
10.3* -- 1997 Employee Share Option and Restricted Share Plan
10.4* -- Non-Employee Trustee Share Option Plan
10.5* -- Noncompetition Agreement between the Company and Samuel Zell
10.6* -- Form of Contribution Agreement
21.1* -- List of Subsidiaries
23.1* -- Consent of Rosenberg & Liebentritt, P.C. (included as part
of Exhibit 5.1)
23.2 -- Consent of Ernst & Young LLP
23.3* -- Consent of Hogan & Hartson L.L.P.
23.4* -- Consent of Mr. Dobrowski
23.5* -- Consent of Mr. Harper
23.6* -- Consent of Mr. Linneman
24.1 -- Power of Attorney (included in the Signature Page at page
II-6)
27.1 -- Financial Data Schedule
</TABLE>

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

* To be filed by amendment.

ITEM 36. UNDERTAKINGS

The Registrant hereby undertakes:

(1) For purposes of determining any liability under the Securities Act
of 1933, as amended (the "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 Registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the 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 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-4
<PAGE> 194

(3) The undersigned registrant hereby undertakes to provide to the
Underwriter at the closing specified in the Underwriting Agreement
certificates in such denominations and registered in such names as required
by the Underwriter to permit prompt delivery of each purchaser.

(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions,
or otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant 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
registrant 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 Act and will be governed by the final
adjudication of such issue.

II-5
<PAGE> 195

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable ground 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 Chicago, Illinois on this 7th day of May, 1997.

Equity Office Properties Trust

By: /s/ TIMOTHY H. CALLAHAN
------------------------------------
Timothy H. Callahan
President and Chief Executive
Officer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated as of the 7th day of May, 1997.

Each person whose signature appears below hereby constitutes and appoints
Samuel Zell and Timothy H. Callahan, and each of them, as his attorney-in-fact
and agent, with full power of substitution and resubstitution for him in any and
all capacities, to sign any or all amendments or post-effective amendments to
this Registration Statement, or any Registration Statement for the same offering
that is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, and to file the same, with exhibits thereto and other documents in
connection therewith or in connection with the registration of the Common Shares
under the Securities Act of 1934, as amended, with the Securities and Exchange
Commission, granting unto such attorney-in-fact and agent 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
such attorney-in-fact and agent or his substitutes may do or cause to be done by
virtue hereof.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ TIMOTHY H. CALLAHAN President, Chief Executive Officer and Trustee
- -----------------------------------------------------
Timothy H. Callahan

/s/ RICHARD KINCAID Chief Financial Officer (principal financial
- ----------------------------------------------------- officer and principal accounting officer)
Richard Kincaid

/s/ SAMUEL ZELL Chairman of the Board of Trustees
- -----------------------------------------------------
Samuel Zell

/s/ SHELI Z. ROSENBERG Trustee
- -----------------------------------------------------
Sheli Z. Rosenberg
</TABLE>

II-6
<PAGE> 196

EXHIBIT INDEX

<TABLE>
<CAPTION>
PAGE
EXHIBIT NO. DESCRIPTION OF EXHIBIT NO.
- ----------- ---------------------- ----
<C> <C> <S> <C>
1.1* -- Form of Purchase Agreement..................................
3.1* -- Amended and Restated Declaration of Trust of the Company....
3.2* -- Form of Bylaws of the Company...............................
5.1* -- Opinion of Rosenberg & Liebentritt, P.C. regarding the
validity of the securities being registered.................
8.1* -- Opinion of Hogan & Hartson L.L.P. regarding tax matters.....
10.1* -- Form of Agreement of Limited Partnership of the Operating
Partnership.................................................
10.2* -- Form of Registration Rights Agreement between the Company
and the persons named therein...............................
10.3* -- 1997 Employee Share Option and Restricted Share Plan........
10.4* -- Non-Employee Trustee Share Option Plan......................
10.5* -- Noncompetition Agreement between the Company and Samuel
Zell........................................................
10.6* -- Form of Contribution Agreement..............................
21.1* -- List of Subsidiaries........................................
23.1* -- Consent of Rosenberg & Liebentritt, P.C. (included as part
of Exhibit 5.1).............................................
23.2 -- Consent of Ernst & Young LLP................................
23.3* -- Consent of Hogan & Hartson L.L.P............................
23.4* -- Consent of Mr. Dobrowski....................................
23.5* -- Consent of Mr. Harper.......................................
23.6* -- Consent of Mr. Linneman.....................................
24.1 -- Power of Attorney (included in the Signature Page at page
II-6).......................................................
27.1 -- Financial Data Schedule.....................................
</TABLE>

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

* To be filed by amendment.

<PAGE> 1

EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the captions "Summary Selected
Combined Financial Information," "Selected Combined Financial Data" and
"Experts" and to the use of our reports indicated below in this Registration
Statement (Form S-11) and related Prospectus of Equity Office Properties Trust
for the registration of shares of its common stock.

Financial Statements Date of Auditors Report
-------------------- -----------------------
Balance sheet of Equity Office Properties Trust April 28, 1997
as of December 31, 1996

Combined balance sheets of Equity Office
Predecessors as of December 31, 1996 and 1995 and
the related combined statements of operations,
owners' equity and cash flows for each of three
years in the period ended December 31, 1996 March 25, 1997

Statement of Revenue and Certain Expenses of
Promenade II for the year ended December 31, 1995 December 17, 1996

Statement of Revenue and Certain Expenses of Two
California Plaza for the year ended December 31, 1995 January 15, 1997

Statement of Revenue and Certain Expenses of BP Tower
for the year ended December 31, 1995 November 8, 1996

Statement of Revenue and Certain Expenses of SunTrust
Center for the year ended December 31, 1995 December 6, 1996

Statement of Revenue and Certain Expenses of Reston
Town Center for the year ended December 31, 1995 November 19, 1996

<PAGE> 2

Statement of Revenue and Certain Expenses of Colonnade I
for the period from January 1, 1996 to December 4, 1996 April 16, 1997

Statement of Revenue and Certain Expenses of 177 Broad
Street for the year ended December 31, 1996 March 28, 1997

Statement of Revenue and Certain Expenses of Preston
Commons for the year ended December 31, 1996 April 16, 1997

Ernst & Young LLP

Chicago, Illinois
May 6, 1997

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 443,013
<SECURITIES> 0
<RECEIVABLES> 58,661
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 119,076
<PP&E> 3,549,708
<DEPRECIATION> 257,893
<TOTAL-ASSETS> 3,912,565
<CURRENT-LIABILITIES> 209,591
<BONDS> 1,964,892
0
0
<COMMON> 0
<OTHER-SE> 1,738,082
<TOTAL-LIABILITY-AND-EQUITY> 3,912,565
<SALES> 0
<TOTAL-REVENUES> 515,555
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 322,535
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 119,595
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 73,425
<EPS-PRIMARY> 0
<EPS-DILUTED> 0

</TABLE>