EQUITY OFFICE PROPERTIES TRUST
S-11/A, 1998-05-29
REAL ESTATE INVESTMENT TRUSTS
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<PAGE>   1
 
   
      AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 29, 1998
    
 
   
                                                      REGISTRATION NO. 333-51597
    
================================================================================
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                         ------------------------------
 
   
                                AMENDMENT NO. 1
    
   
                                       TO
    
                                   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>
               J. WARREN GORRELL, JR.                                    ERIC S. HAUETER
                   JAMES E. SHOWEN                                     EDWARD F. PETROSKY
               HOGAN & HARTSON L.L.P.                                   BROWN & WOOD LLP
             555 THIRTEENTH STREET, N.W.                             ONE WORLD TRADE CENTER
             WASHINGTON, D.C. 20004-1109                             NEW YORK, NY 10048-0557
                   (202) 637-5600                                        (212) 839-5300
</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, 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 this form is a post-effective amendment filed pursuant to Rule 462(d)
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             PROPOSED
                                                     AMOUNT              MAXIMUM              MAXIMUM             AMOUNT OF
               TITLE OF CLASS                        BEING            OFFERING PRICE     AGGREGATE OFFERING      REGISTRATION
       OF SECURITIES BEING REGISTERED              REGISTERED         PER SHARE (1)          PRICE (1)               FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>                  <C>                  <C>                  <C>
 Series C Preferred Shares of Beneficial
 Interest, $.01 par value per share                10,000,000             $25.00            $250,000,000          $73,750(2)
=================================================================================================================================
</TABLE>
    
 
 (1) Estimated solely for the purpose of calculating the registration fee.
 
   
 (2) Previously paid.
    
                         ------------------------------
 
    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
 
================================================================================
<PAGE>   2
 
   
PROSPECTUS (Subject to Completion, Issued May 29, 1998)
    
   
                                8,000,000 Shares
    
                         Equity Office Properties Trust
                         % Series C Cumulative Redeemable
                    Preferred Shares of Beneficial Interest
                           ($.01 par value per share)
                   (Liquidation Preference $25.00 Per Share)
                            ------------------------
 
   Distributions on the  % Series C Cumulative Redeemable Preferred Shares of
Beneficial Interest, $.01 par value per share (the "Series C Preferred Shares"),
offered hereby (the "Offering") of Equity Office Properties Trust (the
"Company"), a Maryland real estate investment trust, are cumulative from the
date of original issue and are payable quarterly in arrears on the   day of
March, June, September and December of each year, commencing on September  ,
1998, at the rate of      % of the liquidation preference per annum (equivalent
to $       per annum per Series C Preferred Share). See "Series C Preferred
Shares -- Distributions."
   
   The Series C Preferred Shares will not be redeemable prior to June  , 2003.
On and after June  , 2003, the Series C Preferred Shares will be redeemable by
the Company, in whole or from time to time in part, at the option of the
Company, for cash, at a redemption price of $25.00 per share, plus accumulated
and unpaid distributions thereon, if any, to the redemption date. The redemption
price of the Series C Preferred Shares (other than the portion thereof
consisting of accumulated and unpaid distributions) will be payable solely out
of the sale proceeds of other equity securities of the Company, which may
include other classes and series of preferred shares, and from no other source.
The Series C Preferred Shares have no stated maturity, will not be subject to
mandatory redemption or any sinking fund and will not be convertible into any
other securities of the Company. However, the Company may purchase Series C
Preferred Shares at any time in certain circumstances relating to the
maintenance of its ability to qualify as a REIT for federal income tax purposes.
See "Series C Preferred Shares -- Redemption."
    
   In order to assist the Company in maintaining its qualification as a REIT for
federal income tax purposes, ownership, directly or indirectly, by any person of
more than 9.9% in value or number (whichever is more restrictive) of the Series
C Preferred Shares is restricted by the Company's Declaration of Trust. See
"Series C Preferred Shares -- Restrictions on Ownership and Transfer."
 
APPLICATION HAS BEEN MADE TO LIST THE SERIES C PREFERRED SHARES ON THE NEW YORK
 STOCK EXCHANGE (THE "NYSE"), SUBJECT TO OFFICIAL NOTICE OF ISSUANCE, UNDER THE
 SYMBOL "EOP PR C." IF SO APPROVED, TRADING ON THE NYSE IS EXPECTED TO COMMENCE
   WITHIN A 30-DAY PERIOD AFTER THE DATE OF INITIAL DELIVERY OF THE SERIES C
                               PREFERRED SHARES.
                            ------------------------
   
    SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR CERTAIN FACTORS RELEVANT TO AN
INVESTMENT IN THE SERIES C PREFERRED SHARES, INCLUDING:
    
 
   - If the Company does not effectively manage its rapid growth, it may be
     unable to pay distributions to holders of its Preferred Shares;
   - If (i) the Company's assets do not generate income sufficient to pay its
     expenses and maintain its properties, (ii) the Company is unable to renew
     leases or relet space at favorable rents, (iii) new acquisitions fail to
     perform as expected or competition results in increased prices for
     acquisitions, (iv) the Company is unable to sell properties when
     appropriate or (v) unidentified environmental liabilities arise or the
     Company suffers uninsured losses, the Company may be unable to pay
     distributions to holders of its Preferred Shares;
   - If prevailing interest rates or other factors result in higher interest
     rates, increased interest expense would adversely affect cash flow and the
     Company's ability to pay distributions to holders of its Preferred Shares;
   
   - If principal payments on the Company's debt (which had an outstanding
     principal balance of $4.0 billion as of March 31, 1998) due at maturity
     cannot be refinanced, extended or paid with proceeds of other capital
     transactions, the Company's cash flow and ability to pay distributions to
     holders of its Preferred Shares would be adversely affected;
    
   - Conflicts of interest between the Company and certain executive officers
     and trustees could result in decisions that are not in the Company's best
     interest;
   - Contingent or undisclosed liabilities acquired in mergers or similar
     transactions could adversely affect the Company's results of operations,
     financial condition and ability to pay distributions to holders of its
     Preferred Shares; and
   - If the Company fails to qualify as a REIT for federal income tax purposes,
     the Company will be subject to federal income taxation at regular corporate
     rates and, as a result, will have less 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.
                            ------------------------
   
                              PRICE $25.00 A SHARE
    
                            ------------------------
 
   
<TABLE>
<CAPTION>
                                                                                      UNDERWRITING
                                                                  PRICE TO           DISCOUNTS AND          PROCEEDS TO
                                                                 PUBLIC(1)           COMMISSIONS(2)          COMPANY(3)
                                                                 ---------           --------------         -----------
<S>                                                             <C>                  <C>                    <C>
Per Share...................................................       $25.00                  $                     $
Total(4)....................................................    $200,000,000               $                     $
</TABLE>
    
 
- ------------
 
   (1) Plus accumulated distributions, if any, from the date of original
       issuance.
   (2) The Company has agreed to indemnify the Underwriters against certain
       liabilities, including liabilities under the Securities Act of 1933, as
       amended. See "Underwriters."
   
   (3) Before deducting expenses of this Offering payable by the Company
       estimated at $500,000.
    
   
   (4) The Company has granted to the Underwriters an option, exercisable within
       30 days of the date hereof, to purchase up to an additional 1,200,000
       Series C Preferred Shares solely to cover over-allotments, if any. If
       this option is exercised in full, the total Price to Public, Underwriting
       Discounts and Commissions and Proceeds to Company will be $230,000,000,
       $        and $        , respectively. See "Underwriters."
    
                            ------------------------
 
   
   The Series C Preferred Shares are offered, subject to prior sale, when, as
and if issued to and accepted by the Underwriters, and subject to approval of
certain legal matters by Brown & Wood LLP, counsel for the Underwriters. It is
expected that delivery of the Series C Preferred Shares will be made on or about
June    , 1998 at the office of Morgan Stanley & Co. Incorporated, New York, New
York, against payment therefor in immediately available funds.
    
                            ------------------------
MORGAN STANLEY DEAN WITTER
             MERRILL LYNCH & CO.
                           PAINEWEBBER INCORPORATED
                                         PRUDENTIAL SECURITIES INCORPORATED
                                                            SALOMON SMITH BARNEY
 
   
June   , 1998
    
 
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>   3
 
     Certain persons participating in this Offering may engage in transactions
that stabilize, maintain, or otherwise affect the price of the Series C
Preferred Shares. Specifically, the Underwriters may overallot in connection
with this Offering and may bid for, and purchase, Series C Preferred Shares in
the open market. For a description of these activities, see "Underwriters."
 
                                ---------------
 
                               TABLE OF CONTENTS
 
   
<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
Summary...............................    2
  The Company.........................    2
  Acquisition Activity................    3
  Business and Growth Strategies......    4
  Employees...........................    5
  The Properties......................    5
  The Offering........................    6
  Tax Status of the Company...........    7
  Summary Risk Factors................    8
  Conflicts of Interest...............    8
  Summary Selected Financial
     Information......................   10
Risk Factors..........................   12
  There Can be No Assurance that We
     Will Effectively Manage our Rapid
     Growth and Expansion Into New
     Markets..........................   12
  Our Performance and Share Value are
     Subject to Risks Associated with
     the Real Estate Industry.........   12
  Debt Financing, Financial Covenants,
     Degree of Leverage, and Increases
     in Interest Rates could Adversely
     Affect our Financial
     Performance......................   13
  We do not Control our Managed
     Properties or Management and
     Non-REIT Services Businesses.....   14
  Conflicts of Interest could Result
     in Decisions not in the Company's
     Best Interest....................   15
  Environmental Problems are Possible
     and May be Costly................   16
  We are Dependent on our Key
     Personnel........................   17
  Contingent or Undisclosed
     Liabilities Acquired in Mergers
     or Similar Transactions Could
     Adversely Affect our Financial
     Condition........................   17
  The Market Value of our Publicly
     Traded Securities can be
     Adversely Affected by a Number of
     Factors..........................   18
  We are Dependent on External Sources
     of Capital.......................   18
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
  Our Success as a REIT is Dependent
     on Compliance with Federal Income
     Tax Requirements.................   18
The Company...........................   20
  General.............................   20
  Operations..........................   20
  Operational Structure...............   20
  Acquisition Activity................   21
  Business and Growth Strategies......   21
  Employees...........................   22
Use of Proceeds.......................   22
Ratios of Earnings to Combined Fixed
  Charges and Preferred Share
  Distributions.......................   23
Price Range of Common Shares and
  Distribution History................   23
Capitalization........................   24
Selected Financial Information........   25
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.......................   27
  Overview............................   27
  Results of Operations...............   27
  Liquidity and Capital Resources.....   37
  Cash Flows..........................   40
  Capital Improvements................   41
  Tenant Improvements and Leasing
     Commission Costs.................   42
  Development.........................   43
  Year 2000...........................   43
  Inflation...........................   43
  Funds from Operations...............   43
The Properties........................   45
  General.............................   45
  Office Properties by Region.........   45
  Parking Facilities..................   52
  Tenants.............................   52
  Lease Expirations -- Total
     Portfolio........................   54
  Lease Distributions.................   55
  Occupancy...........................   55
  Legal Proceedings...................   55
Management............................   56
</TABLE>
    
 
                                        i
<PAGE>   4
 
   
<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
  Trustees and Executive and Senior
     Officers.........................   56
  Compensation of the Board of
     Trustees; Payment in Common
     Shares...........................   61
  Executive Compensation..............   62
  Compensation Committee Interlocks
     and Insider Participation........   64
  Limitation of Liability and
     Indemnification..................   64
Certain Relationships and Related
  Transactions........................   66
  Formation Transactions..............   66
  Leases and Parking Operations.......   67
  Equity Group Distributions and
     Fees.............................   67
  Wright Runstad Acquisition..........   67
  Certain Other Relationships and
     Related Transactions.............   68
Policies with Respect to Certain
  Activities..........................   69
  Investment Policies.................   69
  Financing Policies..................   69
  Lending Policies....................   70
  Conflict of Interest Policies.......   70
  Policies with Respect to Other
     Activities.......................   71
Principal Shareholders................   72
Series C Preferred Shares.............   74
  Shares of Beneficial Interest
     Generally........................   74
  Series C Preferred Shares
     Generally........................   74
  Ranking.............................   75
  Distributions.......................   75
  Liquidation Preference..............   77
  Redemption..........................   77
  Voting Rights.......................   78
  Conversion Rights...................   80
  Power to Issue Additional Common
     Shares and Preferred Shares......   80
  Restrictions on Ownership and
     Transfer.........................   80
  Transfer Agent, Registrar,
     Conversion Agent and Distribution
     Disbursing Agent.................   82
  Outstanding Shares of Beneficial
     Interest.........................   82
Certain Provisions of Maryland Law and
  the Company's Declaration of Trust
  and Bylaws..........................   85
  Classification and Removal of Board
     of Trustees; Other Provisions....   85
  Changes in Control Pursuant to
     Maryland Law.....................   85
  Amendments to the Declaration of
     Trust............................   86
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
  Advance Notice of Trustee
     Nominations and New Business.....   86
  Anti-takeover Effect of Certain
     Provisions of Maryland Law and of
     the Declaration of Trust and
     Bylaws...........................   87
  Maryland Asset Requirements.........   87
Partnership Agreement.................   88
  Management..........................   88
  Sales of Assets.....................   88
  Removal of the Managing General
     Partner; Transfer of the
     Company's Interests..............   88
  Reimbursement of the Company;
     Transactions with the Company and
     Its Affiliates...................   88
  Redemption of Units.................   89
  Restrictions on Transfer of Units by
     Limited Partners.................   89
  Issuance of Additional Units and/or
     Preference Units.................   89
  Capital Contributions...............   90
  Distributions; Allocations of Income
     and Loss.........................   90
  Exculpation and Indemnification of
     the Company......................   90
  Amendment of the Partnership
     Agreement........................   91
  Term................................   91
Federal Income Tax Consequences.......   92
  Taxation of the Company as a REIT --
     General..........................   92
  Requirements for Qualification as a
     REIT.............................   94
  Taxation of Holders of Series C
     Preferred Shares.................  101
  Taxation of Taxable U.S.
     Shareholders of the Company
     Generally........................  102
  Backup Withholding for Distributions
     by the Company...................  104
  Taxation of Tax-Exempt Shareholders
     of the Company...................  104
  Taxation of Non-U.S. Shareholders of
     the Company......................  105
  Tax Aspects of the Company's
     Ownership of Interests in the ZML
     Opportunity Partnerships, the
     Operating Partnership and the
     Subsidiary Partnerships..........  108
  Other Tax Consequences for the
     Company, Its Shareholders and the
     Noncontrolled Subsidiaries.......  109
</TABLE>
    
 
                                       ii
<PAGE>   5
 
   
<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
ERISA Considerations..................  110
  Employment Benefit Plans,
     Tax-Qualified Pension, Profit
     Sharing or Stock Bonus Plans and
     IRS..............................  110
  Status of the Company and the
     Operating Partnership Under
     ERISA............................  110
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
Underwriters..........................  112
Experts...............................  113
Legal Matters.........................  114
Available Information.................  114
Glossary..............................  115
Index to Financial Statements.........  F-1
</TABLE>
    
 
     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 SERIES C PREFERRED
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.
 
                                       iii
<PAGE>   6
 
                                    SUMMARY
 
   
     The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus. 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,
(i) all rental and square footage data is approximate and/or on a weighted
average basis, and all Property information is presented as of March 31, 1998
and (ii) it is assumed that the Underwriters' over-allotment option has not been
exercised. All references to the historical activities of the Company prior to
July 11, 1997, refer to the activities of the Equity Office Predecessors.
    
 
     Information contained in this Prospectus contains "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"). The Company intends such forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements contained in Section 27A of the Securities Act and such
forward-looking statements are included for purposes of complying therewith.
Such forward-looking statements relate 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.
 
THE COMPANY
 
     The Company was formed in 1996 as a Maryland real estate investment trust
and commenced operations effective with the completion of its initial public
offering (the "IPO") of 28,750,000 common shares of beneficial interest, $.01
par value per share (the "Common Shares"), on July 11, 1997. The Company,
together with the Operating Partnership, was formed to continue and expand the
national office property business organized by Samuel Zell, Chairman of the
Board of Trustees of the Company. The Company, a self-administered and
self-managed real estate investment trust ("REIT"), is the managing general
partner of the Operating Partnership. As of March 31, 1998, the Company owned,
directly or indirectly, 89.6% of the outstanding common units of partnership
interest in the Operating Partnership (the "Units"). The Company owns all of its
assets and conducts substantially all of its business through the Operating
Partnership and its subsidiaries.
 
     As of March 31, 1998, the Company owned or had an interest in 260 office
properties containing approximately 66.6 million square feet of office space
(the "Office Properties") and owned or had an interest in 17 stand-alone parking
facilities containing approximately 16,749 parking spaces (the "Parking
Facilities" and, together with the Office Properties, the "Properties"). To
facilitate maintenance of the Company's qualification as a REIT for federal
income tax purposes, management of properties that are not wholly owned by the
Company and its subsidiaries is generally conducted by Equity Office Properties
Management Corp., a Delaware corporation ("EOP Management Company"), and Beacon
Property Management Corporation, a Delaware corporation ("Beacon Management
Company" and, together with EOP Management Company, the "Management Companies").
 
     The Company's executive offices are located at Two North Riverside Plaza,
Suite 2200, Chicago, Illinois 60606, and its telephone number is (312) 466-3300.
 
                                        2
<PAGE>   7
 
   
     The following diagram depicts in summary form the Company's structure:
    
 
                          COMPANY'S STRUCTURE DIAGRAM

     This diagram is a vertical three-box flow chart. There is a long
rectangular box on top with the words "Equity Office Properties Trust" inside.
A short line with "89.6%" next to it connects this box to a triangular box
below it with the words "EOP Operating Limited Partnership" inside. Another
short line connects the triangular box to a smaller rectangular box below it
with the words "Properties and Property-Owning Subsidiaries" inside.
 
ACQUISITION ACTIVITY
 
   
     During the period from 1987 through 1997, the Company invested
approximately $10 billion, averaging $2.7 billion annually (calculated on a cost
basis) for the three years ended December 31, 1997, in acquisitions of
institutional quality office properties throughout the United States. During the
period from the Company's IPO in July 1997 through May 1998, the Company
completed a number of new acquisitions:
    
 
     BEACON MERGER. On December 19, 1997, the Company, the Operating
Partnership, Beacon Properties Corporation, a Maryland corporation ("Beacon"),
and Beacon Properties, L.P., a Delaware limited partnership of which Beacon was
the sole general partner ("Beacon Partnership"), consummated the transactions
contemplated by the Agreement and Plan of Merger dated September 15, 1997, as
amended, among the Company, the Operating Partnership, Beacon and Beacon
Partnership (the "Merger Agreement"). Pursuant to the Merger Agreement, Beacon
merged with and into the Company and Beacon Partnership merged with and into the
Operating Partnership (the "Beacon Merger"). The acquisition cost of the Beacon
Merger was approximately $4.3 billion.
 
     As a result of the Beacon Merger, the Company acquired interests in 130
Office Properties (the "Beacon Properties") containing approximately 20.9
million rentable square feet of office space. The Beacon Properties are located
in 22 submarkets in six markets: Boston, Atlanta, Chicago, Los Angeles, San Jose
and Washington, D.C.
 
   
     OTHER ACQUISITIONS. On December 17, 1997, the Company acquired ten Office
Properties, containing an aggregate of approximately 3.34 million square feet,
located in Seattle, Washington, Portland, Oregon and Anchorage, Alaska, from
Wright Runstad Holdings L.P., Wright Runstad Asset Management L.P. and Mellon
Bank, N.A., as Trustee for First Plaza Group Trust ("First Plaza") (the "Wright
Runstad Acquisition"). The purchase price was approximately $640 million. In
addition to the Beacon Merger and the Wright Runstad Acquisition, during the
period from the IPO through May 29, 1998, the Company completed thirteen other
acquisition transactions, and partially completed a fourteenth acquisition
transaction, in which it acquired an aggregate of 37 Office Properties and the
remaining 90% interest in the Polk and Taylor Buildings, containing an aggregate
of approximately 13.0 million square feet, located in Boston, New Orleans,
Houston, Dallas, Denver, Philadelphia, Los Angeles, Chicago, San Francisco,
Washington, D.C. and Fairfax and Alexandria, Virginia (the "Other
Acquisitions"). The aggregate consideration paid by the Company for the
    
                                        3
<PAGE>   8
 
   
Other Acquisitions was approximately $2.3 billion, comprised of $2.0 billion in
cash, $163 million in Units, $96 million in assumed liabilities and
approximately $39 million in the form of promissory notes of the Company
payable, at the Company's option, in Common Shares. Subsequent to the IPO, the
Company also acquired three Parking Facilities, containing approximately 2,141
parking spaces in Chicago, New Orleans and Pittsburgh for $54.9 million. Giving
effect to the Other Acquisitions, as of May 29, 1998, the Company owned or had
an interest in 268 Office Properties containing 69.7 million square feet.
    
 
   
     PROBABLE ACQUISITIONS. The Company has entered into agreements to acquire
an aggregate of twelve additional office properties (the "Probable
Acquisitions"). The Company expects to acquire four office properties located in
Denver and four office properties located in Albuquerque during July 1998. These
eight properties contain an aggregate of approximately 866,600 square feet. The
aggregate purchase price for these eight properties is approximately $130
million, comprised of $106 million in cash and approximately $24 million in the
form of promissory notes of the Company payable, at the Company's option, in
Common Shares. The Company has also entered into an agreement to acquire four
office properties (including one office property currently in development)
located in Dallas and Washington, D.C. containing an aggregate of approximately
1.1 million square feet for aggregate consideration estimated to be $158.5
million in cash. The Company expects to complete this acquisition by the end of
September 1998.
    
 
BUSINESS AND GROWTH STRATEGIES
 
     The Company's primary business objective is to achieve sustainable
long-term growth in cash flow and portfolio 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. The
Company intends to supplement this strategy by owning parking facilities.
 
     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 where market conditions permit, (iii) repositioning of certain
Properties which have not yet achieved stabilization, and (iv) increasing
economies of scale.
 
     As of March 31, 1998, 3.7 million rentable square feet of Office Property
space was vacant, representing 5.6% of the Company's total Office Property
portfolio. Of this amount, 537,900 square feet was leased at an average rent of
$29.14 per square foot, with occupancy to commence in whole or in part during
1998. The Company's average operating expenses for the total vacant space were
$9.38 per square foot as of March 31, 1998.
 
     During the period from March 31, 1998 through December 31, 2002, 4,566
leases for 36.3 million rentable square feet of space are scheduled to expire.
As of March 31, 1998, the average rent for this space was $22.18 per square foot
and the average operating expenses were $8.93 per square foot. The actual rental
rates at which available space will be renewed or otherwise relet will depend on
prevailing market factors at the time.
 
     The Company owns certain parcels of undeveloped land acquired in connection
with its acquisition of the Office Properties. The Company is currently
proceeding with the development of two additional office properties totaling
approximately 430,000 square feet. In determining whether to develop land, the
Company considers, among other factors, whether significant pre-leasing can be
arranged or if such development is necessary to protect the Company's investment
in existing Properties.
 
     EXTERNAL GROWTH. The Company is pursuing, and expects to continue to
actively pursue, acquisitions of additional office properties and parking
facilities. Management believes that significant opportunities for external
growth will continue to be available through strategic acquisitions of
institutional quality office properties. 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 or the Operating Partnership, and such
acquisitions may be customary real estate transactions and/or mergers or other
business combinations.
 
                                        4
<PAGE>   9
 
     PARKING FACILITIES. Management believes that parking facilities offer the
Company attractive investment opportunities which are complementary to
investment in office properties. The Company intends to focus its acquisition
efforts for parking facilities 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.
 
EMPLOYEES
 
     As of March 31, 1998, the Company had approximately 1,482 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 PROPERTIES
 
     The Company's portfolio (based on revenues and square footage as of
December 31, 1997) is the largest office portfolio in the United States
controlled by any publicly traded, full-service office company. Management
believes that 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. See "The
Properties."
 
     The operation of the Properties is under the direction of six 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 the Company's Executive Vice President -- Real
Estate Operations.
 
   
     As of March 31, 1998, the Company owned or had an interest in 260 Office
Properties and 17 Parking Facilities. The Company managed an additional 31
office properties through the Management Companies (the "Managed Properties"),
containing 3.7 million square feet, including 29 office properties owned by
certain affiliates of Mr. Zell. See "Properties." The following table shows the
distribution of the Company's Office Properties, Managed Properties, Parking
Facilities and employees by region:
    
 
             DISTRIBUTION OF OFFICE PROPERTIES, MANAGED PROPERTIES,
       PARKING FACILITIES AND EMPLOYEES BY REGION (AS OF MARCH 31, 1998)
 
   
<TABLE>
<CAPTION>
                               OFFICE PROPERTIES       MANAGED PROPERTIES      PARKING FACILITIES
                             ---------------------    ---------------------    -------------------
                                        RENTABLE                 RENTABLE                 NUMBER         NUMBER
         REGION              NUMBER    SQUARE FEET    NUMBER    SQUARE FEET    NUMBER    OF SPACES    OF EMPLOYEES
         ------              ------    -----------    ------    -----------    ------    ---------    ------------
<S>                          <C>       <C>            <C>       <C>            <C>       <C>          <C>
Northeast                                                                                                  458
  CBD....................      23      10,022,538        1         312,000        7        3,852
  Suburban...............      62       8,946,287        3         978,674       --           --
Central                                                                                                    511(1)
  CBD....................      12       9,359,137        1         546,835        5        4,674
  Suburban...............      19       3,980,642       17       1,085,407       --           --
Pacific                                                                                                    133
  CBD....................       7       4,810,336       --              --       --           --
  Suburban...............      36       4,887,602        5         320,468       --           --
West                                                                                                        90
  CBD....................      12       4,008,830       --              --        4        7,464
  Suburban...............      20       4,789,652        1         157,311       --           --
Southeast                                                                                                  155
  CBD....................       6       2,887,795        1         130,189       --           --
  Suburban...............      45       5,797,339        2         207,664       --           --
Southwest                                                                                                  135
  CBD....................       5       2,588,819       --              --        1          759
  Suburban...............      13       4,531,473       --              --       --           --
                              ---      ----------       --       ---------       --       ------         -----
     Total...............     260      66,610,450       31       3,738,548       17       16,749         1,482
                              ===      ==========       ==       =========       ==       ======         =====
</TABLE>
    
 
- ---------------
(1) 257 of these employees are located at the Company's headquarters in Chicago.
 
                                        5
<PAGE>   10
 
THE OFFERING
 
   
Securities Offered............   8,000,000   % Series C Cumulative Redeemable
                                 Preferred Shares of Beneficial Interest (or
                                 9,200,000   % Series C Cumulative Redeemable
                                 Preferred Shares of Beneficial Interest if the
                                 Underwriters' over-allotment option is
                                 exercised in full) (the "Series C Preferred
                                 Shares").
    
 
Distributions.................   Distributions on the Series C Preferred Shares
                                 offered hereby are cumulative from the date of
                                 original issue and are payable quarterly in
                                 arrears on the   day of March, June, September
                                 and December of each year, commencing on
                                 September   , 1998 (or, if any such date is not
                                 a Business Day, on the next succeeding Business
                                 Day), at the rate of      % of the liquidation
                                 preference per annum (equivalent to $       per
                                 annum per Series C Preferred Share).
                                 Distributions on the Series C Preferred Shares
                                 will accumulate whether or not there are funds
                                 legally available for the payment of such
                                 distributions and whether or not such
                                 distributions are declared. If the Company
                                 designates any portion of a distribution as
                                 "capital gain dividend," a holder's share of
                                 such capital gain dividend would be an amount
                                 that bears the same ratio to the total amount
                                 of distributions paid to such holder for the
                                 year as the aggregate amount designated as a
                                 capital gain dividend bears to the aggregate
                                 amount of all distributions paid on all classes
                                 of shares for the year. See "Series C Preferred
                                 Shares -- Distributions."
 
Ranking.......................   The Series C Preferred Shares will rank, with
                                 respect to the payment of distributions and the
                                 distribution of assets upon liquidation,
                                 dissolution or winding up of the Company, on a
                                 parity with the Company's outstanding Series A
                                 Preferred Shares and Series B Preferred Shares
                                 and senior to the Common Shares. See "Series C
                                 Preferred Shares -- Ranking."
 
Liquidation Preference........   The Series C Preferred Shares will have a
                                 liquidation preference of $25.00 per Series C
                                 Preferred Share, plus an amount equal to
                                 accumulated and unpaid distributions. See
                                 "Series C Preferred Shares -- Liquidation
                                 Rights."
 
Maturity......................   The Series C Preferred Shares have no stated
                                 maturity and will not be subject to mandatory
                                 redemption or any sinking fund.
 
   
Redemption....................   The Series C Preferred Shares will not be
                                 redeemable prior to June   , 2003. On and after
                                 June   , 2003, the Series C Preferred Shares
                                 will be redeemable for cash at the option of
                                 the Company, in whole or from time to time in
                                 part, at a redemption price of $25.00 per
                                 share, plus accumulated and unpaid
                                 distributions thereon, if any, to the
                                 redemption date. The redemption price (other
                                 than the portion thereof consisting of
                                 accumulated and unpaid distributions) will be
                                 payable solely out of the sale proceeds of
                                 other equity securities of the Company, which
                                 may include other classes or series of
                                 preferred shares of beneficial interest, and
                                 from no other source. In certain circumstances
                                 related to the Company's maintenance of its
                                 ability to qualify as a REIT for federal income
                                 tax purposes, the Company may purchase Series C
                                 Preferred Shares. See "Series C Preferred
                                 Shares -- Redemption."
    
                                        6
<PAGE>   11
 
Voting Rights.................   If distributions on the Series C Preferred
                                 Shares are in arrears for six or more quarterly
                                 periods (whether or not consecutive), holders
                                 of the Series C Preferred Shares (voting
                                 separately as a class with all other classes or
                                 series of equity securities of the Company upon
                                 which like voting rights have been conferred
                                 and are exercisable) will be entitled to vote
                                 for the election of two additional trustees to
                                 serve on the Board of Trustees of the Company
                                 until all distribution arrearages with respect
                                 to the Series C Preferred Shares are
                                 eliminated. The Series C Preferred Shares will
                                 also be entitled to certain additional voting
                                 rights described herein. See "Series C
                                 Preferred Shares -- Voting Rights." The
                                 Company's outstanding Series A Preferred Shares
                                 and Series B Preferred Shares have
                                 substantially similar voting rights.
 
Conversion....................   The Series C Preferred Shares will not be
                                 convertible into or exchangeable for any other
                                 property or securities of the Company.
 
NYSE Listing..................   Application has been made to list the Series C
                                 Preferred Shares on the NYSE, subject to
                                 official notice of issuance, under the symbol
                                 "EOP Pr C." Trading on the NYSE is expected to
                                 commence within a 30-day period after the date
                                 of initial delivery of the Series C Preferred
                                 Shares. While the Underwriters have advised the
                                 Company that they intend to make a market in
                                 the Series C Preferred Shares prior to
                                 commencement of trading on the NYSE, they are
                                 under no obligation to do so and no assurance
                                 can be given that a market for the Series C
                                 Preferred Shares will exist prior to or upon
                                 commencement of trading. See "Underwriters."
 
Use of Proceeds...............   The net proceeds from the Offering will be used
                                 primarily for general corporate purposes, which
                                 may include the acquisition of additional
                                 office properties and parking facilities and
                                 the repayment of indebtedness. See "Use of
                                 Proceeds."
 
Ownership Limit...............   In order to assist the Company in maintaining
                                 its qualification as a REIT for federal income
                                 tax purposes, ownership, directly or
                                 indirectly, by any person of more than 9.9% in
                                 value or number (whichever is more restrictive)
                                 of the Series C Preferred Shares is restricted
                                 by the Company's Declaration of Trust.
 
TAX STATUS OF THE COMPANY
 
     The Company intends to elect to be taxed as a REIT under Sections 856
through 860 of the Code, commencing with its taxable year ended December 31,
1997. Commencing with its formation on July 11, 1997, the Company believes that
it has been organized and has operated in a manner so as to qualify for taxation
as a REIT under the Code. The Company believes its organization and proposed
method of operation will enable it to continue to meet the requirements for
qualification and taxation as a REIT. To maintain REIT status, an entity must
meet a number of organizational and operational requirements and is required
each year to distribute at least 95% of its net taxable income (other than net
capital gain). As a REIT, the Company generally is not subject to federal income
tax on net income it distributes currently to its shareholders. If the Company
fails to qualify as a REIT for any taxable year, it will be subject to federal
income tax at regular corporate rates. See "Federal Income Tax Considerations --
Taxation of the Company as a REIT -- General" and "Risk Factors -- Our Success
as a REIT is Dependent on Compliance with Federal Income Tax Requirements." Even
though the Company expects to qualify for taxation as a REIT, the Company will
be subject to certain federal, state and local taxes on its income and property.
 
                                        7
<PAGE>   12
 
SUMMARY RISK FACTORS
 
     - If the Company does not effectively manage its rapid growth, it may be
       unable to pay distributions to holders of its Preferred Shares;
 
     - If (i) the Company's assets do not generate income sufficient to pay its
       expenses and maintain its properties, (ii) the Company is unable to renew
       leases or relet space at favorable rents, (iii) new acquisitions fail to
       perform as expected or competition results in increased prices for
       acquisitions, (iv) the Company is unable to sell properties when
       appropriate or (v) unidentified environmental liabilities arise or the
       Company suffers uninsured losses, the Company may not be able to pay
       distributions to holders of its Preferred Shares;
 
     - If prevailing interest rates or other factors result in higher interest
       rates, increased interest expense would adversely affect cash flow and
       the Company's ability to pay distributions to holders of its Preferred
       Shares;
 
   
     - If principal payments on the Company's debt (which had an outstanding
       principal balance of $4.0 billion as of March 31, 1998) due at maturity
       cannot be refinanced, extended or paid with proceeds of other capital
       transactions, the Company's cash flow and ability to pay distributions to
       holders of its Preferred Shares would be adversely affected;
    
 
     - Conflicts of interest between the Company and certain executive officers
       and trustees could result in decisions that are not in the Company's best
       interest;
 
     - Contingent or undisclosed liabilities acquired in mergers or similar
       transactions could adversely affect the Company's results of operations,
       financial condition and ability to pay distributions to holders of its
       Preferred Shares; and
 
     - If the Company fails to qualify as a REIT for federal income tax
       purposes, the Company will be subject to federal income taxation at
       regular corporate rates and, as a result, will have less cash available
       for distribution.
 
   
CONFLICTS OF INTEREST
    
 
   
     - The transactions pursuant to which the Company was formed in July 1997
       were not negotiated at arm's length. As a result, representations and
       warranties made by contributors of properties to the Company and the
       indemnification provided for the breach thereof may not be as good as if
       such representation and warranty had been negotiated at arm's length. If
       the Company incurs losses attributable to breaches of these
       representations and warranties in excess of the indemnification limit,
       such losses would be paid out of the Company's assets, with the potential
       consequence of decreasing cash available for distribution to
       securityholders.
    
 
   
     - Messrs. Zell, Callahan and Stevens and Ms. Rosenberg, each of whom is a
       trustee or executive officer of the Trust who has an economic interest in
       the companies that contributed properties and the management business to
       the Company in connection with its formation, have a conflict of interest
       in pursuing any claims the Company might have arising out of the
       transactions surrounding its formation.
    
 
   
     - Mr. Zell's affiliates control the Management Companies and most of the
       Managed Properties, which may result in a conflict of interest with
       respect to the Company's dealings with the Management Companies and any
       Managed Properties controlled by Mr. Zell.
    
 
   
     - As of March 1, 1998, Mr. Zell and Ms. Rosenberg (trustees of the Trust)
       own (as determined in accordance with the Commission's rules)
       approximately 3.3% of the outstanding Common Shares (including Common
       Shares issuable upon exchange of Units). They also exercise significant
       influence on the management and operation of the Company, which influence
       might be exercised in a manner that is inconsistent with the interests of
       the Company's other securityholders.
    
 
   
     - Although Mr. Zell entered into a noncompetition agreement at the time of
       the IPO which prohibits him from competing, directly or indirectly, with
       the Company's business of owning, operating, buying, selling, financing
       and managing office and parking facility properties in the United States,
       he and his
    
 
                                        8
<PAGE>   13
 
   
       affiliates have a broad and varied range of investment interests,
       including interests in other real estate investment companies. Mr. Zell's
       continued involvement in other investment activities could result in
       competition to the Company as well as management decisions that are
       inconsistent with the interests of other securityholders.
    
 
                                        9
<PAGE>   14
 
                     SUMMARY SELECTED FINANCIAL INFORMATION
 
   
    The following sets forth summary selected consolidated and combined
financial and operating information on a pro forma basis for the Company and on
an historical basis for the Company and the Company's predecessors ("Equity
Office Predecessors"). The following historical information should be read in
conjunction with the consolidated and combined financial statements and notes
thereto of the Company and Equity Office Predecessors included elsewhere in this
Prospectus. The summary selected consolidated financial and operating
information of the Company at March 31, 1998, and for the three months then
ended, has been derived from the historical unaudited consolidated financial
statements of the Company included elsewhere in this Prospectus. The summary
selected combined historical and operating information of Equity Office
Predecessors for the three months ended March 31, 1997, has been derived from
the historical unaudited combined financial statements of Equity Office
Predecessors included elsewhere in this Prospectus. The summary selected
consolidated historical and operating information of the Company at December 31,
1997, and for the period from July 11, 1997 to December 31, 1997, has been
derived from the historical consolidated financial and operating information of
the Company audited by Ernst & Young LLP, independent auditors, whose report
with respect thereto is included elsewhere in this Prospectus. The summary
selected combined historical and operating information at December 31, 1996 and
for the period from January 1, 1997 to July 10, 1997 and the years ended
December 31, 1996 and 1995, has been derived from the historical combined
financial and operating information of 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 financial
and operating information of the Equity Office Predecessors at December 31, 1995
and for the year ended December 31, 1994 has been derived from the historical
audited combined financial statements not included herein. The summary selected
combined financial and operating information of Equity Office Predecessors at
December 31, 1994 and 1993, and for the year ended December 31, 1993, has been
derived from the historical unaudited combined financial statements of Equity
Office Predecessors. Unaudited pro forma operating information for the three
months ended March 31, 1998 is presented as if the acquisitions that occurred
during and subsequent to the period, the Probable Acquisitions, the February
1998 Notes Offering, the Series B Preferred Offering and the UIT Offering had
occurred on January 1, 1998 and, therefore, incorporates certain assumptions
that are described in the notes to the Pro Forma Condensed Combined Financial
Statements included elsewhere in this Prospectus. Unaudited pro forma operating
information for the year ended December 31, 1997 is presented as if the
borrowings under the Credit Facilities at the end of the period, acquisitions
(including the Beacon Merger) that occurred during and subsequent to the period,
the Probable Acquisitions, the IPO and Consolidation, the Private Debt Offering,
the February 1998 Notes Offering, the Series B Preferred Offering and the UIT
Offering had occurred on January 1, 1997 and, therefore, incorporates certain
assumptions that are described in the notes to the Pro Forma Condensed Combined
Financial Statements included elsewhere in this Prospectus. The unaudited pro
forma balance sheet data is presented as if the UIT Offering, the acquisitions
that occurred subsequent to March 31, 1998, and the Probable Acquisitions had
occurred on March 31, 1998. The pro forma information does not purport to
represent what the Company's financial position or results of operations would
actually have been if these transactions had, in fact, occurred on such date or
at the beginning of the period indicated, or to project the Company's financial
position or results of operations at any future date or for any future period.
    
   
<TABLE>
<CAPTION>
                                                                                                                  EQUITY OFFICE
                                                                   EQUITY OFFICE                                  PREDECESSORS
                                                                   PREDECESSORS                                     (COMBINED
                                      COMPANY                        (COMBINED       COMPANY         COMPANY       HISTORICAL)
                                     PRO FORMA        COMPANY       HISTORICAL)     PRO FORMA        FOR THE         FOR THE
                                   FOR THE THREE   FOR THE THREE   FOR THE THREE     FOR THE       PERIOD FROM     PERIOD FROM
                                   MONTHS ENDED    MONTHS ENDED    MONTHS ENDED     YEAR ENDED    JULY 11, 1997   JAN. 1, 1997
                                     MARCH 31,       MARCH 31,       MARCH 31,     DECEMBER 31,    TO DEC. 31,     TO JULY 10,
                                       1998            1998            1997            1997           1997            1997
                                   -------------   -------------   -------------   ------------   -------------   -------------
                                                                                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                <C>             <C>             <C>             <C>            <C>             <C>
OPERATING DATA:
REVENUES:
Rental, parking and other........   $   403,810     $   369,593        $148,471    $ 1,549,695     $   406,713      $327,017
                                    -----------     -----------        --------    -----------     -----------      --------
   Total revenues................   $   408,037     $   373,820        $154,567    $ 1,581,263     $   412,968      $339,104
                                    -----------     -----------        --------    -----------     -----------      --------
EXPENSES:
 Interest........................   $    82,286          69,884          36,355    $   337,986     $    76,675      $ 80,481
 Depreciation and amortization...        71,331          67,792          28,081        284,949          70,346        66,034
 Property operating(1)...........       150,702         137,865          58,148        566,579         155,679       127,285
 General and administrative......        13,948          13,948           7,073         76,048          17,690        17,201
 Provision for value
   impairment....................            --              --              --             --              --            --
                                    -----------     -----------        --------    -----------     -----------      --------
   Total expenses................   $   318,267     $   289,489        $129,657    $ 1,265,562     $   320,390      $291,001
                                    -----------     -----------        --------    -----------     -----------      --------
Income before (income) loss
 allocated to minority interests,
 income from investments in
 unconsolidated joint ventures,
 gain on sales of real estate,
 and extraordinary items.........   $    89,770     $    84,331        $ 24,910    $   315,701     $    92,578      $ 48,103
Minority interests allocation....        (8,142)         (8,264)           (529)       (30,327)         (7,799)         (912)
Income from investments in
 unconsolidated joint ventures...         3,200           3,634             922         10,976           3,173         1,982
Gain/(Loss) on sales of real
 estate and extraordinary
 items(2)........................            --          (6,959)          5,466             --         (16,240)       12,236
                                    -----------     -----------        --------    -----------     -----------      --------
Net income before preferred
 dividends.......................        84,828          72,742          30,769        296,350          71,712        61,409
Preferred dividends..............       (12,459)         (6,271)             --        (49,710)           (649)           --
                                    -----------     -----------        --------    -----------     -----------      --------
Net income available to Common
 Shares..........................   $    72,369     $    66,471        $ 30,769    $   246,640     $    71,063      $ 61,409
                                    ===========     ===========        ========    ===========     ===========      ========
Net income available per weighted
 average Common Share outstanding
 -- Basic........................   $       .29     $       .27                    $       .98     $       .44
                                    ===========     ===========                    ===========     ===========
Net income available per weighted
 average Common Share outstanding
 -- Diluted......................   $       .28     $       .27                    $       .98     $       .43
                                    ===========     ===========                    ===========     ===========
Weighted average Common Shares
 outstanding -- Basic............   251,576,114     249,766,440                    251,155,672     162,591,477
                                    ===========     ===========                    ===========     ===========
Weighted average Common Shares
 outstanding -- Diluted..........   282,066,810     280,327,761                    282,095,690     180,014,027
                                    ===========     ===========                    ===========     ===========
 
<CAPTION>
 
                                          EQUITY OFFICE PREDECESSORS
                                             (COMBINED HISTORICAL)
                                       FOR THE YEARS ENDED DECEMBER 31,
                                   -----------------------------------------
                                     1996       1995       1994       1993
                                   --------   --------   --------   --------
<S>                                <C>        <C>        <C>        <C>
OPERATING DATA:
REVENUES:
Rental, parking and other........  $493,396   $356,959   $230,428   $150,315
                                   --------   --------   --------   --------
   Total revenues................  $508,124   $371,457   $240,878   $159,246
                                   --------   --------   --------   --------
EXPENSES:
 Interest........................  $119,595   $100,566   $ 59,316   $ 36,755
 Depreciation and amortization...    96,237     74,156     46,905     29,752
 Property operating(1)...........   201,067    151,488    107,412     74,028
 General and administrative......    23,145     21,987     15,603     12,012
 Provision for value
   impairment....................        --     20,248         --         --
                                   --------   --------   --------   --------
   Total expenses................  $440,044   $368,445   $229,236   $152,547
                                   --------   --------   --------   --------
Income before (income) loss
 allocated to minority interests,
 income from investments in
 unconsolidated joint ventures,
 gain on sales of real estate,
 and extraordinary items.........  $ 68,080   $  3,012   $ 11,642   $  6,699
Minority interests allocation....    (2,086)    (2,129)     1,437      1,772
Income from investments in
 unconsolidated joint ventures...     2,093      2,305      1,778         --
Gain/(Loss) on sales of real
 estate and extraordinary
 items(2)........................     5,338     31,271      1,705         --
                                   --------   --------   --------   --------
Net income before preferred
 dividends.......................    73,425     34,459     16,562      8,471
Preferred dividends..............        --         --         --         --
                                   --------   --------   --------   --------
Net income available to Common
 Shares..........................  $ 73,425   $ 34,459   $ 16,562   $  8,471
                                   ========   ========   ========   ========
Net income available per weighted
 average Common Share outstanding
 -- Basic........................
Net income available per weighted
 average Common Share outstanding
 -- Diluted......................
Weighted average Common Shares
 outstanding -- Basic............
Weighted average Common Shares
 outstanding -- Diluted..........
</TABLE>
    
 
                                       10
<PAGE>   15
   
<TABLE>
<CAPTION>
                                                                     EQUITY OFFICE
                                                                     PREDECESSORS
                                        COMPANY                        (COMBINED
                                       PRO FORMA        COMPANY       HISTORICAL)         COMPANY
                                     FOR THE THREE   FOR THE THREE   FOR THE THREE       PRO FORMA        COMPANY FOR THE
                                     MONTHS ENDED    MONTHS ENDED    MONTHS ENDED       FOR THE YEAR        PERIOD FROM
                                       MARCH 31,       MARCH 31,       MARCH 31,     ENDED DECEMBER 31,   JULY 11, 1997 TO
                                         1998            1998            1997               1997           DEC. 31, 1997
                                     -------------   -------------   -------------   ------------------   ----------------
                                                         (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                  <C>             <C>             <C>             <C>                  <C>
BALANCE SHEET DATA:
 (at end of period)
Investment in real estate after
 accumulated depreciation..........   $12,115,032     $11,200,676     $        --       $        --         $10,976,319
                                      -----------     -----------     -----------       -----------         -----------
 Total assets......................   $12,702,559     $11,803,994     $        --       $        --         $11,751,672
                                      -----------     -----------     -----------       -----------         -----------
Mortgage debt, unsecured notes and
 lines of credit...................   $ 4,648,736     $ 3,987,530     $        --       $        --         $ 4,284,317
                                      -----------     -----------     -----------       -----------         -----------
 Total liabilities.................   $ 5,024,930     $ 4,363,724     $        --       $        --         $ 4,591,697
                                      -----------     -----------     -----------       -----------         -----------
Minority interests.................   $   748,020     $   747,920     $        --       $        --         $   754,818
                                      -----------     -----------     -----------       -----------         -----------
Shareholders'/Owners' equity.......   $ 6,929,609     $ 6,692,350     $        --       $        --         $ 6,405,157
                                      -----------     -----------     -----------       -----------         -----------
OTHER DATA:
General and administrative expenses
 as a percentage of total
 revenues..........................           3.4%            3.7%            4.6%              4.8%                4.3%
                                      -----------     -----------     -----------       -----------         -----------
Number of Office Properties owned
 at period end(3)..................           280             260              86               280                 258
                                      -----------     -----------     -----------       -----------         -----------
Net rentable square feet of Office
 Properties owned at period end (in
 millions)(3)......................          71.6            66.6            29.7              71.6                65.3
                                      -----------     -----------     -----------       -----------         -----------
Occupancy of Office Properties
 owned at period end(3)............            94%             94%             91%               94%                 94%
                                      -----------     -----------     -----------       -----------         -----------
Number of Parking Facilities owned
 at period end.....................            17              17              10                17                  17
                                      -----------     -----------     -----------       -----------         -----------
Number of spaces at Parking
 Facilities owned at period end....        16,749          16,749           7,321            16,749              16,749
                                      -----------     -----------     -----------       -----------         -----------
Funds from Operations(4)...........                   $   150,836     $    52,755                           $   163,253
                                                                                                            -----------
Cash flow from operating
 activities........................                   $   110,765     $    41,087                           $   190,754
Cash flow used for investing
 activities........................                   $  (270,947)    $  (109,506)                          $(1,592,272)
Cash flow from financing
 activities........................                   $   (56,990)    $    34,120                           $ 1,630,346
 
<CAPTION>
 
                                      EQUITY OFFICE
                                      PREDECESSORS
                                        (COMBINED
                                     HISTORICAL) FOR     EQUITY OFFICE PREDECESSORS (COMBINED HISTORICAL)
                                     THE PERIOD FROM             FOR THE YEARS ENDED DECEMBER 31,
                                     JAN. 1, 1997 TO   -----------------------------------------------------
                                      JULY 10, 1997       1996          1995          1994          1993
                                     ---------------   -----------   -----------   -----------   -----------
                                                  (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                  <C>               <C>           <C>           <C>           <C>
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
                                       -----------     -----------   -----------   -----------   -----------
 Total assets......................    $        --     $ 3,912,565   $ 2,650,890   $ 2,090,933   $ 1,318,644
                                       -----------     -----------   -----------   -----------   -----------
Mortgage debt, unsecured notes and
 lines of credit...................    $        --     $ 1,964,892   $ 1,434,827   $ 1,261,156   $   798,897
                                       -----------     -----------   -----------   -----------   -----------
 Total liabilities.................    $        --     $ 2,174,483   $ 1,529,334   $ 1,350,552   $   845,315
                                       -----------     -----------   -----------   -----------   -----------
Minority interests.................    $        --     $    11,080   $    31,587   $     9,283   $   (15,298)
                                       -----------     -----------   -----------   -----------   -----------
Shareholders'/Owners' equity.......    $        --     $ 1,727,002   $ 1,089,969   $   731,098   $   488,627
                                       -----------     -----------   -----------   -----------   -----------
OTHER DATA:
General and administrative expenses
 as a percentage of total
 revenues..........................            5.1%            4.6%          5.9%          6.5%          7.5%
                                       -----------     -----------   -----------   -----------   -----------
Number of Office Properties owned
 at period end(3)..................             --              83            73            63            48
                                       -----------     -----------   -----------   -----------   -----------
Net rentable square feet of Office
 Properties owned at period end (in
 millions)(3)......................             --            29.2          23.1          18.5          13.6
                                       -----------     -----------   -----------   -----------   -----------
Occupancy of Office Properties
 owned at period end(3)............             --              90%           86%           88%           80%
                                       -----------     -----------   -----------   -----------   -----------
Number of Parking Facilities owned
 at period end.....................             --              10             3            --            --
                                       -----------     -----------   -----------   -----------   -----------
Number of spaces at Parking
 Facilities owned at period end....             --           7,321         3,323            --            --
                                       -----------     -----------   -----------   -----------   -----------
Funds from Operations(4)...........    $   113,022     $   160,460   $    96,104   $    60,372            --
                                       -----------     -----------   -----------   -----------   -----------
Cash flow from operating
 activities........................    $    95,960     $   165,975   $    93,878   $    73,821            --
Cash flow used for investing
 activities........................    $  (571,068)    $  (924,227)  $  (380,615)  $  (513,965)           --
Cash flow from financing
 activities........................    $   245,851     $ 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 column entitled "Company Pro Forma for the year ended December 31, 1997"
    and "Company Pro Forma for the three months ended March 31, 1998" excludes
    the effect of any gain (loss) on sales of real estate and extraordinary
    items.
    
 
   
(3) The pro forma number of Office Properties as of March 31, 1998 includes
    Office Properties acquired subsequent to March 31, 1998 and Probable
    Acquisitions.
    
 
(4) 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. The Company believes that Funds from Operations is helpful to
    investors as a measure of the performance of an equity REIT because, along
    with cash flow from operating activities, financing activities and investing
    activities, it provides investors with an indication of the ability of the
    Company to incur and service debt, to make capital expenditures and to fund
    other cash needs. 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 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."
 
                                       11
<PAGE>   16
 
                                  RISK FACTORS
 
     Set forth below are the risks that we believe are material to investors who
purchase or own the Company's Common Shares or preferred shares of beneficial
interest ("Preferred Shares"), including the Series C Preferred Shares (the
Common Shares and the Preferred Shares are collectively referred to as
"Shares"), or Units of limited partnership interest of the Operating
Partnership, which are redeemable on a one-for-one basis for Common Shares or
their cash equivalent. We refer to the Shares and the Units together as
"securities," and the investors who own Shares and/or Units as
"securityholders."
 
THERE CAN BE NO ASSURANCE THAT WE WILL EFFECTIVELY MANAGE OUR RAPID GROWTH AND
EXPANSION INTO NEW MARKETS
 
     We are currently growing rapidly. As of March 31, 1998, we owned interests
in 260 Office Properties containing 66.6 million square feet. We also owned
interests in 17 Parking Facilities containing approximately 16,749 parking
spaces. Our office portfolio grew by 107% (on a square footage basis) and our
parking portfolio grew by 13% (based on the number of parking spaces) from the
time of our IPO in July 1997 through the end of the year. Additionally, the
Beacon Merger, which closed in December 1997, substantially expanded our
operations in Boston and extended our operations to San Jose. The Wright Runstad
Acquisition, which also closed in December 1997, extended our operations to
Seattle, Washington, Portland, Oregon and Anchorage, Alaska. Other recent
acquisitions extended our operations to downtown New Orleans, suburban
Philadelphia, Minneapolis and Pittsburgh. We plan to continue this rapid growth
for the foreseeable future. We plan on managing this growth by applying our
experience to new markets and properties and expect to be successful in that
effort. If we do not effectively manage our rapid growth, however, we may not be
able to make expected distributions to our securityholders, including holders of
the Series C Preferred Shares.
 
OUR PERFORMANCE AND SHARE VALUE ARE SUBJECT TO RISKS ASSOCIATED WITH THE REAL
ESTATE INDUSTRY
 
     GENERAL. If our assets do not generate income sufficient to pay our
expenses, service our debt and maintain our Properties, we may not be able to
make expected distributions to our securityholders. Several factors may
adversely affect the economic performance and value of our Properties. These
factors include changes in the national, regional and local economic climate,
local conditions such as an oversupply of office properties or a reduction in
demand for office properties, the attractiveness of our Properties to tenants,
competition from other available office properties, changes in market rental
rates and the need to periodically repair, renovate and relet space. Our
performance also depends on our ability to collect rent from tenants and to pay
for adequate maintenance, insurance and other operating costs (including real
estate taxes), which could increase over time. Also, the expenses of owning and
operating a property are not necessarily reduced when circumstances such as
market factors and competition cause a reduction in income from the property. If
a property is mortgaged and we are unable to meet the mortgage payments, the
lender could foreclose on the mortgage and take the property. In addition,
interest rate levels, the availability of financing, changes in laws and
governmental regulations (including those governing usage, zoning and taxes) and
the possibility of bankruptcies of tenants may adversely affect our financial
condition and results of operations.
 
     WE MAY BE UNABLE TO RENEW LEASES OR RELET SPACE AS LEASES EXPIRE. When our
tenants decide not to renew their leases upon expiration, we may be unable to
relet the space. Even if the tenants do renew or we can relet the space, the
terms of renewal or reletting (including the cost of required renovations) may
be less favorable than current lease terms. Over the next five years (through
the end of 2002), leases will expire on a total of 55% of the rentable square
feet at our current properties. If we are unable to promptly renew the leases or
relet this space, or if the rental rates upon such renewal or reletting are
significantly lower than expected rates, then our results of operations and
financial condition will be adversely affected. Consequently, our cash flow and
ability to service debt and make distributions to securityholders, including
holders of the Series C Preferred Shares, would be adversely affected.
 
     NEW ACQUISITIONS MAY FAIL TO PERFORM AS EXPECTED AND COMPETITION FOR
ACQUISITIONS MAY RESULT IN INCREASED PRICES FOR PROPERTIES. We intend to
continue to actively acquire office and parking properties. Newly acquired
properties may fail to perform as expected. We may underestimate the costs
necessary to bring an
 
                                       12
<PAGE>   17
 
acquired property up to standards established for its intended market position.
Additionally, we expect other major real estate investors with significant
capital will compete with us for attractive investment opportunities. These
competitors include publicly traded REITs, private REITs, investment banking
firms and private institutional investment funds. This competition has increased
prices for office properties. We expect to acquire properties with cash from
secured or unsecured financings and proceeds from offerings of equity or debt.
We may not be in a position or have the opportunity in the future to make
suitable property acquisitions on favorable terms. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
 
     BECAUSE REAL ESTATE INVESTMENTS ARE ILLIQUID, WE MAY NOT BE ABLE TO SELL
PROPERTIES WHEN APPROPRIATE. Real estate investments generally cannot be sold
quickly. We may not be able to vary our portfolio promptly in response to
economic or other conditions. This inability to respond promptly to changes in
the performance of our investments could adversely affect our financial
condition, results of operations and ability to service debt and make
distributions to holders of the Series C Preferred Shares.
 
     SOME POTENTIAL LOSSES ARE NOT COVERED BY INSURANCE. We carry comprehensive
liability, fire, extended coverage and rental loss insurance on all of our
Properties. We believe the policy specifications and insured limits of these
policies are adequate and appropriate. There are, however, certain types of
losses, such as lease and other contract claims, that generally are not insured.
Should an uninsured loss or a loss in excess of insured limits occur, we could
lose all or a portion of the capital we have invested in a property, as well as
the anticipated future revenue from the property. In such an event, we might
nevertheless remain obligated for any mortgage debt or other financial
obligations related to the property.
 
     We carry earthquake insurance on all of our Properties, including those
located in California. Our earthquake policies are subject to coverage
limitations which we believe are commercially reasonable. In light of the
California earthquake risk, California building codes since the early 1970s have
established construction standards for all new buildings. The current and
strictest construction standards were adopted in 1987. Of the 43 properties (as
of March 31, 1998) located in California, 12 have been built since January 1,
1988 and we believe they were constructed in full compliance with the applicable
standards existing at the time of construction. It is nevertheless a possibility
that material losses in excess of insurance proceeds will occur in the future.
 
DEBT FINANCING, FINANCIAL COVENANTS, DEGREE OF LEVERAGE, AND INCREASES IN
INTEREST RATES COULD ADVERSELY AFFECT OUR FINANCIAL PERFORMANCE
 
     SCHEDULED DEBT PAYMENTS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION. Our
business is subject to risks normally associated with debt financing. Cash flow
could be insufficient to pay distributions to securityholders at expected levels
and meet required payments of principal and interest. We may not be able to
refinance existing indebtedness (which in virtually all cases requires
substantial principal payments at maturity) and, if we can, the terms of such
refinancing might not be as favorable as the terms of existing indebtedness. The
total principal amount of our outstanding indebtedness was $4.0 billion as of
March 31, 1998. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources -- 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, our
cash flow will not be sufficient in all years to repay all maturing debt. If
prevailing interest rates or other factors result in higher interest rates, the
increased interest expense would adversely affect cash flow and our ability to
service debt and make distributions to securityholders.
 
     FINANCIAL COVENANTS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION. If a
property is mortgaged to secure payment of indebtedness and we are unable to
meet mortgage payments, the mortgagee could foreclose on the property, resulting
in loss of income and asset value. The mortgages on our properties contain
customary negative covenants which, among other things, limit our ability,
without the prior consent of the lender, to further mortgage the property, to
enter into new leases or materially modify existing leases, and to discontinue
insurance coverage. In addition, our Credit Facilities contain certain customary
restrictions, requirements and other limitations on our ability to incur
indebtedness, including total debt to assets ratios,
 
                                       13
<PAGE>   18
 
secured debt to total assets ratios, debt service coverage ratios and minimum
ratios of unencumbered assets to unsecured debt. The Indenture under which our
senior unsecured indebtedness is issued contains certain financial and operating
covenants including, among other things, certain coverage ratios, as well as
limitations on our ability to incur secured and unsecured indebtedness, sell all
or substantially all of our assets and engage in mergers and consolidations and
certain acquisitions. Foreclosure on mortgaged properties or an inability to
refinance existing indebtedness would likely have a negative impact on our
financial condition, results of operations and ability to make distributions to
holders of the Series C Preferred Shares.
 
   
     OUR DEGREE OF LEVERAGE COULD LIMIT OUR ABILITY TO OBTAIN ADDITIONAL
FINANCING. Our Debt to Market Capitalization Ratio (total debt as a percentage
of total debt plus the market value of the outstanding Common Shares, Preferred
Shares and Units) was approximately 30.9% as of March 31, 1998. Our Board of
Trustees has adopted a policy of incurring indebtedness for borrowed money only
through the Operating Partnership and its subsidiaries and only if upon such
incurrence our Debt to Market Capitalization Ratio would be approximately 50% or
less. This policy may be reviewed and modified from time to time by the Board
without notice to our securityholders. The degree of leverage could have
important consequences to securityholders, including affecting our ability to
obtain additional financing in the future for working capital, capital
expenditures, acquisitions, development or other general corporate purposes and
making us more vulnerable to a downturn in business or the economy generally.
    
 
     RISING INTEREST RATES COULD ADVERSELY AFFECT CASH FLOW. We obtained the
$600 Million Credit Facility in July 1997 and the $1.5 Billion Credit Facility
in October 1997 and sold the $1.25 Billion Notes and the MOPPRS in the February
1998 Notes Offering. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources -- Debt
Financing." The $1.25 Billion Notes and MOPPRS have fixed interest rates, but
advances under the Credit Facilities bear interest at a variable rate based upon
one-month LIBOR. We had, as of December 31, 1997, interest rate hedging
agreements for approximately $1.0 billion of our floating rate debt to limit our
exposure to rising interest rates, but terminated these agreements when we paid
down the Credit Facilities with the proceeds of the $1.25 Billion Notes
Offering, the MOPPRS Offering and the Series B Preferred Offering. Although
hedging agreements enable us to convert floating rate liabilities to fixed rate
liabilities, they expose us to the risk that the counterparties to such hedge
agreements may not perform, which could increase our exposure to rising interest
rates. Generally, however, the counterparties to hedging agreements which the
Company would enter into are major financial institutions. We may borrow
additional money with variable interest rates in the future, and enter into
other transactions to limit our exposure to rising interest rates as appropriate
and cost effective. Increases in interest rates, or the loss of the benefits of
hedging agreements, would increase our interest expenses, which would adversely
affect cash flow and our ability to service our debt and make distributions to
securityholders.
 
WE DO NOT CONTROL OUR MANAGED PROPERTIES OR MANAGEMENT AND NON-REIT SERVICES
BUSINESSES
 
     WE DO NOT CONTROL OUR MANAGEMENT AND SERVICES BUSINESS. To facilitate
maintenance of our REIT qualification, we have Noncontrolled Subsidiaries that
provide management and other services for properties that we do not wholly own.
As of March 31, 1998, we had five Noncontrolled Subsidiaries: EOP Management
Company and Beacon Management Company (which we refer to together as the
"Management Companies"), which manage the Managed Properties and certain
properties which are held in partnerships or subject to participation agreements
with unaffiliated third parties (the "Joint Venture Properties"); Beacon Design
Company, which provides third-party tenant design services; Beacon Construction
Company, which provides third-party construction services; and EOP Office
Company, which owns a noncontrolling interest in Wright Runstad Asset Limited
Partnership, which provides third-party development services. While we generally
own substantially all (95% or 99%) of the economic interest in the Noncontrolled
Subsidiaries, their voting stock is owned directly or indirectly by private
companies controlled by Mr. Zell. See "-- Conflicts of Interest Could Result in
Decisions Not in the Company's Best Interests -- Mr. Zell's Affiliates Control
Our Management Companies and Most of the Managed Properties" below. We therefore
do not control the timing or amount of distributions or the management and
operation of the Noncontrolled Subsidiaries. As a result, decisions relating to
the declaration and payment of distributions and the business policies and
operations of the
 
                                       14
<PAGE>   19
 
   
Noncontrolled Subsidiaries could be adverse to our interests or could lead to
adverse financial results, which could adversely affect our financial condition,
results of operations and ability to make distributions to holders of the Series
C Preferred Shares. Also, there are certain services for our tenants that we
would like to provide but are prohibited from doing so by the REIT tax laws and
regulations. Certain such services are being provided by Tenant Services Corp.,
which is owned entirely by private companies controlled by Mr. Zell. We have no
control over, or ownership interest in, Tenant Services Corp., which operates as
an independent contractor. Consequently, we are not able to assure that Tenant
Services Corp. will conduct its day-to-day operations in a manner consistent
with our best interests. We may, however, terminate the services of Tenant
Services Corp. at any time upon 30 days' notice.
    
 
CONFLICTS OF INTEREST COULD RESULT IN DECISIONS NOT IN THE COMPANY'S BEST
INTEREST
 
     THERE WERE NO ARM'S LENGTH NEGOTIATIONS IN THE FORMATION TRANSACTIONS. The
transactions pursuant to which we formed the Company in July 1997, which we
sometimes refer to as the "Formation Transactions," were not negotiated at arm's
length. The representations and warranties made by the contributors of
properties to the Company in the Formation Transactions and the indemnification
provided for breach of such representations and warranties may not be as good as
they might have been had they been negotiated at arm's length. Such
indemnification is limited generally to an amount equal to 1% of the value of
consideration paid for the properties and to $15 million with respect to pre-IPO
liabilities of the management business contributed by affiliates of Mr. Zell. If
we incur losses attributable to breaches of the representations and warranties
made by the contributors of properties in the Formation Transactions and such
losses are in excess of the indemnification limit, they would have to be paid
for out of our assets, with the potential consequence of decreasing cash
available for distribution to securityholders. To date, we have no knowledge of
any material breaches of the agreements (which we refer to collectively as the
"Contribution Agreement") pursuant to which the Formation Transactions occurred.
 
   
     WE COULD SUFFER MONETARY LOSSES IF WE FAIL TO ENFORCE THE CONTRIBUTION
AGREEMENT. Mr. Zell has a substantial economic interest in the companies that
contributed properties and the management business to the Company in the
Formation Transactions. Consequently, Mr. Zell has a conflict of interest with
respect to his obligation as one of our officers and trustees to enforce the
terms of the Contribution Agreement. If circumstances arise where we should seek
to enforce such agreement, particularly the indemnification provisions and the
remedy provisions for breaches of representations and warranties, Mr. Zell might
assert a position contrary to the Company's. If this happens and Mr. Zell were
to prevail, we would not collect money we might otherwise be entitled to. Also,
the Common Shares and Units that are available to satisfy claims for such
indemnification will be, to the extent not used for this purpose, available for
distribution to entities in which Messrs. Zell, Callahan and Stevens and Ms.
Rosenberg, each of whom is an executive officer and/or trustee of the Company,
have economic interests. This is in accordance with the Contribution Agreement.
Consequently, these executive officers and trustees also have a conflict of
interest in pursuing any claim the Company might have arising out of the
Formation Transactions.
    
 
   
     MR. ZELL'S AFFILIATES CONTROL OUR MANAGEMENT COMPANIES AND MOST OF THE
MANAGED PROPERTIES. The Management Companies and Beacon Property Management,
L.P. provide property management services and, in most cases, asset management
services to the 35 Joint Venture Properties and to the 31 Managed Properties, 29
of which are owned or controlled by affiliates of Mr. Zell and three of which
are owned by unrelated third parties. Most of these management contracts were
not negotiated on an arm's length basis. While we believe that the management
fees we receive from these properties 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, Mr. Zell
controls and has a substantial interest in the private company which has voting
control of the Management Companies. See "-- We Do Not Control Our Managed
Properties or Management and Non-REIT Services Businesses" above.
    
 
     CERTAIN TRUSTEES AND OFFICERS HAVE CONFLICTS OF INTEREST AND COULD EXERCISE
INFLUENCE IN A MANNER INCONSISTENT WITH SHAREHOLDERS' BEST INTEREST. As of March
1, 1998, Mr. Zell and Ms. Rosenberg owned (as determined in accordance with the
Commission's rules) approximately 3.3%, and all other trustees and executive
officers of the Company as a group owned approximately 2.4%, of the outstanding
Common Shares
 
                                       15
<PAGE>   20
 
(in each case including Common Shares issuable upon exchange of Units). In
addition, Mr. Zell and his affiliates may receive distributions of up to
approximately 9.4 million additional Units (representing approximately 3.4% of
the outstanding Common Shares on a fully diluted basis) during the two-year
period ending on or prior to July 11, 1999. These Units were set aside at the
time of the IPO and are issuable if we achieve certain performance objectives,
based on the market price of the Common Shares. Mr. Zell and Ms. Rosenberg have
significant influence on the management and operation of the Company. Such
influence might be exercised in a manner that is inconsistent with the interests
of other securityholders.
 
   
     MR. ZELL AND HIS AFFILIATES CONTINUE TO BE INVOLVED IN OTHER INVESTMENT
ACTIVITIES. Although Mr. Zell entered into a noncompetition agreement at the
time of the IPO, which prohibits him from competing, directly or indirectly,
with the Company's business of owning, operating, buying, selling, financing and
managing office and parking facility properties in the United States, he and his
affiliates have a broad and varied range of investment interests, including
interests in other real estate investment companies. Mr. Zell and his affiliates
may acquire interests in other companies. He may not be able to control whether
any such company competes with the Company. Consequently, Mr. Zell's continued
involvement in other investment activities could result in competition to the
Company as well as management decisions which might not reflect the interests of
our securityholders.
    
 
     We did not obtain noncompetition agreements with any of the former Beacon
officers or directors in connection with the Beacon Merger. Consequently, any
former officer or director of Beacon could engage in activities in competition
with activities of the Company except, in the case of Mr. Sidman, who became one
of our trustees, to the extent that his actions would violate his fiduciary
duties.
 
     WE LEASE OUR CORPORATE OFFICES FROM AN AFFILIATE OF MR. ZELL. Our corporate
offices are at Two North Riverside Plaza in Chicago. We lease our office space
there from one of Mr. Zell's affiliates. We believe, however, that the lease
terms, including the rental rates, reflect current market terms.
 
ENVIRONMENTAL PROBLEMS ARE POSSIBLE AND MAY BE COSTLY
 
     Federal, state and local laws and regulations relating to the protection of
the environment may require a current or previous owner or operator of real
estate to investigate and clean up hazardous or toxic substances or petroleum
product releases at such property. The owner or operator may have to pay a
governmental entity or third parties for property damage and for investigation
and clean-up costs incurred by 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. Even if more than one person may have been responsible for
the contamination, each person covered by the environmental laws may be held
responsible for all of the clean-up costs incurred. In addition, third parties
may sue the owner or operator of a site for damages and costs resulting from
environmental contamination emanating from that site.
 
     Environmental laws also govern the presence, maintenance and removal of
asbestos. Such laws require that owners or operators of buildings containing
asbestos properly manage and maintain the asbestos, that they notify and train
those who may come into contact with asbestos and that they undertake special
precautions, including removal or other abatement, if asbestos would be
disturbed during renovation or demolition of a building. Such laws may impose
fines and penalties on building owners or operators who fail 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 Phase I environmental
site assessments at all of our Properties. These assessments 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, these consultants have conducted
additional testing, 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 environmental problem, and for
contamination in groundwater.
 
                                       16
<PAGE>   21
 
     These environmental assessments have not revealed any environmental
liabilities at the Properties that we believe would have a material adverse
effect on our business, assets, financial condition or results of operations nor
are we aware of any such material environmental liability. Asbestos is in a
number of the Office Properties, but most of these buildings contain only minor
amounts. We believe this asbestos is in good condition and almost none of it is
easily crumbled. We are currently properly managing and maintaining all of the
asbestos and we are following other requirements relating to asbestos. The
presence of asbestos should not present a significant risk as long as compliance
with these requirements continues.
 
     For a few of the Properties, the environmental assessments note potential
offsite sources of contamination, such as underground storage tanks. For some of
the Properties, the environmental assessments note previous uses such as the
former presence of underground storage tanks. In most of these cases, follow-up
soil and/or groundwater sampling has not identified evidence of significant
contamination. In the few cases where contamination has been found, existing
plans to mitigate and monitor the sites and/or financial commitments from
certain prior owners and tenants to cover costs related to mitigation should
prevent the contamination from becoming a significant liability.
 
     We believe that our Properties are in compliance in all material respects
with applicable environmental laws. We believe that the issues identified in the
environmental reports will not have a material adverse effect if we continue to
comply with environmental laws and with the recommendations set forth in these
reports. Unidentified environmental liabilities could arise, however, and could
have an adverse effect on our financial condition, results of operations and
ability to make distributions to holders of Series C Preferred Shares.
 
WE ARE DEPENDENT ON OUR KEY PERSONNEL
 
     We depend on the efforts of our executive officers, particularly Messrs.
Zell and Callahan. If they resigned, our operations could be adversely effected.
We do not have employment agreements with either of these officers.
 
CONTINGENT OR UNDISCLOSED LIABILITIES ACQUIRED IN MERGERS OR SIMILAR
TRANSACTIONS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION
 
     When the Company was formed, we acquired all the assets of the ZML
Opportunity Partnerships (four real estate investment funds sponsored by Mr.
Zell) and certain assets of affiliates of Mr. Zell. These assets were acquired
subject to existing liabilities. Each of the ZML Opportunity Partnerships will
liquidate over the two-year period ending on or prior to July 11, 1999, and the
Units and other assets (including cash from distributions), net of liabilities,
will be distributed to affiliates of Mr. Zell and the limited partners of the
ZML Opportunity Partnerships during such time period. Our recourse against
affiliates of Mr. Zell with respect to liabilities relating to the management
business they contributed when the Company was formed is limited to $15 million.
Our recourse for any unknown liabilities in connection with the contribution of
properties when the Company was formed is limited to 1% of the value of the
consideration paid for those assets and must be asserted prior to July 11, 1999.
Similarly, the assets we acquired in the Beacon Merger were acquired subject to
liabilities and without any recourse with respect to unknown liabilities.
Unknown liabilities with respect to properties acquired when we formed the
Company or in the Beacon Merger might include liabilities for clean-up or
remediation of undisclosed environmental conditions, claims of tenants, vendors
or other persons dealing with the entities prior to the IPO or the Beacon Merger
(if such claims had not been asserted prior to the respective closings of such
transactions), accrued but unpaid liabilities incurred in the ordinary course of
business, and claims for indemnification by general partners, directors,
officers and others indemnified by the ZML Opportunity Partnerships or Beacon.
Similarly, we succeeded to any liabilities that the ZML REITs may have had for
periods prior to the IPO and that Beacon may have had prior to the Beacon
Merger. We also succeeded to any liabilities, including claims for property
transfer taxes, arising out of the contribution to us of properties when the
Company was formed and in connection with the Beacon Merger. In the future, we
may face additional risks of contingent or undisclosed liabilities as a result
of mergers, other business combinations or similar transactions.
 
                                       17
<PAGE>   22
 
THE MARKET VALUE OF OUR PUBLICLY TRADED SECURITIES CAN BE ADVERSELY AFFECTED BY
A NUMBER OF FACTORS
 
     CHANGES IN MARKET CONDITIONS COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR
PUBLICLY TRADED SECURITIES. As with other publicly traded equity securities, the
value of our publicly traded securities depends on various market conditions,
which may change from time to time. Among the market conditions that may affect
the value of our publicly traded securities are the following: the extent of
institutional investor interest in the Company; the reputation of REITs and
office REITs generally and the attractiveness of their equity securities in
comparison to other equity securities (including securities issued by other real
estate companies); our financial condition and performance; and general
financial market conditions.
 
     OUR EARNINGS WILL AFFECT THE MARKET PRICE OF OUR PUBLICLY TRADED
SECURITIES. We believe that the market value of a REIT's equity securities is
based primarily upon the market's perception of the REIT's growth potential and
its current and potential future cash distributions, and is secondarily based
upon the real estate market value of the underlying assets. For that reason,
Shares may trade at prices that are higher or lower than the net asset value per
share. To the extent we retain operating cash flow for investment purposes,
working capital reserves or other purposes, these retained funds, while
increasing the value of our underlying assets, may not correspondingly increase
the market price of our Shares. Our failure to meet the market's expectations
with regard to future earnings and cash distributions would likely adversely
affect the market price of our publicly traded securities.
 
     MARKET INTEREST RATES MAY HAVE AN EFFECT ON THE VALUE OF OUR PUBLICLY
TRADED SECURITIES. One of the factors that investors consider important in
deciding whether to buy or sell shares of a REIT is the distribution rate on
such shares (as a percentage of the price of such shares) relative to market
interest rates. If market interest rates go up, prospective purchasers of Shares
may expect a higher distribution rate. Higher interest rates would not, however,
result in more funds for us to distribute and, in fact, would likely increase
our borrowing costs and potentially decrease funds available for distribution.
Thus, higher market interest rates could have a substantial adverse effect on
the market price of our publicly traded securities.
 
WE ARE DEPENDENT ON EXTERNAL SOURCES OF CAPITAL
 
     To qualify as a REIT, the Company must distribute to its shareholders each
year at least 95% of its net taxable income (excluding any net capital gain).
See "Federal Income Tax Considerations -- Requirements for Qualification as a
REIT -- Annual Distribution Requirements Applicable to REITs." Because of these
distribution requirements, it is not likely that we will be able to fund all
future capital needs, which we expect will continue to be significant, solely
from income from operations. We therefore will have to rely on third-party
sources of capital, which may or may not be available, and, if available, may
not be on favorable terms. Our access to third-party sources of capital depends
on a number of factors, including the market's perception of our growth
potential and our current and potential future earnings. Moreover, additional
equity offerings may result in substantial dilution of the interests of holders
of Common Shares, and additional debt financing may substantially increase our
leverage.
 
OUR SUCCESS AS A REIT IS DEPENDENT ON COMPLIANCE WITH FEDERAL INCOME TAX
REQUIREMENTS
 
     FAILURE OF THE COMPANY TO QUALIFY AS A REIT WOULD HAVE SERIOUS ADVERSE
CONSEQUENCES TO OUR SECURITYHOLDERS. We believe that, since the IPO in July
1997, the Company has qualified for taxation as a REIT for federal income tax
purposes. We plan to continue to meet the requirements for taxation as a REIT.
Many of these requirements, however, are highly technical and complex. The
determination that the Company is a REIT requires an analysis of various factual
matters and circumstances that may not be totally within our control. For
example, to qualify as a REIT, at least 95% of our gross income must come from
certain sources that are itemized in the REIT tax laws. The Company is also
required to distribute to shareholders at least 95% of its REIT taxable income
(excluding capital gains). The fact that we hold our assets through the
Operating Partnership and its subsidiaries further complicates the application
of the REIT requirements. Even a technical or inadvertent mistake could
jeopardize our REIT status. Furthermore, Congress and the IRS might make changes
to the tax laws and regulations, and the courts might issue new rulings that
make it more
 
                                       18
<PAGE>   23
 
difficult, or impossible, for the Company to remain qualified as a REIT. We do
not believe, however, that any pending or proposed tax law changes would
jeopardize our REIT status.
 
     Hogan & Hartson L.L.P., special tax counsel to the Company, has given us an
opinion to the effect that the Company is organized in conformity with the
requirements for qualification and taxation as a REIT under the Code and that
the Company's proposed method of operation will enable it to continue to meet
the requirements for qualification and taxation as a REIT. See "Federal Income
Tax Considerations -- Taxation of the Company as a REIT." The opinion of Hogan &
Hartson L.L.P. is based on assumptions and factual representations made by us
regarding the Company's ability to meet the requirements for qualification as a
REIT and is not binding on the IRS or any court. Moreover, Hogan & Hartson
L.L.P. does not review or monitor the Company's compliance with the requirements
for REIT qualification on an ongoing basis. We cannot guarantee that the Company
will be qualified and taxed as a REIT, because the Company's qualification and
taxation as a REIT will depend upon the Company's ability to meet on an ongoing
basis the requirements imposed under the Code.
 
     If the Company fails to qualify as a REIT, the Company would be subject to
federal income tax at regular corporate rates. Also, unless the IRS granted the
Company relief under certain statutory provisions, the Company would remain
disqualified as a REIT for four years following the year the Company first
failed to qualify. If the Company failed to qualify as a REIT, the Company would
have to pay significant income taxes and would therefore have less money
available for investments or for distributions to shareholders. This would
likely have a significant adverse affect on the value of our securities. In
addition, the Company would no longer be required to make any distributions to
shareholders. See "Federal Income Tax Considerations -- Requirements for
Qualification as a REIT -- Failure of the Company to Qualify as a REIT."
 
     WE PAY SOME TAXES. Even if the Company qualifies as a REIT, we are required
to pay certain federal, state and local taxes on our income and property. In
addition, any net taxable income earned directly by the Noncontrolled
Subsidiaries is subject to federal and state income tax. See "Federal Income Tax
Considerations -- Other Tax Consequences for the Company, Its Shareholders and
the Noncontrolled Subsidiaries."
 
     WE COULD BE DISQUALIFIED AS A REIT OR HAVE TO PAY TAXES IF OUR PREDECESSORS
OR BEACON DID NOT QUALIFY AS REITS. If one or more of the ZML REITs that merged
into the Company at the time of the IPO or Beacon had failed to qualify as a
REIT throughout the duration of its existence, then it might have had
undistributed "C corporation earnings and profits." If that were the case and
the Company did not distribute such earnings and profits prior to December 31,
1997, the Company might not qualify as a REIT. We believe that each of the ZML
REITs and Beacon qualified as a REIT and that, in any event, neither any ZML
REIT nor Beacon had any undistributed "C corporation earnings and profits" at
the time of its respective merger into the Company. If any ZML REIT or Beacon
failed to qualify as a REIT, an additional concern would be that it would have
recognized taxable gain at the time it was merged into the Company (and the
Company would be liable for the tax on such gain). This would be the case even
though the applicable merger qualified as a "tax-free reorganization," unless
the Company makes a special election that is available under current law. The
Company will make such an election with respect to each of the ZML REITs and
Beacon. This election will have the effect of requiring the Company, if a ZML
REIT or Beacon was not qualified as a REIT, to pay corporate income tax on any
gain existing at the time of the applicable merger on assets acquired in the
merger if such assets are sold within 10 years after the merger of the ZML REITs
or Beacon (as applicable) into the Company. Finally, if a ZML REIT did not
qualify as a REIT, the Company could be precluded from electing REIT status for
up to four years after the year in which such ZML REIT failed to qualify if the
Company were determined to be a "successor" to that ZML REIT. See "Federal
Income Tax Considerations -- Taxation of the Company as a REIT -- General" and
"-- Requirements for Qualification as a REIT."
 
                                       19
<PAGE>   24
 
                                  THE COMPANY
 
GENERAL
 
     The Company was formed in 1996 as a Maryland REIT and commenced operations
effective with the completion of its IPO. The Company, together with the
Operating Partnership, was formed to continue and expand the national office
property business organized by Mr. Zell, Chairman of the Board of Trustees of
the Company. The Company, a self-administered and self-managed REIT, is the
managing general partner of the Operating Partnership. As of March 31, 1998, the
Company owned, directly or indirectly, 89.6% of the outstanding Units. The
Company owns all of its assets and conducts substantially all of its business
through the Operating Partnership and its subsidiaries.
 
     As of March 31, 1998, the Company owned or had an interest in 260 Office
Properties containing approximately 66.6 million rentable square feet of office
space and owned or had an interest in 17 Parking Facilities containing
approximately 16,749 parking spaces. To facilitate maintenance of the Company's
qualification as a REIT for federal income tax purposes, management of
properties that are not wholly owned by the Company and its subsidiaries is
generally conducted through EOP Management Company and Beacon Management
Company.
 
     The principal executive offices of the Company are located at Two North
Riverside Plaza, 22nd Floor, Chicago, Illinois 60606, and their telephone number
is (312) 466-3300. The Company maintains regional offices in Los Angeles,
Denver, Houston, Chicago, Atlanta and Washington, D.C.
 
OPERATIONS
 
     The operation of the Properties is under the direction of six 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 the Company's Executive Vice President -- Real
Estate Operations.
 
OPERATIONAL STRUCTURE
 
     The Operating Partnership is the entity through which the Company owns 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 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 Companies provide office property and asset management
services to 31 Managed Properties, 29 of which are owned by affiliates of Mr.
Zell. The Management Companies and Beacon Property Management, L.P., a Delaware
limited partnership ("BPMLP"), provide office property and asset management
services to 35 Joint Venture Properties. The Management Companies and BPMLP
collect property management fees for the performance of such services. See "Risk
Factors -- We Do Not Control Our Managed Properties or Management and Non-REIT
Services Businesses."
    
 
   
     The 35 Joint Venture Properties are held in partnerships or are subject to
participation agreements with unaffiliated third parties. Twenty-eight of the
Joint Venture Properties are Office Properties and seven are Parking Facilities.
The Company or a subsidiary is the managing general partner of each of the Joint
Venture Properties (except for Civic Parking L.L.C., where a subsidiary of the
Company is one of two managing members).
    
 
     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 under leases where such service companies bear
the operating expenses.
 
                                       20
<PAGE>   25
 
ACQUISITION ACTIVITY
 
   
     During the period from 1987 through 1997, the Company invested
approximately $10 billion, averaging $2.7 billion annually (calculated on a cost
basis) for the three years ended December 31, 1997, in acquisitions of
institutional quality office properties throughout the United States. During the
period from the Company's IPO in July 1997 through May 1998, the Company
completed a number of new acquisitions:
    
 
     BEACON MERGER. On December 19, 1997, the Company, the Operating
Partnership, Beacon, and Beacon Partnership consummated the transactions
contemplated by the Merger Agreement, whereby Beacon merged with and into the
Company and Beacon Partnership merged with and into the Operating Partnership.
The acquisition cost of the Beacon Merger was approximately $4.3 billion.
 
     As a result of the Beacon Merger, the Company acquired interests in 130
Office Properties containing approximately 20.9 million rentable square feet of
office space. The Beacon Properties are located in 22 submarkets in six markets:
Boston, Atlanta, Chicago, Los Angeles, San Jose and Washington, D.C.
 
   
     OTHER ACQUISITIONS.  On December 17, 1997, the Company consummated the
Wright Runstad Acquisition in which it acquired ten Office Properties,
containing an aggregate of approximately 3.34 million square feet, located in
Seattle, Washington, Portland, Oregon and Anchorage, Alaska, from Wright Runstad
Holdings L.P., Wright Runstad Asset Management L.P. and Mellon Bank, N.A., as
Trustee for First Plaza. The purchase price was approximately $640 million. In
addition to the Beacon Merger and the Wright Runstad Acquisition, during the
period from the IPO through May 29, 1998, the Company completed the Other
Acquisitions in which it acquired an aggregate of 37 Office Properties and the
remaining 90% interest in the Polk and Taylor Buildings, containing an aggregate
of approximately 13.0 million square feet, located in Boston, New Orleans,
Houston, Dallas, Denver, Philadelphia, Los Angeles, Chicago, San Francisco,
Washington, D.C. and Fairfax and Alexandria, Virginia. The aggregate
consideration paid by the Company for the Other Acquisitions was approximately
$2.3 billion, comprised of $2.0 billion in cash, $163 million in Units, $96
million in assumed liabilities and approximately $39 million in the form of
promissory notes of the Company payable, at the Company's option, in Common
Shares. Subsequent to the IPO, the Company also acquired three Parking
Facilities, containing approximately 2,141 parking spaces in Chicago, New
Orleans and Pittsburgh for $54.9 million. Giving effect to the Other
Acquisitions, as of May 29, 1998, the Company owned or had an interest in 268
Office Properties containing 69.7 million square feet.
    
 
   
     PROBABLE ACQUISITIONS.  The Company has entered into agreements to acquire
an aggregate of twelve additional office properties in the Probable
Acquisitions. The Company expects to acquire four office properties located in
Denver and four office properties located in Albuquerque during July 1998. These
eight properties contain an aggregate of approximately 866,600 square feet. The
aggregate purchase price for these eight properties is approximately $130
million, comprised of $106 million in cash and approximately $24 million in the
form of promissory notes of the Company payable, at the Company's option, in
Common Shares. The Company has also entered into an agreement to acquire four
office properties (including one office property currently in development)
located in Dallas and Washington, D.C. containing an aggregate of approximately
1.1 million square feet for aggregate consideration estimated to be $158.5
million in cash. The Company expects to complete this acquisition by the end of
September 1998.
    
 
BUSINESS AND GROWTH STRATEGIES
 
     The Company's primary business objective is to achieve sustainable
long-term growth in cash flow and portfolio 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. The
Company intends to supplement this strategy by owning parking facilities.
 
     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 where market conditions permit, (iii) repositioning of certain
Properties which have not yet achieved stabilization, and (iv) increasing
economies of scale.
 
                                       21
<PAGE>   26
 
     As of March 31, 1998, 3.7 million rentable square feet of Office Property
space was vacant, representing 5.6% of the Company's total Office Property
portfolio. Of this amount, 537,900 square feet was leased at an average rent of
$29.14 per square foot, with occupancy to commence in whole or in part during
1998. The Company's average operating expenses for the total vacant space were
$9.38 per square foot as of March 31, 1998.
 
     During the period from March 31, 1998 through December 31, 2002, 4,566
leases for 36.3 million rentable square feet of space are scheduled to expire.
As of March 31, 1998, the average rent for this space was $22.18 per square foot
and the average operating expenses were $8.93 per square foot. The actual rental
rates at which available space will be renewed or relet will depend on
prevailing market factors at the time.
 
     The Company owns certain parcels of undeveloped land acquired in connection
with the acquisition of the Office Properties. The Company is currently
proceeding with the development of two additional office properties totaling
approximately 430,000 square feet. In determining whether to develop land, the
Company considers, among other factors, whether significant pre-leasing can be
arranged or if such development is necessary to protect the Company's investment
in existing Properties.
 
     EXTERNAL GROWTH.  The Company is pursuing, and expects to continue to
actively pursue, acquisitions of additional office properties and parking
facilities. Management believes that significant opportunities for external
growth will continue to be available through strategic acquisitions of
institutional quality office properties. 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 or the Operating Partnership, and such
acquisitions may be customary real estate transactions and/or mergers or other
business combinations.
 
     PARKING FACILITIES.  Management believes that parking facilities offer the
Company attractive investment opportunities which are complementary to
investment in office properties. The Company intends to focus its acquisition
efforts for parking facilities 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.
 
EMPLOYEES
 
     As of March 31, 1998, the Company had approximately 1,482 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.
 
                                USE OF PROCEEDS
 
   
     The net cash proceeds to the Company from the Offering, after deducting
discounts and commissions and estimated Offering expenses of $   million, are
estimated to be approximately $   million. The Company intends to use these net
cash proceeds of the Offering for general corporate purposes, which may include
the acquisition of additional office properties and parking facilities and the
repayment of outstanding indebtedness under the Credit Facilities. As of March
31, 1998, the outstanding amounts of indebtedness to be repaid, which bore
interest at various floating rates, had a weighted average annual rate of 6.4%
and a weighted average maturity of two years.
    
 
     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 that are consistent with the Company's
qualification for taxation as a REIT.
 
                                       22
<PAGE>   27
 
                RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND
                         PREFERRED SHARE DISTRIBUTIONS
 
     The Company's ratios of earnings to combined fixed charges and preferred
share distributions are as follows:
 
   
<TABLE>
<CAPTION>
                                                                          EQUITY OFFICE
                                 THREE MONTHS                              PREDECESSORS         EQUITY OFFICE PREDECESSORS
                                    ENDED              COMPANY              (COMBINED             (COMBINED HISTORICAL)
                                  MARCH 31,          (HISTORICAL)          HISTORICAL)           YEARS ENDED DECEMBER 31,
                                --------------     JULY 11, 1997 TO     JANUARY 1, 1997 TO   --------------------------------
                                1998      1997    DECEMBER 31, 1997       JULY 10, 1997      1996   1995   1994   1993   1992
                                ----      ----   --------------------   ------------------   ----   ----   ----   ----   ----
<S>                             <C>       <C>    <C>                    <C>                  <C>    <C>    <C>    <C>    <C>
Ratio of Earnings to Combined
  Fixed Charges and Preferred
  Share Distributions.........  1.94      1.90            2.11                 1.52          1.49   1.21   1.24   1.23   1.24
</TABLE>
    
 
     The ratios of earnings to combined fixed charges and preferred share
distributions were computed by dividing earnings by fixed charges. For this
purpose, earnings consist of income (loss) before gains from sales of property
and extraordinary items plus fixed charges. Fixed charges consist of interest
expense (including interest costs capitalized), the amortization of debt
issuance costs, the portion of rental expense deemed to represent interest
expense and preferred share distributions.
 
             PRICE RANGE OF COMMON SHARES AND DISTRIBUTION HISTORY
 
   
     The Common Shares began trading on the NYSE on July 8, 1997, under the
symbol "EOP." On May 27, 1998, the last reported sales price per Common Share on
the NYSE was 28 3/16, and there were approximately 828 holders of record of the
Common Shares. The table below sets forth the historical quarterly high and low
closing sales price per Common Share reported on the NYSE and the distributions
paid by the Company with respect to each such period.
    
 
   
<TABLE>
<CAPTION>
                         PERIOD                           HIGH          LOW       DISTRIBUTIONS
                         ------                           ----          ---       -------------
<S>                                                       <C>  <C>      <C> <C>   <C>
1997
- --------------------------------------------------------
  Third Quarter (from July 9, 1997).....................  $33  15/16    $26 1/16      $.26(1)
  Fourth Quarter........................................  $34  11/16    $29 --        $.30
1998
- --------------------------------------------------------
  First Quarter.........................................  $31  7/8      $28 --        $.32
  Second Quarter (through May 27, 1998).................  $31  --       $27 11/16        --
</TABLE>
    
 
- ---------------
(1) The Company paid a distribution of $.26 per Common Share on October 9, 1997,
    to shareholders of record on September 29, 1997, for the period from July
    11, 1997 (the closing of the IPO), through September 30, 1997, which is
    approximately equivalent to a quarterly distribution of $.30 and an annual
    distribution of $1.20 per Common Share.
 
                                       23
<PAGE>   28
 
                                 CAPITALIZATION
 
   
     The following table sets forth the capitalization of the Company as of
March 31, 1998 on a historical basis and a Pro Forma Basis. The information set
forth in the table should be read in conjunction with the financial statements
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>
                                                                   MARCH 31, 1998
                                                              -------------------------
                                                                             PRO FORMA
                                                              HISTORICAL       BASIS
                                                              -----------   -----------
                                                                   (IN THOUSANDS)
<S>                                                           <C>           <C>
Debt:
  Mortgage Debt(1)..........................................  $ 2,060,105   $ 2,108,214
  Credit Facilities(1)......................................      243,000       792,667
  Notes Payable.............................................    1,684,425     1,747,855
Minority Interests..........................................      747,920       748,020
Shareholders' Equity........................................    6,692,350     6,929,609
                                                              -----------   -----------
     Total Capitalization...................................  $11,427,800   $12,326,365
                                                              ===========   ===========
</TABLE>
    
 
- ---------------
   
(1) See Notes 5 and 6 of the notes to the March 31, 1998 Historical Consolidated
    and Combined Financial Statements of the Company and the Equity Office
    Predecessors for information relating to the indebtedness.
    
 
                                       24
<PAGE>   29
 
                         SELECTED FINANCIAL INFORMATION
 
   
    The following sets forth selected consolidated and combined financial and
operating information on a pro forma basis for the Company and on an historical
basis for the Company and the Equity Office Predecessors. The following
historical information should be read in conjunction with the consolidated and
combined financial statements and notes thereto of the Company and Equity Office
Predecessors included elsewhere in this Prospectus. The selected consolidated
financial and operating information of the Company at March 31, 1998, and for
the three months then ended, has been derived from the historical unaudited
consolidated financial statements of the Company included elsewhere in this
Prospectus. The selected combined historical and operating information of Equity
Office Predecessors for the three months ended March 31, 1997, has been derived
from the historical unaudited combined financial statements of Equity Office
Predecessors included elsewhere in this Prospectus. The selected consolidated
historical and operating information of the Company at December 31, 1997, and
for the period from July 11, 1997 to December 31, 1997, has been derived from
the historical consolidated financial and operating information of the Company
audited by Ernst & Young LLP, independent auditors, whose report with respect
thereto is included elsewhere in this Prospectus. The selected combined
historical and operating information at December 31, 1996 and for the period
from January 1, 1997 to July 10, 1997 and the years ended December 31, 1996 and
1995, has been derived from the historical combined financial and operating
information of Equity Office Predecessors audited by Ernst & Young LLP,
independent auditors, whose report with respect thereto is included elsewhere in
this Prospectus. The selected combined financial and operating information of
the Equity Office Predecessors at December 31, 1995 and for the year ended
December 31, 1994 has been derived from the historical audited combined
financial statements not included herein. The selected combined financial and
operating information of Equity Office Predecessors at December 31, 1994 and
1993, and for the year ended December 31, 1993, has been derived from the
historical unaudited combined financial statements of Equity Office
Predecessors. Unaudited pro forma operating information for the three months
ended March 31, 1998 is presented as if the acquisitions that occurred during
and subsequent to the period, the Probable Acquisitions, the February 1998 Notes
Offering, the Series B Preferred Offering and the UIT Offering, had occurred on
January 1, 1998 and, therefore, incorporates certain assumptions that are
described in the notes to the Pro Forma Condensed Combined Financial Statements
included elsewhere in this Prospectus. Unaudited pro forma operating information
for the year ended December 31, 1997 is presented as if the borrowings under the
Credit Facilities at the end of the period, acquisitions (including the Beacon
Merger) that occurred during and subsequent to the period, the Probable
Acquisitions, the IPO and Consolidation, the Private Debt Offering, the February
1998 Notes Offering, the Series B Preferred Offering, and the UIT Offering had
occurred on January 1, 1997 and, therefore, incorporates certain assumptions
that are described in the notes to the Pro Forma Condensed Combined Financial
Statements included elsewhere in this Prospectus. The unaudited pro forma
balance sheet data is presented as if the borrowings under the Credit Facilities
that occurred subsequent to March 31, 1998, the UIT offering, the acquisitions
that occurred subsequent to March 31, 1998, and the Probable Acquisitions had
occurred on March 31, 1998. The pro forma information does not purport to
represent what the Company's financial position or results of operations would
actually have been if these transactions had, in fact, occurred on such date or
at the beginning of the period indicated, or to project the Company's financial
position or results of operations at any future date or for any future period.
    
   
<TABLE>
<CAPTION>
                                                                    EQUITY OFFICE
                                                                    PREDECESSORS
                                       COMPANY                        (COMBINED                         COMPANY
                                      PRO FORMA        COMPANY       HISTORICAL)                        FOR THE
                                    FOR THE THREE   FOR THE THREE   FOR THE THREE      COMPANY        PERIOD FROM
                                    MONTHS ENDED    MONTHS ENDED    MONTHS ENDED    PRO FORMA FOR    JULY 11, 1997
                                      MARCH 31,       MARCH 31,       MARCH 31,     THE YEAR ENDED    TO DEC. 31,
                                        1998            1998            1997        DEC. 31, 1997        1997
                                    -------------   -------------   -------------   --------------   -------------
                                                                     (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                 <C>             <C>             <C>             <C>              <C>
OPERATING DATA:
REVENUES:
Rental, parking and other.........   $   403,810     $   369,593      $148,471       $ 1,549,695      $   406,713
                                     -----------     -----------      --------       -----------      -----------
   Total revenues.................   $   408,037     $   373,820      $154,567       $ 1,581,263      $   412,968
                                     -----------     -----------      --------       -----------      -----------
EXPENSES:
 Interest.........................   $    82,286     $    69,884      $ 36,355       $   337,986      $    76,675
 Depreciation and amortization....        71,331          67,792        28,081           284,949           70,346
 Property operating(1)............       150,702         137,865        58,148           566,579          155,679
 General and administrative.......        13,948          13,948         7,073            76,048           17,690
 Provision for value impairment...            --              --            --                --               --
                                     -----------     -----------      --------       -----------      -----------
   Total expenses.................   $   318,267     $   289,489      $129,657       $ 1,265,562      $   320,390
                                     -----------     -----------      --------       -----------      -----------
 Income before (income) loss
   allocated to minority
   interests, income from
   investments in unconsolidated
   joint ventures, gain on sales
   of real estate, and
   extraordinary items............   $    89,770     $    84,331      $ 24,910       $   315,701      $    92,578
Minority interests allocation.....        (8,142)         (8,264)         (529)          (30,327)          (7,799)
Income from investments in
 unconsolidated joint ventures....         3,200           3,634           922            10,976            3,173
Gain/(Loss) on sales of real
 estate and extraordinary
 items(2).........................            --          (6,959)        5,466                --          (16,240)
                                     -----------     -----------      --------       -----------      -----------
Net income before preferred
 dividends........................        84,828          72,742        30,769           296,350           71,712
Preferred dividends...............       (12,459)         (6,271)           --           (49,710)            (649)
                                     -----------     -----------      --------       -----------      -----------
Net income available to Common
 Shares...........................   $    72,369     $    66,471      $ 30,769       $   246,640      $    71,063
                                     ===========     ===========      ========       ===========      ===========
Net income available per weighted
 average Common Share outstanding
 -- Basic.........................   $       .29     $       .27                     $       .98      $       .44
                                     ===========     ===========                     ===========      ===========
Net income available per weighted
 average Common Share outstanding
 -- Diluted.......................   $       .28     $       .27                     $       .98      $       .43
                                     ===========     ===========                     ===========      ===========
Weighted average Common Shares
 outstanding -- Basic.............   251,576,114     249,766,440                     251,155,672      162,591,477
                                     ===========     ===========                     ===========      ===========
Weighted average Common Shares
 outstanding -- Diluted...........   282,066,810     280,327,761                     282,095,690      180,014,027
                                     ===========     ===========                     ===========      ===========
 
<CAPTION>
 
                                     EQUITY OFFICE
                                     PREDECESSORS
                                       (COMBINED             EQUITY OFFICE PREDECESSORS
                                    HISTORICAL) FOR             (COMBINED HISTORICAL)
                                    THE PERIOD FROM       FOR THE YEARS ENDED DECEMBER 31,
                                    JAN. 1, 1997 TO   -----------------------------------------
                                     JULY 10, 1997      1996       1995       1994       1993
                                    ---------------   --------   --------   --------   --------
<S>                                 <C>               <C>        <C>        <C>        <C>
OPERATING DATA:
REVENUES:
Rental, parking and other.........     $327,017       $493,396   $356,959   $230,428   $150,315
                                       --------       --------   --------   --------   --------
   Total revenues.................     $339,104       $508,124   $371,457   $240,878   $159,246
                                       --------       --------   --------   --------   --------
EXPENSES:
 Interest.........................     $ 80,481       $119,595   $100,566   $ 59,316   $ 36,755
 Depreciation and amortization....       66,034         96,237     74,156     46,905     29,752
 Property operating(1)............      127,285        201,067    151,488    107,412     74,028
 General and administrative.......       17,201         23,145     21,987     15,603     12,012
 Provision for value impairment...           --             --     20,248         --         --
                                       --------       --------   --------   --------   --------
   Total expenses.................     $291,001       $440,044   $368,445   $229,236   $152,547
                                       --------       --------   --------   --------   --------
 Income before (income) loss
   allocated to minority
   interests, income from
   investments in unconsolidated
   joint ventures, gain on sales
   of real estate, and
   extraordinary items............     $ 48,103       $ 68,080   $  3,012   $ 11,642   $  6,699
Minority interests allocation.....         (912)        (2,086)    (2,129)     1,437      1,772
Income from investments in
 unconsolidated joint ventures....        1,982          2,093      2,305      1,778         --
Gain/(Loss) on sales of real
 estate and extraordinary
 items(2).........................       12,236          5,338     31,271      1,705         --
                                       --------       --------   --------   --------   --------
Net income before preferred
 dividends........................       61,409         73,425     34,459     16,562      8,471
Preferred dividends...............           --             --         --         --         --
                                       --------       --------   --------   --------   --------
Net income available to Common
 Shares...........................     $ 61,409       $ 73,425   $ 34,459   $ 16,562   $  8,471
                                       ========       ========   ========   ========   ========
Net income available per weighted
 average Common Share outstanding
 -- Basic.........................
Net income available per weighted
 average Common Share outstanding
 -- Diluted.......................
Weighted average Common Shares
 outstanding -- Basic.............
Weighted average Common Shares
 outstanding -- Diluted...........
</TABLE>
    
 
                                       25
<PAGE>   30
   
<TABLE>
<CAPTION>
                                                                  EQUITY OFFICE                                    EQUITY OFFICE
                                                                  PREDECESSORS                                     PREDECESSORS
                                     COMPANY                        (COMBINED        COMPANY                         (COMBINED
                                    PRO FORMA        COMPANY       HISTORICAL)      PRO FORMA      COMPANY FOR    HISTORICAL) FOR
                                  FOR THE THREE   FOR THE THREE   FOR THE THREE        FOR         THE PERIOD       THE PERIOD
                                  MONTHS ENDED    MONTHS ENDED    MONTHS ENDED      THE YEAR      FROM JULY 11,    FROM JAN. 1,
                                    MARCH 31,       MARCH 31,       MARCH 31,         ENDED          1997 TO          1997 TO
                                      1998            1998            1997        DEC. 31, 1997   DEC. 31, 1997    JULY 10, 1997
                                  -------------   -------------   -------------   -------------   -------------   ---------------
                                                           (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                               <C>             <C>             <C>             <C>             <C>             <C>
BALANCE SHEET DATA:
  (at end of period)
 Investment in real estate after
   accumulated depreciation.....   $12,115,032     $11,200,676      $      --        $   --        $10,976,319       $      --
                                   -----------     -----------      ---------        ------        -----------       ---------
 Total assets...................   $12,702,559     $11,803,994      $      --        $   --        $11,751,672       $      --
                                   -----------     -----------      ---------        ------        -----------       ---------
 Mortgage debt, unsecured notes
   and lines of credit..........   $ 4,648,736     $ 3,987,530      $      --        $   --        $ 4,284,317       $      --
                                   -----------     -----------      ---------        ------        -----------       ---------
 Total liabilities..............   $ 5,024,930     $ 4,363,724      $      --        $   --        $ 4,591,697       $      --
                                   -----------     -----------      ---------        ------        -----------       ---------
 Minority interests.............   $   748,020     $   747,920      $      --        $   --        $   754,818       $      --
                                   -----------     -----------      ---------        ------        -----------       ---------
 Shareholders'/Owners' equity...   $ 6,929,609     $ 6,692,350      $      --        $   --        $ 6,405,157       $      --
                                   -----------     -----------      ---------        ------        -----------       ---------
OTHER DATA:
 General and administrative
   expenses as a percentage of
   total revenues...............           3.4%            3.7%           4.6%          4.8%               4.3%            5.1%
                                   -----------     -----------      ---------        ------        -----------       ---------
 Number of Office Properties
   owned at period end(3).......           280             260             86           280                258              --
                                   -----------     -----------      ---------        ------        -----------       ---------
 Net rentable square feet of
   Office Properties owned at
   period end (in
   millions)(3).................          71.6            66.6           29.7          71.6               65.3              --
                                   -----------     -----------      ---------        ------        -----------       ---------
 Occupancy of Office Properties
   owned at period end(3).......            94%             94%            91%           94%                94%             --
                                   -----------     -----------      ---------        ------        -----------       ---------
 Number of Parking Facilities
   owned at period end..........            17              17             10            17                 17              --
                                   -----------     -----------      ---------        ------        -----------       ---------
 Number of spaces at Parking
   Facilities owned at period
   end..........................        16,749          16,749          7,321        16,749             16,749              --
                                   -----------     -----------      ---------        ------        -----------       ---------
 Funds from Operations(4).......                   $   150,836      $  52,755                      $   163,253       $ 113,022
                                                                                                   -----------       ---------
 Cash flow from operating
   activities...................                   $   110,765      $  41,087                      $   190,754       $  95,960
 Cash flow used for investing
   activities...................                   $  (270,947)     $(109,506)                     $(1,592,272)      $(571,068)
 Cash flow from financing
   activities...................                   $   (56,990)     $  34,120                      $ 1,630,346       $ 245,851
 
<CAPTION>
 
                                        EQUITY OFFICE PREDECESSORS (COMBINED
                                                     HISTORICAL)
                                          FOR THE YEARS ENDED DECEMBER 31,
                                  -------------------------------------------------
                                     1996         1995         1994         1993
                                  ----------   ----------   ----------   ----------
                                    (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                               <C>          <C>          <C>          <C>
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
                                  ----------   ----------   ----------   ----------
 Total assets...................  $3,912,565   $2,650,890   $2,090,933   $1,318,644
                                  ----------   ----------   ----------   ----------
 Mortgage debt, unsecured notes
   and lines of credit..........  $1,964,892   $1,434,827   $1,261,156   $  798,897
                                  ----------   ----------   ----------   ----------
 Total liabilities..............  $2,174,483   $1,529,334   $1,350,552   $  845,315
                                  ----------   ----------   ----------   ----------
 Minority interests.............  $   11,080   $   31,587   $    9,283   $  (15,298)
                                  ----------   ----------   ----------   ----------
 Shareholders'/Owners' equity...  $1,727,002   $1,089,969   $  731,098   $  488,627
                                  ----------   ----------   ----------   ----------
OTHER DATA:
 General and administrative
   expenses as a percentage of
   total revenues...............         4.6%         5.9%         6.5%         7.5%
                                  ----------   ----------   ----------   ----------
 Number of Office Properties
   owned at period end(3).......          83           73           63           48
                                  ----------   ----------   ----------   ----------
 Net rentable square feet of
   Office Properties owned at
   period end (in
   millions)(3).................        29.2         23.1         18.5         13.6
                                  ----------   ----------   ----------   ----------
 Occupancy of Office Properties
   owned at period end(3).......          90%          86%          88%          80%
                                  ----------   ----------   ----------   ----------
 Number of Parking Facilities
   owned at period end..........          10            3           --           --
                                  ----------   ----------   ----------   ----------
 Number of spaces at Parking
   Facilities owned at period
   end..........................       7,321        3,323           --           --
                                  ----------   ----------   ----------   ----------
 Funds from Operations(4).......  $  160,460   $   96,104   $   60,372           --
                                  ----------   ----------   ----------   ----------
 Cash flow from operating
   activities...................  $  165,975   $   93,878   $   73,821           --
 Cash flow used for 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 column entitled "Company Pro Forma for the year ended December 31, 1997"
    and "Company Pro Forma for the three months ended March 31, 1998 excludes
    the effect of any gain (loss) on sales of real estate and extraordinary
    items.
    
 
   
(3) The pro forma number of Office Properties as of March 31, 1998 includes
    Office Properties acquired subsequent to March 31, 1998 and Probable
    Acquisitions.
    
 
(4) The White Paper on Funds from Operations approved by the Board of Governors
    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. The Company believes that Funds from Operations is helpful
    to investors as a measure of the performance of an equity REIT because,
    along with cash flow from operating activities, financing activities and
    investing activities, it provides investors with an indication of the
    ability of the Company to incur and service debt, to make capital
    expenditures and to fund other cash needs. 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 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."
 
                                       26
<PAGE>   31
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
OVERVIEW
 
   
     The following discussion and analysis of the consolidated and combined
financial condition and results of operations should be read in conjunction with
the Consolidated Financial Statements of the Company and the Combined Financial
Statements of Equity Office Predecessors and Notes thereto contained herein. All
references to the historical activities of the Company prior to July 11, 1997,
the date of the Company's IPO, contained in this Management's Discussion and
Analysis of Financial Condition and Results of Operations refer to the
activities of the Equity Office Predecessors. Terms employed herein as defined
terms, but without definition, shall have the meaning set forth in the financial
statements. Statements contained in this "Management's Discussion and Analysis
of Financial Condition and Results of Operations" which are not historical facts
may be forward-looking statements within the meaning of Section 27A of the
Securities Act. The Company intends such forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements contained
in Section 27A of the Securities Act and are included for purposes of complying
therewith. 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
which speak only as of March 31, 1998.
    
 
   
     The Company owns substantially all of its assets and conducts substantially
all of its business through the Operating Partnership and its subsidiaries. At
March 31, 1998, the Company owned, directly or indirectly, approximately 89.6%
of the Units.
    
 
   
RESULTS OF OPERATIONS
    
 
GENERAL
 
   
     The following discussion is based primarily on the Consolidated Financial
Statements of the Company and the Combined Financial Statements of Equity Office
Predecessors, as applicable, as of March 31, 1998, December 31, 1997 and 1996
and for the three months ended March 31, 1998 and 1997, and for each of the
years ended December 31, 1997, 1996 and 1995.
    
 
     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 from noncombined affiliates for the management of the
Managed Properties.
 
   
     As of March 31, 1998, the Company owned or had an interest in 260 Office
Properties totaling approximately 66.6 million square feet, and 17 stand-alone
Parking Facilities with approximately 16,749 spaces, including properties
acquired through the Beacon Merger (the "Total Portfolio"). Of the Total
Portfolio, 71 of these Office Properties, totaling approximately 22.6 million
square feet and three Parking Facilities were acquired prior to January 1, 1996;
11 Office Properties, totaling approximately 6.1 million square feet, and seven
Parking Facilities were acquired in 1996; 176 Office Properties, totaling
approximately 36.6 million square feet, and seven Parking Facilities were
acquired during the year ended December 31, 1997; and two Office Properties
totaling approximately 1.2 million square feet were acquired during the three
months ended March 31, 1998. As a result of this rapid growth in the size of the
Total Portfolio, the financial data presented shows large increases in revenues
and expenses from period to period. For the foregoing reasons, the Company does
not believe its period to period financial data is comparable. Therefore, the
analysis below shows changes resulting from Properties that were held during the
entire period for the periods being compared (the "Core Portfolio") and the
changes in Total Portfolio. The Core Portfolio for the comparison between the
three months ended March 31, 1998 and 1997 consists of 81 Office Properties
totaling approximately 28.2 million square feet and ten Parking Facilities
acquired prior to January 1, 1997. The Core Portfolio for these comparisons
excludes Barton Oaks Plaza II, a 118,529 square foot Office Property which was
sold in January 1997, 8383 Wilshire, a 417,463 square foot Office Property,
which was sold in May 1997, and 28 State Street, a 570,040 square foot Office
Property, which was undergoing major redevelopment for the
    
 
                                       27
<PAGE>   32
 
   
periods discussed. The Core Portfolio for the comparison between the year ended
December 31, 1997 and 1996 consists of 70 Office Properties and three Parking
Facilities acquired prior to January 1, 1996. The Core Portfolio for these
comparisons excludes Barton Oaks Plaza II, a 118,529 square foot Office Property
which was sold in January 1997, 8383 Wilshire, a 417,463 square foot Office
Property, which was sold in May 1997, and 28 State Street, a 570,040 square foot
Office Property, which was undergoing major redevelopment for the periods
discussed. 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. The Core Portfolio for these comparisons includes Barton
Oaks Plaza II and 8383 Wilshire.
    
 
   
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 TO THE THREE MONTHS ENDED MARCH
31, 1997.
    
 
   
     The table below represents selected operating information for the Total
Portfolio and for the Core Portfolio which consists of the 81 Office Properties
and ten Parking Facilities acquired prior to January 1, 1997.
    
 
   
<TABLE>
<CAPTION>
                                                       TOTAL PORTFOLIO                               CORE PORTFOLIO
                                          ------------------------------------------    -----------------------------------------
                                                                INCREASE/       %                             INCREASE/      %
                                            1998       1997     (DECREASE)   CHANGE       1998       1997     (DECREASE)   CHANGE
                                            ----       ----     ----------   ------       ----       ----     ----------   ------
                                                                          (DOLLARS IN THOUSANDS)
<S>                                       <C>        <C>        <C>          <C>        <C>        <C>        <C>          <C>
Property revenues.......................  $369,593   $148,471    $221,122     148.9%    $159,538   $144,938    $ 14,600     10.1%
Interest income.........................     3,070      4,896      (1,826)    (37.3)         288        490        (202)   (41.2)
Fees from noncombined affiliates........     1,157      1,200         (43)     (3.6)          --         --          --       --
                                          --------   --------    --------    -------    --------   --------    --------    -----
    Total revenues......................   373,820    154,567     219,253     141.8      159,826    145,428      14,398      9.9
                                          --------   --------    --------    -------    --------   --------    --------    -----
Interest expense........................    69,884     36,355      33,529      92.2       20,872     35,573     (14,701)   (41.3)
Depreciation and amortization...........    67,792     28,081      39,711     141.4       27,703     26,928         775      2.9
Property operating expenses.............   137,865     58,148      79,717     137.1       58,354     56,752       1,602      2.8
General and administrative..............    13,948      7,073       6,875      97.2          N/A        N/A         N/A      N/A
                                          --------   --------    --------    -------    --------   --------    --------    -----
    Total expenses......................   289,489    129,657     159,832     123.3      106,929    119,253     (12,324)   (10.3)
                                          --------   --------    --------    -------    --------   --------    --------    -----
Income before allocation to minority
  interests, income from investment in
  unconsolidated joint ventures, gain on
  sale of real estate and extraordinary
  items.................................    84,331     24,910      59,421     238.5       52,897     26,175      26,722    102.1
Minority interests......................    (8,264)      (529)     (7,735)   1462.2         (506)      (363)       (143)    39.4
Income from unconsolidated joint
  ventures..............................     3,634        922       2,712     294.1          702        922        (220)   (23.9)
Gain on sale of real estate and
  extraordinary items...................    (6,959)     5,466     (12,425)   (227.3)          --         --          --       --
                                          --------   --------    --------    -------    --------   --------    --------    -----
    Net income..........................  $ 72,742   $ 30,769    $ 41,973     136.4%    $ 53,093   $ 26,734    $ 26,359     98.6%
                                          ========   ========    ========    =======    ========   ========    ========    =====
Property revenues less property
  operating expenses before interest,
  depreciation, amortization and general
  and administrative expenses...........  $231,728   $ 90,323    $141,405     156.6%    $101,184   $ 88,186    $ 12,998     14.7%
                                          ========   ========    ========    =======    ========   ========    ========    =====
</TABLE>
    
 
   
     Property Revenues: The increase in rental revenues, tenant reimbursements,
parking income and other income ("Property Revenues") in the Core Portfolio
resulted from a combination of occupancy and rental rate increases. The weighted
average occupancy of the Core Portfolio increased from approximately 92.1% at
January 1, 1997 to 94.7% as of March 31, 1998. This increase represents
approximately 755,700 square feet of additional occupancy in the Core Portfolio
between January 1, 1997 and March 31, 1998. Property Revenues for the Total
Portfolio include lease termination fees of approximately $2.9 million and $2.3
million for the three months ended March 31, 1998 and 1997, respectively, and
Property Revenues for the Core Portfolio include lease termination fees of $0.9
million and $2.3 million for the three months ended March 31, 1998 and 1997,
respectively (which are included in the other revenue category on the
consolidated and combined statements of operations). These fees are related to
specific tenants who have paid a fee to terminate their lease obligations before
the end of the contractual term of the lease. Although the Company has
historically experienced similar levels of such termination fees, there is no
way of predicting the timing or amounts of future lease termination fees. The
straight-line rent adjustment which is included in rental revenues for the Total
Portfolio for the three months ended March 31, 1998 and 1997 was approximately
$17.1 million and $3.9 million, respectively. The straight-line rent adjustment
which is included in rental revenues for the Core Portfolio for the three months
ended March 31, 1998 and 1997 was approximately $7.8 million and $3.9 million,
respectively.
    
 
                                       28
<PAGE>   33
 
   
     Interest Income: Interest income for the Total Portfolio decreased by
approximately $1.8 million to $3.1 million for the three months ended March 31,
1998, compared to $4.9 million for the three months ended March 31, 1997. Prior
to the Consolidation, each of the entities involved in the Consolidation needed
to maintain separate cash reserves which in the aggregate were higher than the
cash reserves the Company maintains going forward. Due to the availability of
borrowings under the Credit Facilities, the Company currently maintains lower
cash reserves which are targeted to be between $25 to $50 million (although the
cash balance may at times be more or less in anticipation of pending
acquisitions or other transactions). Although the lower cash balance will result
in lower interest income in future periods, this loss in income is expected to
be offset by savings on interest expense on the Credit Facilities.
    
 
   
     Interest Expense: Interest expense increased by approximately $33.5 million
for the Total Portfolio to $69.9 million for the three months ended March 31,
1998 compared to $36.4 million for the three months ended March 31, 1997. This
increase resulted from having more debt outstanding in the first quarter of 1998
than during the comparable period of 1997. The increase in total debt and the
related increase in interest expense was directly related to Property
acquisitions. While the Company's total debt and total interest expense have
increased due to acquisition activity, the total debt as a percentage of total
assets decreased from approximately 50% of total assets at March 31, 1997 to
33.8% of total assets at March 31, 1998, and the Company's interest coverage
ratio increased from 2.5 times in 1997 to 3.2 times in 1998. In addition, the
weighted average interest rate on the Company's debt decreased from
approximately 7.6% at March 31, 1997 to approximately 7.2% at March 31, 1998.
The decrease in interest expense in the Core Portfolio of approximately $14.7
million is primarily due to the paydown of outstanding indebtedness with the IPO
proceeds and the replacement of secured debt with unsecured debt.
    
 
   
     Depreciation and Amortization: Depreciation and amortization increased for
the Total Portfolio as a result of properties acquired and capital and tenant
improvements made at properties in the Core Portfolio during 1997 and 1998 and
the recording of substantially all the Company's assets and liabilities at their
fair market value in connection with the Consolidation and the IPO.
    
 
   
     Property Operating Expenses: The increase in real estate taxes and
insurance, repairs and maintenance, and property operating expenses ("Property
Operating Expenses") in the Core Portfolio relates primarily to increases in
real estate taxes due to higher property valuations.
    
 
   
     General and Administrative Expenses: General and administrative expenses
increased by approximately $6.9 million to $13.9 million for the three months
ended March 31, 1998, compared to $7.1 million for the three months ended March
31, 1997. General and administrative expenses as a percentage of total revenues
was approximately 3.7% and 4.6% for the three months ended March 31, 1998 and
1997, respectively. The primary reasons for the increase in general and
administrative expenses are the significant increase in the size of the
Company's portfolio and increased expenses associated with becoming a public
company. While general and administrative expenses will continue to increase as
the size of the Company's portfolio increases, it is anticipated that the
Company will realize increased economies of scale with future growth.
    
 
                                       29
<PAGE>   34
 
   
PARKING OPERATIONS
    
 
   
     The Total Portfolio and Core Portfolio selected operating information for
the three months ended March 31, 1998 and 1997, presented above includes results
of operations from the Parking Facilities. Summarized information for the
Parking Facilities is presented below.
    
 
   
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1998 TO THE THREE MONTHS ENDED
MARCH 31, 1997.
    
 
   
<TABLE>
<CAPTION>
                                          TOTAL PARKING PORTFOLIO                      CORE PARKING PORTFOLIO
                                  ----------------------------------------    ----------------------------------------
                                                      INCREASE/       %                           INCREASE/       %
                                   1998      1997     (DECREASE)    CHANGE     1998      1997     (DECREASE)    CHANGE
                                   ----      ----     ----------    ------     ----      ----     ----------    ------
                                                                 (DOLLARS IN THOUSANDS)
<S>                               <C>       <C>       <C>           <C>       <C>       <C>       <C>           <C>
Property Revenues.............    $6,971    $4,650      $2,321       49.9%    $5,215    $4,650      $ 565        12.2%
Interest income...............        33        65         (32)     (49.2)        33        65        (32)      (49.2)
                                  ------    ------      ------      -----     ------    ------      -----       -----
    Total revenues............     7,004     4,715       2,289       48.5      5,248     4,715        533        11.3
                                  ------    ------      ------      -----     ------    ------      -----       -----
Interest expense..............     1,368     1,259         109        8.7      1,368     1,259        109         8.7
Depreciation and
  amortization................     1,402       815         587       72.0      1,092       815        277        34.0
Property Operating Expenses...     1,997     1,182         815       69.0      1,521     1,182        339        28.7
                                  ------    ------      ------      -----     ------    ------      -----       -----
    Total expenses............     4,767     3,256       1,511       46.4      3,981     3,256        725        22.3
                                  ------    ------      ------      -----     ------    ------      -----       -----
Income before allocation to
  minority interests and
  income from investment in
  unconsolidated joint
  ventures....................     2,237     1,459         778       53.3      1,267     1,459       (192)      (13.2)
Minority interests............       (69)      (60)         (9)      15.0        (69)      (60)        (9)       15.0
Income from unconsolidated
  joint ventures..............       681        --         681         --         --        --         --          --
                                  ------    ------      ------      -----     ------    ------      -----       -----
Net income....................    $2,849    $1,399      $1,450      103.6%    $1,198    $1,399      $(201)      (14.4)%
                                  ======    ======      ======      =====     ======    ======      =====       =====
Property revenues less
  property operating expenses
  before interest,
  depreciation, amortization
  and general and
  administrative expenses.....    $4,974    $3,468      $1,506       43.4%    $3,694    $3,468      $ 226         6.5%
                                  ======    ======      ======      =====     ======    ======      =====       =====
</TABLE>
    
 
                                       30
<PAGE>   35
 
YEARS ENDED DECEMBER 31, 1997 AND 1996
 
     The table below represents selected operating information for the Total
Portfolio and for the Core Portfolio for the years ended December 31, 1997 and
1996.
 
   
<TABLE>
<CAPTION>
                                               TOTAL PORTFOLIO                                CORE PORTFOLIO
                                  -----------------------------------------      -----------------------------------------
                                                        INCREASE/      %                               INCREASE/      %
                                    1997       1996     (DECREASE)   CHANGE        1997       1996     (DECREASE)   CHANGE
                                  --------   --------   ----------   ------      --------   --------   ----------   ------
                                                                      ($ IN THOUSANDS)
<S>                               <C>        <C>        <C>          <C>         <C>        <C>        <C>          <C>
Property revenues...............  $733,730   $493,396    $240,334      48.7%     $458,968   $427,936    $ 31,032      7.3%
Interest income.................    13,392      9,608       3,784      39.4%        1,056      1,882        (826)   (43.9)%
Fees from noncombined
  affiliates....................     4,950      5,120        (170)     (3.3)%                     --          --       --
                                  --------   --------    --------    ------      --------   --------    --------    -----
  Total revenues................   752,072    508,124     243,948      48.0%      460,024    429,818      30,206      7.0%
                                  --------   --------    --------    ------      --------   --------    --------    -----
Interest expense................   157,156    119,595      37,561      31.4%       93,606    110,566     (16,960)   (15.3)%
Depreciation and amortization...   136,380     96,237      40,143      41.7%       85,999     84,411       1,588      1.9%
Property operating expenses.....   282,964    201,067      81,897      40.7%      177,972    176,432       1,540      0.9%
General and administrative......    34,891     23,145      11,746      50.7%          N/A        N/A         N/A      N/A
                                  --------   --------    --------    ------      --------   --------    --------    -----
    Total expenses..............   611,391    440,044     171,347      38.9%      357,577    371,409     (13,832)    (3.7)%
                                  --------   --------    --------    ------      --------   --------    --------    -----
Income before allocation to
  minority interests, income
  from investment in
  unconsolidated joint ventures,
  gain on sales of real estate
  and extraordinary items.......   140,681     68,080      72,601     106.6%      102,447     58,409      44,038     75.4%
Minority interests..............    (8,711)    (2,086)     (6,625)   (317.6)%      (1,679)    (1,986)        307     15.5%
Income from unconsolidated joint
  ventures......................     5,155      2,093       3,062     146.3%        2,432      2,093         339     16.2%
Gain on sales of real estate and
  extraordinary items...........    (4,004)     5,338      (9,342)   (175.0)%     (16,311)        --     (16,311)      --
                                  --------   --------    --------    ------      --------   --------    --------    -----
Net income......................  $133,121   $ 73,425    $ 59,696      81.3%     $ 86,889   $ 58,516    $ 28,373     48.5%
                                  ========   ========    ========    ======      ========   ========    ========    =====
Property revenues less property
  operating expenses before
  interest, depreciation,
  amortization and general and
  administrative expenses.......  $450,766   $292,329    $158,437      54.2%     $280,996   $251,504    $ 29,492     11.7%
                                  ========   ========    ========    ======      ========   ========    ========    =====
</TABLE>
    
 
   
     Property Revenues. The increase in Property Revenues in the Core Portfolio
resulted from a combination of occupancy and rental rate increases. The weighted
average occupancy of the Core Portfolio increased from approximately 88.5% at
January 1, 1996 to 94.8% as of December 31, 1997. This increase represents
approximately 1.4 million square feet of additional occupancy in the Core
Portfolio between January 1, 1996 and December 31, 1997. Included in Property
Revenues for the Core Portfolio are lease termination fees of approximately $3.7
million and $5.6 million for the years ended December 31, 1997 and 1996,
respectively (which are included in the other revenue category on the
consolidated and combined statement of operations). These fees are related to
specific tenants who have paid a fee to terminate their lease obligations before
the end of the contractual term of the lease. Although the Company has
historically experienced similar levels of such termination fees, there is no
way of predicting the timing or amounts of future lease termination fees. The
straight-line rent adjustment which is included in rental revenues for the Core
Portfolio for the years ended December 31, 1997 and 1996, was approximately
$14.6 million and $13.9 million, respectively. The straight-line rent adjustment
which is included in rental revenues for the Total Portfolio for the years ended
December 31, 1997 and 1996 was approximately $27.7 million and $18.4 million,
respectively. Other income for 1996 also includes approximately $8.8 million
relating to the Company's share of a litigation settlement.
    
 
     Interest Income. Interest income for the Total Portfolio increased by
approximately $3.8 million to $13.4 million for the year ended December 31,
1997, compared to $9.6 million for the year ended December 31, 1996. This
increase in interest income is primarily due to having a greater amount of cash
reserves invested in short term investments pending investment in property
acquisitions prior to the IPO. Prior
 
                                       31
<PAGE>   36
 
to the Consolidation, each of the entities involved in the Consolidation needed
to maintain separate cash reserves which in the aggregate were higher than the
cash reserves the Company anticipates maintaining going forward. Due to the
availability of borrowings under the Company's Credit Facilities, the Company
currently maintains lower cash reserves which are targeted to be between $25 and
$50 million (although the cash balance may at times be more or less in
anticipation of pending acquisitions or other transactions). The lower cash
balance will result in lower interest income in future periods, however, this
loss in income should be offset by savings on interest expense on the Company's
Credit Facilities.
 
     Fees from Noncombined Affiliates. Fees from noncombined affiliates
decreased in 1997 from approximately $5.1 million in 1996 to $4.9 million in
1997. These fees are expected to continue to decrease in future periods as the
Managed Properties are sold. Fee income for the years ended December 31, 1997
and 1996, of approximately $0.4 million and $1.3 million, respectively, was
related to properties which have been sold.
 
     Interest Expense. Interest expense increased by approximately $37.6 million
for the Total Portfolio to $157.2 million for the year ended December 31, 1997
compared to $119.6 million for the year ended December 31, 1996. This increase
resulted from having more debt outstanding in 1997. The increase in total debt
and the related increase in interest expense was directly related to property
acquisitions. While the Company's total debt and total interest expense have
increased due to acquisition activity, the total debt as a percentage of total
assets decreased from 50% of total assets at December 31, 1996 to 36.5% of total
assets at December 31, 1997, and the Company's interest coverage ratio increased
from 2.4 times in 1996 to 2.8 times in 1997. In addition, the weighted average
interest rate on the Company's debt decreased from approximately 7.7% at
December 31, 1996 to approximately 7.2% at December 31, 1997. The decrease in
interest expense in the Core Portfolio of $17.0 million is primarily due to the
replacement of secured debt with unsecured debt.
 
     Depreciation and Amortization. Depreciation and amortization increased for
the Total Portfolio as a result of properties acquired during 1997 and the
recording of substantially all the Company's assets and liabilities at their
fair market value in connection with the Consolidation and the Company's IPO.
 
     The increase in depreciation in the Core Portfolio resulted from the
recording of substantially all the Company's assets and liabilities at their
fair market value in connection with the Consolidation and the Company's IPO.
The decrease in amortization in the Core Portfolio resulted from the write-off
of deferred financing and leasing costs at the time of the Consolidation and the
Company's IPO.
 
   
     Property Operating Expenses. The increase in Property Operating Expenses in
the Core Portfolio relates primarily to increases in real estate taxes due to
higher property valuations partially offset by real estate tax refunds recorded
in the year ended December 31, 1997.
    
 
     General and Administrative Expenses. General and administrative expenses
for the Total Portfolio increased by approximately $11.8 million to $34.9
million for the year ended December 31, 1997, compared to $23.1 million for the
year ended December 31, 1996. General and administrative expenses as a
percentage of total revenues was approximately 4.6% for the years ended December
31, 1997 and 1996. The primary reasons for the increase in general and
administrative expenses are the significant increase in the size of the
Company's portfolio and increased expenses associated with becoming a public
company. While general and administrative expenses will continue to increase as
the size of the Company's portfolio increases, it is anticipated that general
and administrative expenses as a percentage of total revenue will initially
remain stable (or increase slightly), as the full costs of running a public
company are reflected in operations, and then decrease over time as the Company
realizes increased economies of scale.
 
     PARKING OPERATIONS. Included in the Total and Core Portfolio selected
operating information, for the years ended December 31, 1997 and 1996, are
results of operations from the stand-alone Parking Facilities, the summarized
information for which is presented below. As of December 31, 1997, the Company
owned or had an interest in 17 stand-alone Parking Facilities with approximately
16,749 spaces. Of the Total Portfolio, three Parking Facilities were acquired
prior to January 1, 1996; seven Parking Facilities were acquired in 1996; and
seven Parking Facilities were acquired during the year ended December 31, 1997.
The Core Portfolio for the comparison between the years ended December 31, 1997
and 1996 consist of three Parking Facilities acquired prior to January 1, 1996.
 
                                       32
<PAGE>   37
 
 COMPARISON OF THE YEAR ENDED DECEMBER 31, 1997 TO THE YEAR ENDED DECEMBER 31,
                                      1996
 
   
<TABLE>
<CAPTION>
                                    TOTAL PARKING PORTFOLIO                      CORE PARKING PORTFOLIO
                            ---------------------------------------      ---------------------------------------
                                                INCREASE/      %                             INCREASE/      %
                             1997      1996     (DECREASE)   CHANGE       1997      1996     (DECREASE)   CHANGE
                            -------   -------   ----------   ------      -------   -------   ----------   ------
                                                           (DOLLARS IN THOUSANDS)
<S>                         <C>       <C>       <C>          <C>         <C>       <C>       <C>          <C>
Property revenues.........  $22,577   $10,203    $12,374     121.3%      $10,238   $ 9,873     $  365       3.7%
Interest income...........      249       141        108      76.6%          239       141         98      69.5%
                            -------   -------    -------     -----       -------   -------     ------     -----
    Total revenues........   22,826    10,344     12,482     120.7%       10,477    10,014        463       4.6%
                            -------   -------    -------     -----       -------   -------     ------     -----
Interest expense..........    5,427     1,814      3,613     199.2%        2,724     1,645      1,079      65.6%
Depreciation and
  amortization............    4,031     1,432      2,599     181.5%        1,708     1,359        349      25.7%
Property operating
  expenses................    5,124     3,152      1,972      62.6%        2,619     3,081       (462)    (15.0)%
                            -------   -------    -------     -----       -------   -------     ------     -----
    Total expenses........   14,582     6,398      8,184     127.9%        7,051     6,085        966      15.9%
                            -------   -------    -------     -----       -------   -------     ------     -----
Income before allocation
  to minority interests
  and income from
  investment in
  unconsolidated joint
  ventures................    8,244     3,946      4,298     108.9%        3,426     3,929       (503)    (12.8)%
Minority interests........     (323)     (252)       (71)    (28.2)%        (323)     (252)       (71)    (28.2)%
Income from unconsolidated
  joint ventures..........    2,461        --      2,461        --            --        --         --        --
                            -------   -------    -------     -----       -------   -------     ------     -----
Net income................  $10,382   $ 3,694    $ 6,688     181.1%      $ 3,103   $ 3,677     $ (574)    (15.6)%
                            =======   =======    =======     =====       =======   =======     ======     =====
Property revenues less
  property operating
  expenses before
  interest, depreciation,
  amortization and general
  and administrative
  expenses................  $17,453   $ 7,051    $10,402     147.5%      $ 7,619   $ 6,792     $  827      12.2%
                            =======   =======    =======     =====       =======   =======     ======     =====
</TABLE>
    
 
                                       33
<PAGE>   38
 
YEARS ENDED DECEMBER 31, 1996 AND 1995
 
     The table below presents selected operating information for the Total
Portfolio and for the Core Portfolio for the years ended December 31, 1996 and
1995.
 
   
<TABLE>
<CAPTION>
                                          TOTAL PORTFOLIO                                 CORE PORTFOLIO
                             ------------------------------------------      -----------------------------------------
                                                   INCREASE/       %                               INCREASE/      %
                               1996       1995     (DECREASE)   CHANGE         1996       1995     (DECREASE)   CHANGE
                             --------   --------   ----------   -------      --------   --------   ----------   ------
                                                              (DOLLARS IN THOUSANDS)
<S>                          <C>        <C>        <C>          <C>          <C>        <C>        <C>          <C>
Property revenues..........  $493,396   $356,959    $136,437       38.2%     $349,810   $327,017    $ 22,793       7.0%
Interest income............     9,608      8,599       1,009       11.7%           --         --          --        --
Fees from noncombined
  affiliates...............     5,120      5,899        (779)     (13.2)%          --         --          --        --
                             --------   --------    --------    -------      --------   --------    --------    ------
    Total revenues.........   508,124    371,457     136,667       36.8%      349,810    327,017      22,793       7.0%
                             --------   --------    --------    -------      --------   --------    --------    ------
Interest expense...........   119,595    100,566      19,029       18.9%       85,225     85,371        (146)     (0.2)%
Depreciation and
  amortization.............    96,237     74,156      22,081       29.8%       71,969     68,226       3,743       5.5%
Property operating
  expenses.................   201,067    151,488      49,579       32.7%      143,511    137,103       6,408       4.7%
General and
  administrative...........    23,145     21,987       1,158        5.3%           --         --          --        --
Provision for value
  impairment...............        --     20,248     (20,248)    (100.0)%          --     20,248     (20,248)   (100.0)%
                             --------   --------    --------    -------      --------   --------    --------    ------
    Total expenses.........   440,044    368,445      71,599       19.4%      300,705    310,948     (10,243)     (3.3)%
                             --------   --------    --------    -------      --------   --------    --------    ------
Income before allocation to
  minority interests,
  income from investment in
  unconsolidated joint
  ventures, gain on sales
  of real estate and
  extraordinary items......    68,080      3,012      65,068    2,160.3%       49,105     16,069      33,036     205.6%
Minority interests, net of
  extraordinary gain of
  $20,035 in 1995 for the
  total and core
  portfolios...............    (2,086)    (2,129)         43        2.0%       (1,733)    (2,023)        290      14.3%
Income from unconsolidated
  joint ventures...........     2,093      2,305        (212)      (9.2)%       2,093      2,305        (212)     (9.2)%
Gain on sales of real
  estate and extraordinary
  items....................     5,338     31,271     (25,933)     (82.9)%          --     31,271     (31,271)   (100.0)%
                             --------   --------    --------    -------      --------   --------    --------    ------
Net income.................  $ 73,425   $ 34,459    $ 38,966      113.1%     $ 49,465   $ 47,622    $  1,843       3.9%
                             ========   ========    ========    =======      ========   ========    ========    ======
Property revenues less
  property operating
  expenses before interest,
  depreciation,
  amortization and general
  and administrative
  expenses.................  $292,329   $205,471    $ 86,858       42.3%     $206,299   $189,914    $ 16,385       8.6%
                             ========   ========    ========    =======      ========   ========    ========    ======
</TABLE>
    
 
     Property Revenues. The increase in Property Revenues in the Core Portfolio
resulted from a combination of occupancy and rental rate increases. The weighted
average occupancy of the Core Portfolio increased from approximately 87.5% at
January 1, 1995 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. Included in Property
Revenues for the Core Portfolio are lease termination fees of $5.6 million and
$5.0 million for the years ended December 31, 1996 and 1995, respectively (these
amounts are included in the other revenue category on the combined statements of
operations). These fees are related to specific tenants who have paid a fee to
terminate their lease obligations before the end of the contractual term of the
lease. Although the Company has historically experienced similar levels of such
termination fees, there is no way of predicting the timing or amounts of future
lease termination fees. The straight-line rent adjustment which is included in
rental revenues for the Core Portfolio for the years ended December 31, 1996 and
1995, was approximately $6.8 million and $10.5 million, respectively. The
straight-line rent adjustment
 
                                       34
<PAGE>   39
 
which is included in rental revenues for the Total Portfolio for the years ended
December 31, 1996 and 1995, was approximately $18.4 million and $12.7 million,
respectively. Other income for 1996 also includes approximately $8.8 million
relating to the Company's share of a litigation settlement.
 
     Interest Income. Interest income for the Total Portfolio increased by
approximately $1.0 million to $9.6 million for the year ended December 31, 1996
compared to $8.6 million for the year ended December 31, 1995. This increase in
interest income is due primarily to having a larger amount of cash invested in
short term investments pending the purchase of new acquisitions.
 
     Fees from Noncombined Affiliates. Fee income from the Managed Properties
for the Total Portfolio decreased as a result of disposition activities in 1995
and 1996 which reduced the number of properties being managed.
 
     Interest Expense. Interest expense increased by approximately $19.0 million
for the Total Portfolio to $119.6 million for the year ended December 31, 1996
compared to $100.6 million for the year ended December 31, 1995. This increase
was primarily the result of increased debt obtained to finance acquisitions.
 
     Depreciation and Amortization. The increase in depreciation and
amortization in the Core Portfolio was related to depreciation of capital and
tenant improvements made at properties in the Core Portfolio in 1995 and 1996
and the amortization of leasing commissions and loan fees paid during that time
period.
 
     Property Operating Expenses. The increase in Property Operating Expenses in
the Core Portfolio resulted from an increase in maintenance expenses in 1996 and
real estate tax refunds received in 1995, with approximately $1.9 million
relating to a single property, which reduced the tax expense in 1995.
 
     General and Administrative. General and administrative expenses increased
by approximately $1.1 million to $23.1 million for the year ended December 31,
1996 compared to $22.0 million for the year ended December 31, 1995. General and
administrative expenses as a percentage of total revenues was approximately 4.6%
and 5.9% for the years ended December 31, 1996 and 1995, respectively. While
general and administrative expenses will continue to increase as the size of the
Company's portfolio increases, it is anticipated that general and administrative
expenses as a percentage of total revenues will initially remain stable (or
increase slightly), as the full costs of running a public company are reflected
in operations, and then decrease over time as the Company realizes increased
economies of scale.
 
     Provision for Value Impairment. During 1995, the Financial Accounting
Standards Board issued Statement No. 121 "Accounting for the Impairment of
Long-Lived Assets to Be Disposed Of" 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. As a result of cash deficits, San
Felipe Plaza was evaluated for impairment and accordingly, during the year ended
December 31, 1995, Equity Office Predecessors recorded a provision for value
impairment of approximately $20.2 million, of which $17.5 million related to the
adjustment of investment in real estate and approximately $2.7 million related
to unamortized lease acquisition costs.
 
     PARKING OPERATIONS.  Included in the Total Portfolio numbers above are
results of operations from the stand-alone Parking Facilities, the summarized
information for which is presented below. As of December 31, 1996, the Company
owned or had an interest in 10 stand-alone Parking Facilities with approximately
7,144 spaces. During the year ended December 31, 1995, the Company acquired
three Parking Facilities with
 
                                       35
<PAGE>   40
 
approximately 3,128 spaces. Of the Total Parking Portfolio, there were no
Parking Facilities acquired prior to January 1, 1995, therefore there is not a
Core Portfolio for comparison purposes.
 
   
<TABLE>
<CAPTION>
                                                               TOTAL PARKING
                                                                 PORTFOLIO
                                                                YEARS ENDED
                                                                DECEMBER 31,
                                                              ----------------
                                                               1996      1995
                                                              -------   ------
                                                                (DOLLARS IN
                                                                 THOUSANDS)
<S>                                                           <C>       <C>
Property revenues...........................................  $10,203   $5,391
Interest income.............................................      141       17
                                                              -------   ------
  Total Revenues............................................   10,344    5,408
                                                              -------   ------
Interest expense............................................    1,814      937
Depreciation and amortization...............................    1,432      722
Property operating expenses.................................    3,152    1,797
                                                              -------   ------
  Total expenses............................................    6,398    3,456
                                                              -------   ------
Income before allocation to minority interests..............    3,946    1,952
Minority interests..........................................     (252)      --
                                                              -------   ------
Net income..................................................  $ 3,694   $1,952
                                                              =======   ======
Property revenues less property operating expenses before
  interest, depreciation, amortization and general and
  administrative expenses...................................  $ 7,051   $3,594
                                                              =======   ======
</TABLE>
    
 
   
     DISPOSITIONS OF PROPERTY. Equity Office Predecessors sold two Office
Properties in 1997: Barton Oaks Plaza II (118,529 net rentable square feet) was
sold in January 1997 and 8383 Wilshire (417,463 net rentable square feet) was
sold in May 1997. In January 1996, Equity Office Predecessors sold the
condominium portion, comprised of a 210-room hotel, at Three Lakeway, a
mixed-use property. Below is a summary of the operations of these Office
Properties for the three months ended March 31, 1997, and for the years ended
December 31, 1997, 1996 and 1995.
    
 
   
<TABLE>
<CAPTION>
                                                  THREE MONTHS     YEARS ENDED DECEMBER 31,
                                                     ENDED        --------------------------
                                                 MARCH 31, 1997    1997      1996     1995
                                                 --------------   -------   ------   -------
                                                           (DOLLARS IN THOUSANDS)
<S>                                              <C>              <C>       <C>      <C>
Property revenues..............................      $2,202       $ 3,246   $9,959   $ 9,445
                                                     ------       -------   ------   -------
Interest expense...............................          36            36      956     4,910
Depreciation and amortization..................         451           451    2,286     2,262
Property operating expenses....................         958         1,468    4,869     3,068
                                                     ------       -------   ------   -------
  Total expenses...............................       1,445         1,955    8,111    10,240
                                                     ------       -------   ------   -------
Income before gain on sales of real estate and
  extraordinary items..........................         757         1,291    1,848      (795)
Gain on sales of real estate and extraordinary
  items........................................       5,302        13,088    5,338        --
                                                     ------       -------   ------   -------
Net income (loss)..............................      $6,059       $14,379   $7,186   $  (795)
                                                     ======       =======   ======   =======
Property revenues less property operating
  expenses before interest, depreciation,
  amortization and general and administrative
  expenses.....................................      $1,244       $ 1,778   $5,090   $ 6,377
                                                     ======       =======   ======   =======
</TABLE>
    
 
                                       36
<PAGE>   41
 
   
LIQUIDITY AND CAPITAL RESOURCES
    
 
   
LIQUIDITY
    
 
   
     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. Prior to the IPO, 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. The
Company currently intends to continue to make, but has not contractually bound
itself to make, regular quarterly distributions to holders of Series A Preferred
Shares, Series B Preferred Shares, Common Shares and Units. The Company
established annualized distribution rates as follows: 8.98% per annum ($2.245
per share) for each Series A Preferred Share, 5.25% per annum ($2.625 per share)
for each Series B Preferred Share, and $1.28 per annum per Common Share and
Unit.
    
 
   
     The Company intends to continue to fund recurring capital costs and
non-revenue enhancing tenant improvements from cash from operations and draws
under its Credit Facilities. The Company also expects that its Credit Facilities
will provide for temporary working capital, unanticipated cash needs, and
funding of acquisitions.
    
 
   
     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.
    
 
   
DEBT FINANCING
    
 
   
     The table below summarizes the mortgage debt, unsecured notes and Credit
Facility indebtedness outstanding at March 31, 1998 and December 31, 1997,
including a net premium on mortgage debt and unsecured notes (net of accumulated
amortization of approximately $2.4 million and $2.1 million) of approximately
$5.9 million and $1.2 million, respectively, recorded in connection with the
Company's Consolidation, debt assumed in connection with certain of the
Company's acquisitions, the $1.25 Billion Notes Offering and the $250 million
MOPPRS Offering.
    
 
   
<TABLE>
<CAPTION>
                                                                MARCH 31, 1998    DECEMBER 31, 1997
                                                                --------------    -----------------
                                                                      (DOLLARS IN THOUSANDS)
<S>                                                             <C>               <C>
DEBT SUMMARY:
Balance
  Fixed rate................................................      $3,721,009         $2,219,496
  Variable rate.............................................         266,521          2,064,821
                                                                  ----------         ----------
     Total..................................................      $3,987,530         $4,284,317
                                                                  ==========         ==========
Percent of total debt:
  Fixed rate................................................           93.3%              51.8%
  Variable rate.............................................            6.7%              48.2%
                                                                  ----------         ----------
     Total..................................................          100.0%             100.0%
                                                                  ==========         ==========
Weighted average interest rate at end of period:
  Fixed rate................................................            7.3%               7.5%
  Variable rate.............................................            6.5%               6.9%
                                                                  ----------         ----------
     Weighted average.......................................            7.2%               7.2%
                                                                  ==========         ==========
</TABLE>
    
 
   
     The variable rate debt shown above bore interest at a 30-day LIBOR-based
floating interest rate. The 30-day LIBOR at March 31, 1998 was approximately
5.7%; therefore, the weighted average spread of the Company's interest rate over
LIBOR at March 31, 1998 was approximately 0.8%.
    
 
                                       37
<PAGE>   42
 
   
MORTGAGE FINANCING
    
 
   
     As of March 31, 1998, the Company's total mortgage debt (excluding the
Company's share of unconsolidated debt of approximately $121.9 million)
consisted of approximately $2.0 billion of fixed rate debt with a weighted
average interest rate of approximately 7.5% and $23.5 million of variable rate
debt bearing interest at the 30-day LIBOR plus 1%. The Company's mortgage debt
at March 31, 1998 will mature as follows:
    
 
   
<TABLE>
<CAPTION>
                                                 (DOLLARS IN THOUSANDS)
<S>                                              <C>
1998.........................................          $   80,431
1999.........................................              52,908
2000.........................................             151,236
2001.........................................             432,997
2002.........................................              69,583
Thereafter...................................           1,271,519
                                                       ----------
     Subtotal................................           2,058,674
Net premium (net of accumulated amortization
  of $2.4 million)...........................               1,431
                                                       ----------
     Total...................................          $2,060,105
                                                       ==========
</TABLE>
    
 
   
     The instruments encumbering the Properties (a) restrict transfer of the
properties, (b) prohibit liens on the Properties and (c) require payment of
taxes on the Properties, maintenance of the Properties in good condition,
maintenance of insurance on the Properties and lender consent to leases with
material tenants.
    
 
   
CREDIT FACILITIES
    
 
   
     Lines of Credit. The $600 Million Credit Facility matures on May 29, 2001
and bears interest at LIBOR plus 60 basis points and has a facility fee equal to
 .20% per annum. The spread over LIBOR is subject to change based on the
Company's investment grade rating. In addition, a competitive bid option,
whereby the lenders participating in the facility bid on the interest rate to be
charged, is available for up to $250 million of the facility. During the three
months ended March 31, 1998, the Company repaid at various times in the
aggregate of $648.9 million pursuant to the $600 Million Credit Facility with
available cash and the proceeds of the $1.25 Billion Notes Offering, the $250
Million MOPPRS Offering and the $300 Million Series B Preferred Shares Offering.
As of March 31, 1998 the balance of the $600 Million Credit Facility was
approximately $243.0 million. Subsequent to March 31, 1998, an additional $257.0
million has been drawn on the $600 Million Credit Facility for property
acquisitions.
    
 
   
     Term Loan Facility. The $1.5 Billion Credit Facility is available for the
acquisition of properties and general corporate purposes and carries an interest
rate equal to LIBOR plus 80 basis points. The spread over LIBOR is subject to
change based on the Company's investment grade rating. The $1.5 Billion Credit
Facility matures on July 1, 1998, and may be extended to October 1, 1998. An
unused commitment fee is payable quarterly in arrears based upon the unused
amount of the $1.5 Billion Credit Facility as follows: .15% per annum if the
unused amount is between 0% to 33%; .20% per annum if the unused amount is more
than 33% but less than 66%; .25% per annum if the unused amount is greater than
66%. Under the terms of the $1.5 Billion Credit Facility any amounts repaid
cannot be re-drawn. In February 1998, the entire $1.044 billion outstanding was
repaid with proceeds received from the issuance of the $300 Million Series B
Preferred Shares Offering, $1.25 Billion Notes Offering and $250 Million MOPPRS
Offering. As of March 31, 1998, no amounts were outstanding and the amount
available to draw under the $1.5 Billion Credit Facility was approximately
$305.6 million. Subsequent to March 31, 1998, an additional $57 million was
drawn on the $1.5 Billion Credit Facility.
    
 
   
     Beacon Lines. The Company assumed $533 million in unsecured debt in
connection with the Beacon Merger relating to the outstanding balance of the
Beacon lines of credit at the time of the closing of the Beacon Merger. The
Company repaid $95 million of the Beacon lines prior to December 31, 1997 and
repaid
    
 
                                       38
<PAGE>   43
 
   
the remaining balance of the lines in February 1998 with the proceeds of the
$1.25 Billion Notes Offering, $250 Million MOPPRS Offering and the $300 Million
Series B Preferred Shares Offering. The lines were terminated upon repayment in
February 1998.
    
 
   
UNSECURED NOTES
    
 
   
     $180 Million Notes Offering. In September 1997, the Company completed the
$180 Million Notes Offering. The terms of the $180 Million Notes Offering
consist of four tranches with maturities from seven to ten years.
    
 
   
     $1.25 Billion Notes Offering. In February 1998, the Company completed the
$1.25 Billion Notes Offering. The $1.25 Billion Notes consist of four tranches
with maturities of five to 20 years.
    
 
   
     $250 Million MandatOry Par Put Remarketed Securities Offering. In February
1998, the Company completed the $250 Million MOPPRS Offering. The MOPPRS are
subject to mandatory tender on February 15, 2002.
    
 
   
     The table below summarizes the Company's unsecured notes as of March 31,
1998:
    
 
   
<TABLE>
<CAPTION>
                                                       AMOUNT (IN      STATED    EFFECTIVE
                     TRANCHE                           THOUSANDS)       RATE      RATE(A)
                     -------                           ----------      ------    ---------
<S>                                                  <C>               <C>       <C>
4 Year MOPPRS due 2002...........................      $  250,000       6.38%      6.31%
5 Year Notes due 2003............................         300,000       6.38%      6.75%
7 Year Notes due 2004............................          30,000       7.24%      7.24%
7 Year Notes due 2005............................         400,000       6.63%      7.04%
8 Year Notes due 2005............................          50,000       7.36%      7.67%
9 Year Notes due 2006............................          50,000       7.44%      7.73%
10 Year Notes due 2007...........................          50,000       7.42%      7.69%
10 Year Notes due 2008...........................         300,000       6.75%      7.03%
20 Year Notes due 2018...........................         250,000       7.25%      7.56%
                                                       ----------       ----       ----
     Subtotal....................................       1,680,000       6.74%      7.02%
                                                                        ====       ====
     Net premium (net of accumulated amortization
       of $27)...................................           4,425
                                                       ----------
     Total.......................................      $1,684,425
                                                       ==========
</TABLE>
    
 
- -------------------------
   
(A) Includes the cost of the terminated interest rate protection agreements and
    offering and transaction costs.
    
 
   
     On March 5, 1998, the Company filed a registration statement relating to a
registered offer to exchange the unsecured notes issued in the $180 Million
Notes Offering, the $1.25 Billion Notes Offering and the $250 Million MOPPRS
Offering for registered securities of the Company with terms identical in all
material respects to the terms of the existing notes.
    
 
   
     Interest Rate Protection Agreements. In order to limit the market risk
associated with variable rate debt, the Company entered into several interest
rate protection agreements in 1997 of which approximately $1.0 billion were
outstanding at December 31, 1997. In February 1998, the Company terminated $700
million of interest rate protection agreements at a cost of approximately $31.3
million in connection with the $1.25 Billion Notes Offering and the $250 Million
MOPPRS Offering. The cost of the interest rate protection agreements will be
amortized to interest expense over the respective terms of each tranche. In
addition, the Company terminated the remaining $300 million of interest rate
protection agreements in connection with the Series B Preferred Shares at a cost
of approximately $7.0 million which is reflected as an extraordinary loss in the
statement of operations for the three months ended March 31, 1998.
    
 
   
     Restrictions and Covenants. Agreements or instruments relating to the $600
Million Credit Facility, $180 Million Notes Offering, the $1.5 Billion Credit
Facility, the $1.25 Billion Notes Offering and the $250 Million MOPPRS Offering
contain certain restrictions and requirements regarding total debt to assets
ratios, secured
    
 
                                       39
<PAGE>   44
 
   
debt to total assets ratios, debt service coverage ratios, minimum ratio of
unencumbered assets to unsecured debt and other limitations.
    
 
   
EQUITY SECURITIES
    
 
   
     Below is a summary of the equity securities issued in connection with
various transactions occurring since December 31, 1997:
    
 
   
     - In February 1998, the Company completed the Series B Preferred Shares
       Offering. The Series B Preferred Shares are convertible at any time at
       the option of the holder to Common Shares at a conversion price of $35.70
       per Common Share (equivalent to a conversion ratio of 1.40056 Common
       Shares for each Series B Preferred Share). The Series B Preferred Shares
       are non-callable for five years with a mandatory call in year 2008.
       Proceeds from the Series B Preferred Share Offering were used to pay down
       amounts outstanding under the Credit Facilities.
    
 
   
     - During the three months ended March 31, 1998 there were 262,866 share
       options exercised and 157,576 Units converted to Common Shares.
    
 
   
     - In April 1998, the Company completed a private placement of 1,628,009
       Restricted Common Shares at $28.5625 per share for net proceeds of
       approximately $44.1 million which were used to paydown the Credit
       Facilities.
    
 
   
CASH FLOWS
    
 
   
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO MARCH 31, 1997
    
 
   
     Cash and cash equivalents decreased by approximately $217.2 million, to
approximately $11.7 million at March 31, 1998, compared to $228.9 million at
December 31, 1997. This decrease was the result of approximately $270.9 million
invested in new acquisitions, capital and tenant improvements, and payment of
leasing commissions, increased escrow deposits and restricted cash, offset by
distributions from investments in unconsolidated joint ventures, $57.0 million
used by financing activities, reduced by approximately $110.8 million of cash
generated by operations. Net cash provided by operating activities increased by
approximately $69.7 million to approximately $110.8 million from $41.1 million
primarily due to the additional cash flow generated by the increase in the
number of properties owned. Net cash used for investing activities increased by
approximately $161.4 million from $109.5 million to $270.9 million mainly due to
an increase in the amount of real estate assets purchased during the three
months ended March 31, 1998 compared to the three months ended March 31, 1997
reduced by an increase in distributions received from investments in
unconsolidated subsidiaries. Net cash used for financing activities increased by
approximately $91.1 million from $34.1 million provided by financing activities
in the three months ended March 31, 1997 to $57.0 million used for financing
activities in the three months ended March 31, 1998 due primarily to a net
increase in principal payments on the lines of credit offset by proceeds from
unsecured notes and the Series B Preferred Shares Offering.
    
 
   
YEARS ENDED DECEMBER 31, 1997 AND 1996
    
 
     For discussion purposes, the cash flows for the year ended December 31,
1997 combine the cash flows of Equity Office Predecessors for the period January
1, 1997 to July 10, 1997 and the cash flows of the Company for the period July
11, 1997 to December 31, 1997. The cash flows for the year ended December 31,
1996 represent solely the cash flows of Equity Office Predecessors.
Consequently, the comparison of the periods provides only limited information
regarding the cash flows of the Company.
 
     Cash and cash equivalents decreased by approximately $181.5 million, to
approximately $228.9 million at December 31, 1997, compared to $410.4 million at
December 31, 1996. This decrease was the result of approximately $2.2 billion
invested in new acquisitions, capital and tenant improvements, and payment of
leasing commissions reduced by approximately $286.7 million of cash generated by
operations and $1.9 billion generated from financing activities (including the
$181.1 million contributed by Equity Office Predecessors). Net cash provided by
operating activities increased by approximately $120.7 million to approximately
$286.7
 
                                       40
<PAGE>   45
 
million from $166.0 million primarily due to the additional cash flow generated
by the increase in the number of properties owned. Net cash used for investing
activities increased by approximately $1.3 billion from $0.9 billion to $2.2
billion mainly due to an increase in the amount of real estate assets purchased
during the year ended December 31, 1997 compared to the year ended December 31,
1996. Net cash provided by financing activities increased by approximately $0.8
billion from $1.1 billion to $1.9 billion due to net proceeds from the sale of
common stock, an increase in proceeds from lines of credit and unsecured notes,
partially offset by a decrease in proceeds from mortgage notes and an increase
in principal payments on mortgage notes and lines of credit.
 
YEARS ENDED DECEMBER 31, 1996 AND 1995
 
     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, $1.1 billion 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 operating
activities increased by $72.1 million from $93.9 million to $166.0 million
primarily due to the additional cash flow generated by the increase in the
number of properties owned. Net cash used for investing activities increased by
$543.6 million from $380.6 million to $924.2 million mainly due to an increase
in the amount of real estate assets purchased during 1996 compared to 1995. Net
cash provided by financing activities increased by $781.1 million from $276.5
million to $1.1 billion due to an increase in capital contributions and to an
increase in proceeds received on mortgage notes, and a net decrease in principal
payments on mortgage notes and revolving lines of credit offset in part by
distributions to minority interest partners.
 
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 made during the first
five years after acquisition of these properties are treated separately from
typical recurring capital expenditures, 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 three months ended
March 31, 1998 and the years ended December 31, 1997, 1996 and 1995 were
approximately $10.6 million, $78.0 million, $100.3 million and $48.8 million,
respectively or $.16, $1.19, $3.49 and $2.16 per square foot, respectively.
These amounts include approximately $31.2 million, $47.3 million and $16.8
million for the years ended December 31, 1997, 1996 and 1995, respectively, for
the redevelopment of the 28 State Street Building.
    
 
   
     The Company considers capital expenditures to be recurring expenditures
relating to the ongoing maintenance of the Office Properties. The table below
summarizes capital expenditures for the three months ended March 31, 1998 and
the years ended December 31, 1997, 1996 and 1995. The capital expenditures set
forth below are not necessarily indicative of future capital expenditures.
    
 
   
<TABLE>
<CAPTION>
                                                  MARCH 31,      DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                                     1998            1997            1996            1995
                                                 ------------    ------------    ------------    ------------
<S>                                              <C>             <C>             <C>             <C>
Number of Office Properties..................         260             258              81              71
Rentable Square Feet (in millions)...........        66.6            65.3            28.7            22.6
Capital Expenditures per square foot.........        $.02            $.08            $.16            $.14
</TABLE>
    
 
                                       41
<PAGE>   46
 
TENANT IMPROVEMENTS AND LEASING COMMISSION COSTS
 
   
     The Company distinguishes its tenant improvements and leasing commissions
between those that are revenue enhancing (i.e., required for space which is
vacant at the time of acquisition or that has been vacant for nine months or
more) and non-revenue enhancing (i.e., 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 three months ended March 31, 1998 and the years ended December 31, 1997,
1996 and 1995. The number of Office Properties shown below for all years
presented excludes Barton Oaks Plaza II and 8383 Wilshire which were sold in
January 1997 and May 1997, respectively. 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>
                                             MARCH 31,        DECEMBER 31,      DECEMBER 31,      DECEMBER 31,
                                                1998              1997              1996              1995
                                            ------------      ------------      ------------      ------------
<S>                                         <C>               <C>               <C>               <C>
Number of Office Properties...............       260               258                81                71
Rentable square feet (in millions)........        66.6              65.3              28.7              22.6
Revenue enhancing tenant improvements and
  leasing commissions:
  Amounts (in thousands)..................   $ 5,704           $18,272           $31,534           $20,981
  Per square foot improved................   $    12.59(1)     $    19.74(3)     $    30.26(4)     $    22.89
  Per total square foot...................   $      .34(2)     $      .27(3)     $     1.10(4)     $      .93
Non-revenue enhancing tenant improvements
  and leasing commissions:
Renewal space
  Amounts (in thousands)..................   $ 4,955           $ 8,334           $15,486           $10,008
  Per square foot improved................   $     5.60(1)     $     5.73(3)     $     6.79(4)     $     7.82
  Per total square foot...................   $      .29(2)     $      .12(3)     $      .54(4)     $      .44
Retenanted space
  Amounts (in thousands)..................   $ 5,050           $14,806           $31,987           $ 8,446
  Per square foot improved................   $    16.94(1)     $    15.10(3)     $    20.64(4)     $    19.80
  Per square foot total...................   $      .30(2)     $      .22(3)     $     1.11(4)     $      .37
                                             ----------        ----------        ----------        ----------
Total non-revenue enhancing (in
  thousands)..............................   $10,005           $23,140           $47,473           $18,454
Per square foot improved..................   $     8.45(1)     $     9.50(3)     $    12.39(4)     $    10.81
Per total square foot.....................   $      .59(2)     $      .35(3)     $     1.65(4)     $      .81
</TABLE>
    
 
- ---------------
   
(1) The per square foot calculations as of March 31, 1998 are calculated taking
    the total dollars anticipated to be expended on tenant improvements for
    tenants taking occupancy during the three months ended March 31, 1998,
    divided by the total square footage being improved or total building square
    footage. The actual amounts expended as of March 31, 1998 for revenue
    enhancing, non-revenue enhancing renewal and released space were $7.7
    million, $2.3 million and $8.1 million, respectively.
    
 
   
(2) The amounts shown have been annualized to reflect a full year of comparable
    operation. The actual costs per total square foot as of March 31, 1998 for
    revenue enhancing and non-revenue enhancing renewal and released space were
    $.08, $.07 and $.07, respectively.
    
 
   
(3) The per square foot calculations as of December 31, 1997 are calculated
    taking the total dollars anticipated to be expended on tenant improvements
    for tenants taking occupancy during the year ended December 31, 1997,
    divided by the total square footage being improved or total building square
    footage. The actual amounts expended as of December 31, 1997 for revenue
    enhancing and non-revenue enhancing renewal and released space were $18.4
    million, $12.4 million and $33.5 million, respectively.
    
 
   
(4) 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 at 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 retenanted space were approximately $30.6 million, $14 million and $20.8
    million, respectively.
    
 
                                       42
<PAGE>   47
 
   
DEVELOPMENT
    
 
   
     In connection with the Beacon Merger and other acquisitions, the Company
acquired certain properties that are currently in various stages of development
or pre-development. One of these properties (Crosby Corporate Center II,
consisting of 256,000 square feet) was already in the construction phase at the
time of the Beacon Merger and the Company expects that the development will be
completed in 1998. The Company also announced its intention to develop John
Marshall III into a 180,000 square foot office building which has been 100%
pre-leased to a single tenant. In addition, the Company has taken steps
necessary to continue the development process on the remainder of the
development properties acquired as part of the Beacon Merger, while it evaluates
its alternatives with respect to the ultimate completion of these projects.
    
 
   
     The Company has also entered into a contract to purchase the Rand Tower
Garage in Minneapolis, Minnesota upon completion, which is anticipated to be in
January 1999. The purchase price for this 589 space parking facility will be
approximately $19 million. In addition, the Company has entered into an
agreement to purchase Prominence in Buckhead, an office building under
development in the Buckhead sub-market of Atlanta, Georgia. The property, which
will consist of a 430,000 square foot office building and 1,350 parking spaces,
and will be acquired upon its completion (scheduled for mid-1999). The purchase
will also include an 11.88 acre site that may be used to develop Phase II of
Prominence. There are no immediate plans to develop the 11.88 acre site, which
is zoned for a 420,000 square foot office tower. The purchase price for the
Prominence office building and the development site will be approximately $70.0
million. These transactions are contingent upon certain terms and conditions as
set forth in their respective purchase agreements. There can be no assurance
that these transactions will be consummated as described above.
    
 
   
     In addition to the properties described above, the Company also owns
various land parcels suitable for development. However, no significant
development activity is taking place on these sites at this time.
    
 
YEAR 2000
 
     The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have time-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process transactions, send invoices or
engage in similar normal business activities.
 
     The Company does not believe that the impact of the recognition of the year
2000 by its information and operating technology systems will have a material
adverse effect on the Company's financial condition or results of operations.
The majority of any necessary system changes will be upgraded in the normal
course of business. The Company has initiated formal communications with all of
its significant suppliers to determine the extent to which the Company's
interface systems are vulnerable to those third parties' failure to remediate
their own year 2000 issues. There can be no guarantee that the systems of other
companies on which the Company's systems rely will be timely converted or would
not have an adverse effect on the Company's systems.
 
INFLATION
 
     Substantially all of the office leases require the tenant to pay, as
additional rent, a portion of any increases in real estate taxes (except, in the
case of certain California leases, which limit the ability of the landlord to
pass through to the tenants the effect of increased real estate taxes
attributable to a sale of real property interests) and operating expenses over a
base amount. In addition, many of the office leases provide for fixed increases
in base rent or indexed calculations (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, as defined by
NAREIT, to be an appropriate measure of performance for an equity REIT. While
Funds from Operations is a relevant and widely used measure of operating
performance of equity REITs, it does not represent cash flow from
 
                                       43
<PAGE>   48
 
operations or net income as defined by generally accepted accounting principles
("GAAP"), and it should not be considered as an alternative to these indicators
in evaluating liquidity or operating performance of the Company.
 
   
     The following table reflects the calculation of the Company's and Equity
Office Predecessor's combined Funds from Operations for the three months ended
March 31, 1998 and 1997 and the years ended December 31, 1997, 1996 and 1995 on
an historical basis.
    
 
   
<TABLE>
<CAPTION>
                                                  THREE MONTHS ENDED
                                                      MARCH 31,                  YEARS ENDED DECEMBER 31,
                                                ----------------------    --------------------------------------
                                                  1998         1997          1997           1996         1995
                                                ---------    ---------    -----------    ----------    ---------
                                                                     (DOLLARS IN THOUSANDS)
<S>                                             <C>          <C>          <C>            <C>           <C>
Income before income from investment in
  unconsolidated joint ventures, gain on
  sales of real estate, extraordinary items
  and minority interests....................    $  84,331    $  24,910    $   140,681    $   68,080    $   3,012
Add back (deduct):
  (Income) allocated to minority
    interests...............................         (538)        (529)        (1,701)       (2,086)      (2,129)
  Income from investment in unconsolidated
    joint ventures..........................        3,634          922          5,155         2,093        2,305
  Provision for value impairment............           --           --             --            --       20,248
  Depreciation and amortization (real estate
    related)................................       69,406       27,452        130,465        92,373       72,668
  Net amortization of loan premiums and
    discounts...............................          274           --          2,324            --           --
  Preferred dividends.......................       (6,271)          --           (649)           --           --
                                                ---------    ---------    -----------    ----------    ---------
Funds from Operations before effect of
  adjusting straight-line rental revenue and
  expenses included in Funds from Operations
  to a cash basis(1)........................      150,836       52,755        276,275       160,460       96,104
                                                ---------    ---------    -----------    ----------    ---------
  Deferred rental revenue...................      (17,119)      (3,899)       (27,740)      (18,427)     (12,663)
  Deferred rental expense...................          555          549          2,206           788           --
                                                ---------    ---------    -----------    ----------    ---------
Funds from Operations excluding
  straight-line rental revenue and expense
  adjustments...............................    $ 134,272    $  49,405    $   250,741    $  142,821    $  83,441
                                                =========    =========    ===========    ==========    =========
Cash Flow provided by (used for):
  Operating Activities......................    $ 110,765    $  41,087    $   286,714    $  165,975    $  93,878
  Investing Activities......................    $(270,947)   $(109,506)   $(2,163,340)   $ (924,227)   $(380,615)
  Financing Activities(2)...................    $ (56,990)   $  34,120    $ 1,876,197    $1,057,551    $ 276,513
  Ratio of earnings to combined fixed
    charges and preferred share
    distributions...........................         1.94         1.90           1.81          1.49         1.21
</TABLE>
    
 
- ---------------
(1) The White Paper on Funds from Operations approved by the Board of Governors
    of 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. The Company believes that Funds from Operations is helpful
    to investors as a measure of the performance of an equity REIT because,
    along with cash flow from operating activities, financing activities and
    investing activities, it provides investors with an indication of the
    ability of the Company to incur and service debt, to make capital
    expenditures and to fund other cash needs. 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 the Company. Funds
    from Operations does not represent cash generated from operating activities
    in accordance with GAAP nor does it represent cash available to pay
    distributions and should not be considered as an alternative to net income
    (determined in accordance with GAAP) as an indication of 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.
 
(2) For the year ended December 31, 1997, cash flow provided by financing
    activities includes approximately $181.1 million in cash contributed from
    Equity Office Predecessors in connection with the Consolidation.
 
                                       44
<PAGE>   49
 
                                 THE PROPERTIES
 
GENERAL
 
   
     The Company's portfolio (based on revenue and square footage as of December
31, 1997) is the largest portfolio of office properties of any publicly traded,
full-service office company in the United States. As of March 31, 1998, the
Company owned or had an interest in 260 Office Properties containing
approximately 66.6 million rentable square feet of office space and owned or had
an interest in 17 Parking Facilities containing approximately 16,749 parking
spaces. The Office Properties are located in 78 submarkets in 39 markets in 24
states and the District of Columbia. The Office Properties, by rentable square
feet, are located approximately 51% in CBDs and approximately 49% in suburban
markets. As of March 31, 1998, the Office Properties were, on a weighted average
basis, 94.4% occupied by a total of 5,705 tenants, with no single tenant
accounting for more than 1.5% of annualized rent (except for the U.S. General
Services Administration, which accounted for 3.5% of annualized rent). An
additional 537,900 square feet (approximately 0.8% of the rentable square
footage of the Office Properties) was leased, with occupancy to commence in
whole or in part during 1998.
    
 
     All Property data is as of March 31, 1998.
 
                          OFFICE PROPERTIES BY REGION
   
<TABLE>
<CAPTION>
                                                 PERCENTAGE                                                   ANNUALIZED
                                                  OF TOTAL                                                       NET
                                                   OFFICE                               PERCENTAGE            EFFECTIVE
                                                 PORTFOLIO                                  OF                 RENT PER
                         NUMBER      RENTABLE     RENTABLE                 ANNUALIZED   PORTFOLIO    NUMBER    OCCUPIED
                           OF         SQUARE       SQUARE     PERCENTAGE      RENT      ANNUALIZED     OF       SQUARE
       REGION          PROPERTIES      FEET         FEET       OCCUPIED    ($000S)(1)      RENT      LEASES    FOOT(2)
       ------          ----------    --------    ----------   ----------   ----------   ----------   ------   ----------
<S>                    <C>          <C>          <C>          <C>          <C>          <C>          <C>      <C>
Northeast............      85       18,968,825      28.5%        95.0%     $  473,239      33.8%     1,445      $14.75
Central..............      31       13,339,779      20.0         93.1         287,506      20.6      1,171       11.32
Pacific..............      43        9,697,938      14.6         93.8         212,435      15.2        664       13.57
West.................      32        8,798,482      13.2         95.2         158,251      11.3      1,051       10.85
Southeast............      51        8,685,134      13.0         96.7         157,259      11.2        698       11.10
Southwest............      18        7,120,292      10.7         92.6         109,901       7.9        676        8.79
                          ---       ----------     -----         ----      ----------     -----      -----      ------
  Total/Weighted
    Average..........     260       66,610,450     100.0%        94.4%     $1,398,591     100.0%     5,705       12.26
                          ===       ==========     =====                   ==========     =====      =====
 
<CAPTION>
 
                       ANNUALIZED
                        RENT PER
                        OCCUPIED
                         SQUARE
       REGION           FOOT(1)
       ------          ----------
<S>                    <C>
Northeast............    $26.26
Central..............     23.15
Pacific..............     23.35
West.................     18.90
Southeast............     18.72
Southwest............     16.66
                         ------
  Total/Weighted
    Average..........    $22.23
</TABLE>
    
 
- ---------------
 
(1) Annualized Rent is the monthly contractual rent under existing leases as of
    March 31, 1998 multiplied by 12. This amount reflects total rent before any
    rent abatements and includes expense reimbursements, which may be estimates.
    Total rent abatements for leases in effect as of March 31, 1998 for the 12
    months ending March 31, 1999 are approximately $9.3 million.
 
(2) Annualized Net Effective Rent is calculated for leases in effect as of March
    31, 1998 as follows: Annualized Rent, calculated as described above, was
    reduced by the estimated operating expenses per square foot, based on 1997
    actual operating expense for Properties owned as of January 1, 1997 and
    based on the Company's estimate of annual operating expense for Properties
    acquired subsequent to January 1, 1997.
 
                                       45
<PAGE>   50
 
     The following table sets forth certain information relating to each Office
Property as of March 31, 1998.
   
<TABLE>
<CAPTION>
                                                                            PERCENTAGE
                                                                             OF TOTAL
                                                                              OFFICE                               PERCENTAGE
                                                                            PORTFOLIO                                  OF
                                        NUMBER                  RENTABLE     RENTABLE                 ANNUALIZED   PORTFOLIO
                                          OF       YEAR/BUILT    SQUARE       SQUARE     PERCENTAGE      RENT      ANNUALIZED
              PROPERTY                PROPERTIES   RENOVATED      FEET         FEET       OCCUPIED    ($000S)(1)      RENT
              --------                ----------   ----------   --------    ----------   ----------   ----------   ----------
<S>                                   <C>          <C>         <C>          <C>          <C>          <C>          <C>
NORTHEAST REGION
Stamford, CT
 Shelton
 Shelton Point......................       1        1985/93       159,848       0.2%        96.2%     $    2,307       0.2%
 Stamford
   One Stamford Plaza...............       1        1986/94       212,244       0.3        100.0           5,255       0.4
   Two Stamford Plaza...............       1        1986/94       253,020       0.4         97.4           6,794       0.5
   Three Stamford Plaza.............       1        1980/94       241,575       0.4        100.0           5,592       0.4
   Four Stamford Plaza..............       1        1979/94       260,581       0.4        100.0           5,177       0.4
   177 Broad Street.................       1          1989        187,573       0.3         99.4           4,564       0.3
   300 Atlantic Street..............       1        1987/96       272,458       0.4        100.0           7,332       0.5
   Canterbury Green(3)..............       1          1987        224,405       0.3         98.0           6,796       0.5
                                         ---                   ----------     -----                   ----------     -----
   Stamford Total/Weighted
     Average........................       8                    1,811,704       2.7         99.0          43,817       3.1
Washington, D.C.
 Central Business District
   1111 19th Street.................       1        1979/93       252,014       0.4         97.0           7,154       0.5
   1620 L Street....................       1          1989        156,272       0.2         98.0           4,361       0.3
   One Lafayette Centre.............       1        1980/93       314,634       0.5         99.5           9,814       0.7
 East End
   1333 H Street....................       1          1982        244,585       0.4         90.9           6,289       0.4
 Alexandria/Old Town
   1600 Duke Street.................       1          1985         68,770       0.1        100.0           1,626       0.1
 Crystal City
   Polk and Taylor Buildings(5).....       2          1970        902,371       1.4         99.9          24,519       1.8
 Fairfax Center
   Centerpointe I & II..............       2        1988-90       407,723       0.6         99.8           7,150       0.5
   Fair Oaks Plaza..................       1          1986        177,917       0.3         95.3           2,742       0.2
 Herndon/Dulles
   Northridge I.....................       1          1988        124,319       0.2        100.0           3,312       0.2
 Reston
   Reston Town Center...............       3          1990        726,045       1.1        100.0          20,211       1.4
 Rosslyn/Ballston
   1300 North 17th Street...........       1          1980        380,199       0.6         99.7          10,196       0.7
   1616 N. Fort Myer Drive..........       1          1974        292,826       0.4        100.0           7,296       0.5
 Tyson's Corner
   E. J. Randolph...................       1          1983        164,906       0.2        100.0           3,743       0.3
   John Marshall I..................       1          1981        255,558       0.4        100.0           5,154       0.4
                                         ---                   ----------     -----                   ----------     -----
   Washington D.C. Total/Weighted
     Average........................      18                    4,468,139       6.7         99.0         113,568       8.1
Boston
 Downtown -- Financial District
   100 Summer Street................       1        1974/90     1,037,801       1.6        100.0          31,128       2.2
   150 Federal Street...............       1          1988        529,730       0.8         99.0          18,019       1.3
   175 Federal Street...............       1          1977        207,366       0.3         92.4           4,693       0.3
   2 Oliver Street-147 Milk
     Street.........................       1          1988        270,302       0.4         92.8           4,685       0.3
   225 Franklin Street..............       1        1966/96       916,722       1.4         99.0          34,316       2.5
   28 State Street(6)...............       1        1968/97       570,040       0.9         59.8          11,531       0.8
   75-101 Federal Street(4)(7)......       2          1988        811,054       1.2         93.8          25,922       1.9
   One Post Office Square(4)(8).....       1          1981        765,780       1.1         99.2          22,642       1.6
   Rowes Wharf(4)(8)................       3          1987        344,698       0.5         98.4          12,068       0.9
   Russia Wharf.....................       1        1978-82       312,833       0.5         94.6           4,933       0.4
   South Station(3).................       1          1988        178,959       0.3         99.5           6,319       0.5
 Downtown -- Government Center
   Center Plaza.....................       1          1969        637,069       1.0         94.5          15,536       1.1
 East Cambridge
   One Canal Park...................       1          1987         98,154       0.1         67.9           1,869       0.1
   Riverview I & II.................       2        1985-86       263,892       0.4        100.0           7,257       0.5
   Ten Canal Park...................       1          1987        110,843       0.2        100.0           2,179       0.2
 Northwest
   Crosby Corporate Center..........       6          1996        337,285       0.5         97.8           4,839       0.3
   New England Executive Park.......       9        1970/85       817,008       1.2         89.6          16,467       1.2
   The Tower at New England
     Executive Park(12).............       1        1971/98       195,228       0.3         36.5           1,632       0.1
 South
   Westwood Business Center.........       1          1985        164,985       0.2         90.3           3,014       0.2
 
<CAPTION>
                                               ANNUALIZED
                                                  NET
                                               EFFECTIVE    ANNUALIZED
                                                RENT PER     RENT PER
                                      NUMBER    OCCUPIED     OCCUPIED
                                        OF       SQUARE       SQUARE
              PROPERTY                LEASES    FOOT(2)      FOOT(1)
              --------                ------   ----------   ----------
<S>                                   <C>      <C>          <C>
NORTHEAST REGION
Stamford, CT
 Shelton
 Shelton Point......................     13      $ 8.96       $14.99
 Stamford
   One Stamford Plaza...............     11       14.07        24.76
   Two Stamford Plaza...............     20       16.47        27.56
   Three Stamford Plaza.............     15       13.26        23.15
   Four Stamford Plaza..............      9       10.74        19.87
   177 Broad Street.................     17       14.23        24.47
   300 Atlantic Street..............     26       15.65        26.91
   Canterbury Green(3)..............     18       20.97        30.89
                                      -----
   Stamford Total/Weighted
     Average........................    129       14.33        24.43
Washington, D.C.
 Central Business District
   1111 19th Street.................     28       18.13        29.25
   1620 L Street....................     16       18.27        28.47
   One Lafayette Centre.............     21       19.18        31.36
 East End
   1333 H Street....................     22       16.09        28.30
 Alexandria/Old Town
   1600 Duke Street.................     10       15.25        23.65
 Crystal City
   Polk and Taylor Buildings(5).....      9       19.86        27.21
 Fairfax Center
   Centerpointe I & II..............     17        9.81        17.57
   Fair Oaks Plaza..................     34        9.23        16.17
 Herndon/Dulles
   Northridge I.....................      1       19.94        26.64
 Reston
   Reston Town Center...............     83       18.03        27.84
 Rosslyn/Ballston
   1300 North 17th Street...........     32       18.34        26.89
   1616 N. Fort Myer Drive..........     14       15.54        24.92
 Tyson's Corner
   E. J. Randolph...................     16       14.76        22.70
   John Marshall I..................      2       13.31        20.17
                                      -----
   Washington D.C. Total/Weighted
     Average........................    305       16.61        25.68
Boston
 Downtown -- Financial District
   100 Summer Street................     25       14.44        29.99
   150 Federal Street...............     22       21.57        34.37
   175 Federal Street...............     31       12.92        24.50
   2 Oliver Street-147 Milk
     Street.........................     48       12.13        18.67
   225 Franklin Street..............     20       22.27        37.83
   28 State Street(6)...............     15       23.90        33.82
   75-101 Federal Street(4)(7)......     70       20.19        34.09
   One Post Office Square(4)(8).....     67       17.42        29.81
   Rowes Wharf(4)(8)................     44       16.55        35.59
   Russia Wharf.....................     46        8.23        16.68
   South Station(3).................     29       14.06        35.47
 Downtown -- Government Center
   Center Plaza.....................     83       12.64        25.80
 East Cambridge
   One Canal Park...................      4       15.49        28.03
   Riverview I & II.................      4       15.60        27.50
   Ten Canal Park...................      1       11.13        19.66
 Northwest
   Crosby Corporate Center..........      6       10.86        14.67
   New England Executive Park.......     83       12.17        22.48
   The Tower at New England
     Executive Park(12).............      3       13.29        22.90
 South
   Westwood Business Center.........     17        9.59        20.23
</TABLE>
    
 
                                       46
<PAGE>   51
   
<TABLE>
<CAPTION>
                                                                            PERCENTAGE
                                                                             OF TOTAL
                                                                              OFFICE                               PERCENTAGE
                                                                            PORTFOLIO                                  OF
                                        NUMBER                  RENTABLE     RENTABLE                 ANNUALIZED   PORTFOLIO
                                          OF       YEAR/BUILT    SQUARE       SQUARE     PERCENTAGE      RENT      ANNUALIZED
              PROPERTY                PROPERTIES   RENOVATED      FEET         FEET       OCCUPIED    ($000S)(1)      RENT
              --------                ----------   ----------   --------    ----------   ----------   ----------   ----------
<S>                                   <C>          <C>         <C>          <C>          <C>          <C>          <C>
 West
   Wellesley Office Park............       8        1963-84       641,793       1.0%        99.0%     $   16,299       1.2%
                                         ---                   ----------     -----                   ----------     -----
   Boston Total/Weighted Average....      44                    9,211,542      13.8         92.8         245,348      17.5
New York City
 Third Avenue
   850 Third Avenue.................       1        1960/96       562,567       0.8         99.2          16,804       1.2
Philadelphia
 Conshohocken
   Four Falls Corporate Center(4)...       1          1988        254,355       0.4         99.8           6,239       0.4
 Center City
   1601 Market Street...............       1          1970        681,289       1.0         94.8          13,326       1.0
   1700 Market Street...............       1          1969        825,547       1.2         85.8          14,414       1.0
 King of Prussia/Valley Forge
   Oak Hill Plaza(4)................       1          1982        164,360       0.2        100.0           3,007       0.2
   Walnut Hill Plaza(4).............       1          1985        149,716       0.2         94.7           2,779       0.2
 Main Line
   One Devon Square(4)..............       1          1984         73,267       0.1         64.4             877       0.1
   Two Devon Square(4)..............       1          1985         63,226       0.1          100           1,012       0.1
   Three Devon Square(4)............       1                        6,000       0.0        100.0             218       0.0
 Plymouth Meeting/Blue Bell
   One Valley Square(4).............       1          1982         70,289       0.1        100.0           1,229       0.1
   Two Valley Square(4).............       1          1990         70,622       0.1         92.1           1,246       0.1
   Three Valley Square(4)...........       1          1984         84,605       0.1         97.7           1,579       0.1
   Four and Five Valley Square(4)...       2          1988         68,321       0.1        100.0           1,340       0.1
                                         ---                   ----------     -----                   ----------     -----
   Philadelphia Total/Weighted
     Average........................      13                    2,511,597       3.8         92.3          47,265       3.4
Norfolk
 Norfolk
   Dominion Tower(4)................       1          1987        403,276       0.6         95.7           6,438       0.5
                                         ---                   ----------     -----                   ----------     -----
   NORTHEAST REGION
   TOTAL/WEIGHTED AVERAGE...........      85                   18,968,825      28.5%        95.0%     $  473,239      33.8%
CENTRAL REGION
Chicago
 Downtown-Central Loop
   161 N. Clark.....................       1          1992      1,010,520       1.5%        80.4%     $   19,379       1.4%
   200 West Adams...................       1        1985/96       677,222       1.0         91.2          12,930       0.9
   30 N. LaSalle Street(3)..........       1        1974/90       925,950       1.4         95.1          19,448       1.4
   One North Franklin...............       1          1991        617,592       0.9         99.3          14,109       1.0
 Downtown-West Loop
   10 & 30 S. Wacker................       2        1983-87     2,003,288       3.0         95.7          62,668       4.5
   101 N. Wacker....................       1       1980/1990      575,294       0.9         87.3          11,089       0.8
   Civic Opera House................       1       1929/1996      841,778       1.3         96.7          13,164       0.9
 O'Hare
   Presidents Plaza.................       4        1980-82       815,604       1.2         96.4          16,589       1.2
   1700 Higgins.....................       1          1986        133,876       0.2        100.0           2,491       0.2
 Oak Brook
   AT&T Plaza.......................       1          1984        224,847       0.3         97.9           5,041       0.4
   Oakbrook Terrace Tower...........       1          1988        772,928       1.2         87.9          17,580       1.3
   Westbrook Corporate Center.......       5        1985-96     1,107,372       1.7         92.9          27,553       2.0
 Lake County
   Tri-State International..........       5          1986        546,263       0.8         88.9          10,913       0.8
                                         ---                   ----------     -----                   ----------     -----
   Chicago Total/Weighted Average...      25                   10,252,534      15.4         92.6         232,954      16.7
Indianapolis
 Downtown
   Bank One Center/Tower............       2          1990      1,057,877       1.6         94.0          19,727       1.4
Cleveland
 Downtown
   BP Tower.........................       1          1985      1,242,144       1.9         94.8          18,871       1.3
Columbus
 Downtown
   One Columbus Building............       1          1987        407,472       0.6         92.5           8,933       0.6
 Suburban
   Community Corporate Center.......       1          1987        250,169       0.4        100.0           4,867       0.3
   One Crosswoods Center............       1          1984        129,583       0.2         97.2           2,155       0.2
                                         ---                   ----------     -----                   ----------     -----
   Columbus Total/Weighted
     Average........................       3                      787,224       1.2         95.7          15,955       1.1
   CENTRAL REGION TOTAL/WEIGHTED
     AVERAGE........................      31                   13,339,779      20.0%        93.1%     $  287,506      20.6%
 
<CAPTION>
                                               ANNUALIZED
                                                  NET
                                               EFFECTIVE    ANNUALIZED
                                                RENT PER     RENT PER
                                      NUMBER    OCCUPIED     OCCUPIED
                                        OF       SQUARE       SQUARE
              PROPERTY                LEASES    FOOT(2)      FOOT(1)
              --------                ------   ----------   ----------
<S>                                   <C>      <C>          <C>
 West
   Wellesley Office Park............     89      $16.60       $25.66
                                      -----
   Boston Total/Weighted Average....    707       15.06        28.71
New York City
 Third Avenue
   850 Third Avenue.................     27       16.94        30.10
Philadelphia
 Conshohocken
   Four Falls Corporate Center(4)...     44       16.49        24.59
 Center City
   1601 Market Street...............     69       11.82        20.63
   1700 Market Street...............     47       10.49        20.35
 King of Prussia/Valley Forge
   Oak Hill Plaza(4)................      4       10.81        18.30
   Walnut Hill Plaza(4).............     19       13.12        19.60
 Main Line
   One Devon Square(4)..............      9       13.10        18.57
   Two Devon Square(4)..............      6       10.53        16.00
   Three Devon Square(4)............      1       30.90        36.37
 Plymouth Meeting/Blue Bell
   One Valley Square(4).............      7       11.57        17.49
   Two Valley Square(4).............      6       12.17        19.17
   Three Valley Square(4)...........      6       12.76        19.10
   Four and Five Valley Square(4)...      5       13.07        19.62
                                      -----
   Philadelphia Total/Weighted
     Average........................    223       11.11        20.40
Norfolk
 Norfolk
   Dominion Tower(4)................     54        9.15        16.68
                                      -----
   NORTHEAST REGION
   TOTAL/WEIGHTED AVERAGE...........  1,445      $14.75       $26.26
CENTRAL REGION
Chicago
 Downtown-Central Loop
   161 N. Clark.....................     56      $10.75       $23.85
   200 West Adams...................     61        9.43        20.94
   30 N. LaSalle Street(3)..........    113        8.35        22.09
   One North Franklin...............     55        9.66        23.00
 Downtown-West Loop
   10 & 30 S. Wacker................    124       17.35        32.68
   101 N. Wacker....................     37        9.37        22.07
   Civic Opera House................    206        5.70        16.17
 O'Hare
   Presidents Plaza.................     66        9.05        21.09
   1700 Higgins.....................     16       10.65        18.61
 Oak Brook
   AT&T Plaza.......................     27       15.35        22.90
   Oakbrook Terrace Tower...........     55       17.12        25.87
   Westbrook Corporate Center.......    101       18.28        26.79
 Lake County
   Tri-State International..........     42       14.82        22.47
                                      -----
   Chicago Total/Weighted Average...    959       11.70        24.54
Indianapolis
 Downtown
   Bank One Center/Tower............     80       11.41        19.83
Cleveland
 Downtown
   BP Tower.........................     38        7.74        16.02
Columbus
 Downtown
   One Columbus Building............     30       16.42        23.70
 Suburban
   Community Corporate Center.......     43       12.24        19.46
   One Crosswoods Center............     21       10.22        17.11
                                      -----
   Columbus Total/Weighted
     Average........................     94       13.38        21.19
   CENTRAL REGION TOTAL/WEIGHTED
     AVERAGE........................  1,171      $11.32       $23.15
</TABLE>
    
 
                                       47
<PAGE>   52
<TABLE>
<CAPTION>
                                                                            PERCENTAGE
                                                                             OF TOTAL
                                                                              OFFICE                               PERCENTAGE
                                                                            PORTFOLIO                                  OF
                                        NUMBER                  RENTABLE     RENTABLE                 ANNUALIZED   PORTFOLIO
                                          OF       YEAR/BUILT    SQUARE       SQUARE     PERCENTAGE      RENT      ANNUALIZED
              PROPERTY                PROPERTIES   RENOVATED      FEET         FEET       OCCUPIED    ($000S)(1)      RENT
              --------                ----------   ----------   --------    ----------   ----------   ----------   ----------
<S>                                   <C>          <C>         <C>          <C>          <C>          <C>          <C>
PACIFIC REGION
Los Angeles
 Downtown
   550 S. Hope......................       1          1991        566,434       0.9%        80.7%     $    9,732       0.7%
   Two California Plaza(3)..........       1          1992      1,329,809       2.0         88.2          26,224       1.9
 Pasadena
   Pasadena Towers..................       2        1990-91       439,367       0.7         92.3          10,966       0.8
 Westwood
   10880 Wilshire Boulevard(3)......       1        1970/92       534,047       0.8         90.1          13,547       1.0
   10960 Wilshire Boulevard.........       1        1971/92       543,804       0.8         94.8          15,083       1.1
                                         ---                   ----------     -----                   ----------     -----
   Los Angeles Total/Weighted
     Average........................       6                    3,413,461       5.1         88.8          75,551       5.4
Orange County
 Anaheim Stadium Area
   500 Orange Tower(9)..............       1          1988        290,765       0.4         94.1           5,081       0.4
 Town & Country
   1100 Executive Tower.............       1          1987        366,747       0.6        100.0           6,590       0.5
 Airport Office Area
   1920 Main Plaza..................       1          1988        305,662       0.5         90.3           5,842       0.4
   2010 Main Plaza..................       1          1988        280,882       0.4         89.9           6,111       0.4
                                         ---                   ----------     -----                   ----------     -----
   Orange County Total/Weighted
     Average........................       4                    1,244,056       1.9         94.0          23,624       1.7
San Diego
 University Town Center
   The Plaza at La Jolla
     Village(4).....................       5        1987-90       635,419       1.0        100.0          15,169       1.1
   Smith Barney Tower...............       1          1987        187,999       0.3         85.0           3,528       0.3
                                         ---                   ----------     -----                   ----------     -----
   San Diego Total/Weighted
     Average........................       6                      823,418       1.2         96.6          18,697       1.3
San Francisco
 Downtown -- Financial District
   201 Mission Street...............       1          1981        483,289       0.7         99.6           9,655       0.7
   580 California...................       1          1984        313,012       0.5         99.2           8,219       0.6
   60 Spear Street Building.........       1        1967/87       133,782       0.2        100.0           3,302       0.2
   One Maritime Plaza...............       1        1967/90       523,929       0.8         86.9          13,605       1.0
   One Market.......................       1        1976/95     1,460,081       2.2         97.0          38,695       2.8
                                         ---                   ----------     -----                   ----------     -----
   San Francisco Total/Weighted
     Average........................       5                    2,914,093       4.4         96.0          73,476       5.3
San Jose
 Mountain View
   Shoreline Technology Park........      12        1985-91       726,508       1.1        100.0          13,450       1.0
 Santa Clara
   Lake Marriott Business Park......       7          1981        401,402       0.6        100.0           4,418       0.3
 Sunnyvale
   Sunnyvale Business Center........       3          1990        175,000       0.3        100.0           3,219       0.2
                                         ---                   ----------     -----                   ----------     -----
   San Jose Total/Weighted
     Average........................      22                    1,302,910       2.0        100.0          21,087       1.5
   PACIFIC REGION TOTAL/WEIGHTED
     AVERAGE........................      43                    9,697,938      14.6%        93.8%     $  212,435      15.2%
WEST REGION
Anchorage
 Midtown
   Calais Office Center(3)..........       2          1975        190,599       0.3%        99.8%     $    3,542       0.3%
Phoenix
 Central Corridor
   49 East Thomas Road(10)..........       1        1974/93        18,892       0.0         71.1             114       0.0
   One Phoenix Plaza(11)............       1          1989        586,403       0.9        100.0           7,316       0.5
                                         ---                   ----------     -----                   ----------     -----
   Phoenix Total/Weighted Average...       2                      605,295       0.9         99.1           7,430       0.5
Minneapolis
 Minneapolis -- Central Business
   District LaSalle Plaza...........       1          1991        588,908       0.9         98.1          15,347       1.1
Denver
 Southeast
   Denver Corporate Center II &
     III............................       2       1981/93-97     358,357       0.5        100.0           6,341       0.5
   The Quadrant.....................       1          1985        313,302       0.5         87.1           5,290       0.4
                                         ---                   ----------     -----                   ----------     -----
   Denver Total/Weighted Average....       3                      671,659       1.0         94.0          11,631       0.8
St. Louis
 Mid County
   Interco Corporate Tower..........       1          1986        339,163       0.5        100.0           7,209       0.5
 
<CAPTION>
                                               ANNUALIZED
                                                  NET
                                               EFFECTIVE    ANNUALIZED
                                                RENT PER     RENT PER
                                      NUMBER    OCCUPIED     OCCUPIED
                                        OF       SQUARE       SQUARE
              PROPERTY                LEASES    FOOT(2)      FOOT(1)
              --------                ------   ----------   ----------
<S>                                   <C>      <C>          <C>
PACIFIC REGION
Los Angeles
 Downtown
   550 S. Hope......................     36      $10.72       $21.30
   Two California Plaza(3)..........     31       13.24        22.37
 Pasadena
   Pasadena Towers..................     34       17.40        27.04
 Westwood
   10880 Wilshire Boulevard(3)......     45       16.90        28.16
   10960 Wilshire Boulevard.........     33       17.40        29.27
                                      -----
   Los Angeles Total/Weighted
     Average........................    179       13.06        24.92
Orange County
 Anaheim Stadium Area
   500 Orange Tower(9)..............     49       11.66        18.57
 Town & Country
   1100 Executive Tower.............     25       10.52        17.97
 Airport Office Area
   1920 Main Plaza..................     37       12.25        21.16
   2010 Main Plaza..................     30       15.98        24.19
                                      -----
   Orange County Total/Weighted
     Average........................    141       11.63        20.21
San Diego
 University Town Center
   The Plaza at La Jolla
     Village(4).....................     89       16.46        23.87
   Smith Barney Tower...............     18       13.61        22.09
                                      -----
   San Diego Total/Weighted
     Average........................    107       15.34        23.51
San Francisco
 Downtown -- Financial District
   201 Mission Street...............     18        9.44        20.05
   580 California...................     27       16.16        26.46
   60 Spear Street Building.........      9       13.35        24.69
   One Maritime Plaza...............     38       19.25        29.87
   One Market.......................    114       16.17        27.31
                                      -----
   San Francisco Total/Weighted
     Average........................    206       14.77        26.26
San Jose
 Mountain View
   Shoreline Technology Park........     12       15.44        18.51
 Santa Clara
   Lake Marriott Business Park......     16        7.05        11.01
 Sunnyvale
   Sunnyvale Business Center........      3       16.24        18.40
                                      -----
   San Jose Total/Weighted
     Average........................     31       12.96        16.18
   PACIFIC REGION TOTAL/WEIGHTED
     AVERAGE........................    664      $13.57       $23.35
WEST REGION
Anchorage
 Midtown
   Calais Office Center(3)..........     36      $ 9.96       $18.62
Phoenix
 Central Corridor
   49 East Thomas Road(10)..........     14        1.33         8.50
   One Phoenix Plaza(11)............      1       11.92        12.48
                                      -----
   Phoenix Total/Weighted Average...     15       11.57        12.39
Minneapolis
 Minneapolis -- Central Business
   District LaSalle Plaza...........     30       10.44        26.55
Denver
 Southeast
   Denver Corporate Center II &
     III............................     15       10.14        17.69
   The Quadrant.....................     38       11.14        19.40
                                      -----
   Denver Total/Weighted Average....     53        9.93        18.43
St. Louis
 Mid County
   Interco Corporate Tower..........     33       11.60        21.26
</TABLE>
 
                                       48
<PAGE>   53
<TABLE>
<CAPTION>
                                                                            PERCENTAGE
                                                                             OF TOTAL
                                                                              OFFICE                               PERCENTAGE
                                                                            PORTFOLIO                                  OF
                                        NUMBER                  RENTABLE     RENTABLE                 ANNUALIZED   PORTFOLIO
                                          OF       YEAR/BUILT    SQUARE       SQUARE     PERCENTAGE      RENT      ANNUALIZED
              PROPERTY                PROPERTIES   RENOVATED      FEET         FEET       OCCUPIED    ($000S)(1)      RENT
              --------                ----------   ----------   --------    ----------   ----------   ----------   ----------
<S>                                   <C>          <C>         <C>          <C>          <C>          <C>          <C>
Albuquerque
 Downtown
   500 Marquette Building...........       1          1985        230,022       0.3%        93.6%     $    3,412       0.2%
Oklahoma City
 Northwest
   Atrium Towers....................       2        1980/95       155,865       0.2         88.5           1,228       0.1
   5100 Brookline(4)................       1          1974        105,459       0.2         83.3             842       0.1
                                         ---                   ----------     -----                   ----------     -----
   Oklahoma City Total/Weighted
     Average........................       3                      261,324       0.4         86.4           2,070       0.1
Portland
 Downtown
   1001 Fifth Avenue................       1          1980        368,138       0.6         95.6           6,298       0.5
Dallas
 LBJ/Quorum
   Four Forest(4)...................       1          1985        394,324       0.6         93.4           5,894       0.4
   Lakeside Square..................       1          1987        397,328       0.6         98.3           7,913       0.6
   North Central Plaza Three........       1        1986/94       346,575       0.5         80.4           4,665       0.3
 Central
   8080 NCX.........................       1        1984/95       283,707       0.4         86.7           4,192       0.3
 North Central Expressway
   9400 NCX.........................       1        1981/95       379,556       0.6         89.2           4,811       0.3
 Preston Center
   Preston Commons..................       3          1986        418,604       0.6         90.6           8,460       0.6
   Sterling Plaza...................       1        1984/94       302,747       0.5         88.8           5,122       0.4
                                         ---                   ----------     -----                   ----------     -----
   Dallas Total/Weighted Average....       9                    2,522,841       3.8         90.0          41,058       2.9
Ft. Worth
 W/SW Fort Worth
   Summitt Office Park..............       2        1974/93       239,095       0.4         96.2           2,805       0.2
Seattle
 Bellevue -- Central Business
   District
   One Bellevue Center(3)...........       1          1983        344,715       0.5         98.9           7,146       0.5
   Rainer Plaza(3)..................       1          1986        410,855       0.6         98.3           8,763       0.6
 Seattle -- Central Business
   District
   1111 Third Avenue................       1          1980        528,282       0.8         97.9           9.309       0.7
   First Interstate Center..........       1          1983        915,883       1.4         98.4          19,583       1.4
   Second and Seneca Buildings......       2       1991/1996      480,272       0.7         99.6          10,036       0.7
   Nordstrom Medical Tower..........       1          1986        101,431       0.2         97.8           2,611       0.2
                                         ---                   ----------     -----                   ----------     -----
   Seattle Total/Weighted Average...       7                    2,781,438       4.2         98.5          57,447       4.1
   WEST REGION TOTAL/WEIGHTED
     AVERAGE........................      32                    8,798,482      13.2%        95.2%     $  158,251      11.3%
SOUTHEAST REGION
Ft. Lauderdale
 Downtown
   First Union Center...............       1          1991        225,500       0.3%        99.0%     $    6,129       0.4%
Orlando
 Central Business District
   SunTrust Center..................       1          1988        640,385       1.0         94.5          14,945       1.1
Palm Beach County, FL
 West Palm Beach
   One Clearlake Centre.............       1          1987        215,104       0.3         92.8           3,876       0.3
Sarasota
 Downtown
   Sarasota City Center.............       1          1989        247,891       0.4         88.6           4,135       0.3
Tampa
 Westshore/Airport
   Tampa Commons....................       1          1985        254,808       0.4         99.5           4,824       0.3
   Westshore Center.................       1          1984        215,523       0.3         99.4           3,577       0.3
                                         ---                   ----------     -----                   ----------     -----
   Tampa Total/Weighted Average.....       2                      470,331       0.7         99.5           8,402       0.6
Atlanta
 Central Perimeter
   One Perimeter Center.............       4        1972-86     1,264,027       1.9         94.0          21,910       1.6
   Two Perimeter Center.............      11       1971-1985      980,708       1.5         98.9          15,588       1.1
   Three Perimeter Center...........      14        1970-89       557,435       0.8         98.4          10,119       0.7
   Four Perimeter Center............       3        1978-81       483,796       0.7         99.7           8,883       0.6
   Central Park.....................       2          1986        612,733       0.9         92.4          11,435       0.8
   Lakeside Office Park.............       5        1972-78       390,721       0.6         97.1           6,084       0.4
 Midtown
   Promenade II.....................       1          1990        770,840       1.2         97.1          16,783       1.2
 
<CAPTION>
                                               ANNUALIZED
                                                  NET
                                               EFFECTIVE    ANNUALIZED
                                                RENT PER     RENT PER
                                      NUMBER    OCCUPIED     OCCUPIED
                                        OF       SQUARE       SQUARE
              PROPERTY                LEASES    FOOT(2)      FOOT(1)
              --------                ------   ----------   ----------
<S>                                   <C>      <C>          <C>
Albuquerque
 Downtown
   500 Marquette Building...........     31      $ 8.10       $15.84
Oklahoma City
 Northwest
   Atrium Towers....................     38        4.81         8.90
   5100 Brookline(4)................     61        4.26         9.59
                                      -----
   Oklahoma City Total/Weighted
     Average........................     99        3.97         9.17
Portland
 Downtown
   1001 Fifth Avenue................     53       11.01        17.89
Dallas
 LBJ/Quorum
   Four Forest(4)...................     55        9.09        16.01
   Lakeside Square..................     22       11.67        20.27
   North Central Plaza Three........     36        8.99        16.75
 Central
   8080 NCX.........................     35        9.33        17.03
 North Central Expressway
   9400 NCX.........................     67        6.86        14.21
 Preston Center
   Preston Commons..................     68       16.65        22.32
   Sterling Plaza...................     71       10.69        19.05
                                      -----
   Dallas Total/Weighted Average....    354        9.60        18.09
Ft. Worth
 W/SW Fort Worth
   Summitt Office Park..............     62        6.27        12.20
Seattle
 Bellevue -- Central Business
   District
   One Bellevue Center(3)...........     38       13.30        20.97
   Rainer Plaza(3)..................     59       14.01        21.70
 Seattle -- Central Business
   District
   1111 Third Avenue................     55       11.45        18.00
   First Interstate Center..........     74       14.63        21.73
   Second and Seneca Buildings......     34       13.56        20.97
   Nordstrom Medical Tower..........     25       18.42        26.32
                                      -----
   Seattle Total/Weighted Average...    285       13.52        20.96
   WEST REGION TOTAL/WEIGHTED
     AVERAGE........................  1,051      $10.85       $18.90
SOUTHEAST REGION
Ft. Lauderdale
 Downtown
   First Union Center...............     21      $17.89       $27.44
Orlando
 Central Business District
   SunTrust Center..................     46       14.57        24.68
Palm Beach County, FL
 West Palm Beach
   One Clearlake Centre.............     33       10.14        19.41
Sarasota
 Downtown
   Sarasota City Center.............     32       11.33        18.84
Tampa
 Westshore/Airport
   Tampa Commons....................     22       11.55        19.03
   Westshore Center.................     37        8.90        16.70
                                      -----
   Tampa Total/Weighted Average.....     59       10.28        17.96
Atlanta
 Central Perimeter
   One Perimeter Center.............    127       11.72        18.45
   Two Perimeter Center.............     75        9.34        16.07
   Three Perimeter Center...........     56       11.72        18.45
   Four Perimeter Center............      7       11.68        18.41
   Central Park.....................     69       13.01        20.20
   Lakeside Office Park.............     39        8.42        16.04
 Midtown
   Promenade II.....................     24       15.08        22.43
</TABLE>
 
                                       49
<PAGE>   54
<TABLE>
<CAPTION>
                                                                            PERCENTAGE
                                                                             OF TOTAL
                                                                              OFFICE                               PERCENTAGE
                                                                            PORTFOLIO                                  OF
                                        NUMBER                  RENTABLE     RENTABLE                 ANNUALIZED   PORTFOLIO
                                          OF       YEAR/BUILT    SQUARE       SQUARE     PERCENTAGE      RENT      ANNUALIZED
              PROPERTY                PROPERTIES   RENOVATED      FEET         FEET       OCCUPIED    ($000S)(1)      RENT
              --------                ----------   ----------   --------    ----------   ----------   ----------   ----------
<S>                                   <C>          <C>         <C>          <C>          <C>          <C>          <C>
 Northwest
   Paces West.......................       2          1988        641,263       1.0%        99.3%     $   13,127       0.9%
                                         ---                   ----------     -----                   ----------     -----
   Atlanta Total/Weighted Average...      42                    5,701,523       8.6         96.8         103,930       7.4
Charlotte
 Uptown
   Wachovia Center..................       1        1972/94       581,666       0.9        100.0           6,909       0.5
Raleigh/Durham
 South Durham
   University Tower.................       1        1987/92       181,221       0.3         94.3           3,209       0.2
Nashville
 Downtown
   Nations Bank Plaza...............       1        1977/95       421,513       0.6         97.9           5,723       0.4
                                         ---                   ----------     -----                   ----------     -----
   SOUTHEAST REGION TOTAL/WEIGHTED
     AVERAGE........................      51                    8,685,134      13.0%        96.7%     $  157,259      11.2%
SOUTHWEST REGION
New Orleans
 Central Business District
   LL&E Tower.......................       1          1987        545,157       0.8%        84.4%     $    7,255       0.5%
   Texaco Center....................       1          1984        619,714       0.9         89.7           9,161       0.7
 Metairie/E. Jefferson
   One Lakeway Center...............       1        1981/96       289,112       0.4         94.7           4,095       0.3
   Two Lakeway Center...............       1        1984/96       440,826       0.7         95.8           6,549       0.5
   Three Lakeway Center.............       1        1987/96       462,890       0.7         95.0           7,027       0.5
                                         ---                   ----------     -----                   ----------     -----
   New Orleans Total/Weighted
     Average........................       5                    2,357,699       3.5         91.3          34,087       2.4
Austin
 Central Business District
   Franklin Plaza...................       1          1987        517,849       0.8         88.3           9,367       0.7
   One American Center(3)...........       1          1984        505,770       0.8         93.1           9,228       0.7
   San Jacinto Center...............       1          1987        400,329       0.6         96.2           7,304       0.5
                                         ---                   ----------     -----                   ----------     -----
   Austin Total/Weighted Average....       3                    1,423,948       2.1                       25,900       1.9
Houston
 Galleria/West Loop
   San Felipe Plaza(4)..............       1          1984        959,466       1.4         92.4          14,849       1.1
 North/North Belt
   Intercontinental Center..........       1        1983/91       194,801       0.3         99.4           2,715       0.2
   Northborough Tower(4)............       1        1983/90       207,908       0.3         95.4           2,744       0.2
 North Loop/Northwest
   Brookhollow Central..............       3       1972-1981      797,971       1.2         88.7          10,719       0.8
 West
   Destec Tower.....................       1          1982        574,216       0.9         98.7          10,644       0.8
                                         ---                   ----------     -----                   ----------     -----
   Houston Total/Weighted Average...       7                    2,734,362       4.1         93.4          41,672       3.0
San Antonio
 Northwest
   Union Square.....................       1          1986        194,398       0.3         97.6           2,690       0.2
   Colonade I.......................       1          1983        168,637       0.3         93.6           2,399       0.2
   Northwest Center.................       1        1984/94       241,248       0.4         94.7           3,153       0.2
                                         ---                   ----------     -----                   ----------     -----
   San Antonio Total/Weighted
     Average........................       3                      604,283       0.9         95.3           8,242       0.6
                                         ---                   ----------     -----                   ----------     -----
   SOUTHWEST REGION TOTAL/WEIGHTED
     AVERAGE........................      18                    7,120,292      10.7%        92.6%     $  109,901       7.9%
                                         ---                   ----------     -----                   ----------     -----
PORTFOLIO TOTAL/WEIGHTED AVERAGE....     260                   66,610,450     100.0%        94.4%     $1,398,591     100.0%
                                         ===                   ==========     =====                   ==========     =====
 
<CAPTION>
                                               ANNUALIZED
                                                  NET
                                               EFFECTIVE    ANNUALIZED
                                                RENT PER     RENT PER
                                      NUMBER    OCCUPIED     OCCUPIED
                                        OF       SQUARE       SQUARE
              PROPERTY                LEASES    FOOT(2)      FOOT(1)
              --------                ------   ----------   ----------
<S>                                   <C>      <C>          <C>
 Northwest
   Paces West.......................     44      $13.84       $20.62
                                      -----
   Atlanta Total/Weighted Average...    441       11.52        18.83
Charlotte
 Uptown
   Wachovia Center..................      9        6.52        11.88
Raleigh/Durham
 South Durham
   University Tower.................     36       11.63        18.78
Nashville
 Downtown
   Nations Bank Plaza...............     21        6.78        13.87
                                      -----
   SOUTHEAST REGION TOTAL/WEIGHTED
     AVERAGE........................    698      $11.10       $18.72
SOUTHWEST REGION
New Orleans
 Central Business District
   LL&E Tower.......................     33      $ 9.26       $15.76
   Texaco Center....................     28       10.32        16.48
 Metairie/E. Jefferson
   One Lakeway Center...............     52        8.57        14.95
   Two Lakeway Center...............     84       10.01        15.50
   Three Lakeway Center.............     52       10.26        15.98
                                      -----
   New Orleans Total/Weighted
     Average........................    249        8.95        15.84
Austin
 Central Business District
   Franklin Plaza...................     37       11.48        20.50
   One American Center(3)...........     34        9.99        19.59
   San Jacinto Center...............     43        9.00        18.96
                                      -----
   Austin Total/Weighted Average....    114        9.42        19.72
Houston
 Galleria/West Loop
   San Felipe Plaza(4)..............    125        9.47        16.74
 North/North Belt
   Intercontinental Center..........     12        6.84        14.02
   Northborough Tower(4)............     15        7.28        13.83
 North Loop/Northwest
   Brookhollow Central..............     53        8.38        15.14
 West
   Destec Tower.....................     24       11.83        18.78
                                      -----
   Houston Total/Weighted Average...    229        8.71        16.32
San Antonio
 Northwest
   Union Square.....................     22        7.05        14.18
   Colonade I.......................     27        7.85        15.20
   Northwest Center.................     35        7.37        13.79
                                      -----
   San Antonio Total/Weighted
     Average........................     84        7.05        14.31
                                      -----
   SOUTHWEST REGION TOTAL/WEIGHTED
     AVERAGE........................    676      $ 8.79       $16.66
                                      -----
PORTFOLIO TOTAL/WEIGHTED AVERAGE....  5,705      $12.26       $22.23
                                      =====
</TABLE>
 
- -------------------------
 (1) Annualized Rent is the monthly contractual rent under existing leases as of
     March 31, 1998, multiplied by 12. This amount reflects total base rent
     before any rent abatements, but includes expense reimbursements, which may
     be estimates. Total rent abatements for leases in effect as of March 31,
     1998, for the 12 months ending March 31, 1999, are approximately $9.3
     million.
 
 (2) Annualized Net Effective Rent is calculated for leases in effect as of
     March 31, 1998, as follows: Annualized Rent, calculated as described above,
     was reduced by the estimated operating expenses per square foot, based on
     1997 actual operating expenses for Properties owned as of January 1, 1997,
     and based on the Company's estimate of annual operating expenses for
     Properties acquired subsequent to January 1, 1997.
 
                                       50
<PAGE>   55
 
 (3) This Office Property is held subject to a ground lease.
 
   
 (4) This Office Property is held in a partnership with one unaffiliated third
     party and one affiliated party.
    
 
   
 (5) As of March 31, 1998, the Company owned a 10% interest in this Office
     Property. The Company's joint venture partner exercised its buy-sell right
     under the joint venture documents and, in response, the Company acquired
     the joint venture partner's 90% interest in this Office Property for
     consideration of approximately $158 million.
    
 
 (6) This Office Property recently underwent major redevelopment and tenants
     commenced occupancy in May 1997.
 
 (7) This Office Property is held in a private real estate investment trust in
     which the Company and the Trust own 51.6% of the outstanding shares.
 
 (8) As of the date hereof, the Company is involved in continuing discussions
     with its joint venture partner in One Post Office Square and Rowes Wharf
     with respect to the Company's control over property management of such
     Properties. Such joint venture partner did not consent to the transfer to
     the Company of Beacon's joint venture interest in these Properties which
     occurred as a result of the Beacon Merger. Although the Company believes
     that such consent was not required, unless the Company is able to reach an
     agreement with respect to day-to-day management of such Properties, it is
     possible that the joint venture partner could challenge the transfer of
     such Properties in the Beacon Merger, or seek to trigger the buy-sell
     remedy contained in the joint venture documents.
 
 (9) 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.
 
(10) This Office Property was purchased in conjunction with the purchase of One
     Phoenix Plaza for the sole purpose of providing additional parking for the
     tenants of One Phoenix Plaza.
 
(11) 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.
 
(12) This Office Property is currently undergoing a major renovation which is
     scheduled to be completed by the end of 1998.
 
                                       51
<PAGE>   56
 
PARKING FACILITIES
 
     Information concerning the Parking Facilities as of March 31, 1998 is set
forth below.
 
<TABLE>
<CAPTION>
                                          APPROXIMATE                        MANAGEMENT       NUMBER OF
                                           NUMBER OF                          COMPANY          PARKING
             PROPERTY NAME                  SPACES          CITY            OR LESSEE(1)      FACILITIES
             -------------                -----------       ----            ------------      ----------
<S>                                       <C>            <C>              <C>                 <C>
Boston Harbor Garage....................     1,380       Boston           Standard Parking         1
1602-34 Chancellor Garage...............       416       Philadelphia     Central Parking          1
15th & Sansom St. Garage................       313       Philadelphia     Central Parking          1
Juniper/Locust St. Garage...............       541       Philadelphia     Central Parking          1
1111 Sansom St. Garage..................       250       Philadelphia     Central Parking          1
1616 Sansom St. Garage..................       240       Philadelphia     Central Parking          1
Adams Wabash Garage.....................       670       Chicago          Standard Parking         1
Stanwix Parking Garage..................       712       Pittsburgh       Standard Parking         1
Milwaukee Center(2).....................       876       Milwaukee        Standard Parking         1
Capitol Commons Garage(2)(3)............       950       Indianapolis     Central Parking          1
601 Tchoupitoulas Garage................       759       New Orleans      Central Parking          1
North Loop Transportation Center(3).....     1,172       Chicago          Standard Parking         1
Theater District Garage(3)..............     1,006       Chicago          Standard Parking         1
Civic Parking(4)........................     7,464       St. Louis        Central Parking          4
                                            ------                                                --
  Total.................................    16,749                                                17
                                            ======                                                ==
</TABLE>
 
- -------------------------
(1) With the exception of Capitol Commons Garage, all of the named 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 Capitol 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
    nonqualifying gross income for REIT qualification purposes relative to the
    total gross income of the Company.
 
(2) This Parking Facility is held subject to a ground lease.
 
(3) Each of these Parking Facilities is held in a partnership with an
    unaffiliated third party. The Company or a Subsidiary is the managing
    general partner of each such partnership.
 
(4) The Company has a 50% membership interest in a portfolio of four Parking
    Facilities serving the St. Louis, Missouri area.
 
TENANTS
 
     As of March 31, 1998, the Office Properties were leased to 5,705 tenants;
no single tenant accounted for more than 1.5% of the Company's aggregate
annualized rent or 1.2% of aggregate occupied square feet (except for the U.S.
General Services Administration, acting on behalf of various agencies or
departments of the U.S. government, which accounted for 3.5% of annualized rent
and 3.1% of occupied square feet).
 
                                       52
<PAGE>   57
 
                LEASE EXPIRATION BY REGION AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
 
                                                     1998           1999           2000           2001           2002
                                                 ------------   ------------   ------------   ------------   ------------
<S>                    <C>                       <C>            <C>            <C>            <C>            <C>
CENTRAL                Square Feet(1)..........       831,839        976,069      1,386,731        903,221      1,129,223
REGION                 % Square Feet(2)........           6.2%           7.3%          10.4%           6.8%           8.5%
TOTALS                 Annualized Rent(3)......    19,662,316     25,720,926     35,382,249     20,010,855     27,275,611
                       Number of Leases........           167            179            176            159            149
                       Rent Per Square Foot....  $      23.64   $      26.35   $      25.51   $      22.15   $      24.15
NORTHEAST              Square Feet(1)..........     1,071,304      1,405,471      1,805,589      3,062,085      3,093,647
REGION                 % Square Feet(2)........           5.6%           7.4%           9.5%          16.1%          16.3%
TOTALS                 Annualized Rent(3)......    26,863,536     36,237,880     46,758,958     85,479,255     82,281,601
                       Number of Leases........           212            199            237            219            220
                       Rent Per Square Foot....  $      25.08   $      25.78   $      25.90   $      27.92   $      26.60
SOUTHEAST              Square Feet(1)..........       603,026      1,360,034      1,249,925      1,458,653        883,608
REGION                 % Square Feet(2)........           6.9%          15.7%          14.4%          16.8%          10.2%
TOTALS                 Annualized Rent(3)......    10,940,629     22,439,810     25,271,118     27,194,739     17,128,932
                       Number of Leases........           115            147            137            117            111
                       Rent Per Square Foot....  $      18.14   $      16.50   $      20.22   $      18.64   $      19.39
SOUTHWEST              Square Feet(1)..........       614,321        609,935      1,385,634        996,849        930,791
REGION                 % Square Feet(2)........           8.6%           8.6%          19.5%          14.0%          13.1%
TOTALS                 Annualized Rent(3)......     9,299,326      9,575,435     24,520,688     17,002,173     16,421,391
                       Number of Leases........           158            114            130             95             97
                       Rent Per Square Foot....  $      15.14   $      15.70   $      17.70   $      17.06   $      17.64
WEST                   Square Feet(1)..........       755,284        917,926      1,223,990      1,295,815      1,028,883
REGION                 % Square Feet(2)........           8.6%          10.4%          13.9%          14.7%          11.7%
TOTALS                 Annualized Rent(3)......    13,773,994     16,511,547     22,394,176     25,626,770     19,980,697
                       Number of Leases........           264            196            192            159            111
                       Rent Per Square Foot....  $      18.24   $      17.99   $      18.30   $      19.78   $      19.42
PACIFIC                Square Feet(1)..........       340,157      1,131,697      1,329,824      1,712,605        770,985
REGION                 % Square Feet(2)........           3.5%          11.7%          13.7%          17.7%           7.9%
TOTALS                 Annualized Rent(3)......     8,464,674     26,062,219     28,619,822     36,730,190     20,696,178
                       Number of Leases........            90            115            112            115             74
                       Rent Per Square Foot....  $      24.88   $      23.03   $      21.52   $      21.45   $      26.84
PORTFOLIO              Square Feet(1)..........     4,215,931      6,401,132      8,381,693      9,429,228      7,837,137
TOTALS                 % Square Feet(2)........           6.3%           9.6%          12.6%          14.2%          11.8%
                       Annualized Rent(3)......    89,004,474    136,547,816    182,947,012    212,043,981    183,784,411
                       Number of Leases........         1,006            950            984            864            762
                       Rent Per Square Foot....  $      21.11   $      21.33   $      21.83   $      22.49   $      23.45
 
<CAPTION>
                                                                                                2008 AND
                           2003          2004          2005          2006          2007          BEYOND          TOTALS
                       ------------   -----------   -----------   -----------   -----------   ------------   --------------
<S>                    <C>            <C>           <C>           <C>           <C>           <C>            <C>
CENTRAL                   1,285,439       950,883     1,091,564       677,528       490,779      2,695,479       12,418,755
REGION                          9.6%          7.1%          8.2%          5.1%          3.7%          20.2%            93.1%
TOTALS                   37,223,556    23,437,564    22,324,091    14,397,329     9,860,531     52,211,156      287,506,184
                                 81            83            52            45            34             46            1,171
                       $      28.96   $     24.65   $     20.45   $     21.25   $     20.09   $      19.37   $        23.15
NORTHEAST                 1,415,681     1,181,330     1,031,602     1,060,091       944,046      1,953,642       18,024,488
REGION                          7.5%          6.2%          5.4%          5.6%          5.0%          10.3%            95.0%
TOTALS                   36,139,150    29,180,471    27,066,306    23,081,229    22,942,420     57,208,736      473,239,542
                                116            66            52            48            32             44            1,445
                       $      25.53   $     24.70   $     26.24   $     21.77   $     24.30   $      29.28   $        26.26
SOUTHEAST                   330,276       354,743       440,007       594,621        33,750      1,091,326        8,399,969
REGION                          3.8%          4.1%          5.1%          6.8%          0.4%          12.6%            96.7%
TOTALS                    7,352,130     5,389,996     6,368,597    13,663,341       545,976     20,963,612      157,258,880
                                 21            18             9             8             5             10              698
                       $      22.26   $     15.19   $     14.47   $     22.98   $     16.18   $      19.21   $        18.72
SOUTHWEST                   565,885       539,351        74,924       522,951       171,843        183,159        6,595,643
REGION                          7.9%          7.6%          1.1%          7.3%          2.4%           2.6%            92.6%
TOTALS                    9,713,299     9,497,736     1,367,499     8,598,631     3,017,761        887,062      109,901,001
                                 44            19             5             9             2              3              676
                       $      17.16   $     17.61   $     18.25   $     16.44   $     17.56   $       4.84   $        16.66
WEST                      1,095,685     1,007,586       282,593       352,302       216,330        195,508        8,371,902
REGION                         12.5%         11.5%          3.2%          4.0%          2.5%           2.2%            95.2%
TOTALS                   23,268,345    14,899,123     5,669,678     7,464,701     6,193,196      2,468,508      158,250,735
                                 72            24            12            10             7              4            1,051
                       $      21.24   $     14.79   $     20.06   $     21.19   $     28.63   $      12.63   $        18.90
PACIFIC                     538,589       376,523       814,607       513,045       794,965        773,305        9,096,302
REGION                          5.6%          3.9%          8.4%          5.3%          8.2%           8.0%            93.8%
TOTALS                   13,762,478     9,581,781    17,094,691    14,236,129    24,405,886     12,780,746      212,434,793
                                 49            23            29            20            16             21              664
                       $      25.55   $     25.45   $     20.99   $     27.75   $     30.70   $      16.53   $        23.35
PORTFOLIO                 5,231,555     4,410,416     3,735,297     3,720,538     2,651,713      6,892,419       62,907,059
TOTALS                          7.9%          6.6%          5.6%          5.6%          4.0%          10.3%            94.4%
                        127,458,959    91,986,671    79,890,861    81,441,360    66,965,770    146,519,819    1,398,591,135
                                383           233           159           140            96            128            5,705
                       $      24.36   $     20.86   $     21.39   $     21.89   $     25.25   $      21.26   $        22.23
</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
    March 31, 1998 multiplied by 12. This amount reflects total base rent before
    any rent abatements, but includes expense reimbursements. Total rent
    abatements for leases in effect as of March 31, 1998 for the 12 months
    ending March 31, 1998 are approximately $9.3 million.
 
                                       53
<PAGE>   58
 
LEASE EXPIRATIONS -- TOTAL PORTFOLIO
 
     The following table sets forth a summary schedule of the lease expirations
for the Office Properties for leases in place as of March 31, 1998, assuming
that none of the tenants exercise renewal options or termination rights, if any,
at or prior to the scheduled expirations:
 
<TABLE>
<CAPTION>
                                                                                      ANNUALIZED    PERCENTAGE OF
                                        SQUARE     PERCENTAGE                           RENT OF      ANNUALIZED
                          NUMBER OF   FOOTAGE OF    OF TOTAL        ANNUALIZED RENT    EXPIRING        RENT OF
     YEAR OF LEASE         LEASES      EXPIRING     OCCUPIED          OF EXPIRING     LEASES PER      EXPIRING
       EXPIRATION         EXPIRING      LEASES     SQUARE FEET          LEASES        SQUARE FOOT     LEASES(1)
     -------------        ---------   ----------   -----------      ---------------   -----------   -------------
<S>                       <C>         <C>          <C>              <C>               <C>           <C>
1998(2).................    1,006      4,215,931        6.8%        $   89,004,475      $21.11            6.4%
1999....................      950      6,401,132       10.3            136,547,816       21.33            9.8
2000....................      984      8,381,693       13.5            182,947,012       21.83           13.1
2001....................      864      9,429,228       15.1            212,043,981       22.49           15.1
2002....................      762      7,837,137       12.6            183,784,411       23.45           13.1
2003....................      383      5,231,555        8.4            127,458,959       24.36            9.1
2004....................      233      4,410,416        7.1             91,986,671       20.86            6.6
2005....................      159      3,735,297        6.0             79,890,861       21.39            5.7
2006....................      140      3,720,538        6.0             81,441,360       21.89            5.8
2007....................       96      2,651,713        4.3             66,965,770       25.25            4.8
2008....................       58      2,252,516        3.6             55,453,467       24.62            4.0
2009....................       24        790,533        1.3             19,744,576       24.98            1.4
2010 and beyond.........       46      3,131,059        5.0             71,321,776       22.78            5.1
                            -----     ----------      -----         --------------                      -----
Total/Weighted
  Average...............    5,705     62,188,748      100.0%(3)     $1,398,591,135      $22.23          100.0%
                            =====     ==========      =====         ==============                      =====
</TABLE>
 
- ---------------
 
(1) Based on currently payable rent.
 
(2) Represents lease expirations from April 1, 1998 to December 31, 1998 and
    month-to-month leases.
 
(3) Reconciliation of total net rentable square footage is as follows:
 
<TABLE>
<CAPTION>
                                                              SQUARE      PERCENTAGE
                                                             FOOTAGE       OF TOTAL
                                                             -------      ----------
<S>                                                         <C>           <C>
Square footage occupied by tenants......................    62,188,748      93.36%
Square footage used for management offices and building
  use, and remeasurement adjustments....................       718,311       1.08%
                                                            ----------      -----
Total occupied square footage...........................    62,907,059      94.44%
Square footage vacant...................................     3,703,391       5.56%
                                                            ----------      -----
Total net rentable square footage.......................    66,610,450      100.0%
                                                            ==========      =====
</TABLE>
 
                                       54
<PAGE>   59
 
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
March 31, 1998:
 
<TABLE>
<CAPTION>
                                                              PERCENTAGE                                   PERCENTAGE
                                                             OF AGGREGATE                    ANNUALIZED   OF AGGREGATE
                           NUMBER   PERCENT       TOTAL       PORTFOLIO                       RENT PER     PORTFOLIO
       SQUARE FEET           OF     OF ALL      OCCUPIED       OCCUPIED       ANNUALIZED       SQUARE      ANNUALIZED
       UNDER LEASE         LEASES   LEASES     SQUARE FEET   SQUARE FEET         RENT           FOOT          RENT
       -----------         ------   -------    -----------   ------------     ----------     ----------   ------------
<S>                        <C>      <C>        <C>           <C>            <C>              <C>          <C>
2,500 or Less............  2,101      36.8%     2,608,527         4.2%      $   53,033,799     $20.33          3.8%
2,501-5,000..............  1,231      21.6      4,408,417         7.1           93,233,621      21.15          6.7
5,001-7,500..............    662      11.6      4,051,615         6.5           85,902,110      21.20          6.1
7,501-10,000.............    341       6.0      2,949,556         4.8           63,822,566      21.64          4.6
10,001-20,000............    693      12.1      9,756,440        15.7          211,689,949      21.70         15.1
20,001-40,000............    374       6.6     10,217,776        16.4          232,610,246      22.77         16.6
40,001-60,000............    132       2.3      6,411,864        10.3          144,903,115      22.60         10.4
60,001-100,000...........     94       1.6      7,039,652        11.3          174,382,138      24.77         12.5
100,001 or Greater.......     77       1.4     14,744,901        23.7          339,013,591      22.99         24.2
                           -----     -----     ----------       -----       --------------                   -----
Total/Weighted Average...  5,705     100.0%    62,188,748       100.0%      $1,398,591,135     $22.23        100.0%
                           =====     =====     ==========       =====       ==============                   =====
</TABLE>
 
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>
                                                                         PERCENTAGE OF
                                                           AGGREGATE       RENTABLE
                                                           RENTABLE       SQUARE FEET
                         DATE                             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
December 31, 1997.....................................    65,291,790          94
March 31, 1998........................................    66,610,450          94
</TABLE>
 
LEGAL PROCEEDINGS
 
     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 actions
which the Company does not believe to be material or 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, business, results of operations or
financial condition of the Company.
 
                                       55
<PAGE>   60
 
                                   MANAGEMENT
 
TRUSTEES AND EXECUTIVE AND SENIOR OFFICERS
 
   
     The Board of Trustees of the Company currently consists of twelve trustees,
nine of whom are not employees or affiliates of the Company, the Operating
Partnership or the Equity Group. The Board of Trustees is divided into three
classes of trustees. 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.
    
 
     Information concerning the trustees and executive and senior officers of
the Company is set forth below.
 
   
<TABLE>
<CAPTION>
NAME                             AGE                           OFFICES HELD
- ----                             ---                           ------------
<S>                              <C>   <C>
Samuel Zell....................  56    Chairman of the Board, Trustee (term expires in 2001)
Timothy H. Callahan............  47    President, Chief Executive Officer, Trustee (term expires in
                                       1999)
Michael A. Steele..............  51    Chief Operating Officer and Executive Vice President -- Real
                                       Estate Operations
Richard D. Kincaid.............  36    Executive Vice President, Chief Financial Officer
Stanley M. Stevens.............  49    Executive Vice President, Chief Legal Counsel and Secretary
Gary A. Beller.................  51    Executive Vice President -- Parking Facilities
Jeffrey L. Johnson.............  38    Chief Investment Officer and Senior Vice President --
                                       Investments
David H. Crawford..............  41    Senior Vice President -- Administration and General Counsel
                                       for Property Operations
Sybil J. Ellis.................  44    Senior Vice President -- Acquisitions
Frank Frankini.................  43    Senior Vice President -- Design & Construction
Frances P. Lewis...............  44    Senior Vice President -- Corporate Communications
Diane M. Morefield.............  39    Senior Vice President -- Finance/Capital Markets
David H. Naus..................  43    Senior Vice President -- Acquisitions
Michael E. Sheinkop............  35    Senior Vice President -- Portfolio Management
Peter D. Johnson...............  40    Senior Vice President -- Southwest Region
Peter H. Adams.................  51    Senior Vice President -- Pacific Region
Kim J. Koehn...................  42    Senior Vice President -- West Region
Christopher P. Mundy...........  36    Senior Vice President -- Northwest Region
Arvid J. Povilaitis............  38    Senior Vice President -- Central Region
Mark E. Scully.................  40    Senior Vice President -- Southeast Region
Sheli Z. Rosenberg.............  56    Trustee (term expires in 2000)
Thomas E. Dobrowski............  54    Trustee (term expires in 2001)
James D. Harper, Jr. ..........  64    Trustee (term expires in 1999)
Peter Linneman.................  47    Trustee (term expires in 2000)
Jerry M. Reinsdorf.............  62    Trustee (term expires in 2001)
William M. Goodyear............  50    Trustee (term expires in 1999)
David K. McKown................  60    Trustee (term expires in 2000)
H. Jon Runstad.................  56    Trustee (term expires in 2001)
Edwin N. Sidman................  55    Trustee (term expires in 2001)
D. J. A. de Bock...............  59    Trustee (term expires in 1999)
</TABLE>
    
 
     Samuel Zell has been a trustee and Chairman of the Board of the Company
since October 1996. For more than five years, Mr. Zell has served as Chairman of
the Board of Directors of Equity Group Investments, L.L.C. an owner, manager and
financier of real estate and corporations ("EGI"). For more than five years, Mr.
Zell has served as Chairman of the Boards 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"), and
Manufactured Home Communities, Inc., a real estate investment trust specializing
in the ownership and management of manufactured home communities ("MHC"). Since
March 1993, Mr. Zell has served as Chairman of the Board of Equity Residential
Properties Trust, an owner and operator of multifamily residential properties
("EQR"). Since January 1995, Mr. Zell has served as a
 
                                       56
<PAGE>   61
 
director of TeleTech Holdings, Inc., a provider of telephone and computer based
customer care solutions. Since April 1996, Mr. Zell has served as a director of
Ramco Energy plc, an independent oil company based in the United Kingdom. Since
March 1997, Mr. Zell has served as a director of Chart House Enterprises, Inc.,
an owner and operator of restaurants. Since April 1997, Mr. Zell has served as
the Chairman of the Board of Directors of Jacor Communications, Inc., an owner
of radio stations ("Jacor"). Since March 1998, Mr. Zell has served as a director
of Fred Meyer, Inc., a large domestic food retailer and operator of
multi-department stores.
 
     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 EOH and Equity
Office Properties, L.L.C., a property manager of office buildings ("EOP LLC"),
from August 1996 until October 1997. 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
was a Director of MHC from May 1996 until October 1997. Mr. Callahan was Vice
President -- Finance of the Edward J. DeBartolo Corporation, a developer, owner
and operator of shopping centers, in Youngstown, Ohio, from July 1988 until July
1992. Mr. Callahan was employed by Chemical Bank, a commercial bank located in
New York, New York, from July 1973 until March 1987.
 
     Michael A. Steele has been Chief Operating Officer and Executive Vice
President -- Real Estate Operations for the Company since February 1998 and was
Executive Vice President -- Real Estate Operations for the Company from October
1996 until February 1998. Mr. Steele was President and Chief Operating Officer
of EOP LLC from July 1995 until October 1997. Mr. Steele was Executive Vice
President of EOH from July 1995 until October 1997. Mr. Steele was President and
Chief Operating Officer of Equity Office Properties, Inc., a subsidiary of EGI
which provided real estate property management services ("EOP, Inc."), from
November 1993 through October 1995. Mr. Steele was President and Chief Executive
Officer of First Office Management, a former division of Equity Property
Management, Inc., that provided real estate property management services
("FOM"), from June 1992 until October 1993. Mr. Steele was Senior Vice President
and regional director for Rubloff, Inc., a full service real estate company in
Chicago, Illinois, from April 1987 until June 1992.
 
     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
was Senior Vice President and Chief Financial Officer of EOH from July 1995
until October 1997. Mr. Kincaid was Senior Vice President of EGI from February
1995 until July 1995. Mr. Kincaid was Senior Vice President of the Yarmouth
Group, a real estate investment company 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, a commercial bank located in Chicago, Illinois, from August
1987 until August 1990.
 
     Stanley M. Stevens has been Executive Vice President, Chief Legal Counsel
and Secretary of the Company since October 1996. Mr. Stevens was Executive Vice
President and General Counsel of EOH from September 1996 until October 1997. 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.
 
     Gary A. Beller has been Executive Vice President of the Company since March
1997. Mr. Beller has been President of Equity Capital Holdings L.L.C., the
general partner of Equity Capital Holdings, L.P., an asset manager of parking
facilities, since August 1997. Mr. Beller was Senior Vice President --
Redevelopment of Equity Assets Management, Inc., a former subsidiary of EGI
which provided real estate asset management services ("EAM") from October 1987
until March 1997.
 
     Jeffrey L. Johnson has been Chief Investment Officer and Senior Vice
President -- Investments for the Company since February 1998 and was Senior Vice
President -- Investments for the Company from October 1996 until February 1998.
Mr. Johnson was Senior Vice President -- Asset Management for EOH from
 
                                       57
<PAGE>   62
 
July 1996 until October 1997. 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., a real estate advisor 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., a
commercial bank in Winston-Salem, North Carolina, from July 1983 until August
1987.
 
     David H. Crawford has been Senior Vice President -- Administration and
General Counsel for Property Operations of the Company since March 1997. Mr.
Crawford was Senior Vice President and Associate General Counsel of EOH from
September 1996 until October 1997. Mr. Crawford was Senior Vice President and
General Counsel of EOH from July 1995 until September 1996 and of EOP LLC from
September 1996 until July 1997. 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 was Senior Vice President -- Acquisitions of
EOH from July 1995 until October 1997. 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 until October
1993.
 
     Frank Frankini has been Senior Vice President -- Design and Construction of
the Company since March 1997. Mr. Frankini was Senior Vice President -- Design
and Construction of EOP LLC from July 1995 until October 1997. 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., a full
service real estate company in Chicago, Illinois, from October 1984 until
October 1990.
 
     Frances P. Lewis has been Senior Vice President -- Corporate Communications
for the Company since April 1997. Ms. Lewis was Vice President -- Corporate
Communications of EGI from November 1994 until April 1997. Ms. Lewis was Vice
President -- Publications of EGI from September 1988 until October 1994.
 
     Diane M. Morefield has been Senior Vice President -- Finance/Capital
Markets of the Company since July 1997. Ms. Morefield was Senior Manager in the
Corporate Finance practice of Deloitte & Touche, a public accounting and
consulting firm, from November 1994 until July 1997. Ms. Morefield was Executive
Vice President of the Fordham Company, a real estate development company located
in Chicago, Illinois, from November 1993 until November 1994. Ms. Morefield was
Team Leader for the Real Estate Group division, in the Midwest, of Barclays
Bank, a commercial bank located in Chicago, Illinois, from 1982 until November
1993.
 
     David H. Naus has been Senior Vice President -- Acquisitions of the Company
since March 1997. Mr. Naus was Senior Vice President -- Acquisitions for EOH
from December 1995 until October 1997. 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 -- Portfolio Management
for the Company since November 1997. Mr. Sheinkop was Senior Vice President --
Divisional Manager of EOH from March 1997 until October 1997 and for the Company
from March 1997 through December 1997. Mr. Sheinkop was Senior Vice President --
Asset Management of EOH from December 1995 until February 1997. Mr. Sheinkop was
 
                                       58
<PAGE>   63
 
Vice President -- Asset Management of EOH from July 1995 until December 1995.
Mr. Sheinkop was 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.
 
     Peter H. Adams has been Senior Vice President -- Pacific Region of the
Company since March 1998 and was Regional Vice President -- Pacific Region of
the Company from March 1997 until February 1998. Mr. Adams was Vice President --
Group Manager of EOH from July 1994 until March 1997. Mr. Adams was President of
Adams Equities, a private real estate consulting firm, from 1990 to 1994.
 
     Peter D. Johnson has been Senior Vice President -- Southwest Region of the
Company since March 1998 and was Regional Vice President -- Southwest Region
from January 1998 until February 1998. Mr. Johnson was Senior Vice President --
National Accounts from April 1993 until February 1998.
 
     Kim J. Koehn has been Senior Vice President -- West Region of the Company
since March 1998 and was Regional Vice President -- West Region from March 1997
until February 1998 and was also Regional Vice President -- Southwest Region
from March 1997 until December 1997. Mr. Koehn was Senior Vice President --
Asset Management of EOH from December 1995 to February 1997. Mr. Koehn was a
Vice President of EOH from June 1993 until December 1995.
 
     Christopher P. Mundy has been Senior Vice President -- Northeast Region of
the Company since March 1998, and was Regional Vice President -- Northeast
Region from July 1997 until February 1998. Mr. Mundy was Regional Director --
Leasing of EOH from November 1991 until July 1997.
 
     Arvid A. Povilaitis has been Senior Vice President -- Central Region of the
Company since March 1998 and was Regional Vice President -- Central Region from
March 1997 until February 1998. Mr. Povilaitis was Vice President -- Asset
Management of EOH from August 1994 until February 1997. Mr. Povilaitis was Vice
President -- Investment Properties of Strategic Realty Advisors, Inc., a real
estate and advisory company, from January 1994 until August 1994. Mr. Povilaitis
was employed at VMS Realty Partners, a sponsor of public and private real estate
limited partnerships, from January 1983 until January 1994, most recently
serving as Second Vice President.
 
     Mark E. Scully has been Senior Vice President -- Southeast Region of the
Company since March 1998 and was Regional Vice President for the Southeast
Region from March 1997 until February 1998. Mr. Scully was Vice President --
Regional Leasing Director of EOH from January 1995 until February 1997. Mr.
Scully was Regional Leasing Director of EOH from September 1991 until December
1994.
 
     Sheli Z. Rosenberg has been a trustee of the Company since March 1997.
Since November 1994, Ms. Rosenberg has been Chief Executive Officer and
President of EGI. From 1980 until 1997, Ms. Rosenberg was a principal of the law
firm of Rosenberg & Liebentritt, P.C. and is now of counsel to the firm. For
more than five years, Ms. Rosenberg has served on the Board of Directors of each
of the following companies: EGI, AVC, and Anixter. Since March 1993, Ms.
Rosenberg has been a trustee of EQR. Since 1994, Ms. Rosenberg has been a
director of Jacor and since April 1997, has served as the Vice Chairman of the
Board of Directors of Jacor. Ms. Rosenberg was a vice president of First Capital
Benefit Administrators, Inc., a wholly owned indirect subsidiary of Great
American Management and Investment, Inc., ("FCBA") 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. Since August 1986, Ms.
Rosenberg has been a director of MHC. 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. Since May 1997, Ms. Rosenberg has been a director of CVS
Corporation, a drugstore chain.
 
     Thomas E. Dobrowski has been a trustee of the Company since July 1997.
Since December 1994, Mr. Dobrowski has been the managing director of real estate
and alternative investments of General Motors Investment Management Corporation
("GMIMCO"), an investment advisor to several pension funds of General Motors
Corporation ("GM") and its subsidiaries and to several other clients also
controlled by GM. Since March 1993, Mr. Dobrowski has been a director of MHC.
Since April 1994, Mr. Dobrowski has been a
 
                                       59
<PAGE>   64
 
director of Red Roof Inns, Inc., an owner and operator of hotels. Since May
1997, Mr. Dobrowski has been a director of Taubman Centers Inc., an equity REIT
focused on regional shopping centers.
 
     James D. Harper, Jr. has been a trustee of the Company since July 1997.
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. Since May
1993, Mr. Harper has been a trustee of EQR. Since 1993, Mr. Harper has been a
trustee of Urban Land Institute. Since 1997, Mr. Harper has been a director of
Burnham Pacific Properties Inc., a REIT that owns, develops and manages
commercial real estate properties in California. Since June 1997, Mr. Harper has
been a director of American Health Properties, Inc., a REIT specializing in
health care facilities.
 
     Peter Linneman has been a trustee of the Company since July 1997. 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. Since 1986, Dr. Linneman has been a trustee of Universal Health Realty
Trust, a REIT that invests in health care and human service related facilities.
Since 1992, Dr. Linneman has been a trustee of Kranzco Realty Trust, a REIT that
owns, develops, operates, leases, manages, and invests in neighborhood and
community shopping centers and free-standing properties. Since 1993, Dr.
Linneman has been a trustee of Gables Residential Properties Trust, a
self-administered, self-managed residential property REIT. Since 1996, Dr.
Linneman has served as a director of Nevada Investment Holdings, a full service
real estate company which focuses on community shopping centers. From 1993 until
1996, Dr. Linneman was Chairman of the Board of Directors of Rockefeller Center
Properties, Inc., a REIT which previously held the first mortgage loan relating
to Rockefeller Center in New York City.
 
     Jerry M. Reinsdorf has been a trustee of the Company since July 1997. For
more than five years, Mr. Reinsdorf has been the Chairman of the Chicago White
Sox baseball team, the Chairman of the Chicago Bulls basketball team, and a
partner of Bojer Financial Ltd., a real estate investment company located in
Northbrook, Illinois. Since 1996, Mr. Reinsdorf has served as a director of
LaSalle National Bank, N.A., a commercial bank in Chicago, Illinois, the holding
company of which is LaSalle National Corporation, of which Mr. Reinsdorf is also
a director. Since 1993, Mr. Reinsdorf has been a trustee of Northwestern
University in Evanston, Illinois. Mr. Reinsdorf is a stockholder, officer and
director of Jerbo Holdings I, Inc. ("Jerbo") which is the corporate general
partner of a limited partnership which is the general partner of Bojer Realty
Limited Partnership-I ("Bojer Realty"). Bojer Realty was a limited partner of
Smith Dairy Partnership, Ltd. ("Smith Dairy") and a stockholder of the corporate
general partner of Smith Dairy which filed a voluntary petition for relief under
Chapter 11 Bankruptcy on January 24, 1994. On February 14, 1995, an order
dismissing the Smith Dairy bankruptcy case was entered by the Bankruptcy Court
for the Southern District of Florida.
 
     William M. Goodyear has been a trustee of the Company since July 1997.
Since July 1997, Mr. Goodyear has been Chairman of Bank of America, Illinois,
the Midwest business development unit of BankAmerica Corporation, a commercial
bank. Mr. Goodyear was Chairman and Chief Executive Officer of Bank of America
Illinois, a subsidiary of BankAmerica Corporation, from September 1994 until
June 1997, at which time it merged with Bank of America NT & SA, a subsidiary of
BankAmerica Corporation. For more than two years prior to September 1994, Mr.
Goodyear was a Vice Chairman and a member of the Board of Directors of
Continental Bank Corporation, the parent company of Continental Bank, N.A., a
commercial bank which merged into Bank of America Illinois in September 1994.
Since June 1992, Mr. Goodyear has been a member of the Board of Trustees of the
Museum of Science and Industry in Chicago, Illinois. Mr. Goodyear has been a
member of the Board of Trustees of the University of Notre Dame since May 1996
and of Rush-Presbyterian St. Lukes Medical Center in Chicago, Illinois, since
June 1996. Mr. Goodyear has been a member of the Advisory Council for the
University of Chicago Graduate School of Business since September 1995.
 
     David K. McKown has been a trustee of the Company since July 1997. Since
1993, Mr. McKown has been Group Executive of the Diversified Finance and Real
Estate Operating Partnership Unit of BankBoston,
 
                                       60
<PAGE>   65
 
N.A., a commercial bank. Mr. McKown was director of Loan Review for BankBoston,
N.A. from 1990 until 1993. Mr. McKown serves as a Director of Electrolux
Corporation.
 
     H. Jon Runstad was appointed a trustee of the Company effective January 1,
1998, pursuant to a Right to Purchase Agreement dated as of December 16, 1997,
executed in connection with the Wright Runstad Acquisition. Since 1971, Mr.
Runstad has been President and Chief Executive Officer of Wright Runstad &
Company, a Seattle, Washington based owner, manager and developer of office
buildings in the western United States, primarily in the Pacific Northwest.
Since 1987, Mr. Runstad has served as a member of the Board of Regents for the
University of Washington. Since July 1975, Mr. Runstad has served as a trustee
for the Downtown Seattle Association.
 
     Edwin N. Sidman was appointed a trustee of the Company effective March 1,
1998, pursuant to the Merger Agreement. Mr. Sidman served as Chairman of the
Board and a director of Beacon from 1994 until the consummation of the Beacon
Merger in December 1997. He is currently the managing partner of The Beacon
Companies, a private company involved in real estate investment, development and
management. Prior to joining Beacon in 1971, Mr. Sidman practiced law with the
predecessor to the firm of Rubin and Rudman in Boston. Mr. Sidman's professional
affiliations include service as Senior Vice Chairman of the National Realty
Committee. Mr. Sidman is a member of the Board of Trustees of Duke University
and a member of the Board of Directors and Executive Committee for the United
Way of Massachusetts Bay.
 
   
     D. J. A. de Bock was appointed a trustee of the Company effective May 15,
1998. He currently is a member of the Board of Directors of OTIS B.V., Orange
Global Property Fund, and Stichting ROZ Index, a Dutch property index and serves
as an advisor to Jones Lang Wootton Nederland. Prior to his retirement, Mr. de
Bock was Chairman and Chief Executive Officer of ING Real Estate, the real
estate development and investment arm of ING Group from 1995 through 1996. From
1991 until 1994, Mr. de Bock was Managing Director of Innovest Management, an
Amsterdam listed REIT under Dutch law.
    
 
COMPENSATION OF THE BOARD OF TRUSTEES; PAYMENT IN COMMON SHARES
 
     The Company paid each of its non-employee trustees a pro rated fee in 1997
of $20,000. For the full year of 1998, the Company expects to pay each of its
non-employee trustees an annual fee of $40,000. In addition, non-employee
trustees who serve on the Executive Committee, Compensation Committee or Audit
Committee receive an additional $1,000 per annum for each committee on which
they serve. Committee chairs receive an additional $500 per annum. These fees
have been and generally are expected to be paid in Common Shares. Trustees who
are employees of the Company are not paid any trustees' or committee fees. The
Company reimburses its trustees for travel expenses incurred in connection with
their activities on behalf of the Company.
 
     Upon the effective date of the IPO, Mr. Zell and Ms. Rosenberg received
grants of options to purchase 200,000 and 50,000 Common Shares, respectively, at
$21.00 per share, which options will vest in three equal annual installments
(rounded to the nearest whole Common Share) over three years. After the IPO,
each trustee (other than Messrs. Zell and Callahan and Ms. Rosenberg) received a
grant of options to purchase 10,000 Common Shares at the IPO price. In addition,
upon joining the Board of Trustees Mr. Runstad received options to purchase
3,700 Common Shares at a price of $31.50 per share and Mr. Sidman received
options to purchase 2,100 Common Shares at a price of $29.50 per share, each
representing a pro rated portion of the options granted to the Trustees after
the IPO. Under the Company's 1997 Amended and Restated Employee Share Option and
Share Award Plan (the "Employee Plan"), each trustee then in office (including
Messrs. Zell and Callahan and Ms. Rosenberg for the years after 1997) 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 Common Shares will vest as follows: options for
3,333 Common Shares will vest six months after the grant date, options for an
additional 3,333 Common Shares will vest on the first anniversary of the grant
date, and options for the remaining 3,334 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 Employee Plan.
 
                                       61
<PAGE>   66
 
     On February 17, 1998, the Compensation Committee granted fully vested
options to purchase 500,000 Common Shares to Mr. Zell, 94,500 Common Shares to
each of Ms. Rosenberg and Mr. Harper and 47,250 Common Shares to each of Messrs.
Dobrowski, Linneman, Reinsdorf, Goodyear and McKown, at an exercise price of
$29.50 per share.
 
EXECUTIVE COMPENSATION
 
     The following tables show information with respect to the annual
compensation (including option grants) for services rendered to the Company for
the fiscal year ended December 31, 1997, by the chief executive officer and
those persons who were, at December 31, 1997, the other four most highly
compensated executive officers of the Company.
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                       ANNUAL COMPENSATION          LONG-TERM COMPENSATION
                                      ---------------------   -----------------------------------
                                                                      AWARDS             PAYOUTS
                                                              -----------------------   ---------
                                                                           SECURITIES
                                                              RESTRICTED   UNDERLYING   LONG-TERM
                                                                SHARE       OPTIONS     INCENTIVE    ALL OTHER
                                       SALARY      BONUS       AWARD(S)     GRANTED      PAYOUTS    COMPENSATION
 NAME AND PRINCIPAL POSITION   YEAR    ($)(1)      ($)(2)       ($)(3)       (#)(4)        ($)         ($)(5)
 ---------------------------   ----   --------   ----------   ----------   ----------   ---------   ------------
<S>                            <C>    <C>        <C>          <C>          <C>          <C>         <C>
Timothy H. Callahan,.........  1997   $600,000   $1,050,000   $4,976,875    450,000         0          $9,600
President and Chief Executive
Officer
Michael A. Steele,...........  1997    265,000      525,000    1,523,375    250,000         0           9,600
Chief Operating Officer and
Executive Vice President --
Real Estate Operations
Richard D. Kincaid,..........  1997    235,000      465,000    1,523,375    250,000         0           9,600
Executive Vice President and
Chief Financial Officer
Stanley M. Stevens,..........  1997    325,000      375,000      627,000    225,000         0           9,600
Executive Vice President and
Chief Legal Counsel
Jeffrey L. Johnson,..........  1997    225,000      275,000      330,000    183,500         0           9,600
Senior Vice President and
Chief Investment Officer
</TABLE>
 
- ---------------
(1) Amounts shown include cash compensation earned and received by executive
    officers as well as amounts earned but deferred at the election of these
    officers.
 
(2) Cash bonuses are reported in the year earned, even if paid in a subsequent
    year.
 
(3) On September 22, 1997 and December 16, 1997, the Compensation Committee of
    the Board of Trustees granted restricted shares to certain of the Company's
    executive officers pursuant to the Employee Plan. Mr. Callahan was granted
    awards of 85,000 and 70,000 Common Shares, respectively, and Mr. Steele and
    Mr. Kincaid were each granted awards of 17,000 and 30,000 Common Shares,
    respectively. In addition, on December 16, 1997, the Compensation Committee
    of the Board of Trustees granted Mr. Stevens an award of 19,000 Common
    Shares and Mr. Johnson an award of 10,000 Common Shares. These awards will
    vest over a five-year period after being granted (50% after year three, 25%
    after year four, and 25% after year five). The dollar value shown in the
    table for the restricted Common Shares is based on the closing prices of the
    Common Shares on September 22, 1997 and December 16, 1997, the dates of
    grant. This valuation does not take into account the diminution in value
    attributable to the restrictions applicable to the Common Shares. The total
    number of restricted Common Shares held by
 
                                       62
<PAGE>   67
 
    each named executive officer and the value of such restricted shares at
    December 31, 1997, the last trading day of the year, was as follows:
 
<TABLE>
<CAPTION>
                                                                      NUMBER OF        VALUE AT
                                                                     RESTRICTED      DECEMBER 31,
                                NAME                                COMMON SHARES      1997 ($)
                                ----                                -------------    ------------
    <S>                                                             <C>              <C>
    Timothy H. Callahan.........................................       155,000        $4,892,188
    Michael A. Steele...........................................        47,000         1,483,438
    Richard D. Kincaid..........................................        47,000         1,483,438
    Stanley M. Stevens..........................................        19,000           599,688
    Jeffrey L. Johnson..........................................        10,000           315,625
</TABLE>
 
     Distributions are paid on all restricted Common Shares at the same rate as
     on unrestricted Common Shares.
 
(4) Securities underlying options are reported in the year granted.
 
(5) Includes employer matching and profit-sharing contributions to the Company's
    401(k) Retirement Savings Plan.
 
                       OPTION GRANTS IN FISCAL YEAR 1997
 
<TABLE>
<CAPTION>
                                                                                                    POTENTIAL REALIZABLE
                                                                                                      VALUE AT ASSUMED
                                         PERCENT OF TOTAL                                              ANNUAL RATES OF
                            NUMBER OF        OPTIONS                                                 COMMON SHARE PRICE
                            SECURITIES      GRANTED TO                                                APPRECIATION FOR
                            UNDERLYING    EMPLOYEES AND     EXERCISE PRICE                             OPTION TERM(1)
                             OPTIONS       TRUSTEES 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           9.6%             $21.00            July 7, 2007    $2,642,000    $ 6,694,000
                             250,000                             33.00       December 16, 2007     5,187,500     13,147,500
Michael A. Steele.........   150,000           5.3               21.00            July 7, 2007     1,981,500      5,020,500
                             100,000                             33.00       December 16, 2007     2,075,000      5,259,000
Richard D. Kincaid........   150,000           5.3               21.00            July 7, 2007     1,981,500      5,020,500
                             100,000                             33.00       December 16, 2007     2,075,000      5,259,000
Stanley M. Stevens........   150,000           4.8               21.00            July 7, 2007     1,981,500      5,020,500
                              75,000                             33.00       December 16, 2007     1,556,250      3,944,250
Jeffrey L. Johnson........   125,000           3.9               21.00            July 7, 2007     1,651,250      4,183,750
                              58,500                             33.00       December 16, 2007     1,213,875      3,076,515
</TABLE>
 
- ---------------
(1) In accordance with the rules of the 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 annual installments (rounded
    to the nearest whole Common Share) over three years.
 
(3) The exercise price for the initial grant of options on July 7, 1997 was
    based on the IPO price. The exercise price for the grant of options on
    December 16, 1997 was the closing price of the Common Shares on the date of
    grant.
 
(4) An annual compound share price appreciation of 5% from the IPO price of
    $21.00 and the December 16, 1997 closing price of $33.00 per Common Share
    yields a price of $34.21 and $53.75 per Common Share, respectively.
 
(5) An annual compound share price appreciation of 10% from the IPO price of
    $21.00 and the December 16, 1997 closing price of $33.00 per Common Share
    yields a price of $54.47 and $85.59 per Common Share, respectively.
 
                                       63
<PAGE>   68
 
                AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1997
                       AND FISCAL YEAR-END OPTION VALUES
 
<TABLE>
<CAPTION>
                                                    NUMBER OF SECURITIES             VALUE OF UNEXERCISED
                                                   UNDERLYING UNEXERCISED          IN-THE-MONEY OPTIONS AT
                                                OPTIONS AT FISCAL YEAR-END(#)         FISCAL YEAR-END($)
                     NAME                         EXERCISABLE/UNEXERCISABLE      EXERCISABLE/UNEXERCISABLE(1)
                     ----                       -----------------------------    ----------------------------
<S>                                             <C>                              <C>
Timothy H. Callahan...........................            0/450,000                      0/2,112,500
Michael A. Steele.............................            0/250,000                      0/1,584,375
Richard D. Kincaid............................            0/250,000                      0/1,584,375
Stanley M. Stevens............................            0/225,000                      0/1,584,375
Jeffrey L. Johnson............................            0/183,500                      0/1,320,313
</TABLE>
 
- ---------------
(1) Represents the market value of a Common Share at December 31, 1997
    ($31.5625) less the exercise price of in-the-money options.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     The Compensation Committee members are Messrs. Harper and McKown and Ms.
Rosenberg.
 
     Mr. Zell and Ms. Rosenberg serve as members of the board of directors of
EGI, as well as numerous other non-public companies owned in whole or in part by
Mr. Zell or his affiliates (the "Equity Group Companies"), which companies do
not have compensation committees. Ms. Rosenberg is the President and Chief
Executive Officer of EGI and, with respect to the Equity Group Companies, the
directors and executive officers of those companies include Mr. Zell and Ms.
Rosenberg.
 
     For a description of certain transactions with members of the Board of
Trustees or their affiliates, see "Certain Relationships and Related
Transactions."
 
LIMITATION OF LIABILITY AND INDEMNIFICATION
 
     Title 8 of the Corporations and Associations Article of the Annotated Code
of Maryland, as amended from time to time (the "Maryland REIT Law"), permits a
Maryland REIT 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 Company's declaration of trust, as amended from time to
time, and as filed with the State Department of Assessments and Taxation of
Maryland (the "Declaration of Trust"), contains such a provision which
eliminates such liability to the maximum extent permitted by the Maryland REIT
Law.
 
     The Declaration of Trust authorizes the Company, to the maximum extent
permitted by Maryland law, to obligate itself to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any present or former 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 obligate
the Company, to the maximum extent permitted by Maryland law, to indemnify and
to pay or reimburse reasonable expenses in advance of final disposition of a
proceeding to (a) any present or former 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 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 a predecessor
 
                                       64
<PAGE>   69
 
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
against reasonable expenses incurred in connection with the proceeding.
 
     The Maryland REIT Law permits a Maryland REIT to indemnify and advance
expenses to its trustees, officers, employees and agents to the same extent as
permitted by the Maryland General Corporation Law, as amended from time to time
(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. The foregoing limitations on indemnification are
expressly set forth in the Bylaws. 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 or for a judgment of liability on the basis that a
personal benefit was improperly received, unless, in either case, a court orders
indemnification and then only for expenses. Under the MGCL, as a condition to
advancing expenses, as required by the Bylaws, the Company must first receive
(a) a written affirmation by the trustee or officer of his good faith belief
that he has met the standard of conduct necessary for indemnification by the
Company and (b) a written undertaking 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. In addition, Mr. Dobrowski will be indemnified
by GMIMCO and will be covered by an insurance policy maintained by GM, of which
GMIMCO is a subsidiary, in connection with serving on the Board.
 
     The limited partnership agreement of the Operating Partnership (the
"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 Declaration
of Trust limits the liability of the officers and trustees of the Company to the
Company and its shareholders.
 
     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to trustees, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Act and is therefore unenforceable.
 
                                       65
<PAGE>   70
 
                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
FORMATION TRANSACTIONS
 
     BACKGROUND.  The Company was formed pursuant to the consolidation (the
"Consolidation") in July 1997 of the ownership of the Properties owned by the
four Zell/Merrill Lynch institutional real estate investment funds (each a "ZML
Fund" and collectively, the "ZML Funds") and the office property management
business of EOH and the office property asset management business and the
parking asset management business of EGI and EOH relating to the Properties that
were contributed to the Company in the Consolidation (the "Management Business")
owned by the Equity Group. The ZML Funds were formed during the period from 1988
to 1996 to acquire, improve, own, manage, operate and dispose of primarily
office properties.
 
     Each ZML Fund consisted 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
was controlled by Mr. Zell and in which Merrill Lynch & Co. ("Merrill Lynch")
was a limited partner and (iii) a Delaware corporation or Maryland real estate
investment trust (each a "ZML REIT"), as the case may be, that served 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 were 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 (which interests were subsequently converted into Common Shares as
described below), and all but one Investor Limited Partner (in ZML Opportunity
Partnership II) elected to do so.
 
     CONSOLIDATION.  In advance of or simultaneous with the IPO, the Company
engaged in the transactions described below, which were designed to consolidate
the ownership of the Office Properties, the Parking Facilities and the
Management Business, to facilitate the IPO and to 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 that comprised the Company's initial
       portfolio, contributed to the Operating Partnership all of their
       interests in such Office Properties and Parking Facilities.
 
     - The ZML REITs (each a majority or sole limited partner of a ZML
       Opportunity Partnership) merged into the Company, with the Company
       succeeding to their interest in, and also becoming the managing general
       partner of, the ZML Opportunity Partnerships.
 
     - Certain entities (collectively, the "Equity Group") owned directly or
       indirectly by certain trusts (together with certain partnerships
       comprised of such trusts, the "Equity Group Owners") established for the
       benefit of the families of Mr. Zell and of Mr. Robert Lurie, the deceased
       former partner of Mr. Zell, contributed to the Operating Partnership
       substantially all of the interests in the Management Business.
 
     - Shareholders in the ZML REITs received Common Shares 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) received Units (to be distributed over
       the two-year period ending July 11, 1999). Such Units are intended to
       correspond in value to, and be exchangeable commencing two years
       following the closing of the IPO for, Common Shares or, at the Company's
       option, cash equal to the fair market value of such Common Shares.
 
     - Units in the Operating Partnership were 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 of the IPO.
 
                                       66
<PAGE>   71
 
     - The Management Business made a distribution to the Equity Group Owners of
       cash on hand from pre-closing operations, which funds were not acquired
       by the Company pursuant to the Consolidation. Affiliates of Mr. Zell
       received approximately $11.4 million of such distribution.
 
     - The Operating Partnership and EOH transferred the Managed Property
       Business to EOP Management Company, in which the Operating Partnership
       now owns nonvoting stock representing 95% of the equity interest and EOH
       owns all of the voting stock, representing 5% of the equity interest.
 
LEASES AND PARKING OPERATIONS
 
     The Company leases office space owned by Two North Riverside Plaza Joint
Venture, a partnership comprised of trusts established for the benefit of the
families of Mr. Zell and Mr. Lurie, 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 $5,272,100, $12,684,700 and
$12,786,000 during the three months ended March 31, 1998 and the years ended
December 31, 1997 and 1996, respectively, to EGI and its affiliates for such
office space and services, which amounts were calculated to approximate a market
rental rate for the office space and the actual cost of providing these
services. See Note 9 of the Notes to the 1996 Combined Financial Statements of
Equity Office Predecessors included elsewhere in this Prospectus. The
independent members of the Board of Trustees annually review and approve the
rates charged by EGI for services rendered to the Company.
 
     EQR and certain other affiliates of the Company and the Operating
Partnership 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 $69,700, $2,959,600, $3,471,500 and $2,657,500 for the three
months ended March 31, 1998 and the years ended December 31, 1997, 1996 and
1995, respectively.
 
     SZ Parking Limited Partnership, an affiliate of the Equity Group Owners,
has an indirect 10% limited partnership 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 entered into various lease agreements with SPLP or affiliates
of SPLP whereby SPLP or its affiliates lease certain Parking Facilities from the
Company. Certain of these lease agreements provide SPLP or its affiliates with
annual successive options to extend the term of the lease through various dates.
The rent paid in the three months ended March 31, 1998 and the years ended
December 31, 1997, 1996 and 1995 under these lease agreements was approximately
$3,090,700, $11,049,000, $3,161,500 and $1,691,600, respectively. In accordance
with certain of these leases, the Company may be obligated to make an early
termination payment if agreement is not reached as to rent amounts to be paid.
 
EQUITY GROUP DISTRIBUTIONS AND FEES
 
     The partners of the ZML Partners, affiliates of the Equity Group Owners,
have received distributions and fees from the Company through their ownership
interests in the ZML Partners of approximately $4,386,500, $30,322,500 and
$8,603,600 for the three months ended March 31, 1998 and the years ended
December 31, 1997 and 1996, respectively.
 
WRIGHT RUNSTAD ACQUISITION
 
     In connection with the Wright Runstad Acquisition, H. Jon Runstad was
elected as a trustee of the Company effective January 1, 1998. Mr. Runstad
received, directly and indirectly, 552,968 Units in exchange for his interest in
the ten Office Properties and WRALP. Also, Thomas E. Dobrowski, a trustee of the
Company, is the managing director of real estate and alternative investments of
General Motors Investment
 
                                       67
<PAGE>   72
 
Management Corporation, an investment advisor to several pension funds of GM and
its subsidiaries and to several clients also controlled by GM, including First
Plaza, which received $192.4 million in cash, 3,435,688 Common Shares and
warrants to purchase 3,350,000 Common Shares in exchange for First Plaza's
interest in the Office Properties acquired in the Wright Runstad Acquisition.
 
   
CERTAIN OTHER RELATIONSHIPS AND RELATED TRANSACTIONS
    
 
   
     In March 1997, the ZML Partners of ZML Opportunity Partnerships I and II
made certain payments in lieu of any federal income tax, penalties and interest
due 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 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.
    
 
   
     EOP Management Company has entered into management contracts with respect
to 29 properties (as of March 31, 1998) not owned by the Company, but that are
owned or controlled by private entities affiliated with Mr. Zell. These
management contracts were not negotiated on an arms-length basis, but the
Company believes that the management fees it receives under these contracts are
at current market rates. Income recognized for services rendered pursuant to
these contracts for the three months ended March 31, 1998 and the years ended
December 31, 1997, 1996 and 1995, was approximately $1,157,100, $4,949,600,
$5,120,000, and $5,899,000, respectively.
    
 
     Rosenberg & Liebentritt, P.C., a law firm in which Ms. Rosenberg, a
trustee, was a principal until September 11, 1997 and is now of counsel,
received legal fees from the Company of $2,215,900, $3,005,700, $3,480,500 and
$3,230,100 for the three months ended March 31, 1998 and the years ended
December 31, 1997, 1996 and 1995, respectively.
 
   
     Certain services for the Company's tenants that may not be permissibly
undertaken by a REIT are conducted through Tenant Services Corp. owned entirely
by private companies controlled by Mr. Zell. The Company pays Tenant Services
Corp. a fee for such services. The Company has no control over, or ownership
interest in, Tenant Services Corp., which operates as an independent contractor.
The Company may terminate such services at any time upon 30-days' notice.
    
 
                                       68
<PAGE>   73
 
                  POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
 
     The following is a discussion of the policies with respect to investments,
financing and certain other activities of the Company. These policies are
determined by the Board of Trustees and may be amended or revised from time to
time at the discretion of the Board without notice to or a vote of the Company's
shareholders, 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.  All of the
investment activities of the Company are conducted 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
properties and parking facilities 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 Company 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,
which may include markets outside the United States. Future investments,
however, 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 on office properties and other similar interests. A portion of the
Company's interest in two Office Properties, and in two Parking Facilities,
consists of ownership of the mortgage securing such properties. 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. 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. Although the Company has no current intention of
making such an investment, the Company also may legally 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, subject to
the gross income and asset tests necessary for REIT qualification. 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 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 imposed on the
Company under the Credit Facilities and the Indenture, the Company has adopted a
policy of maintaining a Debt to Market 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, Preferred Shares
and Units (not owned by the Company) plus total consolidated and
    
 
                                       69
<PAGE>   74
 
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 and the Operating Partnership 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 Declaration of Trust, the Bylaws or
the Partnership Agreement. To the extent that the Company determines to obtain
additional capital, the Company may issue equity securities, cause the Operating
Partnership to issue additional Units or debt securities, 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 Company
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
Units, 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 it will not incur indebtedness other than
short-term trade, employee compensation, distributions 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 Company and
its Subsidiaries. To the extent that the Company as managing general partner of
the Operating Partnership determines to obtain debt financing in addition to the
existing mortgage indebtedness, the Company intends to do so generally through
mortgages on its Properties, the Credit Facilities and offerings similar to the
February 1998 Notes Offering; however, the Company may cause the Operating
Partnership to issue additional indebtedness in the future. Such indebtedness
may be recourse, nonrecourse or cross-collateralized and may contain
cross-default provisions. The net proceeds of any debt securities issued
directly by the Company (rather than by the Operating Partnership) 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 Credit Facilities, 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, 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 TRUST.  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 the Company's shareholders.
See "Risk Factors -- Conflicts of Interest Could Result In Decisions Not In The
Company's Best Interests." Under Maryland law, contracts or other 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. 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. The Company believes that
this procedure and Mr. Zell's noncompetition agreement, which prohibits him from
competing, directly or indirectly, with the Company's business of owning,
operating, buying, selling, financing and
    
 
                                       70
<PAGE>   75
 
   
managing office and parking facility properties in the United States, will help
to eliminate or minimize certain potential conflicts of interest. Pursuant to
the Bylaws, 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 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 does not apply to the Noncontrolled Subsidiaries.
    
 
     POLICIES APPLICABLE TO ALL TRUSTEES.  Under Maryland law, each trustee is
obligated to offer to the Company any opportunity (with certain limited
exceptions) which comes to him or her 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 unless
approved as described above.
 
     LEASED OFFICE SPACE.  The Company leases office space owned by Two North
Riverside Plaza Joint Venture, a partnership comprised of trusts established for
the benefit of the families of Mr. Zell and Mr. Lurie, at Two North Riverside
Plaza, Chicago, Illinois 60606. In addition, EGI, an entity owned by the Equity
Group Owners, and its affiliates has 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 $12,684,700 and
$12,786,000 during the years ended December 31, 1997 and 1996, respectively, to
EGI and its affiliates for such office space and services, which amounts were
calculated to approximate a market rental rate for the office space and the
actual cost of providing these services. The independent members of the Board of
Trustees annually review and approve the rates charged by EGI for services
rendered to the Company.
 
POLICIES WITH RESPECT TO OTHER ACTIVITIES
 
     The Company and the Operating Partnership may, but do 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 or through Noncontrolled
Subsidiaries. The Company will have authority to offer Common Shares or other
equity or debt securities of the Company in exchange for property and to
repurchase or otherwise reacquire 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 Company also may make loans to joint ventures in
which it may or may not 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 Board of Trustees without notice to shareholders.
 
                                       71
<PAGE>   76
 
                             PRINCIPAL SHAREHOLDERS
 
     The following table sets forth certain information regarding the beneficial
ownership of Common Shares (or Common Shares for which Units are exchangeable)
as of March 1, 1998 by (i) each trustee of the Company, (ii) each named
executive officer of the Company, (iii) all trustees and officers of the Company
as a group and (iv) each person or entity which is the beneficial owner of 5% or
more of the outstanding Common Shares. 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                                    PERCENTAGE
                                              COMMON SHARES             PERCENTAGE             OF ALL
                                                AND UNITS                 OF ALL            COMMON SHARES
         NAME OF BENEFICIAL OWNER           BENEFICIALLY OWNED       COMMON SHARES(1)       AND UNITS(2)
         ------------------------           ------------------       ----------------       -------------
<S>                                         <C>                      <C>                    <C>
State Street Bank & Trust Co., as
  trustee(3)..............................      14,480,472                 5.79%                5.19%
Samuel Zell(4)(5).........................       8,388,014                 3.27                 3.00
Timothy H. Callahan(4)(6).................         514,109               *                     *
Michael A. Steele(4)......................          51,886               *                     *
Richard D. Kincaid(4).....................          49,702               *                     *
Stanley M. Stevens(4)(7)..................         350,255               *                     *
Jeffrey L. Johnson(4).....................          12,995               *                     *
Sheli Z. Rosenberg(4)(8)..................       8,058,059                 3.14                 2.88
Thomas E. Dobrowski(9)....................          50,583               *                     *
James D. Harper(10).......................          98,466               *                     *
Peter Linneman(11)........................          53,933               *                     *
Jerry M. Reinsdorf(12)....................          54,209               *                     *
William M. Goodyear(13)...................          54,224               *                     *
David K. McKown(14).......................          54,221               *                     *
H. Jon Runstad(15)(16)....................       4,348,945                 1.71                 1.56
Edwin N. Sidman(17)(18)...................       1,214,532                    *                    *
FMR Corp.(19).............................      14,091,933                 5.64                 5.05
All trustees and executive officers as a
  group (15 persons)......................      14,809,826                 5.66%                5.30%
                                                ----------                 ----                 ----
</TABLE>
 
- ---------------
  *  Less than 1%.
 
 (1) Assumes Common Shares outstanding as of March 1, 1998. Assumes that all
     Units and/or warrants beneficially held by the identified person (and no
     other person) are redeemed and/or exchanged for Common Shares.
 
 (2) Assumes a total of 279,190,093 Common Shares and Units outstanding as of
     March 1, 1998 (250,030,403 Common Shares and 29,159,690 Units). Assumes
     that all outstanding Units are redeemed for Common Shares.
 
 (3) Includes 14,480,472 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, Massachusetts 02171.
 
 (4) The business address for this shareholder is Two North Riverside Plaza,
     Chicago, Illinois 60606.
 
 (5) Includes 7,886,675 Common Shares (assuming exchange of 6,048,130 Units)
     held by the ZML Partners, ZFT Partnership, EGI Holdings, Inc., EGIL
     Investments, Inc., Samstock/ZFT, L.L.C., Samstock/SZRT, L.L.C., and
     Samstock/Alpha, L.L.C., which may be deemed to be beneficially owned by Mr.
     Zell; however, Mr. Zell disclaims beneficial ownership of 3,983,493 Common
     Shares, including Units exchangeable for Common Shares.
 
                                       72
<PAGE>   77
 
 (6) Includes 324,816 Common Shares held by the ZML Partners which may be deemed
     to be beneficially owned by Mr. Callahan as he is a director and/or
     executive officer of such entity; however, Mr. Callahan disclaims
     beneficial ownership of 309,433 of such Common Shares.
 
 (7) Includes 324,816 Common Shares held by the ZML Partners which may be deemed
     to be beneficially owned by Mr. Stevens as he is a director and/or
     executive officer of such entity; however, Mr. Stevens disclaims beneficial
     ownership of 322,968 of such Common Shares, including Units exchangeable
     for Common Shares.
 
 (8) Includes 7,886,675 Common Shares (assuming exchange of 6,048,130 Units)
     held by the ZML Partners, ZFT Partnership, EGI Holdings, Inc., EGIL
     Investments, Inc., Samstock/ZFT, L.L.C., Samstock/SZRT, L.L.C., and
     Samstock/Alpha, L.L.C., which may be deemed to be beneficially owned by Ms.
     Rosenberg as she is a director and/or executive officer of such entities;
     however, Ms. Rosenberg disclaims beneficial ownership of 7,886,675 of such
     Common Shares, including Units exchangeable for Common Shares.
 
 (9) The business address for this trustee is General Motors Investment
     Management Corporation, 767 5th Avenue, 16th Floor, New York, New York
     10153.
 
(10) The business address for this trustee is JDH Realty Company, 3250 Mary
     Street, Suite 206, Coconut Grove, Florida 33133.
 
(11) The business address for this trustee is The Wharton School of The
     University of Pennsylvania, 56 South 37th Street, Lauder-Fischer Hall,
     Philadelphia, Pennsylvania 19104.
 
(12) The business address for this trustee is Chicago White Sox, 333 W. 35th
     Street, Chicago, Illinois 60616.
 
(13) The business address for this trustee is Bank of America Illinois, 231
     South LaSalle Street, Suite 1322, Chicago, Illinois 60697.
 
(14) The business address for this trustee is BankBoston, N.A., 100 Federal
     Street, Boston, Massachusetts 02110.
 
(15) The business address for this trustee is Wright Runstad & Company, 1191
     Second Avenue, Suite 2000, Seattle, Washington 98101.
 
(16) Includes 4,265,700 Common Shares (assuming exchange of 2,615,700 Units and
     exercise of 1,650,000 warrants to purchase Common Shares) held by Wright
     Runstad Asset Management L.P. and Wright Runstad Holdings L.P., which may
     be deemed to be beneficially owned by Mr. Runstad; however, Mr. Runstad
     disclaims beneficial ownership of 2,144,848 Common Shares, including Units
     and 1,374,671 warrants exchangeable for Common Shares.
 
(17) The business address for this trustee is 50 Rowes Wharf, Boston,
     Massachusetts 02110.
 
(18) Includes 898,605 Common Shares (assuming exchange of 652,650 Units) held by
     The Leventhal Family Limited Partnership (the "Leventhal Partnership").
     Paula Sidman, Mr. Sidman's spouse, is a general partner of the Leventhal
     Partnership, with a one-third interest. Mrs. Sidman disclaims beneficial
     ownership of the Common Shares and Units beneficially owned by the
     Leventhal Partnership, except for 81,895 Common Shares and 217,550 Units in
     which she has a pecuniary interest.
 
(19) Includes 14,091,933 Common Shares held by FMR Corp. for the benefit of its
     clients by its separate accounts, externally managed accounts, registered
     investment companies, subsidiaries and/or other affiliates. FMR Corp. may
     have direct or indirect voting and/or investment discretion over these
     Common Shares. The business address of this shareholder is 82 Devonshire
     Street, Boston, Massachusetts 02109.
 
                                       73
<PAGE>   78
 
                              SERIES C PREFERRED SHARES
 
     The summary of the terms of the Company's shares of beneficial interest 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, Articles Supplementary to
the Declaration of Trust determining the terms of each series of Preferred
Shares (the "Articles Supplementary"), and the Bylaws of the Company. Copies of
the Declaration of Trust, the Articles Supplementary for the Series A Preferred
Shares and the Series B Preferred Shares, the form of Articles Supplementary for
the Series C Preferred Shares and the Bylaws have been included or incorporated
by reference as exhibits to the Registration Statement of which this Prospectus
is a part and may be obtained as described under "Available Information."
 
SHARES OF BENEFICIAL INTEREST GENERALLY
 
   
     The Declaration of Trust of the Company provides that the Company is
authorized to issue 750 million Common Shares and 100 million Preferred Shares.
As of March 31, 1998, 249,948,105 Common Shares and 14,000,000 Preferred Shares
(consisting of 8,000,000 Series A Preferred Shares and 6,000,000 Series B
Preferred 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.
 
     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 Preferred Shares of each series, the Board of
Trustees is required by the Maryland REIT Law and the Declaration of Trust 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, without
shareholder approval, 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 Preferred Shares or Common Shares or
otherwise be in their best interest, or that could adversely affect the rights
and powers of the Series C Preferred Shares. See "-- Power to Issue Additional
Common Shares and Preferred Shares" below.
 
SERIES C PREFERRED SHARES GENERALLY
 
     The Board of Trustees of the Company will adopt Articles Supplementary
determining the terms of the Series C Preferred Shares as a series of Preferred
Shares, designated as the      % Series C Cumulative Redeemable Preferred
Shares. When issued, the Series C Preferred Shares will be validly issued, fully
paid and nonassessable.
 
     In connection with the Offering, the Company will contribute or otherwise
transfer the net proceeds of the sale of the Series C Preferred Shares to the
Operating Partnership and the Operating Partnership will issue to the Company
     % Series C Cumulative Redeemable Preference Units (the "Series C Preference
 
                                       74
<PAGE>   79
 
Units") that mirror the rights, preferences and other terms of the Series C
Preferred Shares. The Operating Partnership will be required to make all
required distributions on such Series C Preference Units prior to any
distribution of cash or assets to the holder of Units or to the holders of any
other equity interests in the Operating Partnership, except for any other series
of Preference Units ranking on a parity with such Series C Preference Units as
to distributions or liquidation, as the case may be, and except for
distributions required to enable the Company to maintain its qualification as a
REIT. The Operating Partnership currently has (i) 8,000,000 Series A Preference
Units outstanding issued to the Company in connection with the Company's
issuance of the Series A Preferred Shares and (ii) 6,000,000 Series B Preference
Units outstanding issued to the Company in connection with the Company's
issuance of the Series B Preferred Shares. The Series A Preference Units and the
Series B Preference Units mirror the rights, preferences and other terms of the
Series A Preferred Shares and Series B Preferred Shares, respectively, and the
Series C Preference Units will rank, as to distribution rights and rights upon
liquidation, on a parity with the Series A Preference Units and the Series B
Preference Units.
 
     Application has been made to list the Series C Preferred Shares on the
NYSE, subject to official notice of issuance. If so approved, trading of the
Series C Preferred Shares on the NYSE is expected to commence within a 30-day
period after the date of initial delivery of the Series C Preferred Shares. See
"Underwriters."
 
RANKING
 
     The Series C Preferred Shares will rank, with respect to distribution
rights and rights upon voluntary or involuntary liquidation, dissolution or
winding up of the Company, (a) senior to all classes or series of Common Shares
and to all equity securities of the Company the terms of which provide that such
equity securities shall rank junior to such Series C Preferred Shares; (b) on a
parity with all equity securities issued by the Company, including the Series A
Preferred Shares or the Series B Preferred Shares, other than those referred to
in clauses (a) and (c); and (c) junior to all equity securities issued by the
Company which rank senior to the Series C Preferred Shares. The term "equity
securities" does not include convertible debt securities.
 
DISTRIBUTIONS
 
     Holders of the Series C Preferred Shares shall be entitled to receive, when
and as authorized by the Board of Trustees, out of funds legally available for
the payment of distributions, cumulative cash distributions at the rate of
     % of the liquidation preference per annum (equivalent to $          per
annum per share). Distributions on the Series C Preferred Shares offered hereby
shall accumulate on a daily basis and be cumulative from the date of original
issuance and shall be payable quarterly in arrears on the   day of each March,
June, September and December, or, if not a Business Day, the next succeeding
Business Day (each, a "Distribution Payment Date") commencing on September   ,
1998. All distributions payable on the Series C Preferred Shares will accumulate
on a daily basis and will be computed on the basis of a 360-day year consisting
of twelve 30-day months. Distributions will be payable to holders of record as
they appear in the share records of the Company at the close of business on the
applicable record date, which shall be the
day of the calendar month in which the applicable Distribution Payment Date
falls or such other date designated by the Board of Trustees of the Company for
the payment of distributions that is not more than 30 nor less than 10 days
prior to such Distribution Payment Date (each, a "Distribution Record Date").
 
     No distributions on the Series C Preferred Shares shall be authorized by
the Board of Trustees of the Company or be paid or set apart for payment by the
Company at such time as the terms and provisions of any agreement of the
Company, including any agreement relating to its indebtedness, prohibits such
authorization, payment or setting apart for payment or provides that such
authorization, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such authorization or payment shall be
restricted or prohibited by law. Covenants in its Credit Facilities provide
generally that the Company may not pay distributions in excess of ninety-five
percent (95%) of Funds From Operations in any Fiscal Year, all as defined in the
Credit Facilities, but such covenants permit the Company, upon certain
circumstances, to pay distributions in an amount necessary to maintain its
qualification as a REIT. The Company does not believe that these covenants will
have any adverse impact on the Company's ability to pay distributions in
 
                                       75
<PAGE>   80
 
respect of the Series C Preferred Shares or in the normal course of business to
its shareholders in amounts necessary to maintain its qualification as a REIT.
In addition, the Articles Supplementary for the Series A Preferred Shares and
Series B Preferred Shares contain provisions which would prohibit or limit
distributions on the Series C Preferred Shares in the event that full cumulative
dividends are not paid on the Series A Preferred Shares or Series B Preferred
Shares, as the case may be.
 
   
     If any Series C Preferred Shares are outstanding, no full distributions
will be declared or paid or set apart for payment on any shares of beneficial
interest of the Company of any other class or series ranking, as to
distributions or upon liquidation, dissolution or winding up of the Company on a
parity with or junior to the Series C Preferred Shares unless full cumulative
distributions have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for such payment on the
Series C Preferred Shares for all past distribution periods and the then current
distribution period. When distributions are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon the Series C
Preferred Shares and any other equity securities ranking as to distributions on
a parity with the Series C Preferred Shares, all distributions declared upon the
Series C Preferred Shares and any other equity securities of the Company ranking
as to distributions on a parity with the Series C Preferred Shares will be
declared pro rata so that the amount of distributions declared per Series C
Preferred Share and each such other equity securities shall in all cases bear to
each other the same ratio that accumulated distributions per Series C Preferred
Share and such other equity securities (which shall not include any accumulation
in respect of unpaid distributions for prior distribution periods if such other
equity securities do not have a cumulative distribution) bear to each other. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any distribution payment or payments on the Series C Preferred Shares which may
be in arrears.
    
 
     Except as provided in the immediately preceding paragraph, unless full
cumulative distributions on the Series C Preferred Shares have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past distribution periods and the
then current distribution period, no distributions (other than in Common Shares
or other equity securities of the Company ranking junior to the Series C
Preferred Shares as to distributions and upon liquidation, dissolution and
winding up of the Company) shall be declared or paid or set aside for payment or
other distribution be declared or made upon the Common Shares or any other
equity securities of the Company ranking, as to distributions or upon
liquidation, dissolution or winding up of the Company, junior to or on a parity
with the Series C Preferred Shares, nor shall any Common Shares or any other
equity securities of the Company ranking junior to or on a parity with the
Series C Preferred Shares as to distributions or upon liquidation, dissolution
or winding up of the Company be redeemed, purchased or otherwise acquired for
any consideration (or any monies be paid to or made available for a sinking fund
for the redemption of any such securities) by the Company (except by conversion
into or exchange for other equity securities of the Company ranking junior to
the Series C Preferred Shares as to distributions and upon liquidation,
dissolution and winding up of the Company).
 
     Notwithstanding the foregoing, distributions on the Series C Preferred
Shares will accumulate whether or not restrictions exist in respect thereof,
whether or not there are funds legally available for the payment thereof and
whether or not such distributions are declared. Accumulated but unpaid
distributions on the Series C Preferred Shares will not bear interest and
holders of the Series C Preferred Shares will not be entitled to any
distributions in excess of full cumulative distributions as described above. Any
distribution payment made on the Series C Preferred Shares shall first be
credited against the earliest accumulated but unpaid distribution due with
respect to such shares which remains payable.
 
     If the Company designates any portion of a distribution as a "capital gain
dividend," a holder's share of such capital gain dividend would be an amount
which bears the same ratio to the total amount of distributions paid to such
holder for the year as the aggregate amount designated as a capital gain
dividend bears to the aggregate amount of all distributions paid on all classes
of shares of beneficial interest for the year.
 
                                       76
<PAGE>   81
 
LIQUIDATION PREFERENCE
 
     In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of the Series C Preferred Shares will be
entitled to receive out of the assets of the Company legally available for
distribution to its shareholders remaining after payment or provision for
payment of all debts and liabilities of the Company, a liquidation preference of
$25.00 per share, plus an amount equal to any accumulated and unpaid
distributions to the date of such payment, before any distribution of assets is
made to holders of Common Shares or any other equity securities that rank junior
to the Series C Preferred Shares as to liquidation rights. After payment of the
full amount of the liquidating distributions to which they are entitled, the
holders of Series C Preferred Shares will have no right or claim to any of the
remaining assets of the Company. The consolidation or merger of the Company with
or into any other entity, a merger of another entity with or into the Company, a
statutory share exchange by the Company or the sale, lease, transfer or
conveyance of all or substantially all of the property or business of the
Company shall not be deemed to constitute a liquidation, dissolution or winding
up of the Company.
 
     If, upon any such voluntary or involuntary liquidation, dissolution or
winding up, the assets of the Company are insufficient to make full payment to
holders of the Series C Preferred Shares and the corresponding amounts payable
on all shares of other classes or series of equity securities of the Company
ranking on a parity with the Series C Preferred Shares as to liquidation rights,
then the holders of the Series C Preferred Shares and all other such classes or
series of equity securities will share ratably in any such distribution of
assets in proportion to the full liquidating distributions to which they would
otherwise be respectively entitled.
 
REDEMPTION
 
   
     The Series C Preferred Shares will not be redeemable prior to June   ,
2003. On and after June   , 2003, the Company, at its option upon not less than
30 or more than 60 days' written notice, may redeem the Series C Preferred
Shares, in whole or from time to time in part, for cash, at a redemption price
of $25.00 per share, plus all accumulated and unpaid distributions thereon to
the date fixed for redemption. The redemption price of the Series C Preferred
Shares (other than any portion thereof consisting of accumulated and unpaid
distributions) will be payable solely from the sale proceeds of other equity
securities of the Company and not from any other source. For purposes of the
preceding sentence, "equity securities" means any equity securities (including
Common Shares and Preferred Shares), depositary shares in respect of any of the
foregoing, interests, participations, or other ownership interests (however
designated) and any rights (other than debt securities convertible into or
exchangeable for equity securities) or options to purchase any of the foregoing.
Holders of Series C Preferred Shares to be redeemed shall surrender such Series
C Preferred Shares at the place designated in the notice of redemption and shall
be entitled to the redemption price and any accumulated and unpaid distributions
payable upon such redemption upon such surrender. If notice of redemption of any
Series C Preferred Shares has been given and if the funds necessary for such
redemption have been set aside by the Company in trust for the benefit of the
holders thereof, then from and after the redemption date dividends on such
Series C Preferred Shares will cease to accumulate and such of any Series C
Preferred Shares will no longer be deemed outstanding and all rights of the
holders thereof will terminate, except the right to receive the redemption price
(including accumulated and unpaid distributions). If fewer than all of the
outstanding Series C Preferred Shares are to be redeemed, the Series C Preferred
Shares to be redeemed shall be selected pro rata (as nearly as may be
practicable without creating fractional shares), by lot or by any other
equitable method determined by the Company. If such redemption is to be by lot
and, as a result of such redemption, any holder of Series C Preferred Shares
would become a holder of a number of Series C Preferred Shares in excess of the
Ownership Limit because such holder's Series C Preferred Shares were not
redeemed, or were only redeemed in part, then, except as otherwise provided in
the Declaration of Trust, the Company will redeem the requisite number of Series
C Preferred Shares of such holder such that no holder will hold in excess of the
Ownership Limit subsequent to such redemption. See "-- Restrictions on Ownership
or Transfers."
    
 
     Notwithstanding the foregoing, unless full cumulative distributions on all
Series C Preferred Shares shall have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment
 
                                       77
<PAGE>   82
 
thereof set apart for payment for all past distribution periods and the then
current distribution period, no Series C Preferred Shares shall be redeemed
unless all outstanding Series C Preferred Shares are simultaneously redeemed;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of Series C Preferred Shares pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Series C Preferred
Shares. In addition, unless full cumulative distributions on all outstanding
Series C Preferred Shares have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for payment
for all past distributions periods and the then current distribution period, the
Company shall not purchase or otherwise acquire directly or indirectly any
Series C Preferred Shares or any equity securities of the Company ranking junior
to or on a parity with the Series C Preferred Shares as to distributions or upon
voluntary or involuntary liquidation, dissolution or winding up of the Company
(except by conversion into or exchange for equity securities of the Company
ranking junior to the Series C Preferred Shares as to distributions and upon
voluntary or involuntary liquidation, dissolution or winding up of the Company).
 
     The foregoing provisions shall not prevent the purchase by the Company of
Series C Preferred Shares pursuant to Article VII of the Declaration of Trust or
otherwise in order to ensure that the Company remains qualified as a REIT for
federal income tax purposes.
 
     Notice of redemption will be given by publication in a newspaper of general
circulation in The City of New York, such publication to be made once a week for
two successive weeks commencing not less than 30 nor more than 60 days' prior to
the redemption date. A similar notice will be mailed by the Company, postage
prepaid, not less than 30 nor more than 60 days' prior to the redemption date,
addressed to the respective holders of record of the Series C Preferred Shares
to be redeemed at their respective addresses as they appear on the share
transfer records of the Company. No failure to give such notice or any defect
therein or in the mailing thereof shall affect the validity of the proceedings
for the redemption of any Series C Preferred Shares except as to the holder to
whom notice was defective or not given. Each notice shall state: (i) the
redemption date; (ii) the redemption price; (iii) the number of Series C
Preferred Shares to be redeemed; (iv) the place or places where the certificates
evidencing Series C Preferred Shares are to be surrendered for payment of the
redemption price; and (v) that distributions on the Series C Preferred Shares to
be redeemed will cease to accumulate on such redemption date. If fewer than all
the Series C Preferred Shares held by any holder are to be redeemed, the notice
mailed to such holder shall also specify the number of Series C Preferred Shares
to be redeemed from such holder.
 
     The holders of Series C Preferred Shares at the close of business on a
Distribution Record Date will be entitled to receive the distribution payable
with respect to the Series C Preferred Shares on the corresponding Distribution
Payment Date notwithstanding the redemption thereof between such Distribution
Record Date and the corresponding Distribution Payment Date or the Company's
default in the payment of the distribution due. Except as provided above, the
Company will make no payment or allowance for unpaid distributions, whether or
not in arrears, on Series C Preferred Shares to be redeemed.
 
     The Series C Preferred Shares will not have a stated maturity and will not
be subject to any sinking fund or mandatory redemption provisions.
 
VOTING RIGHTS
 
     Holders of the Series C Preferred Shares will not have any voting rights,
except as set forth below or as otherwise from time to time required by law.
 
     In any matter in which the Series C Preferred Shares are entitled to vote
(as expressly provided herein or as may be required by law), including any
action by written consent, each Series C Preferred Share shall be entitled to
one vote, which may be directed by the holder thereof (or by any proxy or
proxies of such holder).
 
     Whenever distributions on any of the Series C Preferred Shares are in
arrears for six or more quarterly periods (whether or not consecutive) (a
"Preferred Distribution Default"), the holders of the Series C Preferred Shares
(voting as a single class with all other equity securities of the Company
ranking on a parity with the Series C Preferred Shares as to distributions and
upon voluntary or involuntary liquidation,
 
                                       78
<PAGE>   83
 
dissolution or winding up of the Company upon which like voting rights have been
conferred and are exercisable("Parity Preferred Shares")) will be entitled to
vote for the election of two additional trustees of the Company who will be
elected for a one year term. Such elections shall be held at a special meeting
called by the holders of record of at least 20% of the outstanding Series C
Preferred Shares or the holders of shares of any other series of Parity
Preferred Shares so in arrears (unless such request is received less than 90
days before the date fixed for the next annual or special meeting of
shareholders) or, if the request for a special meeting is received by the
Company less than 90 days before the date fixed for the next annual or special
meeting of the shareholders, at the next annual or special meeting of
shareholders, and at each subsequent annual meeting until all distributions
accumulated on the Series C Preferred Shares for all past distribution periods
and the distribution for the then current distribution period shall have been
fully paid or declared and a sum sufficient for the payment thereof set aside
for payment in full.
 
     If and when all accumulated distributions and the distribution for the then
current distribution period on the Series C Preferred Shares shall have been
paid in full or declared by the Company and set aside for payment in full, the
holders of Series C Preferred Shares shall be divested of the voting rights set
forth in the immediately preceding paragraph (subject to revesting in the event
of each and every Preferred Distribution Default) and, if all accumulated
distributions and the distribution for the then current distribution period have
been paid in full or declared by the Company and set aside for payment in full
on all other series of Parity Preferred Shares upon which like voting rights
have been conferred and are exercisable, the term of office of each trustee so
elected shall terminate. So long as a Preferred Distribution Default shall
continue, any vacancy in the office of a trustee so elected may be filled by
written consent of the trustee so elected remaining in office or, if there is no
such remaining trustee, by vote of holders of a majority of the outstanding
Series C Preferred Shares and any series of Parity Preferred Shares upon which
like voting rights have been conferred and are exercisable (voting as a single
class). Any trustee elected by the holders of Series C Preferred Shares and any
other such Parity Preferred Shares may be removed at any time with or without
cause by the vote of, and shall not be removed otherwise than by the vote of,
the holders of a majority of the outstanding Series C Preferred Shares when they
have the voting rights set forth in the immediately preceding paragraph and all
series of Parity Preferred Shares upon which like voting rights have been
conferred and are exercisable (voting as a single class).
 
     In the event that distributions on any Series A Preferred Shares or Series
B Preferred Shares shall be in arrears for six or more quarterly periods
(whether or not consecutive), then the holders of such Series A Preferred Shares
or Series B Preferred Shares, as the case may be, are entitled to vote for the
election of two trustees of the Company on terms substantially similar to those
described in the preceding two paragraphs. Because the Series A Preferred Shares
and the Series B Preferred Shares constitute the Parity Preferred Shares (as
defined above), in the event that the voting rights described in the preceding
paragraph become exercisable with respect to the Series C Preferred Shares at
such time as similar voting rights are exercisable with respect to the Series A
Preferred Shares and the Series B Preferred Shares, all such Preferred Shares
would vote together as a single class in the election of the two additional
trustees of the Company.
 
     So long as any Series C Preferred Shares remain outstanding, the Company
will not, without the affirmative vote or consent of the holders of at least
two-thirds of the Series C Preferred Shares outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (i) authorize or create, or increase the authorized or
issued amount of, any class or series of shares of beneficial interest ranking
senior to the Series C Preferred Shares with respect to payment of distributions
or the distribution of assets upon voluntary or involuntary liquidation,
dissolution or winding up or reclassify any authorized shares of beneficial
interest of the Company into such shares, or create, authorize or issue any
obligation or security convertible into, exchangeable or exercisable for, or
evidencing the right to purchase, any such shares; or (ii) amend, alter or
repeal the provisions of the Declaration of Trust (including the Articles
Supplementary for the Series C Preferred Shares), whether by merger or
consolidation (an "Event") or otherwise, so as to materially and adversely
affect any right, preference, privilege or voting power of the Series C
Preferred Shares or the holders thereof; provided, however, with respect to the
occurrence of any of the Events set forth in (ii) above, so long as the Series C
Preferred Shares remain outstanding with the terms thereof materially unchanged,
taking into account that upon the occurrence of such an Event, the Company
 
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<PAGE>   84
 
may not be the surviving entity, the occurrence of any such Event shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting powers of holders of Series C Preferred Shares; and provided further
that (x) any increase in the amount of the authorized Preferred Shares or the
creation or issuance of any other class or series of Preferred Shares, or (y)
any increase in the amount of authorized Series C Preferred Shares or any other
class or series of Preferred Shares, in each case ranking on a parity with or
junior to the Series C Preferred Shares with respect to payment of distributions
and the distribution of assets upon liquidation, dissolution or winding up,
shall not be deemed to materially and adversely affect such rights, preferences,
privileges or voting powers.
 
     The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding Series C Preferred Shares shall have been redeemed
or called for redemption and sufficient funds shall have been deposited in trust
to effect such redemption.
 
CONVERSION RIGHTS
 
     The Series C Preferred Shares will not be convertible into or exchangeable
for any other property or securities of the Company.
 
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 Common Shares or
Preferred Shares provides 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 of Preferred Shares, as well as
the Common Shares, are 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, or that could adversely affect the rights
and voting power of the Series C Preferred Shares.
 
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 12 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 as
discussed below, provides that no holder may own, or be deemed to own by virtue
of the attribution provisions of the Code, more than 9.9% in value or number
(whichever is more restrictive) of the Common Shares or of any series of the
Preferred Shares, including the Series C Preferred Shares. The ownership
attribution rules under the Code are complex and may cause Common Shares or any
series of Preferred 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 acquisition of
 
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<PAGE>   85
 
less than 9.9% of the Common Shares or any series of Preferred Shares (or the
acquisition of an interest in an entity that owns, actually or constructively,
Common Shares or any series of Preferred 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
or the Series C Preferred Shares, as the case may be, and thus subject such
Common Shares or the Series C Preferred Shares to the Ownership Limit. The Board
of Trustees will 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 Declaration of Trust permits the Board of Trustees to increase the
Ownership Limit with respect to any class or series of shares of beneficial
interest of the Company; provided, however, that, after giving effect to such
increase, five beneficial owners of Common Shares may not 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 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 will 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")
will 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 will 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 will 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
 
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<PAGE>   86
 
excess shares by the trust, the trustee will be entitled to receive, in trust
for the Beneficiary, all dividends and other distributions paid by the Company
with respect to such excess shares, and also will be entitled to exercise all
voting rights with respect to such excess shares. Subject to Maryland law,
effective as of the date that such shares have been transferred to the trust,
the trustee will 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
will 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 Company. 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 the Company's shares of beneficial interest might receive a premium
for their shares over the then prevailing market price or which such holders
might believe to be otherwise in their best interest.
 
TRANSFER AGENT, REGISTRAR, CONVERSION AGENT AND DISTRIBUTION DISBURSING AGENT
 
     The transfer agent, registrar and distribution disbursing agent for the
Series C Preferred Shares is Boston EquiServe LLP, an affiliate of First
National Bank of Boston.
 
OUTSTANDING SHARES OF BENEFICIAL INTEREST
 
     Common Shares. Subject to the preferential rights of the Series A Preferred
Shares, Series B Preferred Shares and any other shares of beneficial interest
ranking senior to the Common Shares as to distributions and the distribution of
assets upon liquidation, dissolution or winding up and to the provisions of the
Declaration of Trust regarding restrictions on transfers of shares of beneficial
interest, holders of Common Shares are entitled
 
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<PAGE>   87
 
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.
 
     Subject to the provisions of the 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 Common Shares, if any,
will not be able to elect any trustees.
 
     Holders of Common Shares have no preferences, conversion, sinking fund or
redemption rights or preemptive rights to subscribe for any securities of the
Company. Subject to the provisions of the Declaration of Trust regarding
restrictions on transfer, Common Shares have equal distribution, liquidation,
voting 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 Declaration
of Trust provides for an amendment to increase the number 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 Declaration of Trust permits such
action by the Board of Trustees.
 
     Series A Preferred Shares. The Series A Preferred Shares were issued in
connection with the Beacon Merger. The Series A Preferred Shares rank senior to
the Common Shares and on a parity with the Series B Preferred Shares and the
Series C Preferred Shares, with respect to payment of distributions and
distributions of assets upon liquidation, dissolution or winding-up of the
Company. Holders of the Series A Preferred Shares are entitled to receive, when
and as authorized by the Company, cumulative cash distributions at the rate of
8.98% of the $25.00 liquidation preference per annum (equivalent to a fixed
annual amount of $2.245 per share). Such distributions are cumulative and are
payable quarterly in arrears on or before March 15, June 15, September 15 and
December 15 of each year. The Series A Preferred Shares are not convertible or
entitled to the benefit of any sinking fund. On and after June 15, 2002, the
Company, at its option, may redeem the Series A Preferred Shares, in whole or in
part, at any time or from time to time, for cash at a redemption price of $25.00
per share, plus all accumulated and unpaid distributions thereon to the date
fixed for redemption. However, the redemption price (other than the portion
thereof consisting of accrued and unpaid distributions) is payable solely out of
the sale proceeds of other shares of beneficial interest of the Company. Upon
any voluntary or involuntary liquidation, dissolution or winding up of the
Company, the Series A Preferred Shares are entitled to a liquidation preference
of $25 per share, plus accumulated and unpaid distributions to the date of
payment, before any distribution of assets is made to holders of Common Shares
and any other class or series of shares of the Company ranking junior to the
Series A Preferred Shares as to liquidation rights.
 
     Series B Preferred Shares. The Series B Preferred Shares rank senior to the
Common Shares and on a parity with the Series A Preferred Shares and Series C
Preferred Shares with respect to the payment of distributions and amounts upon
liquidation, dissolution or winding up of the Company. Distributions on the
Series B Preferred Shares are cumulative and are payable quarterly on or about
the fifteenth day of February, May, August and November of each year, at the
rate of 5.25% of the $50.00 liquidation preference per annum (equivalent to
$2.625 per annum per share), subject to increase if the Company fails to satisfy
certain obligations to file a registration statement to register resales of the
Series B Preferred Shares and the Common Shares issuable upon redemption or
conversion of the Series B Preferred Shares and to file an application with
 
                                       83
<PAGE>   88
 
the NYSE to list the Series B Preferred Shares and Common Shares issuable upon
redemption or conversion of the Series B Preferred Shares on the NYSE, in each
case, on or before August 10, 1998. However, the redemption price (other than
the portion thereof consisting of accumulated and unpaid distributions) is
payable solely out of the sale proceeds of other shares of beneficial interest
of the Company. Upon any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the Series B Preferred Shares are entitled to a
liquidation preference of $50 per share, plus accumulated and unpaid
distributions to the date of payment, before any distribution of assets is made
to holders of Common Shares and any other class or series of shares of the
Company ranking junior to the Series B Preferred Shares as to liquidation
rights.
 
     The Series B Preferred Shares are convertible at any time, at the option of
the holder, unless previously redeemed, into Common Shares at a conversion price
of $35.70 per Common Share (equivalent to a conversion rate of 1.40056 Common
Shares for each Series B Preferred Share) (the "Conversion Price"), subject to
adjustment in certain circumstances. The Series B Preferred Shares are subject
to mandatory redemption on February 15, 2008 at a price of $50.00 per Series B
Preferred Share, plus accumulated and unpaid distributions to the redemption
date. The Series B Preferred Shares are not redeemable prior to February 15,
2003. On and after February 15, 2003, the Series B Preferred Shares will be
redeemable by the Company, in whole or from time to time in part, at the option
of the Company, for such number of Common Shares as are issuable at the
Conversion Price (the "Share Redemption Right"). The Company may exercise the
Share Redemption Right only if for 20 trading days within any period of 30
consecutive trading days, including the last day of such period, the closing
price of the Common Shares on the NYSE exceeds $41.055 per share, subject to
adjustment in certain circumstances. On and after February 15, 2003, the Series
B Preferred Shares may be redeemed at the option of the Company for cash (the
"Cash Redemption Right"), in whole or from time to time in part, initially at
$51.1667 per Series B Preferred Share and thereafter at prices declining to
$50.00 per Series B Preferred Share on and after February 15, 2007, plus in each
case accumulated and unpaid distributions, if any, to the redemption date. The
Company will not exercise its Cash Redemption Right unless the redemption price
(other than the portion thereof consisting of accumulated and unpaid
distributions) for the exercise of the Cash Redemption Right is paid solely out
of the sale proceeds of other shares of beneficial interest of the Company,
which may include other series of Preferred Shares, and from no other source. In
addition, in certain circumstance relating to the preservation of the Company's
status as a REIT for federal income tax purposes, the Company may purchase
Series B Preferred Shares.
 
     In connection with the Series B Preferred Offering, the Board of Trustees
determined that the Ownership Limit with respect to the Series B Preferred
Shares shall mean the greater of (i) 9.9% of the Series B Preferred Shares (in
value or number, whichever is more restrictive) or (ii) such number of Series B
Preferred Shares such that five Persons who are considered individuals pursuant
to Section 542 of the Code, as modified by Section 856(h)(3) of the Code (taking
into account all Excepted Holders (as defined in the Declaration of Trust),
could not Beneficially Own (as defined in the Declaration of Trust), in the
aggregate, more than 49.5% of the value of the outstanding shares of beneficial
interest of the Company.
 
                                       84
<PAGE>   89
 
              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 have been
filed or incorporated by reference as exhibits to the Registration Statement of
which this Prospectus is a part and may be obtained as described under
"Available Information."
 
     The Declaration of Trust and 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 "Series C
Preferred Shares -- Restrictions on Ownership and Transfer."
 
CLASSIFICATION AND REMOVAL OF BOARD OF TRUSTEES; OTHER PROVISIONS
 
     The 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. 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 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.
 
     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.
 
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 (as defined in the MGCL) or an affiliate of the
Interested Shareholder are prohibited for five years after the most recent date
on which the Interested
 
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<PAGE>   90
 
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 relating to changes in the number of authorized shares of
beneficial interest of the Company must receive the approval of holders of not
less than a majority of all votes entitled to be cast on the matter.
 
ADVANCE NOTICE OF TRUSTEE NOMINATIONS AND NEW BUSINESS
 
     The Bylaws 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
 
                                       86
<PAGE>   91
 
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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<PAGE>   92
 
                             PARTNERSHIP AGREEMENT
 
     The following summary of the Partnership Agreement, including the
descriptions of certain provisions thereof set forth elsewhere in this
Prospectus, is qualified in its entirety by reference to the Partnership
Agreement, a copy of which has been filed as incorporated by reference as an
exhibit to the Registration Statement of which this Prospectus is a part and may
be obtained as described under "Available Information."
 
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 is an additional general partner in
the Operating Partnership, but the right and power to manage the Operating
Partnership is 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. The 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 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 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 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 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
Partnership will reimburse the Company for all expenses it incurs relating to
its activities as general partner, its
 
                                       88
<PAGE>   93
 
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 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 Partnership Agreement, each holder of
Units other than the Company and certain of its affiliates generally will have
the right to require the redemption of its Units at any time or from time to
time beginning on the first anniversary of the issuance of such Units to it (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 partners of the ZML Opportunity Partnerships, including
the Investor Limited Partners, who received Units in the Consolidation will only
have the right to require the redemption of their Units at any time commencing
two years after the closing of the IPO (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 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. 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 Partnership Agreement imposes certain restrictions on the transfer of
Units. The 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 Partnership Agreement, the
distribution of Units by a ZML Opportunity Partnership to any of its partners in
compliance with any applicable securities laws, and the distribution by WRAM and
WRH to one or more of the constituent partners and shareholders, members,
partners or beneficiaries of constituent partners thereof ("Wright Runstad
Investors") in compliance with applicable securities laws. See "Series C
Preferred Shares -- 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
 
                                       89
<PAGE>   94
 
contribute to the Operating Partnership the proceeds, if any, received by the
Company from such issuance. In addition, the Partnership Agreement provides that
the Operating Partnership may also issue 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. Accordingly, in connection with the
Offering the Operating Partnership will issue to the Company Series C Preference
Units that mirror the rights, preferences and other privileges of the Series C
Preferred Shares. 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 unless such limited
or general partner agrees otherwise.
 
DISTRIBUTIONS; ALLOCATIONS OF INCOME AND LOSS
 
     The Partnership Agreement generally provides for the quarterly distribution
of Available Cash (as defined below), as determined in the manner provided in
the 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). If any Preference Units are outstanding,
distributions shall be paid to in accordance with the rights of each class of
Preference Units (and, within each such class, pro rata in proportion to the
respective percentage interest of each holder), with any remaining Available
Cash distributed in accordance with the previous sentence. "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 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
(or they) 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 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
 
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<PAGE>   95
 
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.
 
AMENDMENT OF THE PARTNERSHIP AGREEMENT
 
     Amendments to the Partnership Agreement may be proposed by the Company or
by limited partners owning at least 25% of the then outstanding Units.
Generally, the 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 rights to receive any distributions (except as permitted under the
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.
 
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<PAGE>   96
 
                        FEDERAL INCOME TAX CONSEQUENCES
 
   
     The following discussion summarizes certain federal income tax
considerations relating to the Company and to the acquisition, ownership and
disposition of the Series C Preferred Shares. The following description is not
exhaustive of all possible tax considerations and is not intended to be tax
advice. For example, this summary does not give a detailed discussion of any
state, local or foreign tax consequences. In addition, this 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 subheading "-- 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 subheading "--
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 the 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 current law or
adversely affect existing interpretations of current law. Any such change could
apply retroactively to transactions preceding the date of the change. Except as
described below in "-- Requirements for Qualification as a REIT -- 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 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.
 
   
     Hogan & Hartson L.L.P., special tax counsel to the Company, has reviewed
the following discussion and is of the opinion that, to the extent it
constitutes matters of law or legal conclusions or purports to describe certain
provisions of the federal tax laws, the discussion is a correct summary of the
matters discussed therein.
    
 
     As used in this section, the term "the Company" refers solely to Equity
Office Properties Trust.
 
     EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT WITH ITS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO IT OF THE ACQUISITION, OWNERSHIP AND
SALE OF PIERS 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 AS A REIT -- 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 ended December 31,
1997, when it files its federal income tax return for 1997. The Company believes
that, commencing with its formation on July 11, 1997, it has been organized and
has operated in such a manner so as to qualify for taxation as a REIT under the
Code.
 
     Hogan & Hartson L.L.P., special tax counsel to the Company in connection
with the Offering, will deliver an opinion to the effect that the Company is
organized in conformity with the requirements for qualification and taxation as
a REIT under the Code, and that the Company's proposed method of operation will
enable it to continue to meet the requirements for qualification and taxation as
a REIT. This opinion will be conditioned upon certain representations made by
the Company as to factual matters relating to the organization and operation of
the Company, the Operating Partnership, the ZML Opportunity Partnerships (and
the previous organization and operation of the ZML REITs, which were combined to
form the Company, and Beacon, which was merged into the Company) and the various
entities (corporations,
 
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<PAGE>   97
 
partnerships and limited liability companies) in which the Company owns a direct
or indirect interest, as well as Tenant Services Corp. In addition, this opinion
will be based upon the factual representations of the Company concerning its
business and properties as set forth in this Offering Memorandum and the timely
completion of all actions described in this Offering Memorandum (including the
Company making an election to be taxed as a REIT with its federal income tax
return for the year ended December 31, 1997). The Company intends to continue to
operate in a manner so as to qualify as a REIT in the future, but no assurance
can be given that the Company will qualify or remain qualified as a REIT.
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. See "-- Requirements for Qualification as a
REIT -- Failure of the Company to Qualify as a REIT."
 
     The sections of the Code and the corresponding Treasury Regulations
relating to qualification and operation as a REIT are highly technical and
complex. The following discussion sets forth certain material aspects of the
rules that govern the federal income tax treatment of a REIT and its
shareholders. The discussion is qualified in its entirety by the applicable Code
provisions, Treasury Regulations and administrative and judicial interpretations
thereof, all of which are subject to change prospectively or retroactively.
 
     So long as 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
distributed currently to shareholders. This treatment substantially eliminates
the "double taxation" (i.e., taxation at both the corporate and shareholder
levels) that generally results from investment in a regular corporation. The
Company will, however, be subject to federal income tax in the following
circumstances. 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 any items of tax preference. Third, if the Company
has (i) net income from the sale or other disposition of certain "foreclosure
property" that is held primarily for sale to customers in the ordinary course of
business or (ii) other nonqualifying income from foreclosure property, it will
be subject to tax at the highest corporate rate on such income. Fourth, if the
Company has net income from prohibited transactions (which are, in general,
certain sales or other dispositions of property (other than foreclosure
property) held primarily for sale to customers in the ordinary course of
business), 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
(discussed below), and nonetheless should maintain its qualification as a REIT
because certain other requirements have been met, it will be subject to a 100%
tax on the net income attributable to the greater of either the amount by which
it fails the 75% gross income test or the amount by which it fails the 95% gross
income test. 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, it will be subject to a 4%
excise tax on the excess of such required distribution over the amounts actually
distributed. Seventh, if the Company acquires or has acquired any asset from a C
corporation (i.e., a corporation generally subject to full corporate-level tax)
in a transaction in which the basis of the asset in the acquiror's hands is
determined by reference to the basis of the asset (or any other asset) in the
hands of the C corporation and the acquiror recognizes gain on the disposition
of such asset during the 10-year period beginning on the date on which such
asset was acquired by it, then to the extent of such asset's "Built-In Gain"
(i.e., the excess of (a) the fair market value of such asset at the time of the
acquisition by the Company over (b) the adjusted basis in such asset, determined
as of the time of such acquisition), such gain will be subject to tax at the
highest regular corporate rate applicable, pursuant to anticipated Treasury
Regulations that have not yet been promulgated.
 
     The results described above with respect to the recognition of Built-In
Gain assume that the Company will make an election pursuant to IRS Notice 88-19
with respect to any such acquisition. In this regard, the Built-In Gain rules
would apply with respect to any assets acquired by the Company from a ZML REIT
or Beacon if either a ZML REIT or Beacon had failed to qualify, for any reason,
as a REIT throughout the
 
                                       93
<PAGE>   98
 
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) and a ZML REIT or Beacon failed to qualify as a REIT
at the time of its merger with the Company, the entity that failed to so qualify
would recognize taxable gain on such merger under the Built-In Gain rules (and
the Company would be liable for the tax thereon), notwithstanding that such
merger otherwise qualified as a "tax-free reorganization." The Company believes
that each of the ZML REITs and Beacon qualified as a REIT at the time of its
merger into the Company, but the Company intends to make a protective election
under Notice 88-19 with respect to the merger of each of the ZML REITs and
Beacon in order to avoid the adverse consequences that otherwise could result.
 
REQUIREMENTS FOR QUALIFICATION AS A REIT
 
     GENERAL. The Code defines a REIT as a corporation, trust or association (i)
that 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) that would be taxable as a domestic
corporation, but for Sections 856 through 860 of the Code; (iv) that 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) not more than 50% in value of the outstanding shares of which is
owned directly or indirectly by five or fewer individuals (as defined in the
Code to include certain entities) during the last half of each taxable year (the
"5/50 Rule"); (vii) that makes an election to be a REIT (or has made such
election for a previous taxable year which has not been revoked or terminated)
and satisfies all relevant filing and other administrative requirements
established by the IRS that must be met in order to elect and maintain REIT
status; (viii) that uses a calendar year for federal income tax purposes and
complies with the recordkeeping requirements of the Code and Treasury
Regulations promulgated thereunder; and (ix) that 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 12 months, or during a proportionate part of a taxable year of
less than 12 months. For purposes of determining stock ownership under the 5/50
Rule, a supplemental unemployment compensation benefits plan, a private
foundation or a portion of a trust permanently set aside or used exclusively for
charitable purposes generally is considered an individual. However, a trust that
is a qualified trust under Code Section 401(a) generally is not considered an
individual and beneficiaries of such trust are treated as holding shares of a
REIT in proportion to their actuarial interests in such trust for purposes of
the 5/50 Rule.
 
     The Company believes that it has issued sufficient shares of beneficial
interest with sufficient diversity of ownership to allow it to satisfy the
conditions described in clauses (v) and (vi) above. In addition, the Declaration
of Trust contains restrictions regarding the transfer of shares of beneficial
interest that are intended to assist the Company in continuing to satisfy the
share ownership requirements described in clauses (v) and (vi) above. 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 "-- Requirements for Qualification as a REIT."
 
     In connection with the 5/50 Rule, a REIT is required to send annual letters
to its shareholders requesting information regarding the actual ownership of its
shares. Pursuant to the Taxpayer Relief Act of 1997 (the "1997 Act"), for the
Company's taxable years beginning on or after January 1, 1998, if the Company
complies with the annual letters requirement and it does not know or, exercising
reasonable diligence, would not have known of its failure to meet the 5/50 Rule,
then it will be treated as having met the 5/50 Rule.
 
     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 commenced operations in 1997 and will
make a REIT election for its first taxable year ended December 31, 1997. Hence,
the Company itself will not have any undistributed "C corporation earnings and
profits." However, the Company succeeded to various tax attributes of the ZML
REITs and Beacon, including any undistributed "earnings and profits." If each
ZML REIT and Beacon qualified as a REIT throughout the duration of its
 
                                       94
<PAGE>   99
 
existence, then any undistributed "earnings and profits" to which the Company
succeeded will not be "C corporation earnings and profits" and the Company will
satisfy this requirement. If, however, one or more of the ZML REITs or Beacon
failed to qualify as a REIT throughout the duration of its existence, then it
might have had undistributed "C corporation earnings and profits" that, if not
distributed by the Company prior to the end of its taxable year ended December
31, 1997, could prevent the Company from qualifying as a REIT. The Company
believes that each of the ZML REITs and Beacon qualified as a REIT throughout
the duration of its existence and that, in any event, neither a ZML REIT nor
Beacon should be considered to have had any undistributed "C corporation
earnings and profits" at the time of its merger into the Company. 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 or Beacon. Recently finalized Treasury
Regulations provide for certain "deficiency distribution" procedures. Although
the application of these Treasury Regulations is not entirely clear, it appears
that the Company may be able to use such "deficiency distribution" procedures to
distribute any "C corporation earnings and profits" deemed to have been acquired
from a ZML REIT or Beacon. In order to use this procedure, the Company would
have to make an additional distribution to 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 "C
corporation earnings and profits" that were not distributed prior to the end of
the Company's taxable year ended December 31, 1997. There can be no assurance,
however, 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 its taxable year ended December 31, 1997, but it could
qualify as a REIT for subsequent years.
 
     Finally, if the Company were considered a "successor" to any ZML REIT and
such ZML REIT were determined not to have qualified as a REIT, the Company would
not be eligible to elect REIT status for up to four years after the year in
which such ZML REIT first failed to qualify as a REIT. The Company would be
considered a "successor" for these purposes, however, only if (i) persons who
own more than 50% of the Common Shares at any time during the Company's taxable
year ended December 31, 1997, 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 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 ZML Opportunity Partnership I and ZML 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 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 agreed that neither ZML REIT I nor
ZML REIT II would 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 ZML Opportunity Partnership I and ZML Opportunity Partnership II
made certain payments to the IRS. As a result of the closing agreements, the
technical violations discussed above have caused no adverse impact on either the
REIT status of ZML REIT I and ZML REIT II for the tax years at issue or the
Company's subsequent ability to qualify as a REIT.
 
     QUALIFIED REIT SUBSIDIARIES. Section 856(i) of the Code provides that a
corporation that is a "qualified REIT subsidiary" shall not be treated as a
separate corporation, and all assets, liabilities and items of income, deduction
and credit of a "qualified REIT subsidiary" shall be treated as assets,
liabilities and items of income, deduction and credit of the REIT. Pursuant to
the 1997 Act, for the Company's taxable years beginning on or after January 1,
1998, a "qualified REIT subsidiary" is a corporation all of the capital stock of
 
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which is owned by the REIT. Accordingly, the Company will have the ability, if
it so chooses, to acquire an existing corporation that will qualify as a
"qualified REIT subsidiary," as opposed to having to form such a subsidiary. The
Company currently has two "qualified REIT subsidiaries." The Company may form or
acquire additional "qualified REIT subsidiaries" in the future. In applying the
income and asset tests described below, a "qualified REIT subsidiary" will be
ignored and all assets, liabilities and items of income, deduction and credit of
such "qualified REIT subsidiary" will be treated as assets, liabilities and
items of income, deduction and credit of the Company. A "qualified REIT
subsidiary" of the Company will not be subject to federal corporate income
taxation, although it may be subject to state and local taxation in certain
states.
 
     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 retain the same character in the hands of the REIT for purposes of
Section 856 of the Code, including satisfying the gross income tests and the
asset tests. Thus, the Company's proportionate share of the assets and items of
income of the Operating Partnership (including the Operating Partnership's share
of such items of any subsidiaries of the Operating Partnership that are
partnerships or limited liability companies) will be treated as assets and items
of income of the Company for purposes of applying the requirements described
herein. The Company has direct control of the Operating Partnership, each of the
ZML Opportunity Partnerships, and each partnership or limited liability company
subsidiary of the Operating Partnership and intends to operate them in a manner
that is consistent with the requirements for qualification of the Company as a
REIT.
 
     INCOME TESTS APPLICABLE TO REITS. To qualify as a REIT, the Company must
satisfy two gross income tests. First, at least 75% of the Company's gross
income (excluding gross income from prohibited transactions) for such taxable
year must be derived directly or indirectly from investments relating to real
property or mortgages on real property (including "rents from real property,"
gains on the disposition of real estate, dividends paid by another REIT 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 such taxable year must be derived from such real
property investments, dividends, interest, certain payments under hedging
instruments and gain from the sale or disposition of stock, securities and
certain hedging instruments (or from any combination of the foregoing).
 
     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."
 
     Generally, for rents received by the REIT to qualify as rents "from real
property" for the purpose of satisfying the gross income tests, the REIT may not
operate or manage the property or furnish or render services to the tenants of
such property other than through an independent contractor from whom the REIT
derives no revenue. However, a REIT may provide de minimis services directly to
the tenants of a property, provided, however, that if (i) the REIT operates or
manages a property or furnishes or renders services to the tenants at the
property other than through an independent contractor from whom the REIT derives
no revenue (not including services "usually or customarily rendered" in
connection with the rental of real property and not otherwise considered
"rendered to the occupant") and (ii) the amount received for so doing (the
"Impermissible Tenant Service Income") exceeds 1% of the total amount received
by the REIT with respect to the property, then no amount received by the REIT
with respect to the property will qualify as "rents from real property." If the
Impermissible Tenant Service Income is 1% or less of the total amount received
by the REIT with respect to the property, then only the Impermissible Tenant
Service Income will not qualify as
 
                                       96
<PAGE>   101
 
"rents from real property." A REIT's Impermissible Tenant Service Income will
not be less than 150% of the REIT's direct cost in generating such income. 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 an independent contractor, the cost of the services must be borne by
the independent contractor. In this regard the Company has engaged Tenant
Services Corp. (owned by affiliates of the Equity Group Owners), which has been
structured to qualify as an independent contractor, to perform certain services
that the Company believes are customarily offered in institutional quality
office properties that might not be permissible for a REIT to perform directly.
 
     In any event, for all taxable years, the REIT may directly manage and
operate a Property and may directly perform certain other services so long as
the management and operation provided and such other services performed are
"usually or customarily rendered" with respect thereto in connection with the
rental of space for occupancy only and are not otherwise considered "rendered to
the occupant" of the property. The Company, through the Operating Partnership,
will provide certain services to the Properties. Based upon the Company's
experience in the office rental markets in which the Properties are located, the
Company believes that all services provided to tenants by the Company either (i)
are "usually or customarily rendered" in connection with the rental of office
space for occupancy or (ii) will not result in Impermissible Tenant Service
Income in excess of the de minimis threshold described above, although there can
be no assurance that the IRS will not contend otherwise with respect to either
of these positions.
 
     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 Company's 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 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
(except to the extent that the Impermissible Tenant Service Income would not
exceed the 1% threshold described above or the Board of Trustees otherwise
determines, in its discretion, that the nonqualifying income resulting therefrom
is not material and will not jeopardize the Company's status as a REIT).
 
     The Company has received a ruling from the IRS to the effect that income
received pursuant to agreements entered into by the Operating Partnership with
third-party service companies (the "Service Companies"), to operate attached
parking facilities under which agreements the Operating Partnership bears the
expenses incurred in operating the parking facilities, will qualify as "rents
from real property" for purposes of the 95% and 75% gross income tests. Under
the agreements covered by this ruling, parking garages that 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.
 
     All but one of the stand-alone garages held by the Operating Partnership
are operated by Service Companies under lease agreements whereby the Operating
Partnership and the Service Companies share the gross receipts from the parking
operation or the Operating Partnership receives fixed rental payments from the
Service Companies and bears none of the operational expenses. The income
received by the Operating 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. One stand-alone garage agreement provides for
the receipt of a percentage of net receipts by the Operating Partnership and,
therefore, results in an insignificant amount of non-qualifying gross income
relative to the total gross income of the Company. The Company believes that
this income received under this agreement should not affect its ability to
satisfy the 95% and 75% gross income tests in future taxable years.
 
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<PAGE>   102
 
     "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. In this regard, the Company currently holds,
through Beacon Management Company and Beacon Construction Company, options to
acquire loans secured by the Rowes Wharf property. Such loans provide for
payments of interest based upon cash flow. These loans could not be held
directly by the Company without jeopardizing their qualification as a REIT and
will continue to be held in a taxable "C corporation."
 
     EOP Management Company and Beacon Management Company conduct third-party
management services with respect to properties not wholly owned by the Operating
Partnership; Beacon Design Company provides interior space design services with
respect to properties not wholly owned by the Operating Partnership; and EOP
Office Company, through its interest in WRALP, provides development services
with respect to properties that are not wholly owned by the Operating
Partnership (collectively, together with Beacon Construction Company (which is
expected to cease operations upon completion of its existing contracts), the
"Noncontrolled Subsidiaries"). The Operating Partnership owns 100% of the
non-voting stock of each of the Noncontrolled Subsidiaries, 1% of the voting
stock of Beacon Management Company, Beacon Design Company and Beacon
Construction Company, and none of the voting stock of any of the other
Noncontrolled Subsidiaries. Each of the Noncontrolled Subsidiaries is taxable as
a regular "C corporation." The Company's share of any dividends received from
the Noncontrolled Subsidiaries should qualify for purposes of the 95% gross
income test but not for purposes of the 75% gross income test. The Company does
not anticipate that it will receive sufficient dividends from the Noncontrolled
Subsidiaries 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 generally be available if (i) the Company's failure to meet such
tests is due to reasonable cause and not due to willful neglect and (ii) the
Company attaches a schedule of the sources of its income to its federal income
tax return and any incorrect information on such schedule is 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 fail to qualify as a REIT. As discussed above in "-- Taxation of
the Company as a REIT -- General," even if these relief provisions apply, a tax
would be imposed with respect to the excess net income. No similar relief
provision is available if the Company failed the 30% income test for its taxable
year ended December 31, 1997, pursuant to which, for the taxable year ended
December 31, 1997, 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"). Accordingly, if the 30% gross income test was not met for such
taxable year, the Company will fail to qualify as a REIT. The 30% gross income
test was repealed by the 1997 Act for taxable years beginning on or after
January 1, 1998. The Company believes and has represented that the 30% gross
income test was met for its taxable year ended December 31, 1997.
 
     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. 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
 
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<PAGE>   103
 
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 (including stock of a REIT) 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, except for REITs or "qualified
REIT subsidiaries" or corporations that qualify as REITs, the Company may not
own more than 10% of any one issuer's outstanding voting securities.
    
 
     Stock interests owned by the Company in another REIT are qualifying real
estate assets for purposes of the 75% gross asset test, and, consequently, such
stock interests are not subject to the 10% voting stock limitation described
above. The Operating Partnership currently owns 51.6% of the outstanding stock
of BeaMetFed, Inc., which has elected to be taxed as a REIT for federal income
tax purposes. As a REIT, BeaMetFed, Inc. is subject to the various REIT
qualification requirements described herein. The Company believes that
BeaMetFed, Inc. has been organized and has operated in a manner so as to qualify
for taxation as a REIT for federal income tax purposes and will continue to be
organized and to operate in such a manner. If BeaMetFed, Inc. were to fail to
qualify as a REIT, the Company's stock interests in BeaMetFed, Inc. would cease
to be qualifying real estate assets for purposes of the 75% gross asset test and
would become subject to the 10% voting stock limitation generally applicable to
the Company's ownership in corporations which are neither REITs nor qualified
REIT subsidiaries. Since the Company owns 51.6% of the outstanding stock of
BeaMetFed, Inc., upon any failure of BeaMetFed, Inc. to qualify as a REIT, the
10% voting stock limitation would not be satisfied and the Company itself would
fail to qualify as a REIT.
 
     The Operating Partnership does not own more than 1% of the voting stock of
any of the Noncontrolled Subsidiaries but it does own 100% of the nonvoting
stock of each of the Noncontrolled Subsidiaries. The Operating Partnership also
may own nonvoting stock, representing substantially all of the equity, in other
corporate entities that serve as partners or members in the various entities
that hold title to the Properties. The Company has represented, however, that
the Operating Partnership does not and will not own more than 10% of the voting
securities of any entity that would be treated as a corporation for federal
income tax purposes (other than stock of REITs, which are not taken into account
for purposes of this limitation). In addition, the Company and its senior
management believe, and the Company has represented, that the Company's pro rata
share of the value of the securities of each of the Noncontrolled Subsidiaries
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 Noncontrolled Subsidiaries held by the Company (through the
ZML Opportunity Partnerships and the Operating Partnership) exceeds the 5% value
limitation or that nonvoting stock of the Noncontrolled Subsidiaries 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 a merger, the exercise of Unit Redemption Rights or an additional
capital contribution of proceeds of an offering of shares of beneficial interest
by the Company), 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
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<PAGE>   104
 
the Company fails to cure noncompliance with the asset tests within such time
period, the Company would cease to qualify as a REIT.
 
     ADMINISTRATION'S PROPOSED CHANGES TO REIT ASSET TEST. The Administration's
February 1998 budget proposal includes a proposal to amend the 10% voting
securities test by prohibiting a REIT from owning more than 10% of the vote or
value of all classes of stock of any corporation (other than a "qualified REIT
subsidiary" or another REIT). The proposed 10% vote or value limitation would be
applicable to stock acquired on or after the effective date of the proposal.
Stock owned by the Company prior to the effective date of the proposal generally
would be "grandfathered" (i.e., with respect to such grandfathered stock, the
Company would be subject to the existing 10% voting securities test described
above). However, if the corporation in which such grandfathered stock is held
were to engage in a new trade or business or acquire substantial new assets, the
grandfathered status would terminate with respect to such stock.
 
     The Company owns the majority of the nonvoting stock of the Noncontrolled
Subsidiaries and, consequently, the Company would not satisfy the proposed 10%
value limitation with respect to its stock interest in the Noncontrolled
Subsidiaries. As the proposal is currently drafted, stock held by the Company in
the Noncontrolled Subsidiaries prior to the effective date of the proposal
should be grandfathered. However, if, after the effective date of the proposal,
the Company were to acquire additional stock of a Noncontrolled Subsidiary (or
were deemed to acquire additional stock of a Noncontrolled Subsidiary as a
result of making a contribution to the capital of such Noncontrolled
Subsidiary), such additional stock would not be grandfathered and would be
subject to the 10% vote or value limitation. In addition, if the Noncontrolled
Subsidiaries were to engage in new trades or businesses or acquire substantial
new assets, then grandfathered stock held by the Company in the Noncontrolled
Subsidiaries would lose its grandfathered status and the Company would fail to
qualify as a REIT. Moreover, the Company would not be able to own more than 10%
of the vote or value of any corporation (other than a qualified REIT subsidiary
or another REIT) formed after the effective date of the proposal. Thus, if
enacted as currently drafted, the proposal would materially impede the ability
of the Company to engage in new activities or to expand substantially its
current activities conducted through the Noncontrolled Subsidiaries.
 
     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 Assets 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. See "-- General" above for a discussion of
"Built-In Gain Assets." 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 may elect to require the
shareholders to include the Company's undistributed net capital gains in their
income by designating, in a written notice to shareholders, those amounts as
undistributed capital gains in respect of its shareholders' shares. If the
Company makes such an election, the shareholders will (i) include in their
income as capital gains their proportionate share of such undistributed capital
gains and (ii) be deemed to have paid their proportionate share of the tax paid
by the Company on such undistributed capital gains and thereby receive a credit
or refund for such amount. A shareholder will increase the basis in its Common
Shares by the difference between the amount of capital gain included in its
income and the amount of the tax that the Company is deemed to have paid on the
shareholder's behalf. The earnings and profits of the Company will be adjusted
appropriately. For a more detailed description of the tax consequences to a
shareholder of such a designation, see "-- Taxation of Taxable U.S. Shareholders
of the Company Generally."
 
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<PAGE>   105
 
     In addition, 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 sum of amounts actually
distributed during the calendar year by the REIT and the amount, if any, on
which the REIT paid income tax for such year.
 
     The Company intends to make timely distributions sufficient to satisfy its
annual distribution requirements. In this regard, the Agreement of Limited
Partnership of the Operating Partnership 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 noncash 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.
 
     RECORDKEEPING REQUIREMENTS. Pursuant to applicable Treasury Regulations,
the Company must comply with certain recordkeeping requirements to qualify for
taxation as a REIT.
 
     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 HOLDERS OF SERIES C PREFERRED SHARES
 
     DIVIDENDS AND OTHER DISTRIBUTIONS; BACKUP WITHHOLDING. For a discussion of
the taxation of the Company, the treatment of dividends and other distributions
with respect to shares of the Company, and the backup withholding rules, see the
discussions under the captions "Federal Income Tax Considerations -- Taxation of
the Company as a REIT -- General" and "-- Taxation of Taxable U.S. Shareholders
of the Company Generally." In determining the extent to which a distribution on
the Series C Preferred Shares constitutes a dividend for tax purposes, the
earnings and profits of the Company will be allocated first to distributions
with respect to the Series C Preferred Shares, the Series A Preferred Shares and
the Series B Preferred Shares, and second to distributions with respect to the
Common Shares.
 
     REDEMPTION OF SERIES C PREFERRED SHARES FOR CASH. The treatment accorded to
any redemption by the Company for cash (as distinguished from a sale, exchange
or other disposition) of Series C Preferred Shares
 
                                       101
<PAGE>   106
 
can only be determined on the basis of particular facts as to each holder of
Series C Preferred Shares at the time of redemption. In general, a holder of
Series C Preferred Shares will recognize capital gain or loss measured by the
difference between the amount received by the holder of Series C Preferred
Shares upon the redemption and such holder's adjusted tax basis in the Series C
Preferred Shares redeemed (provided the Series C Preferred Shares are held as a
capital asset) if such redemption (i) results in a "complete termination" of the
interest of the holder of Series C Preferred Shares in all classes of stock of
the Company under Section 302(b)(3) of the Code or (ii) is "not essentially
equivalent to a dividend" with respect to the holder of Series C Preferred
Shares within the meaning of Section 302(b)(1) of the Code. In applying these
tests, there must be taken into account not only any Series C Preferred Shares
owned by the holder of Series C Preferred Shares, but also such holder's
ownership of Common Shares, Series A Preferred Shares, Series B Preferred Shares
and any options (including stock purchase rights) to acquire any of the
foregoing. The holder of Series C Preferred Shares also must take into account
any such securities (including options) which are considered to be owned by such
holder by reason of the constructive ownership rules set forth in Sections 318
and 302(c) of the Code.
 
     If a holder of Series C Preferred Shares owns (actually or constructively)
no Common Shares, Series A Preferred Shares or Series B Preferred Shares or an
insubstantial percentage of the outstanding Common Shares, Series A Preferred
Shares or Series B Preferred Shares, based upon current law, it is probable that
a redemption of Series C Preferred Shares from such holder would be considered
"not essentially equivalent to a dividend." However, whether a distribution is
"not essentially equivalent to a dividend" depends on all of the facts and
circumstances and a holder of Series C Preferred Shares intending to rely on any
of these tests at the time of redemption should consult its own tax adviser to
determine their application to its particular situation.
 
     If the redemption does not meet any of the tests under Section 302 of the
Code, then the redemption proceeds received from the Series C Preferred Shares
will be treated as a distribution on the Series C Preferred Shares as described
under "Federal Income Tax Considerations -- Taxation of Taxable U.S.
Shareholders of the Company Generally." If the redemption is taxed as a
dividend, the adjusted tax basis of the holder of Series C Preferred Shares in
the Series C Preferred Shares redeemed will be transferred to any other
stockholdings of the such holder Company. If the holder of Series C Preferred
Shares owns no other Stockholdings in the Company, under certain circumstances,
such basis may be transferred to a related person, or it may be lost entirely.
 
     SPECIAL CONSIDERATIONS FOR NON-U.S. SHAREHOLDERS. There are several special
considerations for prospective purchasers of Series C Preferred Shares who are
Non-U.S. Shareholders for U.S. federal tax purposes. For a description of these
special considerations, see "-- Taxation of Non-U.S. Shareholders of the
Company," below.
 
TAXATION OF TAXABLE U.S. SHAREHOLDERS OF THE COMPANY GENERALLY
 
     As used herein, the term "U.S. Shareholder" means a holder of Common Shares
or Preferred 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 treated as a corporation or partnership for federal income tax
purposes created or organized in or under the laws of the United States or of
any political subdivision thereof, (iii) is an estate the income of which is
subject to United States federal income taxation regardless of its source or
(iv) a trust whose administration is subject to the primary supervision of a
United States court and which has one or more United States persons who have the
authority to control all substantial decisions of the trust.
 
     DISTRIBUTIONS BY THE COMPANY. 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. 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 shares for tax purposes by
the amount of such distribution (but not below zero), with distributions in
excess of a U.S.
 
                                       102
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Shareholder's adjusted basis in its shares taxable as capital gains (provided
that the shares have been held as a capital asset). Dividends declared by the
Company in October, November, or December of any year and payable to a
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.
 
     Distributions made by the Company that are properly designated by the
Company as capital gain dividends will be taxable to taxable U.S. Shareholders,
who are individuals, estates or trusts, as gain from the sale or exchange of a
capital asset held for more than one year (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 its shares. In the event that
the Company designates any portion of a dividend as a "capital gain dividend," a
U.S. Shareholder's share of such capital gain dividend would be an amount which
bears the same ratio to the total amount of dividends paid to such U.S.
Shareholder for the year as the aggregate amount designated as a capital gain
dividend bears to the aggregate amount of all dividends paid on all classes of
shares for the year.
 
     On November 10, 1997, the IRS issued IRS Notice 97-64, which provides
generally that the Company may classify portions of its designated capital gain
dividend as (i) a 20% rate gain distribution (which would be taxed as long-term
capital gain in the 20% group), (ii) an unrecaptured Section 1250 gain
distribution (which would be taxed as long-term capital gain in the 25% group),
or (iii) a 28% rate gain distribution (which would be taxed as long-term capital
gain in the 28% group). (If no designation is made, the entire designated
capital gain divided will be treated as a 28% rate gain distribution. For a
discussion of the 20%, 25% and 28% tax rates applicable to individuals, see "--
1997 Act Changes to Capital Gain Taxation" below.) IRS Notice 97-64 provides
that a REIT must determine the maximum amounts that it may designate as 20% and
25% rate capital gain dividends by performing the computation required by the
Code as if the REIT were an individual whose ordinary income were subject to a
marginal tax rate of at least 28%. The Notice further provides that designations
made by the REIT only will be effective to the extent that they comply with
Revenue Ruling 89-91, which requires that distributions made to different
classes of shares be composed proportionately of dividends of a particular type.
 
     Distributions that are properly designated by the Company as capital gain
dividends will be taxable to taxable corporate U.S. Shareholders as long-term
capital gain (to the extent that capital gains dividends do not exceed the
Company's actual net capital gain for the taxable year) without regard to the
period for which such corporate U.S. Shareholder has held its shares. Such
corporate U.S. Shareholders may, however, be required to treat up to 20% of
certain capital gain dividends as ordinary income.
 
     U.S. Shareholders may not include in their individual income tax returns
any net operating losses or capital losses of the Company. Instead, such losses
would be carried over by the Company for potential offset against future income
(subject to certain limitations). Distributions made by the Company and gain
arising from the sale or exchange by a U.S. Shareholder of 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. In addition, taxable distributions from the Company generally will be
treated as investment income for purposes of the investment interest
limitations. Capital gain dividends and capital gains from the disposition of
shares (including distributions treated as such), however, will be treated as
investment income only if the U.S. Shareholder so elects, in which case such
capital gains will be taxed at ordinary income rates. The Company will notify
shareholders after the close of the Company's taxable year as to the portions of
distributions attributable to that year that constitute ordinary income, return
of capital and capital gain.
 
     The Company may designate (by written notice to shareholders) its retained
net capital gain (i.e., net capital gain that is not actually distributed as
capital gain dividends, as described above) as undistributed capital gains in
respect of shareholders' shares. Pursuant to such a designation by the Company
with respect to retained net capital gains, a U.S. Shareholder would include its
proportionate share of such gain in income as capital gain and would be treated
as having paid its proportionate share of the tax paid by the REIT with respect
to the gain. The U.S. Shareholder's basis in its shares would be increased by
its share of such gain and decreased by its share of such tax. With respect to
such capital gain of a U.S. Shareholder that is an individual
 
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<PAGE>   108
 
or an estate or trust, the IRS, as described below in this section, has
authority to issue regulations that could apply the special tax rate applicable
generally to the portion of the long-term capital gains of an individual or an
estate or trust attributable to deductions for depreciation taken with respect
to depreciable real property.
 
     SALES OF SHARES. Upon any sale or other disposition of 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 shares for tax purposes. Such gain or loss
will be capital gain or loss if the shares have been held by the U.S.
Shareholder as a capital asset. In the case of a U.S. Shareholder who is an
individual or an estate or trust, such gain or loss will be long-term capital
gain or loss, subject to a 28% tax rate, if such shares have been held for more
than one year but not more than 18 months, and long-term capital gain or loss,
subject to a 20% tax rate, if such shares have been held for more than 18
months. In the case of a U.S. Shareholder that is a corporation, such gain or
loss will be long-term capital gain or loss if such 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 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 that were required to be treated as long-term
capital gains. For a U.S. Shareholder that is an individual, trust or estate,
the long-term capital loss would be apportioned among the applicable long-term
capital gain groups to the extent it appears that distributions received by such
U.S. Shareholder were previously so treated.
 
     1997 ACT CHANGES TO CAPITAL GAIN TAXATION. The 1997 Act altered the
taxation of capital gain income. Under the 1997 Act, individuals, trusts and
estates that hold certain investments for more than 18 months may be taxed at a
maximum long-term capital gain rate of 20% on the sale or exchange of those
investments. Individuals, trusts and estates that hold certain assets for more
than one year but not more than 18 months may be taxed at a maximum long-term
capital gain rate of 28% on the sale or exchange of those investments. The 1997
Act also provides a maximum rate of 25% for "unrecaptured section 1250 gain" for
individuals, trusts and estates, special rules for "qualified 5-year gain," and
other changes to prior law. The 1997 Act allows the IRS to prescribe regulations
on how the 1997 Act's new capital gain rates will apply to sales of capital
assets by "pass-through entities," which include REITs, such as the Company, and
to sales of interests in "pass-through entities." For a discussion of new rules
under the 1997 Act that apply to the taxation of distributions by the Company to
its shareholders that are designated by the Company as "capital gain dividends,"
see "-- Distributions by the Company" above. Shareholders are urged to consult
with their own tax advisors with respect to the new rules contained in the 1997
Act.
 
BACKUP WITHHOLDING FOR DISTRIBUTIONS BY THE COMPANY
 
     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 nonforeign 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 shares
as "debt financed property" within the meaning of the Code and such shares are
not otherwise used in a trade or business, the dividend income from the Company
will not be UBTI to a tax-exempt shareholder. Similarly,
 
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<PAGE>   109
 
income from the sale of shares will not constitute UBTI unless such tax-exempt
shareholder has held such shares as "debt financed property" within the meaning
of the Code or has used the shares in a trade or business.
 
     For tax-exempt 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
shareholders should consult their own tax advisors concerning these "set aside"
and reserve requirements.
 
     Notwithstanding the above, however, the Code provides that 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 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 both the
current ownership of shares and the limitations on transfer and ownership of
shares contained in the Declaration of Trust, the Company does not expect to be
classified as a "pension held REIT."
 
TAXATION OF NON-U.S. SHAREHOLDERS OF THE COMPANY
 
     The rules governing United States federal income taxation of the ownership
and disposition of 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. 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 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
 
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<PAGE>   110
 
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. The Company expects to withhold
United States income tax at the rate of 30% on the gross amount of any such
distributions made to a Non-U.S. Shareholder unless (i) a lower treaty rate
applies and any required form or certification evidencing eligibility for that
reduced rate is filed with the Company or (ii) the Non-U.S. Shareholder files an
IRS Form 4224 with the Company claiming that the distribution is effectively
connected income.
 
     Distributions in excess of current or accumulated earnings and profits of
the Company will not be taxable to a Non-U.S. Shareholder to the extent that
they do not exceed the adjusted basis of the shareholder's shares but rather
will reduce the adjusted basis of such shares. To the extent that such
distributions exceed the adjusted basis of a Non-U.S. Shareholder's shares, they
will give rise to gain from the sale or exchange of its 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.
 
     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) the
investment in the Common Shares is effectively connected with the Non-U.S.
Shareholder's United States trade or business, in 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"), taxable
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 (whether or
not designated as a capital gain dividend) 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.
 
     Pursuant to IRS Notice 97-64, amounts designated by the Company pursuant to
the 1997 Act as undistributed capital gains in respect of shareholders' shares
(see "-- Requirements for Qualification as a REIT -- Annual Distribution
Requirements Applicable to REITs" above) will be treated with respect to
Non-U.S. Shareholders in the manner outlined in the preceding two paragraphs for
actual distributions by the Company of capital gain dividends. Under that
approach, the Non-U.S. Shareholders would be able to offset as a credit against
their United States federal income tax liability resulting therefrom their
proportionate share of the tax paid by the Company on such undistributed capital
gains (and to receive from the IRS a refund to the extent their proportionate
share of such tax paid by the Company were to exceed their actual United States
federal income tax liability).
 
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<PAGE>   111
 
     SALE OF COMMON SHARES. Gain recognized by a Non-U.S. Shareholder upon the
sale or exchange of shares (including a redemption of shares that is not treated
as a dividend) 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 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. Notwithstanding the foregoing, gain from
the sale or exchange of shares not otherwise subject to FIRPTA will be taxable
to a Non-U.S. Shareholder if (i) the investment in the shares is effectively
connected with the Non-U.S. Shareholder's United States trade or business, in
which case the Non-U.S. Shareholder will be subject to the same treatment as
domestic shareholders with respect to such gain (in addition, 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.
 
     The Company believes that it will continue to be a "domestically controlled
REIT," and therefore that the sale of shares will not be subject to taxation
under FIRPTA. However, because the shares are publicly traded, no assurance can
be given that the Company will continue to be a "domestically controlled REIT."
If the Company fails to qualify as a "domestically controlled REIT," gain
arising from the sale or exchange by a Non-U.S. Shareholder of shares still
would not be subject to United States taxation under FIRPTA as a sale of a
"United States real property interest" if (i) the class or series of shares
being sold is "regularly traded" (as defined by applicable Treasury Regulations)
on an established securities market (e.g., the New York Stock Exchange) and (ii)
the selling Non-U.S. Shareholder held 5% or less of the value of the outstanding
class or series of shares being sold at all times during a specified testing
period. If gain on the sale or exchange of 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 and any special alternative
minimum tax in the case of nonresident alien individuals), and the purchaser of
the 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 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 shares by a foreign office of a broker that
(a) is a United States person, (b) derives 50% or more of its gross income for
certain periods from the conduct of a trade or business in the United States or
(c) is a "controlled foreign corporation" (generally, a foreign corporation
controlled by United States 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 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 Department has recently finalized regulations
regarding the withholding and information reporting rules discussed above. In
general, these regulations do not alter the substantive withholding and
information reporting requirements but unify certification procedures and forms
and clarify and modify reliance standards. Pursuant to IRS Notice 98-16, these
regulations generally are effective for
 
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<PAGE>   112
 
payments made after December 31, 1999, subject to certain transition rules.
Valid withholding certificates that are held on December 31, 1999 will remain
valid until the earlier of December 31, 2000 or the date of expiration of the
certificate under rules currently in effect (unless otherwise invalidated due to
changes in the circumstances of the person whose name is on such certificate). A
Non-U.S. Shareholder should consult its own advisor regarding the effect of the
new Treasury Regulations.
 
TAX ASPECTS OF THE COMPANY'S OWNERSHIP OF INTERESTS IN THE ZML OPPORTUNITY
PARTNERSHIPS, THE OPERATING PARTNERSHIP AND THE SUBSIDIARY PARTNERSHIPS
 
     GENERAL. Substantially all of the Company's investments are 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 "-- Requirements for Qualification as a REIT
- -- Ownership of Partnership Interests by a REIT."
 
     ENTITY CLASSIFICATION. If any of the ZML Opportunity Partnerships, the
Operating Partnership, or the Subsidiary Partnerships 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 "-- Requirements for
Qualification as a REIT--Asset Tests Applicable to REITs" and "-- Income Tests
Applicable to REITs"). The same result could occur if any LLC failed to qualify
for treatment as a partnership (or were not disregarded for federal income tax
purposes).
 
     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 Treasury Regulations
provide that the IRS will not challenge the classification of an existing
partnership or limited liability company for tax periods prior to January 1,
1997, so long as (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 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
 
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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 the
Operating 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 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. Under Treasury Regulations
promulgated under Section 704 of the Code, similar rules apply when a
partnership elects to "revalue" its assets in certain situations, such as when a
contribution of property is made to a partnership by a new partner.
 
     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
alternative 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" of accounting for
Book-Tax Differences with respect to the properties initially contributed to the
Operating Partnership in connection with its formation or subsequently acquired
by merger or contribution.
 
     Based on the foregoing, in general, if any asset contributed to or revalued
by the Operating Partnership is determined to have a fair market value which is
greater than its adjusted tax basis, certain partners of the Operating
Partnership (including, as to certain Properties, the Company) will be allocated
lower amounts of depreciation deductions for tax purposes by the Operating
Partnership and increased taxable income and gain on sale. Such 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) of the Code
do not always entirely rectify the Book-Tax Difference on an annual basis or
with respect to a specific transaction such as a sale. Thus, the Company may be
allocated lower depreciation and other deductions, and possibly greater amounts
of taxable income in the event of a sale of contributed assets, and such amounts
may be 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 "-- Requirements
for Qualification as a REIT -- Annual Distribution Requirements Applicable to
REITs."
 
OTHER TAX CONSEQUENCES FOR THE COMPANY, ITS SHAREHOLDERS AND THE NONCONTROLLED
SUBSIDIARIES
 
     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 Noncontrolled Subsidiaries through payments of
dividends on the shares of such Corporations held by the Operating Partnership.
The Noncontrolled Subsidiaries pay federal and state income tax at the full
applicable corporate rates. To the extent that the Noncontrolled Subsidiaries
are required to pay federal, state or local taxes, the cash otherwise available
for distribution by the Company to Shareholders will be reduced accordingly.
 
                                       109
<PAGE>   114
 
                              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 Series C Preferred
Shares is consistent with its fiduciary responsibilities under ERISA. 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"), also should ensure that the
purchase or redemption of the Series C Preferred Shares will not constitute a
prohibited transaction under ERISA or the Code, or if such transaction otherwise
were a prohibited transaction, that such transaction were subject to one or more
statutory or administrative exemptions, the latter issued by the U.S. Department
of Labor ("DOL").
 
STATUS OF THE COMPANY AND THE OPERATING PARTNERSHIP UNDER ERISA
 
     The following section discusses certain principles that apply in
determining whether the fiduciary, or medical savings account or other plan or
investment vehicle 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.
 
     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 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" 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
Commission (the "registration period"), after the end of the fiscal year of the
issuer during which the offering occurred).
 
     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 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
 
                                       110
<PAGE>   115
 
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 Series C
Preferred Shares are of the type of restrictions on transfer generally permitted
under the DOL Regulation and should not result in the failure of the Series C
Preferred Shares to be "freely transferable" within the meaning of the DOL
Regulation. See "Series C Preferred Shares -- Restrictions on Transfer." The
Company also believes that certain restrictions on transfer that derive from the
securities laws, and may derive from the securities laws and from contractual
arrangements with the Underwriters in connection with the Offering should not
result in the failure of the Series C Preferred Shares to be "freely
transferable." Furthermore, the Company is not aware of any other facts or
circumstances limiting the transferability of the Series C Preferred Shares that
are not included among those referenced as not affecting free transferability
under the DOL Regulation, and the Company does not expect to impose in the
future (or to permit any person to impose on its behalf) any other limitations
or restrictions on transfer that would not be among the enumerated permissible
limitations or restrictions.
 
     Assuming that (i) the Series C Preferred 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 Series C Preferred Shares, the Company believes that,
under the DOL Regulation, the Series C Preferred Shares should then be
considered "publicly-offered securities."
 
                                       111
<PAGE>   116
 
                                  UNDERWRITERS
 
     Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the Underwriters
named below, for whom Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, PaineWebber Incorporated, Prudential Securities
Incorporated and Salomon Brothers Inc are acting as representatives (the
"Representatives"), have severally agreed to purchase, and the Company has
agreed to sell to them, severally, the respective number of Series C Preferred
Shares set forth opposite the names of such Underwriters below:
 
<TABLE>
<CAPTION>
                                                              NUMBER OF
                            NAME                               SHARES
                            ----                              ---------
<S>                                                           <C>
Morgan Stanley & Co. Incorporated...........................
Merrill Lynch, Pierce, Fenner & Smith
            Incorporated....................................
PaineWebber Incorporated....................................
Prudential Securities Incorporated..........................
Salomon Brothers Inc .......................................
 
                                                              ---------
            Total...........................................
                                                              =========
</TABLE>
 
     The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Series C Preferred Shares
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to take
and pay for all of the Series C Preferred Shares offered hereby (other than
those covered by the Underwriters' overallotment option described below) if any
such shares are taken.
 
     The Underwriters initially propose to offer part of the Series C Preferred
Shares directly to the public at the public offering price set forth on the
cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $       a share under the public offering price. Any
Underwriter may allow, and such dealers may reallow, a concession not in excess
of $       a share to other Underwriters or to certain dealers. After the
initial offering of the Series C Preferred Shares, the offering price and other
selling terms may from time to time be varied by the Representatives.
 
   
     The Company has granted to the Underwriters an option, exercisable for 30
days after the date hereof, to purchase up to 1,200,000 additional Series C
Preferred Shares to cover over-allotments, if any, at the 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 Series C Preferred Shares to be purchased
by such Underwriter bears to the total number of Series C Preferred Shares, as
shown in the foregoing table.
    
 
     Application has been made to list the Series C Preferred Shares on the
NYSE. If so approved, trading of the Series C Preferred Shares on the NYSE is
expected to commence within the 30-day period after initial
 
                                       112
<PAGE>   117
 
delivery thereof. The Underwriters have advised the Company that they intend to
make a market in the Series C Preferred Shares prior to the commencement of
trading on the NYSE. The Underwriters will have no obligation to make a market
in the Series C Preferred Shares, however, and may cease market-making
activities, if commenced, at any time.
 
   
     The Company has agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during
the period ending 30 days after the date of this Prospectus, (i) offer, pledge,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase, lend
or otherwise transfer or dispose of, directly or indirectly, any Series C
Preferred Shares, any other equity securities of the Company which are
substantially similar to the Series C Preferred Shares (other than any
securities of the Company which are convertible into Common Shares) or any
securities convertible into or exercisable or exchangeable for Series C
Preferred Shares or any other equity securities of the Company which are
substantially similar to the Series C Preferred Shares (other than any
securities of the Company which are convertible into Common Shares) or (ii)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of any Series C Preferred
Shares, any other equity securities of the Company which are substantially
similar to the Series C Preferred Shares (other than any securities of the
Company which are convertible into Common Shares) or any securities convertible
into or exercisable or exchangeable for Series C Preferred Shares or any other
equity securities of the Company which are substantially similar to the Series C
Preferred Shares (other than any securities of the Company which are convertible
into Common Shares), whether any such transaction described in clause (i) or
(ii) above is to be settled by delivery of Series C Preferred Shares, other
securities, in cash or otherwise. The restrictions described in this paragraph
do not apply to the sale of Series C Preferred Shares to the Underwriters.
    
 
     In order to facilitate the offering of the Series C Preferred Shares, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Series C Preferred Shares. Specifically, the
Underwriters may overallot in connection with the offering, creating a short
position in the Series C Preferred Shares for their own account. In addition, to
cover overallotments or to stabilize the price of the Series C Preferred Shares,
the Underwriters may bid for, and purchase, Series C Preferred Shares in the
open market. Finally, the underwriting syndicate may reclaim selling concessions
allowed to an Underwriter or a dealer for distributing the Series C Preferred
Shares in the offering, if the syndicate repurchases previously distributed
Series C Preferred Shares in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Series C Preferred Shares above independent
market levels. The Underwriters are not required to engage in these activities,
and may end any of these activities at any time.
 
                                    EXPERTS
 
     The consolidated financial statements of Equity Office Properties Trust as
of December 31, 1997 and for the period from July 11, 1997 to December 31, 1997,
the combined financial statements of the Equity Office Predecessors as of
December 31, 1996 and for the period from January 1, 1997 to July 10, 1997 and
the years ended December 31, 1996 and 1995, the statements of revenue and
certain expenses for 177 Broad Street, Preston Commons, Oakbrook Terrace Tower,
One Maritime Plaza, 201 Mission Street, 30 N. LaSalle, Columbus America
Properties, Prudential Properties, 550 South Hope Street, Acorn Properties, 10 &
30 South Wacker Drive, One Lafayette Centre, PPM Properties and Wright Runstad
Properties, 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.
 
     The consolidated balance sheets of Beacon Properties Corporation as of
December 31, 1996 and 1995 and the related statements of operations, owners'
equity and cash flows for the years ended December 31, 1996 and 1995 and the
period May 26, 1994 to December 31, 1994, the combined statements of operations,
owners' equity and cash flows of the Beacon predecessor entity for the period
January 1, 1994 to May 25, 1994 and the related financial statement schedules of
Beacon Properties Corporation as of December 31, 1996, included
 
                                       113
<PAGE>   118
 
herein have been so included in reliance on the report of Coopers & Lybrand
L.L.P., independent accountants, given on the authority of that firm as experts
in accounting and auditing.
 
                                 LEGAL MATTERS
 
     The legality of the Series C Preferred Shares will be passed upon for the
Company by Hogan & Hartson L.L.P., Washington, D.C. Certain tax matters will be
passed upon by Hogan & Hartson L.L.P., Washington, D.C., special tax counsel to
the Company. Brown & Wood LLP will act as counsel to the Underwriters. Brown &
Wood LLP will rely, as to matters of Maryland law, upon the opinion of Hogan &
Hartson L.L.P.
 
                             AVAILABLE INFORMATION
 
     The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and, in accordance therewith, is required to
file reports, proxy statements and other information with the Commission. Such
reports, proxy statements and other information can be inspected and copied at
the Public Reference Section of the Commission at Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's regional offices at
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661
and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of the
reports, proxy statements and other information can be obtained form the Public
Reference Section of the Commission, Washington, D.C. 20549, upon payment of
prescribed rates, or in certain cases by accessing the Commission's World Wide
Web site at http://www.sec.gov. The Common Shares are listed on the NYSE under
the symbol "EOP," the Series A Preferred Shares are listed on the NYSE under the
symbol "EOPpfA," and application has been made to list the Series C Preferred
Shares on the NYSE under the symbol "EOPpfC." Such reports, proxy statements and
other information concerning the Company can be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005.
 
     The Company has filed with the Commission a registration statement on Form
S-11 (the "Registration Statement"), of which this Prospectus is a part, under
the Securities Act, with respect to the Series C Preferred Shares offered
hereby. This Prospectus does not contain all of the 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 contents of any contract or other documents are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or documents filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference and the
exhibits and schedules thereto. For further information regarding the Company
and the Series C Preferred Shares, reference is hereby made to the Registration
Statement and such exhibits and schedules which may be obtained from the
Commission at its principal office in Washington, D.C. upon payment of the fees
prescribed by the Commission. The Commission maintains a "web site" that
contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission. The address of
such site is "http://www.sec.gov."
 
                                       114
<PAGE>   119
 
                                    GLOSSARY
 
     For purposes of this Prospectus, the following capitalized terms shall have
the meanings set forth below:
 
     "Articles Supplementary" means Articles Supplementary to the Declaration of
Trust determining the terms of each series of Preferred Shares.
 
     "BankBoston" means BankBoston, N.A.
 
     "Beacon" means Beacon Properties Corporation, a Maryland corporation.
 
     "Beacon Facility" means the credit facility under which the $533 million of
unsecured indebtedness of Beacon was issued and subsequently assumed by the
Company in the Beacon Merger.
 
     "Beacon Management Company" means Beacon Property Management Corporation, a
Delaware corporation.
 
     "Beacon Merger" means the merger of Beacon with and into the Company and
the merger of Beacon Partnership with and into the Operating Partnership.
 
     "Beacon Partnership" means Beacon Properties, L.P., a Delaware limited
partnership.
 
     "Beacon Properties" means the office properties the Company acquired
pursuant to the Beacon Merger.
 
     "Beneficiary" means a trust, the beneficiary of which will be a qualified
charitable organization selected by the Company, to which excess shares of a
Prohibited Owner will be transferred automatically, by operation of law.
 
     "Book-Tax Difference" means the difference between the fair market value of
contributed property at the time of contribution and the adjusted tax basis of
such property at any specific time.
 
     "BPMLP" means Beacon Property Management, L.P., a Delaware limited
partnership.
 
     "Business Day" means any day, other than a Saturday or Sunday, on which
banking institutions in New York, New York and Boston, Massachusetts are open
for business.
 
     "Bylaws" means the bylaws adopted by the Board of Trustees of the Company,
as amended from time to time.
 
     "Cash Redemption Right" means the right of the Company to redeem Series B
Preferred Shares on and after February 15, 2003, in whole or from time to time
in part, at the cash redemption prices applicable thereto.
 
     "CBDs" means central business districts.
 
     "Code" means the Internal Revenue Code of 1986, as amended.
 
     "Commission" means the U.S. Securities and Exchange Commission.
 
     "Common Shares" means the common shares of beneficial interest, $0.01 par
value per share, of the Company.
 
     "Company" means Equity Office Properties Trust, a Maryland real estate
investment trust, and one or more of its subsidiaries (including the Operating
Partnership), and the predecessors thereof, or as the context may require,
Equity Office Properties Trust only or the Operating Partnership only. All
references to the historical activities of the Company prior to July 11, 1997
refer to the activities of the Equity Office Predecessors.
 
     "Consolidation" means all of the transactions described under "Certain
Relationships and Related Transactions -- Formation Transactions."
 
     "Contribution Agreement" means the agreement pursuant to which the ZML
Funds and the Company agreed to consolidate.
 
                                       115
<PAGE>   120
 
     "Conversion Price" means the initial conversion price of $35.70 per Common
Share (equivalent to a conversion rate of 1.40056 Common Shares for each Series
B Preferred Share), as may be adjusted under certain circumstances described in
the Articles Supplementary.
 
     "Core Portfolio" means the properties that were held by the EOP
Predecessors or the Company, as the case may be, during the entire period or for
both periods being compared.
 
     "Credit Facilities" means both the $600 Million Credit Facility and the
$1.5 Billion Credit Facility.
 
     "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, Preferred 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
partner in excess of the Company's proportionate share of such debt.
 
     "Declaration of Trust" means the Company's declaration of trust, as amended
from time to time, and as filed with the State Department of Assessments and
Taxation of Maryland.
 
     "Distribution Payment Date" means the      day of March, June, September
and December, or the next succeeding business day, on which distributions are
payable.
 
     "Distribution Record Date" means the      day of the month in which the
Distribution Payment Date falls or such other date designated by the Board of
Trustees for the payment of distributions.
 
     "DOL" means the U.S. Department of Labor.
 
     "DOL Regulation" means a regulation issued by the DOL that defines plan
assets for certain purposes.
 
     "EGI" means Equity Group Investments, Inc., an owner, manager and financier
of real estate and corporations.
 
   
     "Employee Plan" means the Company's Amended and Restated 1997 Employee
Share Option and Share Award Plan.
    
 
     "EOH" means Equity Office Holdings, L.L.C., a Delaware limited liability
company.
 
     "EOP Management Company" means Equity Office Properties Management Corp., a
Delaware corporation.
 
     "Equity Group" means one or both of EGI and EOH.
 
     "Equity Group Companies" means numerous non-public companies owned in whole
or in part by Mr. Zell or his affiliates.
 
     "Equity Group Owners" means certain trusts established for the benefit of
the families of Mr. Zell and of Mr. Robert Lurie, the deceased former partner of
Mr. Zell, and the partnerships comprised of such trusts.
 
     "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 were combined into the Company pursuant to the
Consolidation.
 
     "ERISA Plan" means an employee benefit plan subject to ERISA.
 
     "Event" means an amendment, alteration or repeal of the provisions of the
Declaration of Trust or the Articles Supplementary for the Series C Preferred
Shares, resulting from a merger or consolidation.
 
     "Exchange Offer Registration Statement" means the registration statement
filed on March 5, 1998 by the Operating Partnership relating to a registered
offer to exchange the unsecured notes in the $180 million Notes Offering, the
$1.25 Billion Notes Offering and the $250 Million MOPPRS Offering for registered
securities of the Operating Partnership with terms identical to those of the
existing notes.
 
     "First Plaza" means First Plaza Group Trust.
 
                                       116
<PAGE>   121
 
     "FIRPTA" means the Foreign Investment in Real Property Tax Act.
 
     "Formation Transactions" means the transactions pursuant to which the
Company and the Operating Partnership were formed.
 
     "Funds from Operations" 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 believes that Funds
from Operations is helpful to investors as a measure of the performance of an
equity REIT because, along with cash flow from operating activities, financing
activities and investing activities, it provides investors with an indication of
the ability of the Company to incur and service debt, to make capital
expenditures and to fund other cash needs. 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.
 
     "GM" means General Motors Corporation.
 
     "GMIMCO" means General Motors Investment Management Corporation, an advisor
to several pension funds of GM.
 
     "Impermissable Tenant Service Income" means the amount received when a REIT
operates or manages a property or furnishes or renders services to the tenants
at the property other than through an independent contractor from whom the REIT
derives no revenue.
 
     "Interested Shareholder" means any person who beneficially owns ten percent
or more of the voting power of a trust's then outstanding shares or an affiliate
of such 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 such trust.
 
     "Investor Limited Partners" means the several institutional investor
limited partners in ZML Opportunity Partnerships I and II.
 
     "IPO" means the Company's July 1997 initial public offering of 28,750,000
Common Shares.
 
     "IRS" means the United States Internal Revenue Service.
 
     "Joint Venture Properties" means 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.
 
     "Leventhal Partnership" means the Leventhal Family Limited Partnership.
 
     "LIBOR" means the London Interbank Offering Rate.
 
     "Managed Properties" means the properties managed by the Management
Companies.
 
     "Managed Property Business" means that portion of the Management Business
that relates to property management of the Managed Properties and the Joint
Venture Properties that were contributed to the Company in the Consolidation,
which business is owned and conducted by EOP Management Company.
 
                                       117
<PAGE>   122
 
     "Management Business" means the office property management business of EOH
and the office property asset management business and the parking asset
management business of EGI and EOH relating to the Properties that were
contributed to the Company in the Consolidation.
 
     "Management Companies" means EOP Management Company and Beacon Management
Company.
 
     "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 and Plan of Merger dated September
15, 1997, as amended, among the Company, the Operating Partnership, Beacon and
Beacon Partnership.
 
   
     "Merrill Lynch" means Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated.
    
 
     "MGCL" means the Maryland General Corporation Law, as amended from time to
time.
 
     "MOPPRS" means the $250 million of 6.376% MandatOry Par Put Remarketing
Securities which the Operating Partnership has agreed to sell in the MOPPRS
Offering.
 
     "NAREIT" means the National Association of Real Estate Investment Trusts,
Inc.
 
     "1997 Act" means the federal Taxpayer Relief Act of 1997.
 
     "Noncontrolled Subsidiaries" means the Management Companies, EOP Office
Company, Beacon Design Company and Beacon Construction Company.
 
     "Non-ERISA Plan" means an IRA or a qualified pension, profit sharing or
stock bonus plan, medical savings account, or other plan or investment vehicle
which is not subject to ERISA.
 
     "Non-U.S. Shareholders" means, collectively, persons that are, for purposes
of federal income taxation, nonresident alien individuals, foreign corporations,
foreign partnerships or foreign estates or trusts.
 
     "NYSE" means the New York Stock Exchange.
 
     "occupied" means all space which is leased and for which the lease term has
commenced.
 
     "Offering" means this offering of Series C Preferred Shares of the Company
pursuant to and as described in this Prospectus.
 
     "Office Properties" means the office properties owned by the Company or in
which the Company has an interest.
 
     "$1.25 Billion Notes Offering" means the Operating Partnership's $1.25
billion private placement of senior unsecured notes completed by the Company in
February 1998.
 
     "$1.5 Billion Credit Facility" means the Company's $1.5 billion unsecured
term loan facility entered into on October 2, 1997, with Morgan Guaranty Trust
Company of New York.
 
     "$180 Million Notes Offering" means the $180 million aggregate principal
amount of debt securities of the Operating Partnership issued in the Private
Debt Offering.
 
     "Operating Partnership" means EOP Operating Limited Partnership, a Delaware
limited partnership, alone as an entity, or, as the context may require, the
combined enterprise consisting of EOP Operating Limited Partnership and its
subsidiaries.
 
     "Other Acquisitions" means the acquisition transactions described in this
Prospectus under "The Company -- Acquisition Activity -- Other Acquisitions."
 
     "Other Plans" means an IRA or a qualified pension, profit sharing or bonus
plan which is not subject to ERISA but is subject to Section 4975 of the Code.
 
     "Ownership Limit" means the provisions of the Declaration of Trust which,
subject to certain exceptions, prohibit ownership, directly or by virtue of the
attribution provisions of the Code, by any single shareholder of
 
                                       118
<PAGE>   123
 
more than 9.9% in value or number of shares (whichever is more restrictive) of
the issued and outstanding shares of any class or series of shares of beneficial
interest of the Company.
 
     "Parity Preferred Shares" means any other series of Preferred Shares
ranking on a parity as to distributions with the Series A Preferred Shares.
 
     "Parking Facilities" means the stand-alone parking facilities which the
Company owns or in which the Company has an interest.
 
     "Partnership Act" means the Delaware Revised Uniform Limited Partnership
Act.
 
     "Partnership Agreement" means the limited partnership agreement of the
Operating Partnership.
 
     "Person" means any individual, corporation, partnership, limited liability
company, joint venture, joint-stock company, trust, unincorporated organization,
real estate investment trust, or government or any agency or political
subdivision thereof.
 
     "Plan Assets" means underlying assets of the Company that are deemed to be
assets of an ERISA Plan.
 
     "Preference Units" means preferred units of partnership interest and
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 Distribution Default" means whenever distributions or any of the
Series C Preferred Shares are in arrears for six or more quarterly periods
(whether or not consecutive).
 
     "Preferred Shares" means any series of preferred shares of beneficial
interest of the Company having such rights, preferences and other privileges,
variations and designations as may be determined by the Company.
 
   
     "Probable Acquisitions" means the twelve additional office properties which
the Company has entered into agreements to acquire.
    
 
   
     "Pro Forma Basis" means giving effect to the following transactions which
occurred subsequent to March 31, 1998: (a) the acquisition or probable
acquisition of 19 office properties and the purchase of the remaining interest
in one of the Company's unconsolidated joint ventures; (b) the UIT Offering and
(c) the Offering.
    
 
     "Prohibited Owner" means any person or entity holding record title to
shares in excess of the Ownership Limit.
 
     "Prohibited Transferee" means the purported transferee of any purported
transfer of shares of beneficial interest of the Company or any other event
which would otherwise result in any person violating the Ownership Limit or the
other restrictions in the Declaration of Trust.
 
     "Properties" means both the Office Properties and the Parking Facilities.
 
     "Property Operating Expenses" means real estate taxes and insurance,
repairs and maintenance and property operating expenses.
 
     "Property Revenues" means rental revenues, tenant reimbursements, parking
income and other income.
 
     "Prospectus" means this Prospectus, as the same may be amended or
supplemented from time to time.
 
     "Registration Statement" means the Registration Statement filed with the
Commission pursuant to the Registration Rights Agreement.
 
     "REIT" means a real estate investment trust as defined under Sections 856
through 860 of the Code and applicable Treasury regulations.
 
     "Related Property Tenant" means a tenant, at least 10% of which is owned by
either the REIT or an actual or constructive owner of 10% or more of the REIT.
 
                                       119
<PAGE>   124
 
     "Representatives" means Morgan Stanley & Co. Incorporated, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, PaineWebber Incorporated, Prudential
Securities Incorporated and Salomon Brothers Inc.
 
     "Restricted Common Shares" means Common Shares issued in transactions not
registered under the Securities Act.
 
     "Securities Act" means the Securities Act of 1933, as amended.
 
     "Series A Preferred Shares" means the 8.98% Series A Cumulative Redeemable
Preferred Shares, liquidation preference $25.00 per share, of the Company.
 
     "Series A Preferred Units" means the 8.98% Series A Cumulative Redeemable
Preferred Units of partnership interest in the Operating Partnership.
 
     "Series B Preferred Offering" means the $300 million private placement of
Series B Preferred Shares completed in February 1998.
 
     "Series B Preferred Shares" means the 5.25% Series B Convertible,
Cumulative Redeemable Preferred Shares, liquidation preference of $50.00 per
share.
 
     "Series B Preferred Units" means the 5.25% Convertible, Cumulative
Redeemable Series B Preferred Units of partnership interest in the Operating
Partnership.
 
     "Series C Preference Units" means the   % Series C Cumulative Redeemable
Preference Units issued to the Company by the Operating Partnership.
 
     "Series C Preferred Shares" means the      % Series C Cumulative Redeemable
Preferred Shares of Beneficial Interest, $.01 par value per share, of the
Company.
 
     "Service Companies" means the third-party parking garage service companies
that the Parking Facilities are leased to and operated by.
 
     "Share Redemption Right" means the right of the Company to redeem Series B
Preferred Shares on and after February 15, 2003, in whole or in part, for such
number of Common Shares as are issuable at the Conversion Price.
 
     "Shares" means the Company's common or preferred shares of beneficial
interest.
 
   
     "$600 Million Credit Facility" means the Company's $600 million unsecured
revolving line of credit that was increased to $1.0 billion on May 28, 1998.
    
 
     "SPLP" means Standard Parking Limited Partnership.
 
     "Subsidiary" or "Subsidiaries" of any party means, generally, any
corporation, partnership, limited liability company, joint venture, trust or
other legal entity of which such Person owns (either directly or through or
together with another Subsidiary of such Person) either (i) a general partner,
managing member or other similar interest, or (ii) (A) 10% or more of the voting
power of the voting capital stock or other equity interest, or (B) 10% or more
of the outstanding voting capital stock or other voting equity interests of such
corporation, partnership, limited liability company, joint venture or other
legal entity. In addition to the entities described above, the term Subsidiary
includes the Noncontrolled Subsidiaries.
 
     "Tenant Services Corp." means Tenant Services Corp., a Delaware corporation
owned entirely by affiliates of the Equity Group Owners.
 
   
     "Total Portfolio" means the 260 Office Properties and the 17 stand-alone
Parking Facilities which the Company owned or had an interest in as of March 31,
1998.
    
 
     "$250 Million MOPPRS Offering" means the Operating Partnership's private
placement of the MOPPRS.
 
     "UIT" means Equity Investor Fund Cohen & Steers Realty Majors Portfolio (a
Unit Investment Trust).
 
     "UIT Offering" means the Company's private placement of $44 million of
Restricted Common Shares in April 1998.
                                       120
<PAGE>   125
 
     "UBTI" means unrelated business taxable income.
 
     "Underwriting Agreement" means the Underwriting Agreement dated the date of
this Prospectus between the Company and the Representatives acting on behalf of
the several Underwriters.
 
     "Unit Redemption Right" means the right of each holder of Units other than
the Company and certain of its affiliates to require the redemption of its Units
at any time or from time to time, subject to the terms and conditions set forth
in the Partnership Agreement.
 
     "Units" means the common units of partnership interest in the Operating
Partnership.
 
     "WRALP" means Wright Runstad Asset Limited Partnership.
 
     "WRAM" means Wright Runstad Asset Management, L.P.
 
     "WRH" means Wright Runstad Holdings, L.P.
 
     "Wright Runstad Acquisition" means the acquisition transaction described in
this Prospectus under "The Company -- Acquisition Activity -- Wright Runstad
Acquisition."
 
     "Wright Runstad Investors" means one or more of the constituent partners
and shareholders, members, partners or beneficiaries of the constituent partners
of WRH and/or WRAM.
 
     "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 Opportunity Partnership I" means Zell/Merrill Lynch Real Estate
Opportunity Partners Limited Partnership.
 
     "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, each of which is a limited partnership
organized under the laws of the State of Illinois.
 
     "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 and ZML Opportunity Partnership
IV.
 
     "ZML REIT I" means ZML Investors, Inc., a Delaware corporation.
 
     "ZML REIT II" means ZML Investors II, Inc., a Delaware corporation.
 
                                       121
<PAGE>   126
 
     "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.
 
                                       122
<PAGE>   127
 
                         INDEX TO FINANCIAL STATEMENTS
 
   
<TABLE>
<CAPTION>
                                                                PAGE
                                                                -----
<S>                                                             <C>
EQUITY OFFICE PROPERTIES TRUST
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
  (UNAUDITED)
  Basis of Presentation.....................................      F-4
  Pro Forma Condensed Combined Balance Sheet as of March 31,
     1998...................................................      F-5
  Pro Forma Condensed Combined Statement of Operations for
     the three months ended March 31, 1998..................      F-6
  Pro Forma Condensed Combined Statement of Operations for
     the year ended December 31, 1997.......................      F-7
  Notes to the Pro Forma Condensed Combined Financial
     Statements.............................................      F-9
HISTORICAL CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
  (UNAUDITED)
  Consolidated Balance Sheets of Equity Office Properties
     Trust as of March 31, 1998 and December 31, 1997.......     F-15
  Consolidated Statement of Operations of Equity Office
     Properties Trust for the three months ended March 31,
     1998 and the Combined Statement of Operations of Equity
     Office Predecessors for the three months ended March
     31, 1997...............................................     F-16
  Consolidated Statement of Cash Flows of Equity Office
     Properties Trust for the three months ended March 31,
     1998 and the Combined Statement of Cash Flows of Equity
     Office Predecessors for the three months ended March
     31, 1997...............................................     F-17
  Notes to Consolidated and Combined Financial Statements...     F-18
HISTORICAL CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
  (AUDITED)
  Report of Independent Auditors............................     F-27
  Consolidated and Combined Balance Sheets of Equity Office
     Properties Trust and Equity Office Predecessors as of
     December 31, 1997 and 1996.............................     F-28
  Consolidated Statement of Operations of Equity Office
     Properties Trust for the period from July 11, 1997 to
     December 31, 1997, and the Combined Statements of
     Operations of Equity Office Predecessors for the period
     from January 1, 1997 to July 10, 1997 and the years
     ended December 31, 1996 and 1995.......................     F-29
  Consolidated Statement of Shareholders' Equity of Equity
     Office Properties Trust for the period from July 11,
     1997 to December 31, 1997 and the Combined Statements
     of Owners' Equity of Equity Office Predecessors for the
     period from January 1, 1997 to July 10, 1997 and the
     years ended December 31, 1996 and 1995.................     F-30
  Consolidated Statement of Cash Flows of Equity Office
     Properties Trust for the period from July 11, 1997 to
     December 31, 1997, and the Combined Statements of Cash
     Flows of Equity Office Predecessors for the period from
     January 1, 1997 to July 10, 1997 and the years ended
     December 31, 1996 and 1995.............................     F-31
  Notes to Consolidated and Combined Financial Statements...     F-32
SCHEDULES
  Schedule III -- Real Estate and Accumulated
     Depreciation...........................................     F-63
  All other schedules for which provision is made in the
     applicable accounting regulations of the Securities and
     Exchange Commission are not required under the related
     instructions or are inapplicable, and therefore have
     been omitted.
</TABLE>
    
 
                                       F-1
<PAGE>   128
 
   
<TABLE>
<CAPTION>
                                                                PAGE
                                                                -----
<S>                                                             <C>
177 BROAD STREET
  Report of Independent Auditors............................     F-68
  Statement of Revenue and Certain Expenses for the year
     ended December 31, 1996................................     F-69
  Notes to Statement of Revenue and Certain Expenses........     F-70
PRESTON COMMONS
  Report of Independent Auditors............................     F-71
  Statement of Revenue and Certain Expenses for the year
     ended December 31, 1996................................     F-72
  Notes to Statement of Revenue and Certain Expenses........     F-73
OAKBROOK TERRACE TOWER
  Report of Independent Auditors............................     F-74
  Statements of Revenue and Certain Expenses for the three
     months ended March 31, 1997 and the year ended December
     31, 1996...............................................     F-75
  Notes to Statements of Revenue and Certain Expenses.......     F-76
ONE MARITIME PLAZA
  Report of Independent Auditors............................     F-77
  Statements of Revenue and Certain Expenses for the three
     months ended March 31, 1997 and the year ended December
     31, 1996...............................................     F-78
  Notes to Statements of Revenue and Certain Expenses.......     F-79
201 MISSION STREET
  Report of Independent Auditors............................     F-80
  Statements of Revenue and Certain Expenses for the three
     months ended March 31, 1997 and the year ended December
     31, 1996...............................................     F-81
  Notes to Statements of Revenue and Certain Expenses.......     F-82
30 N. LASALLE
  Report of Independent Auditors............................     F-83
  Statements of Revenue and Certain Expenses for the three
     months ended March 31, 1997 and the year ended December
     31, 1996...............................................     F-84
  Notes to Statements of Revenue and Certain Expenses.......     F-85
COLUMBUS AMERICA PROPERTIES
  Report of Independent Auditors............................     F-86
  Combined Statements of Revenue and Certain Expenses for
     the period from January 1, 1997 to July 31, 1997 and
     the year ended December 31, 1996.......................     F-87
  Notes to Combined Statements of Revenue and Certain
     Expenses...............................................     F-88
PRUDENTIAL PROPERTIES
  Report of Independent Auditors............................     F-90
  Combined Statements of Revenue and Certain Expenses for
     the period from January 1, 1997 to August 31, 1997 and
     the year ended December 31, 1996.......................     F-91
  Notes to Combined Statements of Revenue and Certain
     Expenses...............................................     F-92
550 SOUTH HOPE STREET
  Report of Independent Auditors............................     F-93
  Statements of Revenue and Certain Expenses for the period
     from April 1, 1997 to July 31, 1997 and the year ended
     March 31, 1997.........................................     F-94
  Notes to Statements of Revenue and Certain Expenses.......     F-95
ACORN PROPERTIES
  Report of Independent Auditors............................     F-96
  Combined Statements of Revenue and Certain Expenses for
     the period from January 1, 1997 to July 31, 1997 and
     the year ended December 31, 1996.......................     F-97
  Notes to Combined Statements of Revenue and Certain
     Expenses...............................................     F-98
</TABLE>
    
 
                                       F-2
<PAGE>   129
 
   
<TABLE>
<CAPTION>
                                                                PAGE
                                                                -----
<S>                                                             <C>
10 & 30 SOUTH WACKER DRIVE
  Report of Independent Auditors............................    F-100
  Combined Statements of Revenue and Certain Expenses for
     the period from January 1, 1997 to July 31, 1997 and
     the year ended December 31, 1996.......................    F-101
  Notes to Combined Statements of Revenue and Certain
     Expenses...............................................    F-102
ONE LAFAYETTE CENTRE
  Report of Independent Auditors............................    F-103
  Statements of Revenue and Certain Expenses for the period
     from January 1, 1997 to July 31, 1997 and the year
     ended December 31, 1996................................    F-104
  Notes to Statements of Revenue and Certain Expenses.......    F-105
PPM PROPERTIES
  Report of Independent Auditors............................    F-106
  Combined Statements of Revenue and Certain Expenses for
     the period from January 1, 1997 to August 31, 1997 and
     the year ended December 31, 1996.......................    F-107
  Notes to Combined Statements of Revenue and Certain
     Expenses...............................................    F-108
WRIGHT RUNSTAD PROPERTIES
  Report of Independent Auditors............................    F-109
  Combined Statements of Revenue and Certain Expenses for
     the period from October 1, 1996 to August 31, 1997 and
     the year ended September 30, 1996......................    F-110
  Notes to Combined Statements of Revenue and Certain
     Expenses...............................................    F-111
BEACON PROPERTIES CORPORATION
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
     Consolidated Balance Sheets as of September 30, 1997
      and December 31, 1996.................................    F-113
     Consolidated Statements of Operations for the nine
      months ended September 30, 1997 and 1996..............    F-114
     Consolidated Statements of Cash Flows for the nine
      months ended September 30, 1997 and 1996..............    F-115
     Notes to Consolidated Financial Statements.............    F-116
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS (AUDITED)
     Report of Independent Accountants......................    F-119
     Consolidated Balance Sheets as of December 31, 1996 and
      1995..................................................    F-120
     Consolidated Statements of Operations for the years
      ended December 31, 1996 and 1995 and for the periods
      May 26, 1994 to December 31, 1994 and January 1, 1994
      to May 25, 1994.......................................    F-121
     Consolidated Statements of Stockholders' Equity for the
      period January 1, 1994 to December 31, 1996...........    F-122
     Consolidated Statements of Cash Flows for the period
      January 1, 1994 to December 31, 1996..................    F-123
     Notes to Consolidated Financial Statements.............    F-124
     Report of Independent Accountants on Financial
      Statement Schedules...................................    F-140
     Schedule III -- Real Estate and Accumulated
      Depreciation as of December 31, 1996..................    F-141
     Schedule IV -- Mortgage Loans on Real Estate as of
      December 31, 1996.....................................    F-145
</TABLE>
    
 
                                       F-3
<PAGE>   130
 
   
                         EQUITY OFFICE PROPERTIES TRUST
    
 
   
               PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
    
 
   
            AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND
    
   
                       FOR THE YEAR ENDED DECEMBER, 1997
    
   
                                  (UNAUDITED)
    
 
   
     The accompanying unaudited Pro Forma Condensed Combined Balance Sheet as of
March 31, 1998 reflects the following transactions which all occurred or are
expected to occur subsequent to March 31, 1998: (a) the acquisition or probable
acquisition of 19 office properties and the purchase of the remaining
partnership interests in one of the Company's unconsolidated joint ventures; (b)
the increase in the $600 Million Credit Facility to $1.0 billion; (c) the UIT
Offering and (d) the anticipated preferred share offering of $200 million
consisting of eight million Series C Cumulative Redeemable Preferred Shares,
liquidation preference of $25.00 per share (the "Offering").
    
 
   
     The accompanying unaudited Pro Forma Condensed Combined Statement of
Operations for the three months ended March 31, 1998 reflects the following
transactions as if they had occurred on January 1, 1998: (a) the acquisition of
2 office properties, and one parking facility, acquired during the three months
ended March 31, 1998; (b) the acquisition of 8 office properties, acquired
between April 1, 1998 and May 26, 1998; (c) the purchase of the remaining
partnership interests in one of the Company's unconsolidated joint ventures; (d)
the probable acquisition of 12 office properties; (e) the February 1998 Notes
Offering; (f) the Series B Preferred Offering; (g) the increase in the $600
Million Credit Facility to $1.0 billion; (h) the UIT Offering; and (i) the
Offering.
    
 
   
     The accompanying unaudited Pro Forma Condensed Combined Statement of
Operations for the year ended December 31, 1997 reflects the following
transactions as if they had occurred on January 1, 1997: (a) the acquisition of
66 office properties, including 20 office properties acquired by Beacon prior to
the Beacon Merger, and seven parking facilities, including an interest in four
parking facilities, acquired during the year ended December 31, 1997; (b) the
disposition of three office properties; (c) the $180 million private debt
offering (the "$180 Million Notes Offering") which occurred on September 3,
1997; (d) the transactions that occurred in connection with the consolidation of
the entities which comprise the predecessors ("Equity Office Predecessors") of
the Company (the "Consolidation") and the initial public offering (the "IPO"),
which closed on July 11, 1997, and the decrease in interest expense resulting
from the use of the net proceeds for the repayment of mortgage debt; (e) the net
change in interest expense from draws on the $1.5 Billion Credit Facility used
to refinance existing mortgage debt; (f) the Beacon Merger; (g) the acquisition
of 10 office properties and one parking facility acquired between January 1,
1998 and May 26, 1998; (h) the purchase of the remaining partnership interest in
one of the Company's unconsolidated joint ventures; (i) the probable acquisition
of 12 office properties; (j) the February 1998 Notes Offering; (k) the Series B
Preferred Offering; (l) the increase in the $600 Million Credit Facility to $1.0
billion; (m) the UIT Offering and (n) the Offering.
    
 
   
     The accompanying unaudited pro forma condensed combined financial
statements have been prepared by management of the Company 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 accompanying notes to the pro forma
condensed combined financial statements as of and for the three months ended
March 31, 1998 and the year ended December 31, 1997, included elsewhere herein.
    
 
                                       F-4
<PAGE>   131
 
   
                         EQUITY OFFICE PROPERTIES TRUST
    
 
   
                 PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
    
 
   
                                 MARCH 31, 1998
    
   
                                  (UNAUDITED)
    
   
                                 (IN THOUSANDS)
    
 
   
<TABLE>
<CAPTION>
                                                    1998 ACQUIRED                 EQUITY OFFICE
                                  EQUITY OFFICE     PROPERTIES AND               PROPERTIES TRUST                 EQUITY OFFICE
                                 PROPERTIES TRUST      PROBABLE        UIT         PRE-OFFERING                  PROPERTIES TRUST
                                    HISTORICAL       ACQUISITIONS    OFFERING       PRO FORMA       OFFERING        PRO FORMA
                                 ----------------   --------------   --------    ----------------   ---------    ----------------
                                                         (A)           (B)                             (C)
<S>                              <C>                <C>              <C>         <C>                <C>          <C>
ASSETS
Investment in real estate,
  net..........................    $11,200,676         $914,356      $     --      $12,115,032      $      --      $12,115,032
Cash and cash equivalents......         11,681               --            --           11,681             --           11,681
Rents and other receivables....         70,478               --            --           70,478             --           70,478
Escrow deposits and restricted
  cash.........................         29,923               --            --           29,923             --           29,923
Investment in unconsolidated
  joint ventures...............        359,804          (15,791)           --          344,013             --          344,013
Other assets...................        131,432               --            --          131,432             --          131,432
                                   -----------         --------      --------      -----------      ---------      -----------
      TOTAL ASSETS.............    $11,803,994         $898,565      $     --      $12,702,559      $      --      $12,702,559
                                   ===========         ========      ========      ===========      =========      ===========
LIABILITIES AND SHAREHOLDERS'
  EQUITY
Mortgage debt..................    $ 2,060,105         $ 48,109      $     --      $ 2,108,214      $      --      $ 2,108,214(G)
Unsecured notes................      1,684,425           63,430            --        1,747,855             --        1,747,855(G)
Lines of credit................        243,000          786,926       (44,059)         985,867       (193,200)(D)      792,667(G)
Distribution payable...........         92,057               --            --           92,057             --           92,057
Other liabilities..............        284,137               --            --          284,137             --          284,137
                                   -----------         --------      --------      -----------      ---------      -----------
      TOTAL LIABILITIES........      4,363,724          898,465       (44,059)       5,218,130       (193,200)       5,024,930
Minority interests:
Operating Partnership..........        718,720              100            --          718,820             --          718,820
Partially owned properties.....         29,200               --            --           29,200             --           29,200
Preferred Shares (100,000
  authorized and 22,000
  issued)......................        500,000               --            --          500,000        200,000(E)       700,000
Common Shares..................          2,499               --            16            2,515             --            2,515
Additional paid in capital.....      6,189,851               --        44,043        6,233,894         (6,800)(F)    6,227,094
                                   -----------         --------      --------      -----------      ---------      -----------
      TOTAL LIABILITIES AND
         SHAREHOLDERS'
         EQUITY................    $11,803,994         $898,565      $     --      $12,702,559      $      --      $12,702,559
                                   ===========         ========      ========      ===========      =========      ===========
</TABLE>
    
 
                                       F-5
<PAGE>   132
 
   
                         EQUITY OFFICE PROPERTIES TRUST
    
 
   
              PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
    
   
                   FOR THE THREE MONTHS ENDED MARCH 31, 1998
    
   
                                  (UNAUDITED)
    
   
                                 (IN THOUSANDS)
    
   
<TABLE>
<CAPTION>
                                                                 1998
                                                          ACQUIRED PROPERTIES
                                        EQUITY OFFICE             AND
                                       PROPERTIES TRUST        PROBABLE         FEBRUARY 1998         SERIES B
                                          HISTORICAL         ACQUISITIONS       NOTES OFFERING   PREFERRED OFFERING   UIT OFFERING
                                       ----------------   -------------------   --------------   ------------------   ------------
                                             (H)                  (U)
<S>                                    <C>                <C>                   <C>              <C>                  <C>
REVENUES:
  Rental.............................      $289,213             $28,511             $  --             $    --            $  --
  Tenant reimbursements..............        52,989               3,588                --                  --               --
  Parking............................        21,214               1,524                --                  --               --
  Other..............................         6,177                 594                --                  --               --
  Fees from noncombined affiliates...         1,157                  --                --                  --               --
  Interest...........................         3,070                  --                --                  --               --
                                           --------             -------             -----             -------            -----
  Total revenues.....................       373,820              34,217                --                  --               --
                                           --------             -------             -----             -------            -----
EXPENSES:
  Property operating.................       137,865              12,837                --                  --               --
  Interest...........................        72,029              16,616               508(V)           (2,774)(W)         (760)(Y)
  Depreciation.......................        64,540               5,684                --                  --               --
  Amortization.......................         1,107                  --                --                  --               --
  General and administrative.........        13,948                  --                --                  --               --
                                           --------             -------             -----             -------            -----
                                            289,489              35,137         508......              (2,774)            (760)
                                           --------             -------             -----             -------            -----
Income before allocation to minority
  interests, income from investment
  in unconsolidated joint ventures...        84,331                (920)             (508)              2,774              760
Minority interests:
  Operating Partnership..............        (7,726)                140                53                 (61)             (79)
  Partially owned properties.........          (538)                 --                --                  --               --
Income from investment in
  unconsolidated joint ventures......         3,634                (434)               --                  --               --
                                           --------             -------             -----             -------            -----
Net income from continuing
  operations.........................        79,701              (1,214)             (455)              2,713              681
                                           --------             -------             -----             -------            -----
Preferred dividends..................        (6,271)                 --                --              (2,188)(X)           --
                                           --------             -------             -----             -------            -----
Net income available for Common
  Shares.............................      $ 73,430             $(1,214)            $(455)            $   525            $ 681
                                           ========             =======             =====             =======            =====
Net income available per weighted
  average Common Share Outstanding
  (Basic)............................
Weighted Average Common Shares
  Outstanding (Basic)................
Net income available per weighted
  average Common Share Outstanding
  (Diluted)..........................
Weighted Average Common Shares
  Outstanding (Diluted)..............
 
<CAPTION>
 
                                        EQUITY OFFICE
                                       PROPERTIES TRUST                EQUITY OFFICE
                                         PRE-OFFERING                 PROPERTIES TRUST
                                          PRO FORMA       OFFERING       PRO FORMA
                                       ----------------   --------    ----------------
 
<S>                                    <C>                <C>         <C>
REVENUES:
  Rental.............................      $317,724       $    --         $317,724
  Tenant reimbursements..............        56,577            --           56,577
  Parking............................        22,738            --           22,738
  Other..............................         6,771            --            6,771
  Fees from noncombined affiliates...         1,157            --            1,157
  Interest...........................         3,070            --            3,070
                                           --------       -------         --------
  Total revenues.....................       408,037            --          408,037
                                           --------       -------         --------
EXPENSES:
  Property operating.................       150,702            --          150,702
  Interest...........................        85,619        (3,333)(Z)       82,286
  Depreciation.......................        70,224            --           70,224
  Amortization.......................         1,107            --            1,107
  General and administrative.........        13,948            --           13,948
                                           --------       -------         --------
                                            321,600        (3,333)         318,267
                                           --------       -------         --------
Income before allocation to minority
  interests, income from investment
  in unconsolidated joint ventures...        86,437         3,333           89,770
Minority interests:
  Operating Partnership..............        (7,673)           69           (7,604)(AB)
  Partially owned properties.........          (538)           --             (538)
Income from investment in
  unconsolidated joint ventures......         3,200            --            3,200
                                           --------       -------         --------
Net income from continuing
  operations.........................        81,426         3,402           84,828
                                           --------       -------         --------
Preferred dividends..................        (8,459)       (4,000)(AA)     (12,459)
                                           --------       -------         --------
Net income available for Common
  Shares.............................      $ 72,967       $  (598)        $ 72,369
                                           ========       =======         ========
Net income available per weighted
  average Common Share Outstanding
  (Basic)............................                                     $   0.29
                                                                          ========
Weighted Average Common Shares
  Outstanding (Basic)................                                      251,576
                                                                          ========
Net income available per weighted
  average Common Share Outstanding
  (Diluted)..........................                                     $   0.28
                                                                          ========
Weighted Average Common Shares
  Outstanding (Diluted)..............                                      282,067
                                                                          ========
</TABLE>
    
 
                                       F-6
<PAGE>   133
 
   
                         EQUITY OFFICE PROPERTIES TRUST
    
 
   
              PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
    
   
                      FOR THE YEAR ENDED DECEMBER 31, 1997
    
   
                                  (UNAUDITED)
    
   
                                 (IN THOUSANDS)
    
   
<TABLE>
<CAPTION>
                                      EQUITY OFFICE                                                CONSOLIDATION
                                     PROPERTIES TRUST   1997 ACQUIRED                  FINANCING      AND IPO
                                        HISTORICAL       PROPERTIES     DISPOSITIONS   ACTIVITY     ADJUSTMENTS
                                     ----------------   -------------   ------------   ---------   -------------
                                           (H)               (I)            (J)
<S>                                  <C>                <C>             <C>            <C>         <C>
REVENUES:
  Rental...........................      $570,379         $245,032        $(5,645)     $     --      $  8,983(L)
  Tenant reimbursements............       106,437           54,560            (62)           --            --
  Parking..........................        47,051           17,229           (573)           --            --
  Other............................         9,863            4,307           (431)           --            --
  Fees from noncombined
    affiliates.....................         4,950               --             --            --            --
  Interest.........................        13,392               69             --            --            --
                                         --------         --------        -------      --------      --------
    Total revenues.................       752,072          321,197         (6,711)           --         8,983
                                         --------         --------        -------      --------      --------
EXPENSES:
  Property operating...............       282,964          124,069         (2,710)           --            --
  Interest.........................       164,105           94,782            (36)       16,606(K)    (27,042)(M)
  Depreciation.....................       122,074           56,550         (2,071)           --         2,737(N)
  Amortization.....................         7,357               --            (54)           --            --
  General and administrative.......        34,891            2,185           (283)           --         1,800(O)
                                         --------         --------        -------      --------      --------
                                          611,391          277,586         (5,154)       16,606       (22,505)
                                         --------         --------        -------      --------      --------
Income before allocation to
  minority interests, income from
  investment in unconsolidated
  joint ventures...................       140,681           43,611         (1,557)      (16,606)       31,488
Minority interests:
  Operating Partnership............        (7,010)              --             --            --       (13,170)
  Partially owned properties.......        (1,701)              --             --            --            --
Income from investment in
  unconsolidated joint ventures....         5,155            1,581             --            --            --
                                         --------         --------        -------      --------      --------
Net income from continuing
  operations.......................       137,125           45,192         (1,557)      (16,606)       18,318
                                         --------         --------        -------      --------      --------
Preferred dividends................          (649)          (7,962)            --            --            --
                                         --------         --------        -------      --------      --------
Net income available for Common
  Shares...........................      $136,476         $ 37,230        $(1,557)     $(16,606)     $ 18,318
                                         ========         ========        =======      ========      ========
Net income available per weighted
  average Common Share outstanding
  (Basic)..........................
Weighted Average Common Shares
  Outstanding (Basic)..............
Net income available per weighted
  average Common Share outstanding
  (Diluted)........................
Weighted Average Common Shares
  Outstanding (Diluted)............
 
<CAPTION>
                                     BEACON PROPERTIES   BEACON MERGER
                                        CORPORATION      AND HISTORICAL
                                        HISTORICAL        ADJUSTMENTS
                                     -----------------   --------------
                                            (P)
<S>                                  <C>                 <C>
REVENUES:
  Rental...........................      $299,196            $5,834(Q)
  Tenant reimbursements............        39,856                --
  Parking..........................            --                --
  Other............................        11,907                --
  Fees from noncombined
    affiliates.....................         3,090                --
  Interest.........................        10,067                --
                                         --------            ------
    Total revenues.................       364,116             5,834
                                         --------            ------
EXPENSES:
  Property operating...............       107,905                --
  Interest.........................        52,344               943(R)
  Depreciation.....................        65,034             5,374(S)
  Amortization.....................         4,209                --
  General and administrative.......        37,455                --(T)
                                         --------            ------
                                          266,947             6,317
                                         --------            ------
Income before allocation to
  minority interests, income from
  investment in unconsolidated
  joint ventures...................        97,169              (483)
Minority interests:
  Operating Partnership............       (12,021)            2,305
  Partially owned properties.......            --                --
Income from investment in
  unconsolidated joint ventures....         6,087                --
                                         --------            ------
Net income from continuing
  operations.......................        91,235             1,822
                                         --------            ------
Preferred dividends................        (9,349)               --
                                         --------            ------
Net income available for Common
  Shares...........................      $ 81,886            $1,822
                                         ========            ======
Net income available per weighted
  average Common Share outstanding
  (Basic)..........................
Weighted Average Common Shares
  Outstanding (Basic)..............
Net income available per weighted
  average Common Share outstanding
  (Diluted)........................
Weighted Average Common Shares
  Outstanding (Diluted)............
</TABLE>
    
 
                                       F-7
<PAGE>   134
 
   
                         EQUITY OFFICE PROPERTIES TRUST
    
 
   
              PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
    
 
   
                      FOR THE YEAR ENDED DECEMBER 31, 1997
    
   
                                  (UNAUDITED)
    
   
                                 (IN THOUSANDS)
    
   
<TABLE>
<CAPTION>
                                     1998 ACQUIRED                                                           EQUITY OFFICE
                                     PROPERTIES AND   FEBRUARY 1998                                         PROPERTIES TRUST
                                        PROBABLE          NOTES       SERIES B PREFERRED       UIT            PRE-OFFERING
                                      ACQUISITIONS      OFFERING           OFFERING          OFFERING          PRO FORMA
                                     --------------   -------------   ------------------     --------       ----------------
                                          (U)
<S>                                  <C>              <C>             <C>                    <C>            <C>
REVENUES:
  Rental...........................     $111,540         $    --           $     --          $    --           $1,235,319
  Tenant reimbursements............       15,792              --                 --               --              216,583
  Parking..........................        5,558              --                 --               --               69,265
  Other............................        2,882              --                 --               --               28,528
  Fees from noncombined
    affiliates.....................           --              --                 --               --                8,040
  Interest.........................           --              --                 --               --               23,528
                                        --------         -------           --------          -------           ----------
    Total revenues.................      135,772              --                 --               --            1,581,263
                                        --------         -------           --------          -------           ----------
EXPENSES:
  Property operating...............       54,351              --                 --               --              566,579
  Interest.........................       68,896           3,735(V)         (19,976)(W)       (3,040)(Y)          351,317
  Depreciation.....................       23,739              --                 --               --              273,437
  Amortization.....................           --              --                 --               --               11,512
  General and administrative.......           --              --                 --               --               76,048
                                        --------         -------           --------          -------           ----------
                                         146,986           3,735            (19,976)          (3,040)           1,278,893
                                        --------         -------           --------          -------           ----------
Income before allocation to
  minority interests, income from
  investment in unconsolidated
  joint ventures...................      (11,214)         (3,735)            19,976            3,040              302,370
Minority interests:
  Operating Partnership............        1,359             389               (440)            (316)             (28,904)
  Partially owned properties.......           --              --                 --               --               (1,701)
Income from investment in
  unconsolidated joint ventures....       (1,847)             --                 --               --               10,976
                                        --------         -------           --------          -------           ----------
Net income from continuing
  operations.......................      (11,702)         (3,346)            19,536            2,724              282,741
                                        --------         -------           --------          -------           ----------
Preferred dividends................           --              --            (15,750)(X)           --              (33,710)
                                        --------         -------           --------          -------           ----------
Net income available for Common
  Shares...........................     $(11,702)        $(3,346)          $  3,786          $ 2,724           $  249,031
                                        ========         =======           ========          =======           ==========
Net income available per weighted
  average Common Share Outstanding
  (Basic)..........................
Weighted Average Common Shares
  Outstanding (Basic)..............
Net income available per weighted
  average Common Share Outstanding
  (Diluted)........................
Weighted Average Common Shares
  Outstanding (Diluted)............
 
<CAPTION>
 
                                                   EQUITY OFFICE
                                                  PROPERTIES TRUST
                                     OFFERING        PRO FORMA
                                     --------     ----------------
 
<S>                                  <C>          <C>
REVENUES:
  Rental...........................  $     --        $1,235,319
  Tenant reimbursements............        --           216,583
  Parking..........................        --            69,265
  Other............................        --            28,528
  Fees from noncombined
    affiliates.....................        --             8,040
  Interest.........................        --            23,528
                                     --------        ----------
    Total revenues.................        --         1,581,263
                                     --------        ----------
EXPENSES:
  Property operating...............        --           566,579
  Interest.........................   (13,331)(Z)       337,986
  Depreciation.....................        --           273,437
  Amortization.....................        --            11,512
  General and administrative.......        --            76,048
                                     --------        ----------
                                      (13,331)        1,265,562
                                     --------        ----------
Income before allocation to
  minority interests, income from
  investment in unconsolidated
  joint ventures...................    13,331           315,701
Minority interests:
  Operating Partnership............       278           (28,626)(AB)
  Partially owned properties.......        --            (1,701)
Income from investment in
  unconsolidated joint ventures....        --            10,976
                                     --------        ----------
Net income from continuing
  operations.......................    13,609           296,350
                                     --------        ----------
Preferred dividends................   (16,000)(AA)      (49,710)
                                     --------        ----------
Net income available for Common
  Shares...........................  $ (2,391)       $  246,640
                                     ========        ==========
Net income available per weighted
  average Common Share Outstanding
  (Basic)..........................                  $     0.98
                                                     ==========
Weighted Average Common Shares
  Outstanding (Basic)..............                     251,156
                                                     ==========
Net income available per weighted
  average Common Share Outstanding
  (Diluted)........................                  $     0.98
                                                     ==========
Weighted Average Common Shares
  Outstanding (Diluted)............                     282,096
                                                     ==========
</TABLE>
    
 
                                       F-8
<PAGE>   135
 
   
                         EQUITY OFFICE PROPERTIES TRUST
    
 
   
         NOTES TO THE PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
    
   
                             (DOLLARS IN THOUSANDS)
    
 
   
A.  To reflect the following acquisitions during the period from April 1, 1998
    to May 26, 1998 and the Probable Acquisitions:
    
 
   
<TABLE>
<CAPTION>
                                                                      LIABILITIES                  RECLASS OF
                                                                        ASSUMED       VALUE OF     HISTORICAL
        PROPERTY           DATE ACQUIRED   PURCHASE COST     PAID      OR ISSUED    UNITS ISSUED      COST
        --------           --------------  -------------   --------   -----------   ------------   ----------
<S>                        <C>             <C>             <C>        <C>           <C>            <C>
Denver Post..............  April 28, 1998    $ 53,100      $ 53,000    $     --         $100        $    --
Miller Global
  Portfolio..............       (1)           393,015       281,476     111,539           --             --
301 Howard and 215
  Fremont................  April 29, 1998      90,000        90,000          --           --             --
Polk & Taylor............       (2)           173,741       157,950          --           --         15,791(4)
Millennium I & II........   May 19, 1998       46,000        46,000          --           --
Colonnade................       (3)           150,000       150,000          --           --             --
Walker Building..........       (3)             8,500         8,500          --           --             --
                                             --------      --------    --------         ----        -------
Totals...................                    $914,356      $786,926    $111,539         $100        $15,791
                                             ========      ========    ========         ====        =======
</TABLE>
    
 
- -------------------------
 
   
     (1) This portfolio consists of 13 office properties. The Company acquired
         four properties on April 30, 1998 and one property on May 15, 1998 and
         expects to acquire the remaining eight properties on July 15, 1998. In
         connection with this acquisition, the Company issued $63.4 million of
         unsecured notes which are payable within 120 days of closing in either
         cash or Common Shares.
    
 
   
     (2) On May 22, 1998, the Company acquired the remaining 90% interest in the
         Polk & Taylor Joint Venture.
    
 
   
     (3) Probable acquisition.
    
 
   
     (4) To reclassify the Company's 10% interest in the unconsolidated joint
         venture to investment in real estate as a result of acquiring the
         remaining 90% interest (see (2) above).
    
 
   
B.  To reflect the UIT Offering and paydown of the Credit Facilities with the
    proceeds as follows:
    
 
   
<TABLE>
<S>                                                            <C>
Par value of Common Shares issued...........................   $    16
Additional paid in capital..................................    44,043
                                                               -------
Proceeds used to paydown Credit Facilities..................   $44,059
                                                               =======
</TABLE>
    
 
   
C. Represents adjustments to reflect the $200 million Offering of eight million
   8.0% Series C Cumulative Redeemable Preferred Shares, liquidation preference
   of $25.00 per share.
    
 
   
D. To reflect the paydown of the Credit Facilities with the net proceeds of the
   Offering as follows:
    
   
 
<TABLE>
<S>                                                            <C>
Gross proceeds..............................................   $200,000
Less: Underwriting and other costs (see Note F).............     (6,800)
                                                               --------
     Net proceeds...........................................   $193,200
                                                               ========
</TABLE>
    
 
   
E. To reflect the Offering.
    
 
   
F. To reflect the underwriting and other costs incurred in connection with the
   Offering.
    
 
                                       F-9
<PAGE>   136
   
                         EQUITY OFFICE PROPERTIES TRUST
    
 
   
 NOTES TO THE PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
    
 
   
G. Scheduled payments of principal on total indebtedness for each of the next
   five years and thereafter, on a pro forma basis are as follows:
    
 
   
<TABLE>
<S>                                                            <C>
1998........................................................   $  497,970
1999........................................................       52,908
2000........................................................      151,236
2001........................................................      919,664
2002........................................................      319,583
Thereafter..................................................    2,701,519
                                                               ----------
     Subtotal...............................................    4,642,880
Net premium (net of accumulated amortization of $2.4
  million)..................................................        5,856
                                                               ----------
     Total..................................................   $4,648,736
                                                               ==========
</TABLE>
    
 
   
H. Represents the consolidated historical statement of operations of the Company
   for the three months ended March 31, 1998 for the Pro Forma Condensed
   Combined Statement of Operations for the three months ended March 31, 1998
   and the combined historical statements of operations of the Company for the
   period from July 11, 1997 to December 31, 1997 and Equity Office Predecessors
   for the period from January 1, 1997 to July 10, 1997, for the Pro Forma
   Condensed Combined Statement of Operations for the year ended December 31,
   1997.
    
 
   
I.  To reflect the operations and the depreciation expense for properties
    acquired in 1997 for the period from January 1, 1997 through the date of
    acquisition. Interest expense was also adjusted, where applicable, to a full
    year, for the year ended December 31, 1997.
    
 
   
<TABLE>
<CAPTION>
                          PROPERTY                          DATE ACQUIRED        NOTE REFERENCE
    ----------------------------------------------------    -----------------    --------------
    <S>                                                     <C>                  <C>
    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
    10880 Wilshire Boulevard............................    April 23, 1997             (1)
    Smith Barney Tower..................................    April 29, 1997
    201 Mission Street..................................    April 30, 1997
    Centerpointe I and II...............................    April 30, 1997             (1)
    Westbrook Corporate Center..........................    May 23, 1997               (1)
    225 Franklin Street.................................    June 4, 1997               (1)
    30 N. LaSalle.......................................    June 13, 1997
    Sunnyvale Business Center...........................    July 1, 1997               (1)
    Adams -- Wabash Parking Facility....................    August 11, 1997
    Columbus America Properties.........................    September 3, 1997
    Civic Opera Building................................    October 1, 1997            (1)
    Prudential Properties...............................    October 1, 1997
    550 South Hope Street...............................    October 6, 1997
    10 & 30 South Wacker Drive..........................    October 7, 1997
    Acorn Properties....................................    October 7, 1997
    200 West Adams......................................    October 8, 1997            (1)
    One Lafayette Centre................................    October 17, 1997
    Lakeside Office Park................................    October 20, 1997           (1)
</TABLE>
    
 
                                      F-10
<PAGE>   137
   
                         EQUITY OFFICE PROPERTIES TRUST
    
 
   
 NOTES TO THE PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
    
 
   
<TABLE>
<CAPTION>
                          PROPERTY                          DATE ACQUIRED        NOTE REFERENCE
    ----------------------------------------------------    -----------------    --------------
    <S>                                                     <C>                  <C>
    Acorn Properties....................................    November 21, 1997
    PPM Properties......................................    November 24, 1997
    LaSalle Office Plaza................................    November 25, 1997
    Stanwix Parking Facility............................    November 25, 1997
    101 North Wacker....................................    December 11, 1997          (1)
    Wright Runstad Properties...........................    December 17, 1997
    Wright Runstad Associates Limited Partnership.......    December 17, 1997
</TABLE>
    
 
- -------------------------
 
   
     (1) Represents properties acquired during 1997 by Beacon prior to the
         Beacon Merger.
    
 
   
     The depreciation adjustment of $56.6 million in the "1997 Acquired
     Properties" column in the statement of operations for the year ended
     December 31, 1997, 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.
    
 
   
J.  To eliminate the operations of Barton Oaks Plaza II, Westlakes Office Park
    and 8383 Wilshire for the year ended December 31, 1997. Barton Oaks Plaza II
    was sold in January and Westlakes Office Park and 8383 Wilshire were sold in
    May 1997.
    
 
   
K. To reflect the additional interest expense on debt obtained in the year ended
   December 31, 1997 on properties acquired before 1997 and to reflect the $180
   Million Notes Offering which occurred on September 3, 1997, and the resulting
   paydown of the revolving credit facility, and to reflect the $235.3 million
   of mortgage indebtedness repaid from draws on the $1.5 Billion Credit
   Facility and the repayment of the revolving credit facility balance. The
   adjustment also eliminates amortization expense recorded on the
   mark-to-market adjustment on debt repaid from draws on the $1.5 Billion
   Credit Facility and reflects amortization related to the fees associated with
   the $1.5 Billion Credit Facility for the year ended December 31, 1997, as
   follows:
    
 
   
<TABLE>
    <S>                                                            <C>
    Additional interest from debt obtained during 1997 on
      properties acquired before 1997...........................   $  1,042
    Additional interest on $180 Million Notes Offering..........      9,218
    Additional interest on $1.5 Billion Credit Facility.........     24,126
    Decrease in interest from repayment of mortgage
      indebtedness..............................................    (13,263)
    Decrease in interest from repayment of the revolving credit
      facility..................................................     (8,052)
    Amortization of fees associated with the $1.5 Billion Credit
      Facility..................................................      5,018
    Eliminate amortization expense recorded on mark to market
      adjustment on debt repaid with the $1.5 Billion Credit
      Facility..................................................     (1,483)
                                                                   --------
         Total..................................................   $ 16,606
                                                                   ========
</TABLE>
    
 
   
L. To reflect the adjustment for the straight-line effect of scheduled rent
   increases, assuming the Consolidation and the IPO closed on January 1, 1997.
    
 
   
M.To reflect the net decrease in interest expense associated with the $15.0
  million of mortgage debt on Denver Corporate Center Towers II and III repaid
  in May 1997 and the $598.4 million repaid with the net proceeds of the IPO and
  cash held by Equity Office Predecessors. In addition, to eliminate the $5.9
  million of amortization historically recognized as a result of the write-off
  of deferred loan costs, net of the $4.1 million amortization of the discount
  required to record the mortgage debt at fair value recorded in connection with
  the Consolidation and the IPO.
    
 
                                      F-11
<PAGE>   138
   
                         EQUITY OFFICE PROPERTIES TRUST
    
 
   
 NOTES TO THE PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
    
 
   
N. To reflect depreciation expense related to the adjustment to record the net
   equity value of the investment in real estate for the year ended December 31,
   1997, on a straight-line basis, as follows:
    
 
   
<TABLE>
<S>                                                            <C>
Historical investment in real estate before accumulated
  depreciation at time of IPO...............................      $5,022,946
Less: Portion allocated to land estimated to be 10%.........        (502,295)
                                                                  ----------
Depreciable basis...........................................      $4,520,651
                                                                  ----------
Depreciation expense based on an estimated useful life of 40
  years.....................................................      $  113,016
Less: Historical depreciation expense related to properties
  contributed at the Consolidation and IPO..................        (106,888)
Less: Pro forma depreciation expense on properties acquired
  in 1997 prior to the Consolidation and the IPO............          (3,391)
                                                                  ----------
Depreciation expense adjustment.............................      $    2,737
                                                                  ==========
</TABLE>
    
 
   
O. To reflect additional general and administrative expenses expected to be
   incurred as a result of reporting as a public entity as follows:
    
 
   
<TABLE>
<S>                                                            <C>
Trustees' and officers' insurance...........................        $  375
Printing and mailing........................................           375
Trustees' fees..............................................           225
Investor relations..........................................           225
Other.......................................................           600
                                                                    ------
  Total.....................................................        $1,800
</TABLE>
    
 
   
P. Represents Beacon's historical statement of operations prior to the Beacon
   Merger for the period from January 1, 1997 to December 18, 1997.
    
 
   
Q. To reflect the adjustment for the straight-line effect of scheduled rent
   increases, assuming the Beacon Merger closed on January 1, 1997.
    
 
   
R. To reflect amortization of mark-to-market adjustment of Beacon's mortgage
   debt.
    
 
   
S. To reflect the depreciation expense related to the adjustment to record the
   net equity value of the investment in real estate and investment in joint
   ventures on a straight-line basis for the year ended December 31, 1997
   associated with the Beacon Merger, as follows:
    
 
   
<TABLE>
<S>                                                            <C>
Investment in real estate for Beacon Properties.............      $4,204,502
Less: Portion allocated to land.............................        (515,022)
                                                                  ----------
Pro Forma depreciable basis of Beacon's investment in real
  estate, net...............................................      $3,689,480
                                                                  ==========
Depreciation expense based on an estimated useful life of 40
  years.....................................................      $   92,237
Less: Historical expense related to the Beacon Properties,
  including the period from December 19, 1997 to December
  31, 1997 after the Beacon Merger..........................         (73,393)
Less: Pro Forma depreciation expense on Beacon's 1997
  acquired properties.......................................         (13,470)
                                                                  ----------
Adjustment to depreciation expense..........................      $    5,374
                                                                  ==========
</TABLE>
    
 
                                      F-12
<PAGE>   139
   
                         EQUITY OFFICE PROPERTIES TRUST
    
 
   
 NOTES TO THE PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
    
 
   
T.  Management has estimated that there will be a reduction of general and
administrative expenses as a result of the Beacon Merger, as follows. The
general and administrative expenses savings have not been included in the pro
forma condensed combined statement of operations. There can be no assurance that
the company will be successful in realizing such anticipated cost savings.
    
 
   
<TABLE>
<S>                                                            <C>
Salaries and benefits.......................................   $16,500
Rent........................................................     1,200
Office and computer expenses................................     1,600
Investor relations..........................................     1,600
Other.......................................................     1,100
                                                               -------
  Total.....................................................   $22,000
                                                               =======
</TABLE>
    
 
   
U. To reflect the operations and the depreciation expense for the following
   properties acquired in 1998 for (a) the pro forma condensed combined
   statement of operations for the three months ended March 31, 1998; for the
   period from January 1, 1998 through the earlier of the date of acquisition or
   March 31, 1998, as applicable, and (b) the pro forma condensed combined
   statement of operations for the year ended December 31, 1997, for the period
   from January 1, 1997 to December 31, 1997. Interest expense was also
   adjusted, where applicable, to reflect three months and a full year, for the
   three months ended March 31, 1998 and the year ended December 31, 1997,
   respectively.
    
 
   
<TABLE>
<CAPTION>
                        PROPERTY                               DATE ACQUIRED
- ---------------------------------------------------------   --------------------
<S>                                                         <C>
BP Garage................................................       January 28, 1998
100 Summer Street........................................         March 18, 1998
The Tower at New England Executive Park..................         March 31, 1998
Denver Post..............................................         April 28, 1998
301 Howard and 215 Fremont...............................         April 29, 1998
Miller Global Portfolio..................................                     (1)
Millennium I & II........................................           May 19, 1998
Polk & Taylor............................................           May 22, 1998
Colonnade................................................   Probable Acquisition
Walker Building..........................................   Probable Acquisition
</TABLE>
    
 
- -------------------------
 
   
     (1) The Company acquired four properties on April 30, 1998 and one property
         on May 15, 1998 and expects to acquire the remaining eight properties
         on July 15, 1998.
    
 
   
     The depreciation adjustment of $5,684 million for the three months ended
     March 31, 1998 and $23,739 million for the year ended December 31, 1997 is
     based on the cost to acquire the properties described above 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.
    
 
   
V. To reflect the net increase in interest expense in connection with the
   February 1998 Notes Offering and the paydown of the revolving credit facility
   and the $1.5 Billion Credit Facility with the net proceeds of the February
   1998 Notes Offering and to reflect amortization of the financing costs
   incurred in connection with the February 1998 Notes Offering.
    
 
   
W.To reflect the decrease in interest expense in connection with the paydown of
  the Credit Facilities with the net proceeds of the Series B Preferred
  Offering.
    
 
   
X. To reflect preferred dividends in connection with the Series B Preferred
   Offering of 5.25% per annum.
    
 
   
Y. To reflect the decrease in interest in connection with the paydown of the
   Credit Facilities with the net proceeds of the UIT Offering (see Note B).
    
 
                                      F-13
<PAGE>   140
                         EQUITY OFFICE PROPERTIES TRUST
 
 NOTES TO THE PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
   
Z. To reflect the decrease in interest expense in connection with the paydown of
   the Credit Facilities with the net proceeds of the Offering (see Note D).
    
 
   
AA. To reflect preferred dividends in connection with the Offering assumed to be
    8.0% per annum.
    
 
   
AB. To reflect the 10.3% and 10.4% minority interests ownership in the Company
    at March 31, 1998 and December 31, 1997, respectively:
    
 
   
<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED          YEAR ENDED
                                                     MARCH 31, 1998         DECEMBER 31, 1997
                                                   ------------------       -----------------
<S>                                                <C>                      <C>
Historical allocation of income to minority
  interests......................................        $7,726                  $ 7,010
Beacon minority interests allocation.............            --                   12,021
Minority interests allocation of income after pro
  forma adjustments..............................          (122)                   9,595
                                                         ------                  -------
Net income allocated to minority interests
  ownership in the Company.......................        $7,604                  $28,626
                                                         ======                  =======
</TABLE>
    
 
                                      F-14
<PAGE>   141
 
   
                         EQUITY OFFICE PROPERTIES TRUST
    
 
   
                          CONSOLIDATED BALANCE SHEETS
    
 
   
<TABLE>
<CAPTION>
                                                               MARCH 31,    DECEMBER 31,
                                                                 1998           1997
                                                               ---------    ------------
                                                              (UNAUDITED)
                                                                (DOLLARS IN THOUSANDS,
                                                                EXCEPT PER SHARE DATA)
<S>                                                           <C>           <C>
ASSETS:
  Investment in real estate.................................  $11,329,911   $11,041,014
  Accumulated depreciation..................................     (129,235)      (64,695)
                                                              -----------   -----------
                                                               11,200,676    10,976,319
  Cash and cash equivalents.................................       11,681       228,853
  Tenant and other receivables (net of allowance for
     doubtful accounts of $476 and $675, respectively)......       33,309        32,531
  Deferred rent receivable..................................       37,169        20,050
  Escrow deposits and restricted cash.......................       29,923        25,772
  Investment in unconsolidated joint ventures...............      359,804       387,332
  Deferred financing costs (net of accumulated amortization
     of $3,726 and $1,855, respectively)....................       48,676         5,090
  Deferred leasing costs (net of accumulated amortization of
     $2,580 and $1,473, respectively).......................       34,947        26,994
  Prepaid expenses and other assets.........................       47,809        48,731
                                                              -----------   -----------
          Total Assets......................................  $11,803,994   $11,751,672
                                                              ===========   ===========
LIABILITIES AND SHAREHOLDERS' EQUITY:
  Mortgage debt (including a net premium of $1,431 and
     $1,157, respectively)..................................  $ 2,060,105   $ 2,063,017
  Unsecured notes (including a net premium of $4,425 and $0,
     respectively)..........................................    1,684,425       180,000
  Lines of credit...........................................      243,000     2,041,300
  Accounts payable and accrued expenses.....................      190,890       260,401
  Due to affiliates.........................................          174           733
  Dividend/distribution payable.............................       92,057         1,191
  Other liabilities.........................................       93,073        45,055
                                                              -----------   -----------
          Total Liabilities.................................    4,363,724     4,591,697
                                                              -----------   -----------
  Commitments and contingencies (Note 10)...................
  Minority interests:
     Operating Partnership..................................      718,720       725,206
     Partially owned properties.............................       29,200        29,612
                                                              -----------   -----------
          Total Minority Interests..........................      747,920       754,818
                                                              -----------   -----------
Shareholders' Equity:
  Preferred Shares, 100,000,000 authorized:
     8.98% Series A Cumulative Redeemable Preferred Shares,
      liquidation preference $25.00 per share; 8,000,000
      issued and outstanding................................      200,000       200,000
     5.25% Series B Convertible Cumulative Redeemable
      Preferred Shares, liquidation preference $50.00 per
      share; 6,000,000, issued and outstanding..............      300,000            --
  Common Shares, $0.01 par value; 750,000,000 shares
     authorized, 250,450,845 and 250,030,403 issued,
     249,948,105 and 249,527,663 outstanding................        2,499         2,495
  Additional paid in capital................................    6,220,213     6,219,511
  Dividends in excess of accumulated earnings...............      (30,362)      (16,849)
                                                              -----------   -----------
          Total Shareholders' Equity........................    6,692,350     6,405,157
                                                              -----------   -----------
          Total Liabilities and Shareholders' Equity........  $11,803,994   $11,751,672
                                                              ===========   ===========
</TABLE>
    
 
   
                            See accompanying notes.
    
 
                                      F-15
<PAGE>   142
 
   
      EQUITY OFFICE PROPERTIES TRUST CONSOLIDATED STATEMENT OF OPERATIONS
    
   
        AND EQUITY OFFICE PREDECESSORS COMBINED STATEMENT OF OPERATIONS
    
 
   
                                  (UNAUDITED)
    
 
   
<TABLE>
<CAPTION>
                                                                 EQUITY OFFICE            EQUITY OFFICE
                                                               PROPERTIES TRUST           PREDECESSORS
                                                                    FOR THE                  FOR THE
                                                              THREE MONTHS ENDED       THREE MONTHS ENDED
                                                                MARCH 31, 1998           MARCH 31, 1997
                                                              ------------------       ------------------
                                                             (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                          <C>                      <C>
Revenues:
  Rental.................................................            $289,213               $116,418
  Tenant reimbursements..................................              52,989                 19,187
  Parking................................................              21,214                  9,530
  Other..................................................               6,177                  3,336
  Fees from noncombined affiliates.......................               1,157                  1,200
  Interest...............................................               3,070                  4,896
                                                                  -----------               --------
          Total revenues.................................             373,820                154,567
                                                                  -----------               --------
Expenses:
  Interest:
     Expense incurred....................................              69,884                 36,355
     Amortization of deferred financing costs............               2,145                    709
  Depreciation...........................................              64,540                 25,005
  Amortization...........................................               1,107                  2,367
  Real estate taxes......................................              50,034                 16,611
  Insurance..............................................               2,243                  1,457
  Repairs and maintenance................................              41,977                 19,440
  Property operating.....................................              43,611                 20,640
  General and administrative.............................              13,948                  7,073
                                                                  -----------               --------
          Total expenses.................................             289,489                129,657
                                                                  -----------               --------
Income before allocation to minority interests, income
  from investment in unconsolidated joint ventures, gain
  on sale of real estate and extraordinary items.........              84,331                 24,910
Minority interests:
  Operating Partnership..................................              (7,726)                    --
  Partially owned properties.............................                (538)                  (529)
Income from investment in unconsolidated joint
  ventures...............................................               3,634                    922
Gain on sale of real estate..............................                  --                  5,741
                                                                  -----------               --------
Income before extraordinary items........................              79,701                 31,044
Extraordinary items......................................              (6,959)                  (275)
                                                                  -----------               --------
Net income...............................................              72,742                 30,769
Preferred dividends......................................              (6,271)                    --
                                                                  -----------               --------
Net income available for Common Shares...................            $ 66,471               $ 30,769
                                                                  ===========               ========
Net income available per weighted average Common Share
  outstanding -- Basic...................................                $.27
                                                                  ===========
Weighted average Common Shares outstanding -- Basic......         249,766,440
                                                                  ===========
Net income available per weighted average Common Share
  outstanding -- Diluted.................................                $.27
                                                                  ===========
Weighted average Common Shares outstanding -- Diluted....         280,327,761
                                                                  ===========
</TABLE>
    
 
   
                            See accompanying notes.
    
 
                                      F-16
<PAGE>   143
 
   
         EQUITY OFFICE PROPERTIES TRUST CONSOLIDATED STATEMENT OF CASH
    
   
     FLOWS AND EQUITY OFFICE PREDECESSORS COMBINED STATEMENT OF CASH FLOWS
    
 
   
                                  (UNAUDITED)
    
 
   
<TABLE>
<CAPTION>
                                                                  EQUITY OFFICE         EQUITY OFFICE
                                                                 PROPERTIES TRUST        PREDECESSORS
                                                                     FOR THE               FOR THE
                                                                THREE MONTHS ENDED    THREE MONTHS ENDED
                                                                  MARCH 31, 1998        MARCH 31, 1997
                                                                ------------------    ------------------
                                                                         (DOLLARS IN THOUSANDS)
<S>                                                             <C>                   <C>
OPERATING ACTIVITIES:
Net income before preferred dividends.......................       $    72,742            $  30,769
Adjustment to reconcile net income to net cash provided by
  operating activities:
  Depreciation and amortization.............................            67,792               28,081
  Amortization of premiums/discounts on unsecured notes and
    terminated interest rate protection agreements..........               440                   --
  Compensation related to restricted shares issued to
    employees...............................................               474                   --
  (Income) from unconsolidated joint ventures...............            (3,634)                (922)
  (Gain) on sale of real estate.............................                --               (5,741)
  Extraordinary items.......................................             6,959                  275
  Provision for doubtful accounts...........................              (111)                  12
  Allocation to minority interests..........................             8,264                  529
  Changes in assets and liabilities:
    (Increase) decrease in rents receivable.................              (666)                 603
    (Increase) in deferred rent receivables.................           (17,119)              (4,105)
    (Increase) decrease in prepaid expenses and other
      assets................................................            (2,624)               3,812
    (Decrease) in accounts payable and accrued expenses.....           (69,511)             (15,216)
    (Decrease) increase in due to affiliates................              (559)               1,551
    Increase in other liabilities...........................            48,318                1,439
                                                                   -----------            ---------
         Net cash provided by operating activities..........           110,765               41,087
                                                                   -----------            ---------
INVESTING ACTIVITIES:
Property acquisitions.......................................          (260,850)             (91,884)
Payments for capital and tenant improvements................           (28,048)             (26,378)
Proceeds from sale of real estate...........................                --               13,298
Distributions from unconsolidated joint ventures............            31,162                1,103
Payments of lease acquisition costs.........................            (9,060)              (4,583)
(Increase) in escrow deposits and restricted cash...........            (4,151)              (1,062)
                                                                   -----------            ---------
         Net cash (used for) investing activities...........          (270,947)            (109,506)
                                                                   -----------            ---------
FINANCING ACTIVITIES:
Proceeds from exercise of options...........................             4,868                   --
Dividends/distributions to shareholders and unit holders....              (392)                  --
Payment of preferred dividends..............................            (4,478)                  --
Net proceeds from sale of Preferred Shares..................           290,250                   --
Payment of offering costs...................................              (117)                  --
Capital contributions.......................................                --              101,569
Capital distributions.......................................                --              (96,170)
(Distributions to) minority interest in partially owned
  properties................................................              (950)              (2,263)
Proceeds from mortgage debt.................................                --              132,446
Proceeds from unsecured notes...............................         1,504,452                   --
Proceeds from lines of credit...............................           333,000                   --
Principal payments on mortgage debt.........................            (3,186)             (28,364)
Principal payments on lines of credit.......................        (2,131,300)             (72,500)
Payments of loan costs......................................           (10,860)                (390)
Termination of interest rate protection agreements..........           (38,277)                  --
Prepayment penalties on early extinguishments of debt.......                --                 (208)
                                                                   -----------            ---------
         Net cash (used for) provided by financing
           activities.......................................           (56,990)              34,120
                                                                   -----------            ---------
Net (decrease) in cash and cash equivalents.................          (217,172)             (34,299)
Cash and cash equivalents at the beginning of the period....           228,853              410,420
                                                                   -----------            ---------
Cash and cash equivalents at the end of the period..........       $    11,681            $ 376,121
                                                                   ===========            =========
SUPPLEMENTAL INFORMATION:
Interest paid during the period, including capitalized
  interest of $3,452 and $1,662, respectively...............       $    64,777            $  37,273
                                                                   ===========            =========
</TABLE>
    
 
   
                            See accompanying notes.
    
 
                                      F-17
<PAGE>   144
 
   
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
    
   
            NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
    
 
   
                                  (UNAUDITED)
    
 
   
     DEFINITION OF TERMS. Capitalized terms used but not defined herein are as
defined in the Company's Annual Report on Form 10-K, as amended by Form 10-K/A,
for the year ended December 31, 1997 (the "Form 10-K").
    
 
   
     The consolidated financial statements of the Company and the combined
financial statements of Equity Office Predecessors have been prepared pursuant
to the Securities and Exchange Commission ("SEC") rules and regulations. The
following notes highlight significant changes to the notes to the December 31,
1997 audited consolidated and combined financial statements of Equity Office
Properties Trust and Equity Office Predecessors and should be read in
conjunction with the financial statements and notes thereto included in the Form
10-K and present interim disclosures as required by the SEC.
    
 
   
NOTE 1 -- BUSINESS
    
 
   
     As used herein, "Company" means Equity Office Properties Trust, a Maryland
real estate investment trust, together with its subsidiaries including EOP
Operating Limited Partnership, a Delaware limited partnership (the "Operating
Partnership"), and the predecessors thereof ("Equity Office Predecessors"). The
Company was formed on October 9, 1996 to continue and expand the national office
property business organized by Mr. Samuel Zell, Chairman of the Board of
Trustees of the Company, and to complete the consolidation of the Equity Office
Predecessors (the "Consolidation"). The Company completed its initial public
offering (the "IPO") on July 11, 1997. The Company is a fully integrated,
self-administered and self-managed real estate company engaged in acquiring,
owning, managing, leasing and renovating office properties and parking
facilities. The Company intends to elect to be taxed as a real estate investment
trust ("REIT") for federal income tax purposes and generally will not be subject
to federal income tax if it distributes 95% of its taxable income and complies
with a number of organizational and operational requirements. As of March 31,
1998, the Company owned or had an interest in 260 office properties (the "Office
Properties") containing approximately 66.6 million rentable square feet of
office space and owned 17 stand-alone parking facilities containing
approximately 16,749 parking spaces (the "Parking Facilities" and, together with
the Office Properties, the "Properties"). The Office Properties are located in
78 submarkets in 39 markets in 24 states and the District of Columbia. The
Office Properties, by rentable square feet, are located approximately 51% in
central business districts ("CBDs") and 49% in suburban markets.
    
 
   
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    
 
   
     Basis of Presentation. The Company owns all of its assets and conducts
substantially all of its business through the Operating Partnership. The Company
is the managing general partner of the Operating Partnership. Due to the
Company's ability as general partner to control either through ownership or by
contract the Operating Partnership and various other subsidiaries, each such
entity has been consolidated with the Company for financial reporting purposes.
The Consolidation and the Beacon Merger were accounted for as purchases in
accordance with Accounting Principles Board Opinion No. 16. Accordingly, the
fair value of the consideration given by the Company was used as the valuation
basis for the transactions. The assets acquired and liabilities assumed by the
Company were recorded at their fair value as of the closing dates of the
Consolidation and the Beacon Merger, respectively, and the excess of the
purchase price over the related historical basis of the net assets acquired was
allocated primarily to investment in real estate.
    
 
   
     The combined financial statements of Equity Office Predecessors prior to
the Consolidation included interests in the Properties of the ZML Opportunity
Partnerships together with their limited and general partners and the Management
Business.
    
 
   
     Use of Estimates. The preparation of the consolidated financial statements
of the Company and the combined financial statements of Equity Office
Predecessors in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets
    
 
                                      F-18
<PAGE>   145
   
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
    
   
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
    
 
   
                                  (UNAUDITED)
    
 
   
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.
    
 
   
     Unaudited Interim Statements. The consolidated financial statements of the
Company as of and for the three months ended March 31, 1998, and the combined
financial statements of Equity Office Predecessors for the three months ended
March 31, 1997 and related footnote disclosures are unaudited. In the opinion of
management, such financial statements reflect all adjustments necessary for a
fair presentation of the results of the interim periods. All such adjustments
are of a normal, recurring nature.
    
 
   
     Reclassifications. Certain reclassifications have been made to the
previously reported 1997 statements in order to provide comparability with the
1998 statements reported herein. These reclassifications have not changed the
1997 results or owners' equity.
    
 
   
NOTE 3 -- INVESTMENT IN REAL ESTATE
    
 
   
     During the three months ended March 31, 1998, the Company acquired the
Properties listed below. Each Property was purchased from an unaffiliated party
and was funded from the Company's Credit Facilities or working capital.
    
 
   
<TABLE>
<CAPTION>
                                                                                                TOTAL
  DATE                                                                       RENTABLE      ACQUISITION COST
ACQUIRED                     PROPERTY                        LOCATION       SQUARE FEET     (IN THOUSANDS)
- --------                     --------                        --------       -----------    ----------------
<C>         <S>                                           <C>               <C>            <C>
1/29/98     BP Garage.................................     Cleveland, OH            --         $ 10,224
3/18/98     100 Summer Street.........................        Boston, MA     1,037,801          222,695
3/31/98     The Tower at New England Executive Park...    Burlington, MA       195,228           27,931
                                                                             ---------         --------
                                                                             1,233,029         $260,850
                                                                             =========         ========
</TABLE>
    
 
   
NOTE 4 -- INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
    
 
   
     The following is a summary of the Company's ownership in the unconsolidated
joint ventures:
    
 
   
<TABLE>
<CAPTION>
                                                                                       COMPANY'S
                                                                                       OWNERSHIP
                      ENTITY                                  PROPERTY            AS OF MARCH 31, 1998
                      ------                                  --------            --------------------
<S>                                                   <C>                         <C>
EOP -- Orange, L.L.C. and EOP -- Ramlessview
  Investors, L.L.C.(A)............................                  500 Orange            100%
Civic Parking, L.L.C.(B)..........................    St. Louis Parking Garage             50%
Wright Runstad Asset Limited Partnership(C).......                         N/A           28.5%
Crystal Holdings, L.P.(D).........................               Polk & Taylor             10%
One Post Office Square Associates(E)..............             One Post Office             50%
BeaMetFed, Inc.(F)................................       75-101 Federal Street             52%
Rowes Wharf Associates(G).........................                 Rowes Wharf             50%
</TABLE>
    
 
- -------------------------
   
(A) The Company owns a mortgage receivable secured by the property and land
    underlying and adjacent to the property.
    
   
(B) The Company owns a 50% membership interest.
    
   
(C) The Company owns a 28.5% non-controlling interest in a property management
    and development company (see Note 10).
    
   
(D) The Company owns a 1% general partner interest and a 9% limited partner
    interest. The Company has agreed to acquire the remaining 90% limited
    partnership interest during 1998 (see Note 11).
    
 
                                      F-19
<PAGE>   146
   
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
    
   
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
    
 
   
                                  (UNAUDITED)
    
 
   
(E)  The Company is a 50% general partner in the joint venture.
    
 
   
(F) The Company is a shareholder in the corporation (a private REIT) which owns
    the property.
    
 
   
(G) The Company owns a 50% equity interest in the property and, subject to a
    subparticipation which the Company expects to redeem for approximately
    $500,000, 50% of a first mortgage.
    
 
   
     These investments are accounted for utilizing the equity method of
accounting. Under this method of accounting, the net equity investment of the
Company is reflected on the consolidated balance sheets, and the consolidated
and combined statements of operations include the Company's share of net income
or loss from the unconsolidated joint ventures. As a result of purchase method
accounting for the Beacon Merger and the Consolidation, any difference between
the carrying amount of these investments on the balance sheet of the Company and
the underlying equity in net assets is amortized as an adjustment to income from
unconsolidated joint ventures over 40 years.
    
 
   
     Combined summarized financial information of the unconsolidated joint
ventures is as follows:
    
 
   
<TABLE>
<CAPTION>
                                                              MARCH 31, 1998    DECEMBER 31, 1997
                                                              --------------    -----------------
                                                                    (DOLLARS IN THOUSANDS)
<S>                                                           <C>               <C>
BALANCE SHEETS
  Real estate, net..........................................     $521,994           $523,670
  Other assets..............................................       76,627             73,450
                                                                 --------           --------
          Total Assets......................................     $598,621           $597,120
                                                                 ========           ========
  Mortgage notes and loans payable..........................     $405,241           $344,427
  Other liabilities.........................................       14,325             15,271
  Partners' and shareholders' equity........................      179,055            237,422
                                                                 --------           --------
          Total Liabilities and Partners' and Shareholders'
            Equity..........................................     $598,621           $597,120
                                                                 ========           ========
Company's share of equity...................................     $129,438           $155,522
Excess of cost of investments over the net book value of
  underlying net assets, net of accumulated depreciation of
  $1,444 and $99, respectively..............................      230,366            231,810
                                                                 --------           --------
Carrying value of investments in unconsolidated joint
  ventures..................................................     $359,804           $387,332
                                                                 ========           ========
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                                              FOR THE THREE       FOR THE THREE
                                                               MONTHS ENDED       MONTHS ENDED
                                                              MARCH 31, 1998     MARCH 31, 1997
                                                              --------------     --------------
                                                                    (DOLLARS IN THOUSANDS)
<S>                                                           <C>               <C>
STATEMENTS OF OPERATIONS
  Revenues..................................................     $28,448             $1,247
  Operating expenses........................................       9,150                115
  Interest expense..........................................       3,775                 --
  Depreciation and amortization.............................       5,677                210
                                                                 -------             ------
          Net income........................................     $ 9,846             $  922
                                                                 =======             ======
  Company's share of net income.............................     $ 3,634             $  922
                                                                 =======             ======
  Company's share of depreciation and amortization (real
     estate related)........................................     $ 3,941             $  210
                                                                 =======             ======
</TABLE>
    
 
                                      F-20
<PAGE>   147
   
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
    
   
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
    
 
   
                                  (UNAUDITED)
    
 
   
NOTE 5 -- MORTGAGE DEBT
    
 
   
     In February 1998, Civic Parking L.L.C. obtained financing of $60.0 million
collateralized by its four parking facilities. The Company has a 50% ownership
interest in Civic Parking, L.L.C. and, accordingly, received $30.0 million of
the financing proceeds. This loan has a 6.85% fixed interest rate and a six year
term.
    
 
   
NOTE 6 -- UNSECURED NOTES
    
 
   
     In February 1998, the Company completed the private placement (the "$1.25
Billion Notes Offering") of $1.25 billion of unsecured notes (the "$1.25 Billion
Notes"). The $1.25 Billion Notes consist of four tranches with maturities of
five to 20 years which were priced at an interest rate spread over the
corresponding Treasury rate. The $1.25 Billion Notes were issued at a discount
of approximately $2.0 million, which will be amortized over the terms of the
respective tranches as an adjustment to interest expense.
    
 
   
     Additionally, in February 1998, the Company privately placed $250 million
of 6.376% MandatOry Par Put Remarketed Securities (the "$250 Million MOPPRS
Offering") due February 15, 2012, ("MOPPRS") which are subject to mandatory
tender on February 15, 2002. The MOPPRS are unsecured obligations of the
Company. The MOPPRS were issued at a premium of approximately $6.5 million,
which will be amortized over the terms of the MOPPRS as an adjustment to
interest expense.
    
 
   
     The proceeds to the Company from the $1.25 Billion Notes Offering and the
$250 Million MOPPRS Offering, net of offering costs, were approximately $1.5
billion. The Company terminated $700 million of hedge agreements in connection
with the issuance of the $1.25 Billion Notes and the MOPPRS at a cost of
approximately $31.3 million which is being amortized as an adjustment to
interest expense. As of March 31, 1998, the weighted average interest rate of
the $1.25 Billion Notes and the MOPPRS, including the amortization of the
offering and transaction costs and the costs incurred in connection with the
termination of the hedge agreements, is approximately 6.95%. The net proceeds of
these offerings were used to paydown the Credit Facilities.
    
 
   
     A summary of the terms of the $1.25 Billion Notes Offering and $250 Million
MOPPRS Offering at March 31, 1998 are as follows:
    
 
   
<TABLE>
<CAPTION>
                                                                    AMOUNT        STATED    EFFECTIVE
                          TRANCHE                               (IN THOUSANDS)     RATE      RATE(A)
                          -------                               --------------    ------    ---------
<S>                                                             <C>               <C>       <C>
4 Year MOPPRS due 2002......................................      $  250,000      6.38%       6.31%
5 Year Notes due 2003.......................................         300,000      6.38%       6.75%
7 Year Notes due 2005.......................................         400,000      6.63%       7.04%
10 Year Notes due 2008......................................         300,000      6.75%       7.03%
20 Year Notes due 2018......................................         250,000      7.25%       7.56%
                                                                  ----------      -----       -----
  Subtotal..................................................       1,500,000      6.66%       6.95%
                                                                                  =====       =====
  Net premium (net of accumulated amortization of $27)......           4,425
                                                                  ----------
  Total.....................................................      $1,504,425
                                                                  ==========
</TABLE>
    
- -------------------------
   
(A) Includes the cost of the terminated interest rate protection agreements and
    offering and transaction costs.
    
 
   
     On March 5, 1998 the Company filed a registration statement, which was
amended on May 1, 1998, relating to a registered offer to exchange the $180
Million Notes, the $1.25 Billion Notes and the $250 Million MOPPRS for
registered securities of the Company with terms identical in all material
respects to the terms of the existing notes.
    
 
                                      F-21
<PAGE>   148
   
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
    
   
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
    
 
   
                                  (UNAUDITED)
    
 
   
NOTE 7 -- SHAREHOLDERS' EQUITY
    
 
   
     In February 1998, the Company completed the private placement (the "Series
B Preferred Shares Offering") of 6,000,000 of its 5.25% Series B Convertible
Cumulative Redeemable Preferred Shares, $50 liquidation preference per share
(the "Series B Preferred Shares"). This offering generated net proceeds of
approximately $290.3 million after offering costs of $9.7 million. The net
proceeds were used to pay down the Credit Facilities. The Series B Preferred
Shares are convertible at any time by the holder into Common Shares at a
conversion price of $35.70 per Common Share, equivalent to a conversion ratio of
1.40056 Common Shares for each Series B Preferred Share. The Series B Preferred
Shares are non-callable for five years with a mandatory call on February 15,
2008. Each Series B Preferred Share will receive an annual distribution of
$2.625 which will be paid quarterly.
    
 
   
     In March 1998, the Company's Board of Trustees authorized a first quarter
distribution of $0.56125 per share for the 8.98% Series A Cumulative Redeemable
Preferred Shares. The distribution was paid on March 15, 1998 to shareholders of
record as of March 9, 1998.
    
 
   
     In March 1998, the Company's Board of Trustees authorized a first quarter
distribution in the amount of $0.32 per Common Share/Unit. The distribution was
paid on April 10, 1998, to the common shareholders/ unit holders of record at
the close of business on March 31, 1998.
    
 
   
     On April 15, 1998 the Company's Board of Trustees authorized a second
quarter distribution for the Series B Preferred Shares of $0.619792 per share,
representing a pro rata distribution (since issuance of the shares on February
19, 1998) based on a full quarterly distribution of $.65625 per share and an
annual distribution of $2.625 per share, payable on May 15, 1998 to shareholders
of record as of May 1, 1998.
    
 
   
     The following table presents the changes in the issued and outstanding
Common Shares and Units for the three months ended March 31, 1998:
    
 
   
<TABLE>
<CAPTION>
                                                             COMMON SHARES      UNITS
                                                             -------------    ----------
<S>                                                          <C>              <C>
Balance at January 1, 1998.................................   249,527,663     29,159,688
Common Shares issued through exercise of options...........       262,866             --
Conversion of Units into Common Shares.....................       157,576       (157,576)
                                                              -----------     ----------
Balance at March 31, 1998..................................   249,948,105     29,002,112
                                                              ===========     ==========
</TABLE>
    
 
   
     The Company's ownership interest in the Operating Partnership as of March
31, 1998 was approximately 89.6%.
    
 
   
     In February 1998, the Company issued approximately 2,122,100 Options at an
exercise price of $29.50 per Common Share under the Employee Plan.
    
 
                                      F-22
<PAGE>   149
   
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
    
   
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
    
 
   
                                  (UNAUDITED)
    
 
   
NOTE 8 -- EARNINGS PER SHARE
    
 
   
     The following table sets forth the computation of basic and diluted
earnings per Common Share:
    
 
   
<TABLE>
<CAPTION>
                                                                    FOR THE THREE
                                                                     MONTHS ENDED
                                                                    MARCH 31, 1998
                                                                    --------------
                                                                (DOLLARS IN THOUSANDS,
                                                                EXCEPT PER SHARE DATA)
<S>                                                             <C>
NUMERATOR:
  Net income available to Common Shares before extraordinary
     items..................................................         $     73,430
  Extraordinary items.......................................               (6,959)
                                                                     ------------
  Numerator for basic earnings per share -- income available
     to Common Shares.......................................               66,471
  Minority interest in Operating Partnership................                7,726
                                                                     ------------
  Numerator for diluted earnings per share -- income
     available to Common Shares.............................         $     74,197
                                                                     ============
DENOMINATOR:
  Denominator for basic earnings per share -- weighted
     average Common Shares..................................          249,766,440
                                                                     ------------
     Effect of dilutive securities:
       Conversion of Units to Common Shares.................           29,031,371
       Share options........................................            1,529,950
                                                                     ------------
  Dilutive potential Common Shares..........................           30,561,321
                                                                     ------------
  Denominator for diluted earnings per share -- adjusted
     weighted-average shares and assumed conversions........          280,327,761
                                                                     ============
  Basic Earnings Available to Common Shares per Weighted
     Average Common Share:
     Net income before extraordinary items..................         $        .29
     Extraordinary items....................................                 (.02)
                                                                     ------------
     Net income per Common Share............................         $        .27
                                                                     ============
  Diluted Earnings Available to Common Shares Per Weighted
     Average Common Share:
     Net income before extraordinary items..................         $        .29
     Extraordinary items....................................                 (.02)
                                                                     ------------
     Net income per Common Share............................         $        .27
                                                                     ============
</TABLE>
    
 
   
     Options to purchase 726,500 Common Shares at a weighted-average exercise
price of $32.93 per Common Share, warrants to purchase 5,000,000 Common Shares
at an exercise price of $39.375 per Common Share and 6,000,000 Series B
Preferred Shares at a conversion price of $35.70 per Common Share which were
outstanding during the three months ended March 31, 1998, were not included in
the computation of diluted earnings per share because they would have an
antidilutive effect.
    
 
   
NOTE 9 -- EXTRAORDINARY ITEM
    
 
   
     The Company incurred an extraordinary loss of approximately $7.0 million in
the three months ended March 31, 1998 due to fees charged related to the
termination of $300 million of interest rate protection agreements in connection
with the issuance of the Series B Preferred Shares.
    
 
                                      F-23
<PAGE>   150
   
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
    
   
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
    
 
   
                                  (UNAUDITED)
    
 
   
NOTE 10 -- COMMITMENTS AND CONTINGENCIES
    
 
   
     Concentration of Credit Risk. The Company 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 the Company believes that the risk is
not significant. In addition, the Company has entered into certain interest rate
protection agreements and 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.
    
 
   
     Environmental. The Company, as an owner of real estate, is subject to
various environmental laws of federal and local governments. Compliance by the
Company with existing laws has not had a material adverse effect on Company's
financial condition and results of operations, and management does not believe
it will have such an impact in the future. However, the Company cannot predict
the impact of new or changed laws or regulations on its current properties or on
properties that it may acquire in future.
    
 
   
     Litigation. The Company has become a party to various legal actions
resulting from the operational activities transferred to the Operating
Partnership in connection with the Consolidation and the Beacon Merger. 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.
    
 
   
     The Company is involved in continuing discussions with its joint venture
partner in One Post Office Square and Rowes Wharf, which were acquired in
connection with the Beacon Merger, with respect to the Company's control over
property management of such Properties. Such joint venture partner did not
consent to the transfer to the Company of Beacon's joint venture interest in
these Properties. Although the Company believes that such consent was not
required, unless the Company is able to reach an agreement with respect to
day-to-day management of such Properties, it is possible that the joint venture
partner could challenge the transfer of such Properties in the Beacon Merger, or
seek to trigger the buy-sell remedy found in the joint venture documents.
    
 
   
     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 actions
which the Company does not believe to be material or 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, business, results of operations or
financial condition of the Company.
    
 
   
     Geographical. The Company carries earthquake insurance on all of the
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 43 Properties
located in California, 12 have been built 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.
    
 
   
     Commitments. In February 1998, the Company entered into a contract to
purchase the Rand Tower Garage in Minneapolis, Minnesota, upon completion of the
parking structure. The purchase price for Rand Tower Garage, which is comprised
of 589 parking spaces in Minneapolis' Central Business District, will be
approximately $19 million. Although the project is scheduled for completion in
January 1999, this transaction is contingent upon certain terms and conditions
as set forth in the purchase agreement. There can be no assurance that this
transaction will be consummated as described above.
    
                                      F-24
<PAGE>   151
   
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
    
   
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
    
 
   
                                  (UNAUDITED)
    
 
   
     In March 1998, the Company's Board of Trustees approved the purchase of
Prominence in Buckhead, an office building development in Atlanta, Georgia. The
property, which will consist of a 430,000 square foot office building and 1,350
parking spaces, will be acquired upon its anticipated completion in mid 1999.
The purchase will also include an 11.88 acre site that may be used to develop
Phase II to the property. The purchase price for the described assets will be
approximately $70 million. This transaction is contingent upon certain terms and
conditions as set forth in the purchase agreement. There can be no assurance
that this transaction will be consummated as described above.
    
 
   
     In accordance with the agreement governing the Company's investment in the
Wright Runstad Asset Limited Partnership (see Note 4), the Company committed to
provide up to $20.0 million in additional financing or credit support for future
development. As of March 31, 1998, no amounts have been funded pursuant to this
agreement.
    
 
   
NOTE 11 -- SUBSEQUENT EVENTS
    
 
   
     The following significant transactions relating to the Company occurred
during the period from April 1, 1998 to May 6, 1998:
    
 
   
        1) On April 2, 1998, the Company acquired vacant land known as Westbrook
           Corporate Center Vacant Land, located in Westchester, Illinois. The
           property is adjacent to Westbrook Corporate Center. The purchase
           price was approximately $3.9 million in cash.
    
 
   
        2) On April 21, 1998, the Company purchased Denver Post Tower consisting
           of approximately 580,000 total square feet located in Denver,
           Colorado, from an unaffiliated party. The purchase price of
           approximately $53.1 million consisted of approximately $53.0 million
           in cash and $100,000 in Units.
    
 
   
        3) On April 29, 1998, the Company acquired 301 Howard Street and 215
           Fremont Street located in San Francisco, CA, from an unaffiliated
           party for approximately $90 million. 301 Howard Street consists of 23
           stories and approximately 306,000 square feet. The 215 Fremont Street
           building consists of approximately 265,000 square feet. 215 Fremont
           Street is currently vacant and will undergo a significant renovation
           and extensive seismic retrofitting prior to re-tenanting.
    
 
   
        4) In April, 1998 the Company entered into an agreement to acquire the
           Colonnade office complex in Dallas, Texas from an unaffiliated party,
           for a purchase price of approximately $150 million. The acquisition
           will include three buildings totaling 982,110 square feet. Phase I
           (289,743 square feet) and Phase II (317,367 square feet) will be
           acquired for approximately $90 million. Phase III (375,000 square
           feet), which is under construction, is scheduled for completion in
           August 1998. The purchase price on the Phase III development will be
           determined at the date of close, based on a pre-determined formula
           factored for leased and unleased space, and is estimated at
           approximately $60 million. The closing on all three phases is
           scheduled for September 1998. This transaction is contingent upon
           certain terms and conditions as set forth in the purchase agreement.
           There can be no assurance that this transaction will be consummated
           as described above.
    
 
   
        5) In April, 1998 the Company acquired four properties and entered into
           agreements to acquire an additional nine properties totaling
           approximately 2.7 million square feet from an unaffiliated party for
           an aggregate purchase price of approximately $394.0 million,
           consisting of nine office properties located in metropolitan Denver,
           CO, and four in Albuquerque, NM. This purchase
    
 
                                      F-25
<PAGE>   152
   
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
    
   
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
    
 
   
                                  (UNAUDITED)
    
 
   
           also includes two future development sites in Denver. The acquisition
           includes the following properties:
    
 
   
<TABLE>
<CAPTION>
                                            APPROXIMATE
      PROPERTY              LOCATION        SQUARE FEET   ACQUISITION DATE
      --------              --------        -----------   ----------------
<S>                      <C>                <C>           <C>
Tabor Center(a)......    Denver, CO            674,278    April 30, 1998
410 17th Street......    Denver, CO            388,953    April 30, 1998
Trinity Place........    Denver, CO            189,163    April 30, 1998
Dominion Plaza.......    Denver, CO            571,468        Pending
Metropoint...........    Denver, CO            263,719        Pending
The Solarium.........    Denver, CO            162,851        Pending
The Terrace
  Building...........    Denver, CO            115,364        Pending
4949 South Syracuse..    Denver, CO             62,633        Pending
One Park square (b)..    Albuquerque, NM       262,020        Pending
                                             ---------
     Total..............................     2,690,449
                                             =========
</TABLE>
    
 
- -------------------------
   
        (a) This property consists of two buildings.
    
 
   
        (b) This property consists of four buildings.
    
 
   
        This transaction is contingent upon certain terms and conditions as set
        forth in the purchase agreement. There can be no assurance that this
        transaction will be consummated as described above.
    
 
   
        6) In April 1998, the Company completed a private placement of 1,628,009
           restricted common shares at $28.5625 per share for net proceeds of
           approximately $44.1 million.
    
 
   
        7) The Company has agreed to acquire the remaining 90% interest in the
           Polk & Taylor property for approximately $158.0 million in cash from
           the Company's joint venture partner. This transaction is contingent
           upon certain terms and conditions as set forth in the purchase
           agreement. There can be no assurance that this transaction will be
           consummated as described above.
    
 
                                      F-26
<PAGE>   153
 
                         REPORT OF INDEPENDENT AUDITORS
 
The Board of Trustees and Shareholders of
Equity Office Properties Trust
 
   
     We have audited the accompanying consolidated balance sheet of Equity
Office Properties Trust (the "Company") and the combined balance sheet of the
Equity Office Predecessors, as defined in Note 1, as of December 31, 1997 and
1996, respectively, and the related consolidated statements of operations,
shareholders' equity and cash flows of the Company for the period from July 11,
1997 to December 31, 1997, and the related combined statements of operations,
owners' equity and cash flows of the Equity Office Predecessors, as defined in
Note 1, for the period from January 1, 1997 to July 10, 1997, and for the years
ended December 31, 1996 and 1995. Our audits also included the financial
statement schedule III, Real Estate and Accumulated Depreciation. These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
    
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
   
     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Equity Office
Properties Trust and the combined financial position of the Equity Office
Predecessors, as defined in Note 1, at December 31, 1997 and 1996, respectively,
and the consolidated results of Equity Office Properties Trust's operations and
cash flows for the period from July 11, 1997 to December 31, 1997, and the
combined results of the Equity Office Predecessors', as defined in Note 1,
operations and cash flows for the period from January 1, 1997 to July 10, 1997
and for the years ended December 31, 1996 and 1995 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.
    
 
                                                           /s/ Ernst & Young LLP
                                                               ERNST & YOUNG LLP
Chicago, Illinois
February 23, 1998, except for Note 25,
as to which the date is March 18, 1998
 
                                      F-27
<PAGE>   154
 
                         EQUITY OFFICE PROPERTIES TRUST
                           CONSOLIDATED BALANCE SHEET
                                      AND
                           EQUITY OFFICE PREDECESSORS
                             COMBINED BALANCE SHEET
 
<TABLE>
<CAPTION>
                                                                EQUITY OFFICE     EQUITY OFFICE
                                                               PROPERTIES TRUST   PREDECESSORS
                                                                 DECEMBER 31,     DECEMBER 31,
                                                                     1997             1996
                                                               ----------------   -------------
                                                                     (DOLLARS IN THOUSANDS,
                                                                       EXCEPT SHARE DATA)
<S>                                                            <C>                <C>
ASSETS:
Investment in real estate...................................     $11,041,014       $3,549,708
Accumulated depreciation....................................         (64,695)        (257,893)
                                                                 -----------       ----------
                                                                  10,976,319        3,291,815
Cash and cash equivalents...................................         228,853          410,420
Tenant and other receivables (net of allowance for doubtful
  accounts of $675 and $55, respectively)...................          32,531            8,675
Deferred rent receivable....................................          20,050           49,986
Escrow deposits and restricted cash.........................          25,772           32,593
Investment in unconsolidated joint ventures.................         387,332           26,910
Deferred financing costs (net of accumulated amortization of
  $1,855 and $3,351, respectively)..........................           5,090            8,372
Deferred leasing costs (net of accumulated amortization of
  $1,473 and $18,455, respectively).........................          26,994           62,593
Prepaid expenses and other assets...........................          48,731           21,201
                                                                 -----------       ----------
     Total Assets...........................................     $11,751,672       $3,912,565
                                                                 ===========       ==========
LIABILITIES AND SHAREHOLDERS'/OWNERS' EQUITY:
Mortgage debt (including a net premium of $1,157 and $0,
  respectively).............................................     $ 2,063,017       $1,837,767
Unsecured notes.............................................         180,000               --
Lines of credit.............................................       2,041,300          127,125
Accounts payable and accrued expenses.......................         260,401           81,995
Due to affiliates...........................................             733            2,074
Distribution payable........................................           1,191           96,500
Other liabilities...........................................          45,055           29,022
                                                                 -----------       ----------
     Total Liabilities......................................       4,591,697        2,174,483
                                                                 -----------       ----------
Commitments and contingencies (Note 24)
Minority interests:
  Operating Partnership.....................................         725,206               --
  Partially owned properties................................          29,612           11,080
                                                                 -----------       ----------
     Total Minority Interests...............................         754,818           11,080
                                                                 -----------       ----------
Owners' equity..............................................              --        1,727,002
Shareholders' equity:
  8.98% Series A Cumulative Redeemable Preferred Shares,
     liquidation preference $25.00 per share; 100,000,000
     shares authorized, and 8,000,000 issued and
     outstanding............................................         200,000               --
  Common Shares, $0.01 par value; 750,000,000 shares
     authorized, 250,030,403 issued and 249,527,663
     outstanding............................................           2,495               --
  Additional paid in capital................................       6,219,511               --
  Dividends in excess of accumulated earnings...............         (16,849)              --
                                                                 -----------       ----------
Total Shareholders'/Owners' Equity..........................       6,405,157        1,727,002
                                                                 -----------       ----------
Total Liabilities and Shareholders'/Owners' Equity..........     $11,751,672       $3,912,565
                                                                 ===========       ==========
</TABLE>
 
                            See accompanying notes.
 
                                      F-28
<PAGE>   155
 
                         EQUITY OFFICE PROPERTIES TRUST
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                      AND
                           EQUITY OFFICE PREDECESSORS
                       COMBINED STATEMENTS OF OPERATIONS
 
<TABLE>
<CAPTION>
                                                                                       EQUITY OFFICE PREDECESSORS
                                                              EQUITY OFFICE,    -----------------------------------------
                                                             PROPERTIES TRUST     FOR THE
                                                                 FOR THE        PERIOD FROM
                                                               PERIOD FROM      JANUARY 1,      FOR THE      FOR THE YEAR
                                                             JULY 11, 1997 TO     1997 TO      YEAR ENDED       ENDED
                                                               DECEMBER 31,      JULY 10,     DECEMBER 31,   DECEMBER 31,
                                                                   1997            1997           1996           1995
                                                             ----------------   -----------   ------------   ------------
                                                                      (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                                          <C>                <C>           <C>            <C>
REVENUES:
Rental.....................................................    $    314,233      $256,146       $386,481       $289,320
Tenant reimbursements......................................          63,196        43,241         62,036         41,935
Parking....................................................          25,960        21,091         27,253         15,390
Other......................................................           3,324         6,539         17,626         10,314
Fees from noncombined affiliates...........................           2,440         2,510          5,120          5,899
Interest...................................................           3,815         9,577          9,608          8,599
                                                               ------------      --------       --------       --------
    Total revenues.........................................         412,968       339,104        508,124        371,457
                                                               ------------      --------       --------       --------
EXPENSES:
Interest:
  Expense incurred.........................................          76,675        80,481        119,595        100,566
  Amortization of deferred financing costs.................           4,178         2,771          4,275          2,025
Depreciation...............................................          64,695        57,379         82,905         64,716
Amortization...............................................           1,473         5,884          9,057          7,415
Real estate taxes..........................................          47,579        34,000         52,182         37,978
Insurance..................................................           3,196         3,060          4,863          3,352
Repairs and maintenance....................................          50,285        45,540         71,156         53,618
Property operating.........................................          54,619        44,685         72,866         56,540
General and administrative.................................          17,690        17,201         23,145         21,987
Provision for value impairment.............................              --            --             --         20,248
                                                               ------------      --------       --------       --------
    Total expenses.........................................         320,390       291,001        440,044        368,445
                                                               ------------      --------       --------       --------
Income before allocation to minority interests,
  income from investment in unconsolidated
  joint ventures, gain on sales of real estate and
  extraordinary items......................................          92,578        48,103         68,080          3,012
Minority interests:
  Operating Partnership....................................          (7,010)           --             --             --
  Partially owned properties, net of extraordinary gain
    of $20,035 in 1995.....................................            (789)         (912)        (2,086)        (2,129)
Income from unconsolidated joint ventures..................           3,173         1,982          2,093          2,305
Gain on sales of real estate...............................             126        12,510          5,338
                                                               ------------      --------       --------       --------
Income before extraordinary items..........................          88,078        61,683         73,425          3,188
Extraordinary items........................................         (16,366)         (274)            --         31,271
                                                               ------------      --------       --------       --------
Net income.................................................          71,712        61,409         73,425         34,459
Preferred dividends........................................            (649)           --             --             --
                                                               ------------      --------       --------       --------
Net income available for Common Shares.....................    $     71,063      $ 61,409       $ 73,425       $ 34,459
                                                               ============      ========       ========       ========
Net income available per weighted average Common Share
  outstanding -- Basic.....................................    $       0.44
                                                               ============
Weighted average Common Shares outstanding -- Basic........     162,591,477
                                                               ============
Net income available per weighted average Common Share
  outstanding -- Diluted...................................    $       0.43
                                                               ============
Weighted average Common Shares outstanding -- Diluted......     180,014,027
                                                               ============
</TABLE>
 
                            See accompanying notes.
                                      F-29
<PAGE>   156
 
                         EQUITY OFFICE PROPERTIES TRUST
           CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                                      AND
                           EQUITY OFFICE PREDECESSORS
                COMBINED STATEMENTS OF CHANGES IN OWNERS' EQUITY
 
<TABLE>
<CAPTION>
                                                           EQUITY OFFICE
                                                          PROPERTIES TRUST
                                                           FOR THE PERIOD             EQUITY OFFICE PREDECESSORS
                                                           JULY 11, 1997     ---------------------------------------------
                                                                 TO           FOR THE PERIOD
                                                            DECEMBER 31,      JANUARY 1, 1997    YEARS ENDED DECEMBER 31,
                                                                1997         TO JULY 10, 1997       1996           1995
                                                          ----------------   -----------------   ----------     ----------
                                                                               (DOLLARS IN THOUSANDS)
<S>                                                       <C>                <C>                 <C>            <C>
PREFERRED SHARES:
Balance, beginning of period............................     $       --         $       --       $       --     $       --
  8.98% Series A Cumulative Redeemable..................        200,000                 --               --             --
                                                             ----------         ----------       ----------     ----------
Balance, end of period..................................     $  200,000         $       --       $       --     $       --
                                                             ==========         ==========       ==========     ==========
COMMON SHARES, $.01 PAR VALUE:
Balance, beginning of period............................     $       --         $       --       $       --     $       --
  Issuance of Common Shares for IPO.....................            287                 --               --             --
  Contribution of net assets from Consolidation at fair
    value in exchange for Common Shares.................          1,230                 --               --             --
  Issuance of Common Shares for acquisitions............             34                 --               --             --
  Sale of Common Shares, net............................             97                 --               --             --
  Issuance of Common Shares for Beacon Merger...........            844                 --               --             --
  Common Shares issued for restricted shares and trustee
    fees................................................              3                 --               --             --
                                                             ----------         ----------       ----------     ----------
Balance, end of period..................................     $    2,495         $       --       $       --     $       --
                                                             ==========         ==========       ==========     ==========
ADDITIONAL PAID IN CAPITAL:
Balance, beginning of period............................     $       --         $       --       $       --     $       --
  Net proceeds from IPO.................................        564,219                 --               --             --
  Contribution of net assets from Consolidation at fair
    value in exchange for Common Shares.................      2,580,259                 --               --             --
  Issuance of Common Shares and Warrants for
    acquisitions........................................        114,966                 --               --             --
  Sale of Common Shares, net............................        273,853                 --               --             --
  Issuance of Common Shares for Beacon Merger...........      2,652,726                 --               --             --
  Common Shares issued for restricted shares and trustee
    fees................................................            162                 --               --             --
  Adjustment for minority interests ownership in
    Operating Partnership...............................         33,326                 --               --             --
                                                             ----------         ----------       ----------     ----------
Balance, end of period..................................     $6,219,511         $       --       $       --     $       --
                                                             ==========         ==========       ==========     ==========
DISTRIBUTIONS IN EXCESS OF ACCUMULATED EARNINGS:
Balance, beginning of period............................     $       --         $       --       $       --     $       --
  Net income available for Common Shares................         71,063                 --               --             --
  Dividends to Common Shares............................        (87,912)                --               --             --
                                                             ----------         ----------       ----------     ----------
Balance, end of period..................................     $  (16,849)        $       --       $       --     $       --
                                                             ==========         ==========       ==========     ==========
OWNERS' EQUITY:
Balance, beginning of period/year.......................     $       --         $1,727,002       $1,089,969     $  731,098
  Contributions.........................................             --            285,542          661,265        337,048
  Offering expenses.....................................             --                 --           (1,157)          (128)
  Distributions.........................................             --           (189,752)         (96,500)       (12,508)
  Net income............................................             --             61,409           73,425         34,459
  Contribution of Owners' Equity to the Company in
    connection with the Consolidation...................             --         (1,884,201)              --             --
                                                             ----------         ----------       ----------     ----------
Balance, end of period/year.............................     $       --         $       --       $1,727,002     $1,089,969
                                                             ==========         ==========       ==========     ==========
</TABLE>
 
                            See accompanying notes.
                                      F-30
<PAGE>   157
 
                         EQUITY OFFICE PROPERTIES TRUST
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                      AND
                           EQUITY OFFICE PREDECESSORS
   
                       COMBINED STATEMENTS OF CASH FLOWS
    
 
<TABLE>
<CAPTION>
                                                                                     EQUITY OFFICE PREDECESSORS
                                                          EQUITY OFFICE     ---------------------------------------------
                                                         PROPERTIES TRUST   FOR THE PERIOD
                                                         THE PERIOD FROM         FROM         FOR THE YEAR   FOR THE YEAR
                                                         JULY 11, 1997 TO   JANUARY 1, 1997      ENDED          ENDED
                                                           DECEMBER 31,       TO JULY 10,     DECEMBER 31,   DECEMBER 31,
                                                               1997              1997             1996           1995
                                                         ----------------   ---------------   ------------   ------------
                                                                              (DOLLARS IN THOUSANDS)
<S>                                                      <C>                <C>               <C>            <C>
OPERATING ACTIVITIES:
  Net income before preferred dividends................    $    71,712         $  61,409       $   73,425     $  34,459
  Adjustment to reconcile net income to net cash
    provided by operating activities:
    Depreciation and amortization......................         70,346            66,034           96,237        74,156
    (Income) from unconsolidated joint ventures........         (3,173)           (1,982)          (2,093)       (2,305)
    (Gain) on sales of real estate.....................           (126)          (12,510)          (5,338)           --
    Provision for value impairment.....................             --                --               --        20,248
    Extraordinary loss from early extinguishments of
      debt.............................................         16,366               274               --            --
    Extraordinary (gain) on repurchase of debt.........             --                --               --       (31,271)
    Provision for doubtful accounts....................          1,686             1,175            2,284         2,096
    Allocation to minority interests...................          7,799               912            2,086         2,129
    Changes in assets and liabilities:
      Decrease (increase) in rents receivable..........          2,064             2,664           (1,550)       (2,998)
      (Increase) in deferred rent receivables..........        (21,421)           (8,061)         (20,421)      (14,413)
      (Increase) decrease in other assets..............        (29,551)           (8,839)          (9,747)        1,374
      Increase in accounts payable and accrued
        expenses.......................................         54,076             2,916           19,241         6,931
      (Decrease) increase in due to affiliates.........           (898)             (722)           1,235           (89)
      Increase (decrease) in other liabilities.........         21,874            (7,310)          10,616         3,561
                                                           -----------         ---------       ----------     ---------
        Net cash provided by operating activities......        190,754            95,960          165,975        93,878
                                                           -----------         ---------       ----------     ---------
INVESTING ACTIVITIES:
  Cash received from Beacon Merger.....................         79,786                --               --            --
  Property acquisitions................................     (1,508,928)         (531,968)        (768,906)     (317,669)
  Payments for capital and tenant improvements.........        (99,586)          (59,511)        (129,485)      (76,985)
  Payment of Beacon Merger costs.......................        (62,069)               --               --            --
  Proceeds from sales of real estate...................             --            72,078           14,502            --
  Distributions from (investments in) unconsolidated
    joint ventures.....................................          4,571           (44,260)           1,688         2,300
  Payments of lease acquisition costs..................        (15,043)           (9,260)         (29,793)      (16,106)
  Decrease (increase) in escrow deposits and restricted
    cash...............................................          8,997             1,853          (12,233)       27,845
                                                           -----------         ---------       ----------     ---------
        Net cash (used for) investing activities.......     (1,592,272)         (571,068)        (924,227)     (380,615)
                                                           -----------         ---------       ----------     ---------
FINANCING ACTIVITIES:
  Net proceeds from sale of Common Shares..............        838,456                --               --            --
  Proceeds from exercise of Beacon options.............         68,191                --               --            --
  Dividends/distributions to Common Shares and Units...        (95,569)               --               --            --
  Capital contributions................................             --           287,949          661,265       337,048
  Capital distributions................................             --          (288,652)         (12,508)      (17,800)
  Payments for offering expenses.......................             --                --           (1,157)         (128)
  (Distributions to) contributions from minority
    interests -- partially owned properties............           (371)           (3,401)         (22,593)          141
  Cash contributed by Equity Office Predecessors in
    connection with Consolidation......................        181,138                --               --            --
  Proceeds from mortgage debt..........................         84,466           154,090          640,953       271,482
  Proceeds from unsecured notes........................        180,000                --               --            --
  Proceeds from lines of credit........................      2,530,425           218,000          216,943       288,000
  Repurchase of debt...................................             --                --               --       (40,078)
  Principal payments on mortgage debt..................       (838,354)          (47,472)        (254,104)     (182,244)
  Principal payments on lines of credit................     (1,294,750)          (72,500)        (165,818)     (378,000)
  Payments of loan costs...............................         (7,039)           (1,889)          (5,430)       (1,908)
  Prepayment penalties on early extinguishments of
    debt...............................................        (16,247)             (274)              --            --
                                                           -----------         ---------       ----------     ---------
        Net cash provided by financing activities......      1,630,346           245,851        1,057,551       276,513
                                                           -----------         ---------       ----------     ---------
Net increase (decrease) in cash and cash equivalents...        228,828          (229,257)         299,299       (10,224)
Cash and cash equivalents at the beginning of the
  period...............................................             25           410,420          111,121       121,345
                                                           -----------         ---------       ----------     ---------
Cash and cash equivalents at the end of the period.....    $   228,853         $ 181,163       $  410,420     $ 111,121
                                                           ===========         =========       ==========     =========
SUPPLEMENTAL INFORMATION:
  Interest paid during the period, including
    capitalized interest of $1,890, $3,669, $4,640 and
    $1,682, respectively...............................    $    70,658         $  82,969       $  121,813     $ 100,700
                                                           ===========         =========       ==========     =========
</TABLE>
 
                            See accompanying notes.
                                      F-31
<PAGE>   158
 
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
            NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
 
NOTE 1 -- BUSINESS AND FORMATION OF COMPANY
 
     As used herein, "Company" means Equity Office Properties Trust, a Maryland
real estate investment trust, together with its subsidiaries including EOP
Operating Limited Partnership, a Delaware limited partnership (the "Operating
Partnership"), and the predecessors thereof ("Equity Office Predecessors"). The
Company was formed on October 9, 1996 to continue and expand the national office
property business organized by Mr. Samuel Zell, Chairman of the Board of
Trustees of the Company and to complete the consolidation of the Equity Office
Predecessors (the "Consolidation") and its initial public offering (the "IPO")
on July 11, 1997. The Company is a fully integrated, self-administered and
self-managed real estate company engaged in acquiring, owning, managing, leasing
and renovating office properties and parking facilities. The Company expects to
qualify as a real estate investment trust ("REIT") for federal income tax
purposes and generally will not be subject to federal income tax if it
distributes 95% of its taxable income and complies with a number of
organizational and operational requirements (see Note 2). As of December 31,
1997, the Company owned or had an interest in 258 office properties (the "Office
Properties") containing approximately 65.3 million rentable square feet of
office space and owned 17 stand-alone parking facilities containing
approximately 16,749 parking spaces (the "Parking Facilities" and, together with
the Office Properties, the "Properties"). The Office Properties are located in
78 submarkets in 39 markets in 24 states and the District of Columbia. The
Office Properties, by rentable square feet, are located approximately 50% in
central business districts ("CBDs") and 50% in suburban markets.
 
     On July 11, 1997, the Company consummated the IPO having sold 28,750,000 of
its common shares of beneficial interest, $0.01 par value per share ("Common
Shares") (including 3,750,000 Common Shares relating to the underwriters
overallotment option) at $21 per Common Share generating proceeds of
approximately $603.8 million. The Company contributed net proceeds from the IPO
(after deducting the underwriting discount of approximately $39.2 million) of
approximately $564.5 million to the Operating Partnership in exchange for
28,750,000 units of partnership interest in the Operating Partnership ("Units").
The Company used the net proceeds of the IPO and available cash reserves to
repay debt of approximately $678.4 million, of which $598.4 million was mortgage
debt and $80 million was a revolving line of credit.
 
     Concurrent with the IPO, the Company also completed the following formation
transactions which resulted in the Consolidation of the Equity Office
Predecessors into the Company:
 
     - Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership,
       Zell/Merrill Lynch Real Estate Opportunity Partners Limited Partnership
       II, Zell/Merrill Lynch Real Estate Opportunity Partners Partnership
       Limited III and Zell/Merrill Lynch Real Estate Opportunity Partners
       Limited Partners IV (collectively the "ZML Opportunity Partnerships"),
       the predecessor owner of the Properties, contributed their interests in
       the Properties to the Operating Partnership in exchange for 126,419,397
       Units.
 
     - ZML Investors Inc., ZML Investors II, Inc., Zell/Merrill Lynch Real
       Estate Opportunity Partners III Trust and Zell/Merrill Lynch Real Estate
       Opportunity Partners IV Trust (collectively "ZML REITs") merged into the
       Company, with the Company succeeding to their interests in, and becoming
       the managing general partners of each of the ZML Opportunity
       Partnerships. Shareholders of the ZML REITs received 122,900,572 Common
       Shares of the Company in exchange for their interests in the ZML REITs.
 
     - Equity Group Investments, Inc. an Illinois corporation ("EGI"), and
       Equity Office Holdings, L.L.C., a Delaware limited liability company
       ("EOH" and together with EGI, the "Equity Group") contributed
       substantially all of their interests in their office property and asset
       management business and parking facilities management business
       (collectively the "Management Business") to the Operating Partnership in
       exchange for 8,358,822 Units.
 
                                      F-32
<PAGE>   159
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     - The Operating Partnership transferred a portion of the office property
       management business of EOH, the office property asset management business
       and the parking asset management business of the Equity Group that
       relates to the property management of the properties owned by the Equity
       Group, together with the 18 Properties held in partnerships or subject to
       participation agreements with unaffiliated parties (the "Joint Venture
       Properties") (collectively, the "Managed Property Business") to Equity
       Office Properties Management Corp., a Delaware corporation (the "EOP
       Management Company"), in exchange for non-voting stock representing 95%
       of the economic value in the EOP Management Company and EOH contributed
       $150,000 to the EOP Management Company in exchange for voting stock
       representing 5% of the economic value of the EOP Management Company.
 
     - ZML Partners Limited Partnership, ZML Partners Limited Partnership II,
       ZML Partners Limited Partnership III and ZML Partners Limited Partnership
       IV (the "ZML Partners"), each of which is the general partner of one of
       the ZML Opportunity Partnerships, each transferred their 5% interest in
       certain corporations which owned a 1% general partnership interest in
       certain of the property title holding entities to a newly formed
       qualified REIT subsidiary in exchange for 26,458 Common Shares.
 
     - The Operating Partnership transferred its 95% interest in certain
       corporations which owned a 1% general partner interest in certain of the
       property title holding entities to a subsidiary of the Company in
       exchange for 502,740 Common Shares. Such Common Shares have been treated
       as treasury stock in the accompanying financial statements.
 
     The table below summarizes the ownership of the Company and the Operating
Partnership upon the completion of the transactions described above:
 
         OWNERSHIP OF EQUITY OFFICE PROPERTIES TRUST (AS OF IPO DATE):
 
<TABLE>
<CAPTION>
                                                                 NUMBER OF
                                                               COMMON SHARES   PERCENTAGE
                                                               -------------   ----------
<S>                                                            <C>             <C>
Original capitalization (by Mr. Samuel Zell)................          1,000         --
Common Shares sold in the IPO...............................     28,750,000       18.9%
Common Shares issued to shareholders of ZML REITs...........    122,900,572       80.8%
Common Shares issued to the ZML Partners....................         26,458         --
Common Shares issued to the Operating Partnership...........        502,740        0.3%
                                                                -----------      -----
     Total (see Note 12)....................................    152,180,770      100.0%
                                                                ===========      =====
(Assuming all Units are converted to Common Shares):
Common Shares sold in the IPO...............................     28,750,000       17.6%
Common Shares issued to shareholders of ZML REITs, including
  Mr. Zell..................................................    122,928,030       75.2%
Units convertible to Common Shares (see Note 12)............     11,877,647        7.2%
                                                                -----------      -----
     Total..................................................    163,555,677      100.0%
                                                                ===========      =====
</TABLE>
 
                                      F-33
<PAGE>   160
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
        OWNERSHIP OF EOP OPERATING LIMITED PARTNERSHIP (AS OF IPO DATE):
 
<TABLE>
<CAPTION>
                                                               NUMBER OF UNITS   PERCENTAGE
                                                               ---------------   ----------
<S>                                                            <C>               <C>
Equity Office Properties Trust (held directly)..............      28,777,458        17.6%
Equity Office Properties Trust (held through its interests
  in the
  ZML Opportunity Partnerships).............................     122,900,572        75.1%
                                                                 -----------       -----
Equity Office Properties Trust subtotal.....................     151,678,030        92.7%
ZML Partners (held through its interest in ZML Opportunity
  Partnerships).............................................       3,229,001         2.0%
Other limited partner (held through its interest in ZML
  Opportunity Partnership II)...............................         289,824         0.2%
Equity Group Investments, Inc...............................       3,737,438         2.3%
Equity Office Holdings, L.L.C...............................       4,621,384         2.8%
                                                                 -----------       -----
     Total..................................................     163,555,677       100.0%
                                                                 ===========       =====
</TABLE>
 
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
BASIS OF PRESENTATION
 
     The Consolidation was accounted for as a purchase in accordance with
Accounting Principles Board Opinion No. 16. Accordingly, the fair value of the
consideration given by the Company was used as the valuation basis for the
transactions. The assets acquired and liabilities assumed by the Company were
recorded at their fair value as of July 11, 1997 and the excess of the purchase
price over the related historical basis of the net assets acquired was allocated
primarily to investment in real estate.
 
   
     The Company's assets, which include investments in joint ventures, are
primarily owned by, and its operations are substantially conducted through, the
Operating Partnership. The Company is the managing general partner of the
Operating Partnership. Due to the Company's ability as general partner to
control either through ownership or by contract the Operating Partnership and
various other subsidiaries, each such entity has been consolidated with the
Company for financial reporting purposes.
    
 
   
     The Beacon Merger (as defined in Note 4) was accounted for using the
purchase method in accordance with Accounting Principles Board Opinion No. 16.
The fair value of the consideration given by the Company in the Beacon Merger
was used as the valuation basis of the combination. The assets acquired and the
liabilities assumed of Beacon were recorded at their relative fair values as of
December 19, 1997 (the "Beacon Closing Date"). The results of operations of the
Beacon properties for the period from the Beacon Closing Date through December
31, 1997 are included in the Company's consolidated statements of operations and
cash flows.
    
 
     The combined financial statements of Equity Office Predecessors prior to
the Consolidation and the IPO included interests in the Properties of the ZML
Opportunity Partnerships together with their limited and general partners
(collectively, the "ZML Funds" which includes ZML Fund I, ZML Fund II, ZML Fund
III and ZML Fund IV) and the Management Business. The financial statements of
Equity Office Predecessors are presented on a combined basis, at historical
cost, because the ZML Funds and the Management Business were under common
control. Minority interests have been recorded for those entities that were not
wholly owned by the ZML Funds. Where controlling interests were not held by the
ZML Funds, the entities were accounted for as investments in unconsolidated
joint ventures utilizing equity accounting. All intercompany transactions and
balances have been eliminated in combination.
 
                                      F-34
<PAGE>   161
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
INVESTMENT IN REAL ESTATE
 
     Subsequent to the Consolidation, 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.............................        Term 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 to Be Disposed Of"
("Statement No. 121") which established accounting standards for the evaluation
of the potential impairment of such assets. Statement No. 121 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 $20.2 million, of which $17.5 million related to the adjustment of
investment in real estate and approximately $2.7 million related to unamortized
lease acquisition cost.
 
     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 the Company 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.
 
DEFERRED LEASING AND FINANCING COSTS
 
     Deferred leasing and financing costs are recorded at cost. The deferred
leasing costs are amortized over the terms of the respective leases and the
deferred financing costs are amortized over the terms of the respective
financings on a straight-line basis, which approximates the effective yield
method.
 
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. The Company records rental income for the full term of
each lease on a straight-line basis. Accordingly, the Company records a
receivable from tenants, net of reserves, which the Company expects to collect
over the remaining term of these leases rather than currently ("Deferred Rent
Receivable"). For existing leases at acquired properties, the term of the lease
is considered to commence as of the acquisition date for purposes of this
calculation. The amounts included in rental income for the periods July 11, 1997
to December 31, 1997 and January 1, 1997 to July 10, 1997 and the years ended
December 31, 1996 and 1995, which were not currently collectible as of such
dates, were approximately $20.0 million, $7.7 million, $18.4 million and $12.7
million, respectively. Deferred Rent Receivable is not recognized for income tax
purposes.
 
                                      F-35
<PAGE>   162
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
CASH EQUIVALENTS
 
     The Company considers cash equivalents to be all highly liquid investments
purchased with a maturity of three months or less at the date of purchase. As of
December 31, 1996 cash equivalents included deposits made to a commingled bank
account which was held in an affiliate's name. Such affiliate provided
centralized cash management services to Equity Office Predecessors.
 
ESCROW DEPOSITS AND RESTRICTED CASH
 
     Escrow deposits primarily consist of amounts held by lenders to provide for
future real estate tax expenditures, tenant improvements and earnest money
deposits on acquisitions. 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 the Company's long-term
debt, consisting of mortgage loans, revolving bank loans and various interest
rate protection agreements, approximate their respective fair market values as
of December 31, 1997 and 1996, respectively. 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, tenant
and other rents receivable, accounts payable and accrued expenses are reasonable
estimates of their fair value.
 
INTEREST RATE PROTECTION AGREEMENTS
 
     The Company periodically enters 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 as an adjustment to interest expense over the term of the
related financing transaction on the straight-line method, which approximates
the effective yield amount.
 
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. The Company incurred federal and state income
and franchise taxes of approximately $0.2 million, $0.9 million, $1.4 million
and $1.6 million for the periods July 11, 1997 to December 31, 1997 and January
1, 1997 to July 10, 1997 and the years ended December 31, 1996 and 1995,
respectively, which are included in general and administrative expenses.
 
     Commencing with the year ended 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
 
                                      F-36
<PAGE>   163
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
undistributed income. The aggregate cost of land and depreciable property for
federal income tax purposes as of December 31, 1997 was approximately $7.5
billion.
 
INCOME PER COMMON SHARE
 
     In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share ("Statement No. 128"). Statement No. 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All net income per weighted average
Common Share and net income per weighted average Common Share -- assuming
dilution amounts for all periods have been presented, and where appropriate,
restated to conform to the Statement No. 128 requirements. The effect of a
conversion of a Unit to a Common Share has been excluded from basic earnings per
Common Share, due to certain restrictions.
 
MINORITY INTERESTS
 
OPERATING PARTNERSHIP:
 
     Net income is allocated to minority interests based on their respective
ownership percentage of the Operating Partnership. The ownership percentage is
calculated by dividing the number of Units held by the minority interests by the
total Units held by both the minority interests and the Company. Issuance of
additional Common Shares or Units changes the ownership interests of both the
minority interests and the Company. Such transactions and the proceeds therefrom
are treated as capital transactions.
 
PARTIALLY OWNED PROPERTIES:
 
     The Company reflects minority interests on the balance sheet for the
portion of properties, which are consolidated by the Company, that are not
wholly owned by the Company. The earnings or losses therefrom have been
reflected as minority interest in the Company's statements of operations.
 
RECLASSIFICATION
 
     Certain reclassifications have been made to the previously reported 1996
and 1995 statements in order to provide comparability with the 1997 statements
report herein. These reclassifications have not changed the 1996 and 1995
results or owners' equity.
 
USE OF ESTIMATES
 
     The preparation of the consolidated financial statements of the Company and
the combined financial statements of Equity Office Predecessors 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.
 
                                      F-37
<PAGE>   164
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 3 -- INVESTMENT IN REAL ESTATE
 
     Investment in real estate, including Office Properties and Parking
Facilities, was as follows:
 
<TABLE>
<CAPTION>
                                                                EQUITY OFFICE     EQUITY OFFICE
                                                               PROPERTIES TRUST   PREDECESSORS
                                                                 DECEMBER 31,     DECEMBER 31,
                                                                     1997             1996
                                                               ----------------   -------------
                                                                    (DOLLARS IN THOUSANDS)
<S>                                                            <C>                <C>
Land........................................................     $ 1,185,411       $  314,370
Building....................................................       9,706,956        2,871,690
Building improvements.......................................          55,278          161,497
Tenant improvements.........................................          89,455          196,093
Furniture and fixtures......................................           3,914            6,058
                                                                 -----------       ----------
     Gross investment in real estate........................      11,041,014        3,549,708
Accumulated depreciation....................................         (64,695)        (257,893)
                                                                 -----------       ----------
     Net investment in real estate..........................     $10,976,319       $3,291,815
                                                                 ===========       ==========
</TABLE>
 
     In connection with the initial rental operations of the 28 State Street
property in Boston, the Company incurred and capitalized approximately $5.6
million and $4.7 million of interest costs in the years ended December 31, 1997
and 1996, respectively.
 
                                      F-38
<PAGE>   165
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     During the year ended December 31, 1997, the Company acquired the
Properties listed below. Each Property was purchased from an unaffiliated party.
The cash portions of the acquisitions were funded from the Company's lines of
credit or working capital. In connection with certain of the acquisitions listed
below, the Company assumed indebtedness of approximately $1.4 billion and issued
Common Shares, Units, preferred shares and warrants with a value of $3.4
billion.
 
<TABLE>
<CAPTION>
                                                                                                TOTAL
                                                                                             ACQUISITION
                                                                               RENTABLE          COST
    DATE ACQUIRED      OFFICE PROPERTY/PORTFOLIO           LOCATION           SQUARE FEET   (IN THOUSANDS)
    -------------      -------------------------           --------           -----------   --------------
<S>                    <C>                         <C>                        <C>           <C>
1/29/97..............  177 Broad Street(1)         Stamford, CT                  187,573      $   36,254(2)
3/21/97..............  Preston Commons(1)          Dallas, TX                    418,604          55,174
4/16/97..............  Oakbrook Terrace Tower(1)   Oakbrook Terrace, IL          772,928         130,108
4/21/97..............  One Maritime Plaza(1)       San Francisco, CA             523,929          99,389
4/28/97..............  Smith Barney Tower(1)       San Diego, CA                 187,999          35,148
4/30/97..............  201 Mission Street(1)       San Francisco, CA             483,289          74,634
6/13/97..............  30 North LaSalle(1)         Chicago, IL                   925,950         100,707
9/3/97...............  LL&E Tower                  New Orleans, LA               545,157          61,819
9/3/97...............  Texaco Center               New Orleans, LA               619,714          66,819
10/1/97..............  Prudential Properties       Houston, TX; Dallas, TX;    2,481,441         284,199
                                                   Philadelphia, PA
10/6/97..............  550 South Hope              Los Angeles, CA               566,434         100,135
10/7/97..............  10 & 30 South Wacker Drive  Chicago, IL                 2,003,288         484,772(3)
10/7/97..............  Acorn Properties            Philadelphia, PA              849,867         130,088
10/17/97.............  One Lafayette Centre        Washington, DC                314,634          82,546
11/21/97.............  Acorn Properties            Philadelphia, PA              154,894          17,285
11/24/97.............  Lakeside Square             Dallas, TX                    392,537          55,524
11/24/97.............  Fair Oaks Plaza             Fairfax, VA                   177,917          24,077
11/24/97.............  1600 Duke Street            Alexandria, VA                 68,770          11,038
11/25/97.............  LaSalle Plaza               Minneapolis, MN               589,432          96,704
12/17/97.............  Wright Runstad Properties   Anchorage, AK; Portland,    3,340,055         640,000(4)
                                                   OR; Seattle, WA
12/19/97.............  Beacon Properties           Boston, Atlanta, Chicago,  20,900,000       4,016,546
                                                   Los Angeles, San Jose and
                                                   Washington, DC
                                                                              ----------      ----------
                                                                              36,504,412      $6,602,966
                                                                              ==========      ==========
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                                TOTAL
                                                                                             ACQUISITION
                                                                                PARKING          COST
    DATE ACQUIRED           PARKING FACILITY               LOCATION             SPACES      (IN THOUSANDS)
    -------------           ----------------               --------             -------     --------------
<S>                    <C>                         <C>                        <C>           <C>
8/11/97..............  Adams Wabash Facility       Chicago, IL                     670         $25,212
9/3/97...............  601 Tchoupitoulas Garage    New Orleans, LA                 759          11,757
11/25/97.............  Stanwix Parking             Pittsburgh, PA                  712          17,909
                                                                                 -----         -------
                                                                                 2,141         $54,878
                                                                                 =====         =======
</TABLE>
 
                                      F-39
<PAGE>   166
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
- ---------------
 
(1) These Properties were acquired by Equity Office Predecessors. The total
    acquisition cost reflected above represents the cost paid by Equity Office
    Predecessors to acquire each respective Property. The acquisition of the
    Properties, or the interest therein, by the Company from Equity Office
    Predecessors in connection with the Consolidation, was recorded as a
    purchase. Accordingly, the assets were recorded by the Company at their fair
    value.
 
(2) The total acquisition cost also included 161 residential units.
 
(3) The total acquisition cost includes $19.3 million related to real estate tax
    liabilities assumed at closing.
 
(4) The Wright Runstad Properties acquisition cost includes $15.0 million
    relating to 5,000,000 warrants which expire in December 2002, to purchase
    Common Shares at $39.375 per Common Share (see Note 12).
 
NOTE 4 -- BEACON MERGER
 
     On December 19, 1997, the Company, the Operating Partnership, Beacon
Properties Corporation, a Maryland corporation ("Beacon") and Beacon Partnership
L.P. ("Beacon Partnership") consummated the merger of Beacon with and into the
Company and Beacon Partnership with and into the Operating Partnership (the
"Beacon Merger") at a cost of approximately $4.3 billion. In the Beacon Merger,
(i) the Company issued 80,596,117 Common Shares in exchange for all of the
outstanding Beacon common shares, (ii) the Company issued 8,000,000 Series A
Preferred Shares in exchange for all of the outstanding Beacon preferred shares,
(iii) the Operating Partnership issued 8,570,886 Units in exchange for the
outstanding common partnership units of Beacon Partnership exclusive of those
held by Beacon, and (iv) the Operating Partnership issued to the Company
80,596,117 Units underlying the Common Shares issued in exchange for the Beacon
common shares and 8,000,000 Series A preferred units underlying the Series A
Cumulative Redeemable Preferred Shares issued in exchange for the Beacon
preferred shares. In addition, the Company assumed the obligation to issue
4,732,822 Common Shares, of which 3,829,739 had been issued as of December 31,
1997 upon the exercise of certain outstanding Beacon employee stock options. The
$4.3 billion purchase price is comprised of the following: (1) based on a share
price of $31.30, the Common Shares, including Common Shares issued for stock
options, and Units were valued at approximately $2.853 billion (which is net of
a reduction for cash received or to be received upon exercise of the stock
options of $86 million); (2) the issuance of 8,000,000 Series A Cumulative
Redeemable Preferred Shares valued at their liquidation value of $200 million;
(3) the assumption of approximately $627 million of secured debt and $533
million of unsecured debt; (4) merger costs of approximately $85 million and;
(5) net of the receipt of approximately $8 million of net assets.
 
     As a result of the Beacon Merger, the Company acquired an interest in 130
Beacon properties containing approximately 20.9 million rentable square feet of
office space. The Beacon properties are located in 22 submarkets in six markets:
Boston, Atlanta, Chicago, Los Angeles, San Jose and Washington, D.C. The Beacon
properties, by rentable square feet, are located 65% in suburban markets and 35%
in CBDs, primarily Boston. As of December 31, 1997, the Beacon properties were
on a weighted average basis approximately 95% leased by a total of approximately
1,694 tenants.
 
     In connection with the Beacon Merger, the Company also acquired a 99%
equity interest in Beacon Management Company, which manages third-party office
and commercial space, Beacon Design Company, which provided third-party and
joint venture tenant design services prior to ceasing such operations upon the
sale of its design service assets in 1998, and Beacon Construction Company,
which provides third-party construction services and is expected to cease such
operations upon completion of its existing contracts.
 
                                      F-40
<PAGE>   167
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 5 -- DISPOSITIONS
 
     In May 1997, Equity Office Predecessors sold 8383 Wilshire, an Office
Property located in Beverly Hills, California for approximately $59 million. The
gain for financial reporting purposes was approximately $6.7 million.
 
     In January 1997, Equity Office Predecessors sold Barton Oaks Plaza II for
approximately $13.5 million. The gain for financial reporting purposes was
approximately $5.9 million.
 
     Three Lakeway is a mixed-use property, that included 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 $14.8 million and
the gain realized was approximately $5.3 million.
 
NOTE 6 -- INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
 
     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, and acquired a 50% limited partnership
interest in Civic Parking, L.L.C. in April 1997. On December 17, 1997, the
Company acquired a 30% noncontrolling interest in Wright Runstad Asset Limited
Partnership ("WRALP") for $20.0 million and agreed to provide up to $20.0
million in additional financing or credit support for future development
activities of WRALP. In connection with the Beacon Merger on December 19, 1997,
the Company acquired interests in four unconsolidated joint ventures (the
"Beacon Joint Ventures"). The Company's ownership in the Beacon Joint Ventures
is as follows:
 
<TABLE>
<CAPTION>
                                                    COMPANY'S OWNERSHIP
                                                    AS OF DECEMBER 31,
    PROPERTY                                               1997
    --------                                        -------------------
    <S>                                             <C>
    Polk & Taylor(A)..............................          10%
    One Post Office(B)............................          50%
    75-101 Federal Street(C)......................          52%
    Rowes Wharf(D)................................          50%
</TABLE>
 
- ---------------
 
(A) The Company owns a 1% general partner interest and a 9% limited partner
    interest.
 
(B) The Company is a general partner in the joint venture.
 
(C) The Company is a shareholder in the corporation (a private REIT) which owns
    the property.
 
(D) The Company owns a 50% interest in the first mortgage.
 
     These investments are accounted for utilizing the equity method of
accounting. Under this method of accounting the net equity investment of the
Company is reflected on the consolidated and combined balance sheets, and the
consolidated and combined statements of operations include the Company's share
of net income or loss from the unconsolidated joint ventures. As a result of
purchase method accounting for the Beacon Merger and the Consolidation, any
difference between the carrying amount of these investments on the balance sheet
of the Company and the underlying equity in net assets is amortized as an
adjustment to income from unconsolidated joint ventures over 40 years.
 
                                      F-41
<PAGE>   168
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Combined summarized financial information of the unconsolidated joint
ventures is as follows:
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,   DECEMBER 31,
                                                                  1997           1996
                                                              ------------   ------------
                                                                (DOLLARS IN THOUSANDS)
<S>                                                           <C>            <C>
BALANCE SHEETS:
  Real estate, net..........................................    $523,670       $26,555
  Other assets..............................................      73,450         1,017
                                                                --------       -------
     Total Assets...........................................    $597,120       $27,572
                                                                ========       =======
  Mortgage notes and loans payable..........................    $344,427       $    --
  Other liabilities.........................................      15,271           662
  Partners' and shareholders' equity........................     237,422        26,910
                                                                --------       -------
     Total Liabilities and Partners' and Shareholders'
      Equity................................................    $597,120       $27,572
                                                                ========       =======
  Company's share of equity.................................    $155,522       $26,910
  Excess of cost of investments over the net book value of
     underlying net assets, net of accumulated depreciation
     of $99.................................................     231,810            --
                                                                --------       -------
  Carrying value of investments in unconsolidated joint
     ventures and corporation...............................    $387,332       $26,910
                                                                ========       =======
</TABLE>
 
<TABLE>
<CAPTION>
                                                                FOR THE YEARS ENDED DECEMBER 31,
                                                                --------------------------------
                                                                  1997        1996        1995
                                                                --------    --------    --------
                                                                     (DOLLARS IN THOUSANDS)
<S>                                                             <C>         <C>         <C>
STATEMENTS OF OPERATIONS:
Revenues....................................................    $16,687     $ 4,775     $ 5,002
Operating expenses..........................................      4,638       1,852       1,995
Interest expense............................................        793          --          --
Depreciation and amortization...............................      2,752         830         702
                                                                -------     -------     -------
     Net income.............................................    $ 8,504     $ 2,093     $ 2,305
                                                                =======     =======     =======
Company's share of net income...............................    $ 5,155     $ 2,093     $ 2,305
                                                                =======     =======     =======
Company's share of depreciation and amortization
  (real estate related).....................................    $ 1,524     $   830     $   702
                                                                =======     =======     =======
</TABLE>
 
NOTE 7 -- MORTGAGE DEBT
 
     The Company had outstanding mortgage indebtedness of approximately $2.1
billion and $1.8 billion as of December 31, 1997 and 1996, respectively. The
historical cost, net of accumulated depreciation, of encumbered properties at
December 31, 1997 and 1996 were approximately $4.3 billion and $2.0 billion,
respectively. During the years ended December 31, 1997 and 1996, the Company (a)
repaid approximately $885.8 million and $254.1 million, respectively, of
mortgage debt with proceeds from the IPO, the credit facilities and available
cash reserves; (b) assumed approximately $890.5 million and $92.1 million,
respectively, of mortgage debt in connection with the acquisition of certain
properties; and (c) obtained proceeds from the financing of certain properties
and draws on existing mortgages totaling approximately $238.6 million and $641.0
million, respectively.
 
     A summary of the Company's fixed and variable rate mortgage debt is as
follows:
 
                                      F-42
<PAGE>   169
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
FIXED RATE MORTGAGE DEBT
 
     As of December 31, 1997 and 1996, the Company had outstanding fixed rate
mortgage indebtedness of approximately $2.0 billion and $1.3 billion,
respectively. Payments on fixed rate mortgage debt are generally due in monthly
installations of principal and interest or interest only. As of December 31,
1997 and 1996, fixed interest rates ranged from 6.67% to 8.63% and 6.88% to 10%,
respectively. The weighted average fixed interest rate was approximately 7.53%
and 7.89% as of December 31, 1997 and 1996, respectively.
 
VARIABLE RATE MORTGAGE DEBT
 
     As of December 31, 1997 and 1996, the Company had outstanding variable rate
mortgage indebtedness of approximately $23.5 million and $533.7 million,
respectively. Payments on variable rate mortgage debt are generally due in
monthly installments of principal and interest or interest only. As of December
31, 1997 the variable interest rate was 6.94% (LIBOR + 1%). As of December 31,
1996, variable interest rates ranged from 6.56% (LIBOR + 1%) to 7.83% (LIBOR +
2.25%). The weighted average variable interest rate was approximately 6.94% and
7.35% as of December 31, 1997 and 1996, respectively.
 
DRAW FACILITIES
 
     As stated in the respective loan agreements, the Company 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,
1997 and 1996, amounts available to draw under these mortgage notes were
approximately $19.0 million and $92.6 million, respectively.
 
REPAYMENT SCHEDULE
 
     Scheduled payments of principal on mortgage debt for each of the next five
years and thereafter, as of December 31, 1997, are as follows:
 
<TABLE>
<CAPTION>
                                                              (DOLLARS IN THOUSANDS)
<S>                                                           <C>
1998........................................................        $   83,792
1999........................................................            52,908
2000........................................................           151,236
2001........................................................           432,962
2002........................................................            69,584
Thereafter..................................................         1,271,378
                                                                    ----------
     Subtotal...............................................         2,061,860
Net premium (net of accumulated amortization of $2.1
  million)..................................................             1,157
                                                                    ----------
     Total..................................................        $2,063,017
                                                                    ==========
</TABLE>
 
NOTE 8 -- LINES OF CREDIT
 
     A $200 million line of credit (the "$200 Million Line") was obtained in
October 1994 and canceled in September 1996. Interest was payable monthly based
on the LIBOR + .625%. The $200 Million Line was secured by the capital
commitments of certain investors and was used to finance acquisitions.
 
     A $275 million acquisition and term loan facility (the "$275 Million Line")
was obtained in September 1996 with a maturity in September 1999 for the purpose
of providing financing for acquisitions. Interest only was payable monthly with
the interest based on various LIBOR options plus various spreads ranging from
1.375% to 1.625% or the prime rate. As of December 31, 1996, the Company had an
outstanding balance under the $275 Million Line of approximately $127.1 million.
 
                                      F-43
<PAGE>   170
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     In April 1997, the Company amended and restated the $275 Million Line to a
$475 million unsecured revolving credit facility (the "$475 Million Line").
Under the $475 Million Line, the Company could draw amounts equal to the lesser
of a) 65% or 50% of the purchase price of certain office buildings or parking
facilities, respectively, or b) an amount based on net operating income for such
property. The $475 Million Line had a maturity of October 21, 1997 but was
terminated on July 15, 1997. Interest only was payable monthly with the interest
based on various LIBOR options plus 1.625% or the prime rate. The Company chose
the LIBOR option.
 
     On July 15, 1997, the Company obtained a $600 million credit facility (the
"$600 Million Credit Facility") to be used for acquisitions and other general
corporate purposes. Amounts were drawn on the $600 Million Credit Facility to
repay the balance outstanding on the $475 Million Line which was terminated when
the $600 Million Credit Facility was obtained. The $600 Million Credit Facility
matures on July 15, 2000. The Company paid a commitment fee of approximately
$1.0 million at the closing of the $600 Million Credit Facility. Prior to the
Company obtaining an investment grade credit rating on its unsecured debt of
BBB- or Baa3 or better from two or more credit rating agencies, the $600 Million
Credit Facility initially bore interest at LIBOR plus 110 basis points, and
required payment of a quarterly unused commitment fee between .15% and .25% of
the unused portion of the $600 Million Credit Facility, depending on the average
unfunded balance during the quarter. In November 1997, the $600 Million Credit
Facility was amended and the interest rate was reduced to LIBOR plus 100 basis
points. In December 1997, the Company received an investment grade credit rating
on its senior unsecured debt from Moody's (Baa1), Duff & Phelps (BBB+) and
Standard & Poor's (BBB). Per the terms of the $600 Million Credit Facility,
these credit ratings resulted in the interest rate being reduced from LIBOR plus
100 basis points to LIBOR plus 60 basis points, and the unused commitment fee
was replaced with a facility fee equal to .20% per annum. In addition, a
competitive bid option, whereby the lenders participating in the $600 Million
Credit Facility bid on the interest rate to be charged, became available for up
to $250 million. As of December 31, 1997, the balance of the $600 Million Credit
Facility was approximately $559 million.
 
     The Company assumed $533 million in unsecured debt in connection with the
Beacon Merger. The Company repaid $95 million prior to December 31, 1997 and
repaid the remaining balance in February 1998 with the proceeds from the $1.25
Billion Notes Offering, the $250 Million MOPPRS Offering and the $300 Million
PIERS Offering as described in Note 25, at which time the lines were terminated.
 
TERM LOAN FACILITY
 
     In October 1997, the Company obtained a $1.5 billion unsecured credit
facility (the "$1.5 Billion Credit Facility"). The $1.5 Billion Credit Facility
is available for the acquisition of properties and general corporate purposes.
The $1.5 Billion Credit Facility carries an interest rate equal to LIBOR plus
100 basis points and may be increased or decreased upon receipt of an investment
grade unsecured debt rating. As mentioned above, the Company received an
investment grade rating in December 1997 resulting in a reduction in the
interest rate to LIBOR plus 80 basis points. The $1.5 Billion Credit Facility
matures July 1, 1998, and may be extended to October 1, 1998. The Company paid
an underwriting fee on the $1.5 Billion Credit Facility at closing of
approximately $4.9 million. In addition, an unused commitment fee is payable
quarterly in arrears based upon the unused amount of the $1.5 Billion Credit
Facility as follows: .15% per annum if the unused amount is between 0% to 33%;
 .20% per annum if the unused amount is more than 33% but less than 66%; .25% per
annum if the unused amount is greater than 66%. In October 1997, the Company
used approximately $236 million of proceeds from the $1.5 Billion Credit
Facility to repay the majority of the variable rate property mortgage
indebtedness outstanding as of September 30, 1997. The Company repaid $150
million on the $1.5 Billion Credit Facility with the proceeds from the $200
million private placement of Common Shares in October 1997. Under the terms of
the $1.5 Billion Credit Facility agreement, any amounts repaid cannot be
re-drawn. In addition, amounts were drawn from the $1.5 Billion Credit Facility
for property acquisitions and general corporate purposes. As of December 31,
1997, the outstanding balance on the $1.5 Billion Credit

                                      F-44
<PAGE>   171
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
Facility was approximately $1.044 billion. The amount available to draw under
the $1.5 Billion Credit Facility was approximately $306 million as of December
31, 1997.
 
NOTE 9 -- UNSECURED NOTES
 
     On September 3, 1997, the Company completed a private debt offering of $180
million (the "$180 Million Notes Offering") with an unaffiliated party. The
terms of the $180 Million Notes Offering consist of four tranches with
maturities from seven to 10 years which were priced at an interest rate spread
over the corresponding U.S. Treasury rate. The Company used the proceeds of the
$180 Million Notes Offering to repay a portion of the $600 Million Credit
Facility. In addition, in connection with the $180 Million Notes Offering, the
Company terminated $150 million of hedge agreements at a cost of approximately
$3.9 million (see Note 10). A summary of the terms of the $180 Million Notes
Offering follows:
 
<TABLE>
<CAPTION>
                                                                              STATED   EFFECTIVE
                          TRANCHE                                 AMOUNT       RATE     RATE(A)
                          -------                              ------------   ------   ---------
<S>                                                            <C>            <C>      <C>
7 Year Senior Notes due 2004................................   $ 30,000,000    7.24%    7.24%
8 Year Senior Notes due 2005................................     50,000,000    7.36%    7.67%
9 Year Senior Notes due 2006................................     50,000,000    7.44%    7.73%
10 Year Senior Notes due 2007...............................     50,000,000    7.42%    7.69%
                                                               ------------    ----     -----
                                                               $180,000,000    7.38%    7.62%
                                                               ============    ====     =====
</TABLE>
 
- ---------------
 
(A) Includes the cost of the terminated interest rate protection agreements.
 
NOTE 10 -- INTEREST RATE PROTECTION AGREEMENTS
 
     In order to limit the market risk associated with variable rate debt, the
Company entered into several interest rate protection agreements. These
agreements effectively convert floating rate debt to a fixed rate basis, as well
as hedge anticipated financing transactions. A summary of the various interest
rate hedge agreements as of December 31, 1997 is as follows: (1) On June 4,
1997, the Company entered into interest rate protection agreements with major
U.S. financial institutions for $700 million of indebtedness. As a result of
this agreement, the Company essentially "locked into" U.S. Treasury rates in
effect as of June 4, 1997, for $700 million in indebtedness. In August 1997, the
Company terminated $150 million of the $700 million of hedge agreements at a
cost of approximately $3.9 million related to the $180 Million Notes Offering
(see Note 9). The portion of the $180 Million Notes Offering protected by these
agreements consisted of three tranches with maturities of eight, nine and ten
years, respectively. The cost of the terminated hedge agreements is amortized to
interest expense over the respective terms of each tranche. (2) On October 6,
1997, the Company entered into an additional $450 million of interest rate
protection agreements based on the U.S. Treasury rates in effect at that date.
The Company has terminated $700 million of hedge agreements in connection with
the February 1998 notes offering (see Note 25) at a cost of approximately $32.6
million. The cost of these terminated hedge agreements will be amortized to
interest expense over the terms of the respective notes offering. The Company
terminated the remaining $300 million of hedge agreements in 1998 at a cost of
approximately $7.4 million which will be reflected as an extraordinary loss. (3)
Equity Office Predecessors entered into an interest rate swap agreement on
October 1995, which effectively fixed the interest rate on a $93.6 million
mortgage loan at 6.94% through the maturity of the loan on June 30, 2000.
 
     Equity Office Predecessors sold several interest rate protection agreements
(aggregating $173 million of LIBOR-based agreements) in June 1997 at a cost of
approximately $1.1 million.
 
                                      F-45
<PAGE>   172
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 11 -- MINORITY INTERESTS IN PARTIALLY OWNED PROPERTIES
 
     The following properties are controlled and partially owned by the Company
but have partners with minority interests. The Company has included 100% of the
financial condition and results of operations of these properties in the
consolidated financial statements of the Company and the combined financial
statements of Equity Office Predecessors. The equity interests of the
unaffiliated partners are reflected as minority interests.
 
<TABLE>
<CAPTION>
                                                              COMPANY'S OWNERSHIP
                                                              AS OF DECEMBER 31,
PROPERTY                                                             1997
- --------                                                      -------------------
<S>                                                           <C>
CIGNA Center................................................           95%(1)
Plaza at La Jolla Village...................................        66.67%(1)
San Felipe Plaza............................................           35%(2)
Capitol Commons Garage......................................           50%(3)
Acorn Properties............................................           89%(4)
</TABLE>
 
- ---------------
 
(1) The Company owns a controlling interest and is the managing general partner.
 
(2) The Company is the managing general partner and receives preferential
    allocations which result in the Company receiving 100% of the economic
    benefits. Prior to the IPO, an affiliate of the Company was the managing
    general partner.
 
(3) The Company owns a controlling interest and receives preferential
    allocations. The unaffiliated partner is entitled to receive 50% of the
    remaining cash flow after the Company receives its preferential allocations.
 
(4) The Company has an 89% managing general partner interest in 11 properties
    and receives preferential allocations which entitles it to 99% of the
    economic benefits. The Company has the option of purchasing the remaining
    interest in all 11 properties, exercisable for a designated period
    commencing three (3) years after the respective closing dates on the initial
    purchases, for additional consideration in the amount of approximately $2.1
    million, all payable in Units valued at $28.775 per Unit.
 
     The Company purchased the unaffiliated joint ventures partners' 3% interest
in First Union Center for approximately $775,000 in 1997. The Company now
effectively owns 100% of First Union Center.
 
                                      F-46
<PAGE>   173
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 12 -- SHAREHOLDERS'/OWNERS' EQUITY AND MINORITY INTERESTS OF
           OPERATING PARTNERSHIP
 
COMMON SHARES AND UNITS
 
     In addition to the Common Shares and Units issued in connection with the
formation transactions described in Note 1 -- Business and Formation of Company,
the Company also issued Common Shares and/or Units in connection with the
following transactions:
 
<TABLE>
<CAPTION>
                        TRANSACTION                            COMMON SHARES     UNITS
                        -----------                            -------------   ----------
<S>                                                            <C>             <C>
Outstanding upon completion of the Consolidation and the IPO
  (see Note 1)..............................................    152,180,770    11,877,647
Common Shares/Units issued in exchange for Properties(1)....      3,435,688     8,711,157
Restricted Shares awarded to Officers (see Note 21).........        298,000            --
Common Shares issued as Trustee compensation................          5,055            --
Sale of Common Shares(2)....................................      9,685,034            --
Issuance of Common Shares for Beacon Merger (including
  3,829,739 of Beacon options exercised) (see Note 4).......     84,425,856     8,570,886
Less Common Shares held as treasury stock (see Note 1)......       (502,740)           --
                                                                -----------    ----------
     Total as of December 31, 1997..........................    249,527,663    29,159,690
                                                                ===========    ==========
</TABLE>
 
- ---------------
 
(1) In September 1997, the Company purchased two Office Properties and a Parking
     Facility from an unaffiliated third party located in New Orleans, Louisiana
     for a purchase price of approximately $140 million. Of this amount, the
     Company issued 1,692,546 Units at a price of $29 per Unit for a total of
     approximately $49.1 million.
 
     In October 1997, the Company purchased four Office Properties from an
     unaffiliated party located in Houston, Texas, Dallas, Texas and
     Philadelphia, Pennsylvania for a purchase price of $289 million. Of this
     amount, the Company issued 2,900,000 Units at a price of $24.50 per Unit
     for a total of approximately $71.1 million.
 
     In October 1997, the Company purchased from an unaffiliated party an
     interest in nine Office Properties located in suburban Philadelphia for a
     purchase price of approximately $127.5 million. Of this amount, the Company
     issued 499,977 Units at a price of $28.775 per Unit for a total of
     approximately $14.4 million. In November 1997, two additional properties
     were purchased from the same party for a purchase price of approximately
     $17.2 million. Of this amount, the Company issued 124,348 Units at a price
     of $28.775 per Unit for a total of approximately $3.6 million.
 
     Also, in October 1997, the Company purchased an Office Property from an
     unaffiliated party located in Washington, D.C. for a purchase price of
     approximately $81.7 million. Of this amount, the Company issued 741,159
     Units at a price of $32.975 per Unit for a total of approximately $24.4
     million.
 
     In December 1997, the Company purchased 10 Office Properties from an
     unaffiliated party located in Seattle and Bellevue, Washington, Portland,
     Oregon and Anchorage, Alaska for a purchase price of $640 million. Of this
     amount, the Company issued 2,615,700 Units at a price of $29.11 per Unit
     for a total of approximately $76.1 million. Furthermore, the Company issued
     3,435,688 Common Shares at a price of $29.11 per Common Share for a total
     of approximately $100 million. In addition, the Company acquired a
     non-controlling interest in the management company of the seller for
     approximately $20 million. Of this amount, the Company issued 137,427 Units
     at a price of $29.11 per Unit for a total of approximately $4.0 million.
 
(2) In October 1997, the Company completed two private placements for a total of
     9,685,034 restricted Common Shares for a total value of approximately
     $273.9 million.
 
                                      F-47
<PAGE>   174
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
OWNERSHIP OF OPERATING PARTNERSHIP
 
     The Company's ownership interest in the Operating Partnership as of
December 31, 1997 was approximately 89.5%.
 
WARRANTS
 
     In connection with the December 1997 purchase of 10 office properties, the
Company issued warrants that expire in December 2002 to purchase an aggregate of
5,000,000 Common Shares at an exercise price of $39.375 per Common Share. The
warrants were valued at $3 per warrant utilizing the Black-Scholes valuation
model at the time of issuance and are reflected as a component of additional
paid in capital.
 
PREFERRED SHARES
 
     On December 19, 1997, the Company issued 8,000,000 8.98% Series A
Cumulative Redeemable Preferred Shares, liquidation preference of $25.00 per
share in connection with the Beacon Merger (see Note 4). Holders of the shares
are entitled to receive, when and as authorized by the Company, cumulative
preferential cash distributions at the rate of 8.98% of the $25.00 liquidation
preference per annum (equivalent to a fixed annual amount of $2.245 per share).
Such distributions are cumulative from December 19, 1997 and are payable
quarterly in arrears on or before March 15, June 15, September 15 and December
15 of each year. Holders of the shares have no other voting rights except as
provided by law and have no preemptive rights. The shares are not convertible,
redeemable or entitled to the benefit of any sinking fund. On and after June 15,
2002, the Company, at its option and upon not less than 30 nor more the 60 days'
written notice, may redeem the shares, in whole or in part, at any time or from
time to time, for cash at a redemption price of $25.00 per share, plus all
accrued and unpaid distributions thereon to the date fixed for redemption.
 
DIVIDENDS/DISTRIBUTIONS
 
     On September 26, 1997, the Company declared a dividend/distribution of
$0.26 per Common Share/Unit outstanding representing a pro rata
dividend/distribution since the closing of the IPO on July 11, 1997, based upon
a full quarterly dividend/distribution of $0.30 per Common Share/Unit and an
annual dividend/distribution of $1.20 per Common Share/Unit, totaling
approximately $43.0 million. The dividend/ distribution was paid on October 9,
1997 to shareholders and unitholders of record on September 29, 1997.
 
     On November 14, 1997, the Company declared a dividend/distribution of $0.30
per Common Share/Unit outstanding, totaling approximately $53.8 million. The
dividend/distribution was paid on December 19, 1997 to the common
shareholders/unitholders of record at the close of business on December 10,
1997. For federal income tax purposes, 19.03% (unaudited) of the dividends paid
in 1997 represented a non-taxable return of capital and the remaining 80.97%
(unaudited) represented ordinary income.
 
EQUITY OFFICE PREDECESSORS CAPITAL CONTRIBUTIONS/DISTRIBUTIONS
 
     As of July 10, 1997, the capital partners of Equity Office Predecessors
previously committed to contribute approximately $2.114 billion, of which
approximately $2.031 billion had been cumulatively contributed by capital
partners and approximately $83 million of the commitment had been canceled.
 
     As of July 10, 1997, the Equity Office Predecessors had cumulatively
distributed approximately $305.9 million to their capital partners.
 
     As of December 31, 1996, the net book value of the 14 apartment buildings
and two shopping centers owned by the ZML Funds (the "Non-Office Properties"),
which were not included in the Equity Office Predecessors combined financial
statements, was approximately $285.9 million. All cash deficits incurred by
 
                                      F-48
<PAGE>   175
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
the Non-Office Properties were 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 for the period January 1, 1997 through July
10, 1997 and the years ended December 31, 1996 and 1995 related to the
Non-Office Properties were approximately $98.7 million, $98.8 million and $0.9
million, respectively.
 
     During 1997, 13 Non-Office Properties were sold to an affiliated party and
two Non-Office Properties were sold to unaffiliated parties which generated net
proceeds of approximately $100.7 million which is included in the $98.7 million
net contributions from the Non-Office Properties for the period from January 1,
1997 to July 10, 1997. The ZML Fund I distributed its interest in the remaining
Non-Office Property to its capital partners prior to the Consolidation.
 
     During 1996, two Non-Office Properties were sold to unaffiliated parties
which generated net proceeds of approximately $96.7 million which was included
in the $98.8 million net contributions from Non-Office Properties for the year
ended December 31, 1996.
 
NOTE 13 - FUTURE MINIMUM RENTS
 
     Future minimum rental receipts due on noncancelable operating leases at the
Office Properties and Parking Facilities as of December 31, 1997 were as
follows:
 
<TABLE>
<CAPTION>
                                                    (DOLLARS IN THOUSANDS)
    <S>                                             <C>
    1998..........................................        $1,049,857
    1999..........................................           990,423
    2000..........................................           865,410
    2001..........................................           731,171
    2002..........................................           587,791
    Thereafter....................................         1,982,691
                                                          ----------
                                                          $6,207,343
                                                          ==========
</TABLE>
 
     The Company is subject to the usual business risks associated with the
collection of the above scheduled rents. The future minimum rents from the
Company's investment in unconsolidated joint ventures which are accounted for
utilizing the equity method, have not been included in the above schedule.
 
                                      F-49
<PAGE>   176
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 14 -- FUTURE MINIMUM LEASE PAYMENTS
 
     As of December 31, 1997, the Company's ownership of 13 Office Properties
and one of its Parking Facilities are subject to ground leases. 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 19, the Company leases its office space from an
affiliate. In addition, the Company has assumed lease obligations of certain
tenants at their former locations. Future minimum lease obligations under these
noncancelable leases, net of sublease rental income, as of December 31, 1997
were as follows:
 
<TABLE>
<CAPTION>
                                                    (DOLLARS IN THOUSANDS)
    <S>                                             <C>
    1998..........................................        $    6,099
    1999..........................................             5,481
    2000..........................................             5,531
    2001..........................................             5,567
    2002..........................................             4,604
    Thereafter....................................           456,289
                                                          ----------
                                                          $  483,571
                                                          ==========
</TABLE>
 
     Rental expense for the years ended December 31, 1997, 1996 and 1995, was
approximately $7.2 million, $4.5 million and $2.4 million, respectively.
 
                                      F-50
<PAGE>   177
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 15 -- EXTRAORDINARY ITEMS AND PROVISIONS FOR VALUE IMPAIRMENT
 
     As reflected in the consolidated statement of operations for the period
from July 11, 1997 through December 31, 1997, and the combined statement of
operations for the period from January 1, 1997 through July 10, 1997, the
Company and Equity Office Predecessors reported an extraordinary loss of
approximately $16.4 million and $0.3 million, respectively, related to
pre-payment penalties on debt retired prior to maturity during the respective
periods with net proceeds from the IPO and available cash reserves.
 
     As reflected in the combined statement of operations for the year ended
December 31, 1995, Equity Office Predecessors reported an extraordinary gain of
approximately $31.3 million on the repurchase of debt, which is net of the $20.0
million minority partners' share, and a provision for value impairment of
approximately $20.2 million related to Equity Office Predecessors' investment in
San Felipe Plaza Ltd.
 
NOTE 16 -- EARNINGS PER SHARE
 
     The following table sets forth the computation of basic and diluted
earnings per Common Share:
 
<TABLE>
<CAPTION>
                                                               FOR THE PERIOD FROM
                                                              JULY 11, 1997 THROUGH
                                                                DECEMBER 31, 1997
                                                              ---------------------
<S>                                                           <C>
NUMERATOR:
  Net income available to Common Shares before extraordinary
     items and gain on sales of real estate.................      $ 87,303,000
  Gain on sales of real estate..............................           126,000
  Extraordinary items.......................................       (16,366,000)
                                                                  ------------
  Numerator for basic earnings per share -- income available
     to Common Shares.......................................        71,063,000
  Minority interest in Operating Partnership................         7,010,000
                                                                  ------------
  Numerator for diluted earnings per share -- income
     available to Common Shares.............................      $ 78,073,000
                                                                  ============
DENOMINATOR:
  Denominator for basic earnings per share -- weighted
     average Common Shares..................................       162,591,477
                                                                  ------------
  Effect of dilutive securities:
     Conversion of Units to Common Shares...................        16,056,085
     Stock options..........................................         1,366,465
                                                                  ------------
  Dilutive potential Common Shares..........................        17,422,550
  Denominator for diluted earnings per share -- adjusted
     weighted average shares and assumed conversions........       180,014,027
                                                                  ============
BASIC EARNINGS AVAILABLE TO COMMON SHARES PER WEIGHTED
  AVERAGE COMMON SHARE:
  Net income before extraordinary items and gain on sales of
     real estate............................................      $        .54
  Gain on sales of real estate..............................                --
  Extraordinary items.......................................              (.10)
                                                                  ------------
  Net income per Common Share...............................      $        .44
                                                                  ============
DILUTED EARNINGS AVAILABLE TO COMMON SHARES PER WEIGHTED
  AVERAGE COMMON SHARE:
  Net income before extraordinary items and gain on sales of
     real estate............................................      $        .52
  Gain on sales of real estate..............................                --
  Extraordinary items.......................................              (.09)
                                                                  ------------
  Net income per Common Share...............................      $        .43
                                                                  ============
</TABLE>
 
                                      F-51
<PAGE>   178
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     For additional disclosures regarding the employee stock options and the
restricted shares see Note 21.
 
     Options to purchase 726,500 Common Shares at a weighted average exercise
price of $32.93 per Common Share and warrants to purchase 5,000,000 Common
Shares at an exercise price of $39.375 per Common Share were outstanding during
1997 but were not included in the computation of diluted earnings per share
because the respective exercise prices were greater than the average market
price of the Common Shares and, therefore, the effect would be antidilutive.
 
     On February 13, 1998, the Company issued 6,000,000 Preferred Income Equity
Redeemable Shares ("PIERS") and the net proceeds of $290.3 million were used to
repay debt (see Note 25). The PIERS are convertible at any time, at the option
of the holder, unless previously redeemed, into Common Shares at a conversion
price of $35.70 per Common Share. In addition, on February 17, 1998, the Company
issued 2 million Options at an exercise price of $29.50 per Common Share under
the Employee Plan.
 
NOTE 17 -- PRO FORMA STATEMENT OF OPERATIONS (UNAUDITED)
 
     The pro forma data presented below is included to illustrate the effect on
the Company's operations as a result of the transactions described below.
 
     The pro forma condensed combined statement of operations for the year ended
December 31, 1997 reflects the following transactions as if they had occurred on
January 1, 1997: (a) the acquisition of 46 Office Properties and seven Parking
Facilities, including an interest in four parking facilities, acquired between
January 1, 1997 and December 17, 1997, and the disposition of two Office
Properties; (b) the $180 Million Notes Offering; (c) the Consolidation and the
IPO, and the decrease in interest expense resulting from the use of the net
proceeds for the repayment of mortgage debt; (d) the net change in interest
expense from draws on the various credit facilities (see Note 8) used to
refinance existing mortgage debt; (e) interest income from an interest in a
mortgage note; (f) the Beacon Merger (see Note 4); (g) the $1.25 Billion Notes
Offering and the $250 Million MOPPRS Offering (see Note 25); (h) the $300
Million PIERS Offering (see Note 25); and (i) the financing of certain
properties.
 
     The pro forma condensed combined statement of operations for the year ended
December 31, 1996 reflects the following transactions as if they had occurred on
January 1, 1996: (a) the acquisition of 57 Office Properties and 14 Parking
Facilities, including an interest in four Parking Facilities, acquired between
January 1, 1996 and December 17, 1997, and the disposition of two Office
Properties; (b) the $180 Million Notes Offering; (c) the Consolidation and the
IPO, and the decrease in interest expense resulting from the use of the net
proceeds for the repayment of mortgage debt; (d) the net change in interest
expense from draws on the various credit facilities (see Note 8) used to
refinance existing mortgage debt; (e) interest income from an interest in a
mortgage note; (f) the Beacon Merger (see Note 4); (g) the $1.25 Billion Notes
Offering and the $250 Million MOPPRS Offering (see Note 25); (h) the $300
Million PIERS Offering (see Note 25); and (i) the financing of certain
properties.
 
                                      F-52
<PAGE>   179
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
   
     The accompanying pro forma combined statements of operations have been
prepared by management of the Company 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.
    
 
<TABLE>
<CAPTION>
                                                                   FOR THE YEARS ENDED
                                                                      DECEMBER 31,
                                                                   1997           1996
                                                               ------------   ------------
                                                                     (DOLLARS IN THOUSANDS
                                                                        EXCEPT SHARE DATA)
<S>                                                            <C>            <C>
REVENUES:
  Rental....................................................   $  1,126,729   $  1,023,596
  Tenant reimbursements.....................................        201,678        170,096
  Parking...................................................         63,707         60,209
  Other.....................................................         27,648         43,526
  Fees from noncombined affiliates..........................          8,210          8,125
  Interest..................................................         23,140         21,143
                                                               ------------   ------------
     Total revenues.........................................      1,451,112      1,326,695
                                                               ------------   ------------
EXPENSES:
  Property operating........................................        516,555        484,882
  Interest..................................................        274,940        269,998
  Depreciation..............................................        252,631        251,723
  Amortization..............................................         12,214          8,782
  General and administrative................................         56,966         32,644
                                                               ------------   ------------
     Total expenses.........................................      1,113,306      1,048,029
                                                               ------------   ------------
Income before allocation to minority interests, income from
  investment in unconsolidated joint ventures, gain on sales
  of real estate and extraordinary items....................        337,806        278,666
DISCONTINUED OPERATIONS:
  Loss from operations -- Construction Company..............         (2,263)        (2,609)
  Loss on sale -- Construction Company......................             --           (249)
MINORITY INTERESTS:
  Operating Partnership.....................................        (30,939)       (28,333)
  Partially owned properties................................         (1,757)        (2,142)
Income from investment in unconsolidated joint ventures.....         12,920          9,850
Gain on sales of real estate................................             --         21,843
Preferred dividends.........................................        (33,710)       (33,710)
                                                               ------------   ------------
Income before extraordinary items...........................        282,057        243,316
Extraordinary items.........................................        (16,365)            --
                                                               ------------   ------------
Net income..................................................   $    265,692   $    243,316
                                                               ============   ============
Basic earnings per weighted average Common Share............   $       1.06   $        .98
                                                               ============   ============
Weighted average Common Shares outstanding -- Basic.........    249,527,663    249,527,663
                                                               ============   ============
Diluted earnings per weighted average Common Share..........   $       1.05   $        .96
                                                               ============   ============
Weighted average Common Shares outstanding -- Diluted.......    282,872,353    282,872,353
                                                               ============   ============
</TABLE>
 
                                      F-53
<PAGE>   180
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 18 -- QUARTERLY DATA (UNAUDITED)
 
     The quarterly data is as follows:
 
<TABLE>
<CAPTION>
                                                   4Q             3Q           2Q         1Q
                                                12/31/97      9/30/97(A)    6/30/97    3/31/97
                                              ------------   ------------   --------   --------
                                                  (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<S>                                           <C>            <C>            <C>        <C>
Total revenues..............................  $    248,400   $    183,886   $165,219   $154,567
                                              ============   ============   ========   ========
Income before allocation to minority
  interests.................................  $     46,704   $     45,736   $ 23,331   $ 24,910
                                              ============   ============   ========   ========
Net income..................................  $     40,208   $     31,290   $ 30,853   $ 30,769
                                              ============   ============   ========   ========
Net income available to Common Shares.......  $     39,559   $     31,290   $ 30,853   $ 30,769
                                              ============   ============   ========   ========
Weighted average Common Shares
  outstanding...............................   172,307,010    151,691,121         --         --
                                              ============   ============   ========   ========
Basic earnings per weighted average Common
  Shares....................................  $       0.23   $       0.21   $     --   $     --
                                              ============   ============   ========   ========
Diluted earnings per weighted average Common
  Shares....................................  $       0.22   $       0.21   $     --   $     --
                                              ============   ============   ========   ========
</TABLE>
 
<TABLE>
<CAPTION>
                                                        4Q         3Q         2Q         1Q
                                                     12/31/96   9/30/96    6/30/96    3/31/96
                                                     --------   --------   --------   --------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                  <C>        <C>        <C>        <C>
Total revenues....................................   $154,887   $126,117   $116,970   $110,150
                                                     ========   ========   ========   ========
Income before allocation to minority interests....   $ 29,688   $ 11,015   $ 14,543   $ 12,834
                                                     ========   ========   ========   ========
Net income........................................   $ 30,383   $ 11,024   $ 14,040   $ 17,978
                                                     ========   ========   ========   ========
</TABLE>
 
- ---------------
 
(A) This column includes the operations of Equity Office Predecessors from July
    1, 1997 through July 10, 1997 and the operations of the Company from July
    11, 1997 through September 30, 1997. The earnings per share disclosures
    pertain only to the operations of the Company from July 11, 1997 through
    September 30, 1997.
 
                                      F-54
<PAGE>   181
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 19 -- RELATED PARTY TRANSACTIONS
 
     Affiliates provide various services to the Company. Fees and reimbursements
paid by the Company to affiliates for the years ended December 31, 1997, 1996
and 1995 were as follows:
 
<TABLE>
<CAPTION>
                                                                                    PAYABLE AS OF
                                                   PAID YEARS ENDED DECEMBER 31,    DECEMBER 31,
                                                   ------------------------------   -------------
                                                     1997       1996       1995     1997    1996
                                                   --------   --------   --------   ----   ------
                                                               (DOLLARS IN THOUSANDS)
<S>                                                <C>        <C>        <C>        <C>    <C>
Acquisition fees(A).............................   $   777    $ 3,068    $ 1,097    $ --   $  587
Accounting and tax related services.............        68        797        554      --       61
Legal fees and expenses(B)......................     3,006      3,481      3,230     550    1,295
Office rent(C)..................................     1,068        777        668      79       --
Disposition fees................................        --        124         --      --       --
Development fees(D).............................       434        702        438      --       --
Reimbursement of property insurance premiums....     6,790      5,032      3,735      32       --
Organizational and offering expenses(E).........       106        778        180      --      106
Administrative services(F)......................       473        822        609      71       20
Consulting......................................       832        274        410       1        5
                                                   -------    -------    -------    ----   ------
                                                   $13,554    $15,855    $10,921    $733   $2,074
                                                   =======    =======    =======    ====   ======
</TABLE>
 
- ---------------
 
(A) Represents amounts paid by Equity Office Predecessors to Merrill Lynch, a
    limited partner of the general partner of the ZML Funds.
 
(B) Represents amounts primarily paid to Rosenberg & Liebentritt, P.C., a law
    firm, for legal fees and expenses in connection with acquisition, corporate
    and leasing activity. A trustee of the Company was a principal of this law
    firm until September 1, 1997 and is now of counsel.
 
(C) The Company leases its corporate office space from an affiliate of the
    Equity Group.
 
(D) The renovation project at the 28 State Street Office Building was being
    managed by an affiliate of the Equity Group. In consideration for their
    services, the development managers were paid fees which management believes
    are equal to or less than market for such services.
 
(E) Affiliates of the Equity Group 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 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 has an indirect minority interest in
Standard Parking Limited Partnership ("SPLP") which manages the parking
operations at certain Properties that are owned by the Company. Management
believes amounts paid to SPLP are equal to market for such services.
 
AMOUNTS RECEIVED AND DUE FROM AFFILIATES
 
     Affiliates of the Company lease space in certain of the Office Properties
owned by the Company. 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 $3.0 million and
$3.5 million for the years ended December 31, 1997 and 1996, respectively.
 
                                      F-55
<PAGE>   182
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Company provides asset and property management services to certain
noncombined office and garage properties owned by affiliates of the Equity
Group. Amounts due for these services as of December 31, 1997 and 1996 were
approximately $0.2 million and $0.8 million, respectively.
 
     The Company entered into various lease agreements with SPLP whereby SPLP
leased certain of the Company's stand-alone Parking Facilities. Certain of these
lease agreements provide SPLP with annual successive options to extend the term
of the lease through various dates. The rent paid in the years ended December
31, 1997 and 1996 under these lease agreements was approximately $11.0 million
and $3.2 million, respectively. In addition, the Company may receive additional
rent based upon actual gross revenues generated by these Parking Facilities. In
accordance with certain of these leases, the Company may be obligated to make an
early termination payment if agreement is not reached as to rent amounts to be
paid.
 
NOTE 20 -- NON-CASH INVESTING AND FINANCING ACTIVITIES
 
     Additional supplemental disclosures of non-cash investing and financing
activities are as follows:
 
<TABLE>
<CAPTION>
                                                                  EQUITY OFFICE
                                                                 PROPERTIES TRUST
                                                               FOR THE PERIOD FROM
                                                              JULY 11, 1997 THROUGH
                                                                DECEMBER 31, 1997
                                                              ----------------------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                           <C>
Mortgage loans and lines of credit assumed through Beacon
  Merger....................................................        $1,160,451
                                                                    ==========
Net liabilities assumed through Beacon Merger...............        $   72,034
                                                                    ==========
Common Shares and Units issued through Beacon Merger
  (assuming exercise of 4,732,822 Options)..................        $2,853,266
                                                                    ==========
8.98% Series A Cumulative Redeemable Preferred Shares issued
  through Beacon Merger.....................................        $  200,000
                                                                    ==========
Common Shares and Units issued through property acquisitions
  (including warrants valued at $15.0 million)..............        $  357,672
                                                                    ==========
Mortgage loans assumed through property acquisitions........        $  263,048
                                                                    ==========
Mortgage loans and line of credit assumed in the
  Consolidation.............................................        $2,196,708
                                                                    ==========
Net liabilities assumed in the Consolidation................        $   62,706
                                                                    ==========
Common Shares and Units issued in the Consolidation.........        $2,830,918
                                                                    ==========
</TABLE>
 
     In addition, Equity Office Predecessors assumed mortgage loans through
property acquisitions of approximately $92.1 million and $265.8 million for the
years ended December 31, 1996 and 1995, respectively.
 
NOTE 21 -- SHARE OPTION PLAN AND RESTRICTED SHARE PLAN
 
     In July 1997, the Company adopted the 1997 Share Option and Share Award
Plan (the "Employee Plan"). The purpose of the Employee Plan is to attract and
retain highly qualified executive officers, trustees, employees and consultants.
Through the Employee Plan, certain officers, trustees, key employees and
consultants of the Company were offered the opportunity to acquire Common Shares
pursuant to grants of options to purchase Common Shares ("Options"), and to
receive dividend equivalent rights with respect to Common Shares ("Dividend
Equivalents") and to receive Restricted Shares. The Compensation Committee
determines the vesting schedule, if any, of each Option and the term, which term
shall not exceed 10 years from the date of grant. As to the Options that have
been granted through December 31, 1997, generally, one-third are exercisable one
year after the initial grant, one-third are exercisable two years following the
date such
                                      F-56
<PAGE>   183
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
Options were granted and the remaining one-third are exercisable three years
following the date such Options were granted. With respect to the Restricted
Shares granted through December 31, 1997, generally, one-half vest three years
after the initial grant, one-fourth vest four years following the date such
Restricted Shares were granted and the remaining one-fourth vest five years
following the date such Restricted Shares were granted. The Common Shares
subject to Options under the Employee Plan were limited to 11,121,786. In
connection with the establishment of the Employee Plan, the Company granted
Options to purchase Common Shares to certain officers, trustees, employees and
consultants of the Company at the IPO price. 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.
 
     The exercise price for all Options under the Employee Plan shall not be
less than the fair market value of the underlying Common Shares at the time the
Option is granted. The Share Option Plan will terminate at such time as no
further Common Shares are available for issuance upon the exercise of Options
and all outstanding Options have expired or been exercised. The Board of
Trustees may at any time amend or terminate the Employee Plan, but termination
will not affect Options previously granted. Any Options which had vested prior
to such termination would remain exercisable by the holder thereof.
 
     The Employee Plan is administered by the Compensation Committee which is
appointed by the Board of Trustees. The Compensation Committee determines those
officers, key employees and consultants to whom, and the time or times at which,
grants of Options will be made. The Compensation Committee interprets the
Employee Plan, adopts rules relating thereto and determines the terms and
provisions of Options.
 
     The Company has elected to apply the provisions of Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees," ("APB No. 25")
in the computation of compensation expense. Under APB No. 25's intrinsic value
method, compensation expense is determined by computing the excess of the market
price of the shares over the exercise price on the measurement date. For the
Company's Options, the intrinsic value on the measurement date (or grant date)
is zero, and no compensation expense is recognized. Financial Accounting
Standards Board No. 123 ("FASB No. 123") requires the Company to disclose pro
forma net income and income per share as if a fair value based accounting method
had been used in the computation of compensation expense. The fair value of the
Options computed under FASB No. 123 would be recognized over the vesting period
of the Options. The fair value for the Company's Options granted in 1997 was
estimated at the time the Options were granted using the Black-Scholes option
pricing model with the following weighted average assumptions: risk-free
interest rate of 5.59%; dividend yields of 4%; volatility factors of the
expected market price of the Company's Common Shares of .24; and a weighted
average expected life of the Options and the Restricted Shares of five years.
 
     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's Options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its Options.
 
                                      F-57
<PAGE>   184
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     For purposes of pro forma disclosures, the estimated fair value of the
Options is amortized to expense over the Options' vesting period. The following
is the unaudited pro forma information for the period from July 11, 1997 through
December 31, 1997:
 
<TABLE>
<CAPTION>
                                                               FOR THE PERIOD FROM
                                                              JULY 11, 1997 THROUGH
                                                                DECEMBER 31, 1997
                                                              ----------------------
                                                              (DOLLARS IN THOUSANDS)
<S>                                                           <C>
Pro forma net income before extraordinary items.............         $ 85,654
Extraordinary items.........................................          (16,240)
                                                                     --------
Pro forma net income available to Common Shares.............         $ 69,414
                                                                     ========
</TABLE>
 
<TABLE>
<CAPTION>
                                                                 BASIC         DILUTED
                                                              EARNINGS PER   EARNINGS PER
                                                              COMMON SHARE   COMMON SHARE
                                                              ------------   ------------
<S>                                                           <C>            <C>
Pro forma income before extraordinary items.................      $.53           $.51
Extraordinary items.........................................      (.10)          (.09)
                                                                  ----           ----
Pro forma net income........................................      $.43           $.42
                                                                  ====           ====
</TABLE>
 
     As of December 31, 1997, there were no Options issued under the Employee
Plan that were exercisable or Restricted Shares that were vested. Exercise
prices for the 4,911,500 Options outstanding as of December 31, 1997 ranged from
$21.00 to $33.00, with a weighted average exercise price of $22.80. Expiration
dates ranged from July 11, 2007 to December 19, 2007. The remaining weighted
average contractual life of Options was 9.65 years. The weighted average grant
date fair value of Options granted during 1997 was $4.44. In addition, there
were 298,000 Restricted Shares issued during 1997.
 
NOTE 22 -- EMPLOYEE SHARE PURCHASE PLAN
 
     In July 1997, the Company adopted its 1997 Non-Qualified Employee Share
Purchase Plan (the "Purchase Plan") for the purpose of attracting highly
qualified executive officers, trustees and employees. The Company has reserved 2
million Common Shares (subject to adjustment for share splits, share
distributions, recapitalizations, or other corporate restructurings) for
issuance pursuant to the Purchase Plan.
 
     The Purchase Plan is administered by the Compensation Committee and allows
eligible employees and trustees to acquire an interest in the Company through
the purchase of Common Shares from the Company at a price equal to 85% of the
lesser of (i) the closing price of the Common Shares on the New York Stock
Exchange ("NYSE") on the day prior to the purchase or (ii) the average closing
price of Common Shares on the NYSE for the six-month period prior to the
purchase.
 
     Common Shares will be offered under the Purchase Plan in semi-annual
offering periods. No such Common Shares were offered as of December 31, 1997.
Eligible employees and trustees who elect to participate in the Purchase Plan
will be able to use funds accumulated through cash contributions or payroll
deductions to purchase Common Shares at a price less than the fair market value
of the Common Shares on the date of purchase.
 
NOTE 23 -- 401(K) PLAN
 
     The Company has established 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 (including the Operating
Partnership).
 
                                      F-58
<PAGE>   185
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The 401(k) Plan permits eligible employees of the Company to defer up to
16% of their annual compensation, subject to certain limitations imposed by the
Internal Revenue Code. The employees' elective deferrals are immediately vested
and nonforfeitable upon contribution to the 401(k) Plan. The Company matches
dollar for dollar employee contributions to the 401(k) Plan up to 4% of the
employee's annual salary. In addition, the Company may elect to make a
discretionary profit sharing contribution.
 
NOTE 24 -- COMMITMENTS AND CONTINGENCIES
 
CONCENTRATION OF CREDIT RISK
 
     The Company 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 the Company believes that the risk is not significant. In
addition, the Company has entered into certain interest rate protection
agreements (see Note 10) and 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.
 
ENVIRONMENTAL
 
     The Company, as an owner of real estate, is subject to various
environmental laws of federal and local governments. Compliance by the Company
with existing laws has not had a material adverse effect on the Company's
financial condition and results of operations, and management does not believe
it will have such an impact in the future. However, the Company 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
 
     The Company has become a party to various legal actions resulting from the
operational activities transferred to the Operating Partnership in connection
with the Consolidation and the Beacon Merger. 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.
 
     The Company is involved in continuing discussions with its joint venture
partner in One Post Office Square and Rowes Wharf, which was acquired in
connection with the Beacon Merger, with respect to the Company's control over
property management of such Properties. Such joint venture partner did not
consent to the transfer to the Company of Beacon's joint venture interest in
these Properties. Although the Company believes that such consent was not
required, unless the Company is able to reach an agreement with respect to
day-to-day management of such Properties, it is possible that the joint venture
partner could challenge the transfer of such Properties in the Beacon Merger, or
seek to trigger the buy-sell remedy found in the joint venture documents.
 
     Except as described above, management of the Company does not believe there
is any litigation threatened against the Company other than routine litigation
arising out of the ordinary course of business, some of which is expected to be
covered by liability insurance, and none of which is expected to have a material
adverse effect on the consolidated and combined financial statements of the
Company.
 
GEOGRAPHICAL RISK
 
     The Company carries earthquake insurance on all of the 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 1970s have
established construction standards for all new buildings. The current and
strictest construction standards were adopted in 1987. Of the
 
                                      F-59
<PAGE>   186
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
43 Properties located in California, 12 have been built 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.
 
NOTE 25 -- SUBSEQUENT EVENTS
 
     The following significant transactions relating to the Company occurred
during the period from January 1, 1998 to March 18, 1998:
 
     1)  In January 1998, the Company acquired BP Garage, located in Cleveland,
        Ohio, from an unaffiliated third party for a purchase price of
        approximately $10.2 million in cash.
 
     2)  In February 1998, the Company completed the private placement of
        6,000,000 of its 5.25% Equity Redeemable Shares (PIERS), $50 liquidation
        per share. This offering generated net proceeds of approximately $290.3
        million after offering costs of $9.7 million and was priced with a 20%
        conversion premium. The PIERS are convertible at any time by the holder
        into Common Shares at a conversion price of $35.70 per Common Share,
        equivalent to a conversion ratio of 1.40056 Common Shares for each
        PIERS. Proceeds from this sale have been used to pay down borrowings
        under the Company's credit facilities. The PIERS are non-callable for
        five years with a mandatory call in year 10. The annual dividend of
        $2.625 per PIERS will be paid quarterly.
 
     3)  In February 1998, the Company completed the private placement of $1.25
        billion of senior unsecured notes (the "$1.25 Billion Notes Offering").
        The notes consist of four tranches with maturities of five to 20 years
        which were priced at an interest rate spread over the corresponding
        Treasury rate.
 
   
        Additionally, the Company privately placed $250 million of 6.376%
        MandatOry Par Put Remarketed Securities ("$250 Million MOPPRS Offering")
        due February 15, 2012, which are subject to mandatory tender on February
        15, 2002. The MOPPRS are senior unsecured obligations of the Company.
    
 
        The proceeds to the Company from the issuance of the $1.25 Billion Notes
        Offering and $250 Million MOPPRS Offering, net of offering costs, were
        approximately $1.49 billion. The Company has terminated $700 million of
        hedge agreements in connection with the $1.25 Billion Notes Offering and
        the $250 Million MOPPRS Offering at a cost of approximately $32.6
        million which will be amortized as an adjustment to interest expense.
        The Company terminated the remaining $300 million of hedge agreements at
        a cost of approximately $7.4 million in connection with the PIERS which
        will be reflected as an extraordinary loss in 1998 (see Note 10). The
        weighted average interest cost of the notes and MOPPRS, including the
        amortization of the offering and transaction costs and the costs
        incurred in connection with the termination of hedge agreements is
        approximately 6.97%.
 
                                      F-60
<PAGE>   187
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     A summary of the terms of the $1.25 Billion Notes Offering and $250 Million
MOPPRS Offering are as follows:
 
<TABLE>
<CAPTION>
                                                                               STATED    EFFECTIVE
        TRANCHE                                                  AMOUNT         RATE      RATE(A)
        -------                                              --------------    ------    ---------
        <S>                                                  <C>               <C>       <C>
        4 Year MOPPRS due 2002............................   $  250,000,000     6.38%      6.42%
        5 Year Notes due 2003.............................      300,000,000     6.38%      6.77%
        7 Year Notes due 2005.............................      400,000,000     6.63%      7.06%
        10 Year Notes due 2008............................      300,000,000     6.75%      7.03%
        20 Year Notes due 2018............................      250,000,000     7.25%      7.56%
                                                             --------------     ----       ----
                                                             $1,500,000,000     6.66%      6.97%
                                                             ==============     ====       ====
</TABLE>
 
        -----------------------
 
        (A) Includes the cost of the terminated interest rate protection
            agreements and offering and transaction costs.
 
        On March 5, 1998, the Company filed a registration statement relating to
        a registered offer to exchange the $180 Million Notes Offering, the
        $1.25 Billion Notes Offering and the $250 Million MOPPRS Offering for
        registered securities of the Company with terms identical in all
        material respects to the terms of the existing notes.
 
     4) In February 1998, the Company entered into a contract to purchase the
        Rand Tower Garage in Minneapolis, Minnesota, upon completion of the
        parking structure. The purchase price for Rand Tower Garage, which is
        comprised of 589 parking spaces in Minneapolis' Central Business
        District, will be approximately $19 million. Although the project is
        slated for completion in January 1999, this transaction is contingent
        upon certain terms and conditions as set forth in the purchase
        agreement. There can be no assurance that this transaction will be
        consummated as described above.
 
     5) In February 1998, the Company issued 2 million Options at an exercise
        price of $29.50 per Common Share under the Employee Plan.
 
     6) In February 1998, the Company obtained financing of $60 million
        collateralized by the St. Louis Parking Garages. The Company has a 50%
        ownership interest in this Parking Facility and, accordingly, received
        $30 million of the financing proceeds. This loan has a 6.85% fixed
        interest rate and a six year term.
 
     7) In March 1998, the Company's Board of Trustees declared a first quarter
        dividend for the 8.98% Series A Cumulative Redeemable Preferred Shares.
        A dividend of $0.56125 per share will be paid on March 15, 1998 to
        shareholders of record as of March 9, 1998. In addition, the Company's
        Board of Trustees declared a first quarter dividend/distribution in the
        amount of $0.32 per Common Share/Unit payable on April 10, 1998, to the
        common shareholders/unit holders of record at the close of business on
        March 31, 1998.
 
     8) In March 1998, the Company's Board of Trustees approved the purchase of
        Prominence in Buckhead, an office building development in Atlanta,
        Georgia. The property, which will consist of a 430,000 square foot
        building and 1,350 parking spaces, will be acquired upon its completion
        in mid 1999. The purchase will also include an 11.88-acre site that may
        be used to develop Phase II to Prominence. The purchase price for the
        described assets will be approximately $70 million. This transaction is
        contingent upon certain terms and conditions as set forth in the
        purchase agreement. There can be no assurance that this transaction will
        be consummated as described above.
 
                                      F-61
<PAGE>   188
         EQUITY OFFICE PROPERTIES TRUST AND EQUITY OFFICE PREDECESSORS
 
     NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
 
     9) In March 1998, the Company purchased from an unaffiliated party 100
        Summer Street, which consists of approximately 1.0 million total square
        feet and is located in Boston, Massachusetts. The purchase price was
        approximately $222 million in cash.
 
                                     F-62
<PAGE>   189
 
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION AS OF DECEMBER 31,
1997(14)
<TABLE>
<CAPTION>
 
                                                                                           INITIAL COST TO COMPANY
                                                                                       -------------------------------
                                                                                                          BUILDINGS
                                                                   DECEMBER 31, 1997                         AND
              DESCRIPTION                          LOCATION          ENCUMBRANCES           LAND         IMPROVEMENTS
              -----------                          --------        -----------------        ----         ------------
<C>  <S>                             <C>     <C>                   <C>                 <C>              <C>
     Office Properties:
  1  60 Spear Street Building......   (3)    San Francisco, CA      $            0     $    2,125,200   $   19,126,500
  2  San Felipe Plaza..............   (3)    Houston, TX                53,087,500         13,471,300      117,984,100
  3  Summit Office Park............   (3)    Ft. Worth, TX                       0          1,421,000       12,789,700
  4  5100 Brookline................   (3)    Oklahoma City, OK                   0            570,700        4,236,500
  5  Tampa Commons.................   (3)    Tampa, FL                           0          2,783,900       25,054,600
  6  Intercontinental Center.......   (3)    Houston, TX                         0          1,750,700       14,406,300
  7  First Union Center............   (3)    Ft. Lauderdale, FL                  0          3,954,000       35,585,900
  8  Four Forest...................   (3)    Dallas, TX                          0          4,767,900       42,911,400
  9  Dominion Tower................   (3)    Norfolk, VA                         0          4,643,700       41,091,200
 10  Northborough Tower............   (3)    Houston, TX                         0          1,704,000       12,185,800
 11  500 Marquette Building........   (3)    Albuquerque, NM                     0          2,219,900       19,978,500
 12  Atrium Towers.................   (3)    Oklahoma City, OK                   0            749,000        6,741,600
 13  One Clearlake Centre..........   (3)    W. Palm Beach, FL                   0          4,585,700       18,771,300
 14  Community Corporate Center....   (3)    Columbus, OH               16,719,900          3,018,900       27,169,800
 15  Sarasota City Center..........   (3)    Sarasota, FL                        0          2,239,600       20,156,700
 16  Denver Corporate Center II and   (3)    Denver, CO                          0          6,059,400       36,534,300
     III...........................
 17  University Tower..............   (3)    Durham, NC                          0          2,085,100       18,766,200
 18  Shelton Pointe................   (3)    Shelton, CT                         0          1,513,900       13,625,200
 19  San Jacinto Center............   (3)    Austin, TX                          0          5,074,500       45,670,600
 20  1111 19th Street..............   (3)    Washington D.C.                     0          5,024,000       45,216,000
 21  Bank One Center/Tower.........   (3)    Indianapolis, IN                    0         14,608,200      131,473,600
 22  North Central Plaza Three.....   (3)    Dallas, TX                          0          3,632,100       32,689,300
 23  The Quadrant..................   (3)    Englewood, CO                       0          4,357,200       39,215,300
 24  Canterbury Green..............  (3)(4)  Stamford, CT               19,034,200                  0       41,987,100
 25  Three Stamford Plaza..........   (3)    Stamford, CT               16,562,800          3,956,600       35,609,700
 26  Union Square..................   (3)    San Antonio, TX                     0          2,368,500       14,236,000
 27  One North Franklin............   (3)    Chicago, IL                         0          9,830,500       88,474,400
 28  1620 L Street.................   (3)    Washington, DC                      0          2,708,200       24,374,100
 29  One & Two Stamford Plaza......   (3)    Stamford, CT                        0          8,267,700       74,409,300
 30  300 Atlantic Street...........   (3)    Stamford, CT                        0          4,632,300       41,690,900
 31  Sterling Plaza................   (3)    Dallas, TX                          0          3,810,600       34,295,500
 32  1700 Higgins..................   (3)    Des Plaines, IL             3,379,700(5)       1,323,100       11,907,900
 33  Franklin Plaza................   (3)    Austin, TX                 34,087,800(5)       6,502,400       58,521,300
 34  Northwest Center..............   (3)    San Antonio, TX             6,465,100(5)       1,947,900       17,531,900
 35  One Columbus Building.........   (3)    Columbus, OH               29,386,100(5)       4,956,300       44,606,300
 36  One Crosswoods Center.........   (3)    Columbus, OH                3,449,200(5)       1,058,900        9,529,700
 37  One Lakeway...................   (3)    Metairie, LA                9,697,600(5)       2,803,900       25,235,400
 38  Three Lakeway.................   (3)    Metairie, LA               17,018,700(5)       4,695,000       43,517,200
 39  Two Lakeway...................   (3)    Metairie, LA               14,692,600(5)       4,643,500       41,791,800
 40  Westshore Center..............   (3)    Tampa, FL                   7,052,600(5)       1,978,800       17,808,700
 
<CAPTION>
       COSTS CAPITALIZED
         SUBSEQUENT TO        GROSS AMOUNT CARRIED AT CLOSE
          ACQUISITION              OF PERIOD 12/31/97
     ---------------------   -------------------------------
              BUILDINGS                         BUILDINGS
                 AND                               AND                           ACCUMULATED       DATE         DATE     DEPRECIABLE
     LAND    IMPROVEMENTS         LAND         IMPROVEMENTS       TOTAL(1)       DEPRECIATION   CONSTRUCTED   ACQUIRED    LIVES(2)
     ----    ------------         ----         ------------       --------       ------------   -----------   --------   -----------
<C>  <C>    <C>              <C>              <C>              <C>               <C>            <C>           <C>        <C>
 
  1   $0    $            0   $    2,125,200   $   19,126,500   $    21,251,700   $   (218,700)     1967        9/29/87        40
  2    0         2,131,400       13,471,300      120,115,500       133,586,800     (1,487,800)     1984        9/29/87        40
  3    0           311,400        1,421,000       13,101,100        14,522,100       (163,300)     1974        3/01/89        40
  4    0           120,100          570,700        4,356,600         4,927,300        (53,100)     1974        3/01/89        40
  5    0            19,200        2,783,900       25,073,800        27,857,700       (286,400)     1985        4/25/89        40
  6    0            43,500        1,750,700       14,449,800        16,200,500       (165,500)     1983        6/28/89        40
  7    0            74,400        3,954,000       35,660,300        39,614,300       (407,900)     1991        6/28/89        40
  8    0           590,100        4,767,900       43,501,500        48,269,400       (523,900)     1985        6/29/89        40
  9    0           238,800        4,643,700       41,330,000        45,973,700       (482,100)     1987        7/25/89        40
 10    0           292,300        1,704,000       12,478,100        14,182,100       (149,600)     1983        8/03/89        40
 11    0           370,200        2,219,900       20,348,700        22,568,600       (255,000)     1985        8/15/89        40
 12    0           374,300          749,000        7,115,900         7,864,900        (94,600)     1980       12/15/89        40
 13    0           562,000        4,585,700       19,333,300        23,919,000       (239,900)     1987       12/29/89        40
 14    0           200,900        3,018,900       27,370,700        30,389,600       (327,100)     1987        6/14/90        40
 15    0            72,500        2,239,600       20,229,200        22,468,800       (236,800)     1989        9/28/90        40
 16    0           603,300        6,059,400       37,137,600        43,197,000       (427,200)   1981-82      12/20/90        40
 
 17    0           146,800        2,085,100       18,913,000        20,998,100       (226,100)     1987       10/16/91        40
 18    0           245,700        1,513,900       13,870,900        15,384,800       (160,300)     1985       11/26/91        40
 19    0           877,900        5,074,500       46,548,500        51,623,000       (555,400)     1987       12/13/91        40
 20    0           154,700        5,024,000       45,370,700        50,394,700       (527,900)     1979       12/18/91        40
 21    0         1,206,700       14,608,200      132,680,300       147,288,500     (1,543,200)     1990        3/24/92        40
 22    0           273,700        3,632,100       32,963,000        36,595,100       (472,100)     1986        4/21/92        40
 23    0           634,100        4,357,200       39,849,400        44,206,600       (464,200)     1985       12/01/92        40
 24    0           370,500                0       42,357,600        42,357,600       (482,800)     1987       12/15/92        40
 25    0           163,100        3,956,600       35,772,800        39,729,400       (419,800)     1980       12/15/92        40
 26    0           289,100        2,368,500       14,525,100        16,893,600       (179,100)     1986       12/23/92        40
 27    0           378,800        9,830,500       88,853,200        98,683,700     (1,026,800)     1991       12/31/92        40
 28    0           662,500        2,708,200       25,036,600        27,744,800       (329,400)     1989        2/05/93        40
 29    0           796,400        8,267,700       75,205,700        83,473,400       (899,100)     1986        3/30/93        40
 30    0           522,000        4,632,300       42,212,900        46,845,200       (501,200)     1987        3/30/93        40
 31    0           367,800        3,810,600       34,663,300        38,473,900       (409,100)     1984        6/25/93        40
 32    0            29,400        1,323,100       11,937,300        13,260,400       (138,900)     1986       11/12/93        40
 33    0         1,269,800        6,502,400       59,791,100        66,293,500       (741,000)     1987       11/12/93        40
 34    0           132,600        1,947,900       17,664,500        19,612,400       (206,300)     1984       11/12/93        40
 35    0           316,200        4,956,300       44,922,500        49,878,800       (515,000)     1987       11/12/93        40
 36    0           188,100        1,058,900        9,717,800        10,776,700       (119,100)     1984       11/12/93        40
 37    0           327,000        2,803,900       25,562,400        28,366,300       (305,400)     1981       11/12/93        40
 38    0         1,097,300        4,695,000       44,614,500        49,309,500       (557,500)     1987       11/12/93        40
 39    0           523,700        4,643,500       42,315,500        46,959,000       (505,200)     1984       11/12/93        40
 40    0           150,300        1,978,800       17,959,000        19,937,800       (217,200)     1984       11/12/93        40
</TABLE>
 
                                      F-63
<PAGE>   190
<TABLE>
<CAPTION>
 
                                                                                           INITIAL COST TO COMPANY
                                                                                       -------------------------------
                                                                                                          BUILDINGS
                                                                   DECEMBER 31, 1997                         AND
              DESCRIPTION                          LOCATION          ENCUMBRANCES           LAND         IMPROVEMENTS
              -----------                          --------        -----------------        ----         ------------
<C>  <S>                             <C>     <C>                   <C>                 <C>              <C>
 41  NationsBank Plaza.............   (3)    Nashville, TN                       0          3,049,200       27,443,100
 42  The Plaza at La Jolla            (3)    San Diego, CA              57,943,100         11,839,400       98,247,900
     Village.......................
 43  Interco Corporate Tower.......   (3)    Clayton, MO                22,038,100          4,688,400       42,195,200
 44  9400 NCX......................   (3)    Dallas, TX                          0          3,570,000       32,129,700
 45  Four Stamford Plaza...........   (3)    Stamford, CT               15,825,200          4,470,900       40,237,900
 46  1920 Main Plaza...............   (3)    Irvine, CA                          0          5,480,700       47,525,800
 47  Paces West....................   (3)    Atlanta, GA                         0         12,833,700       75,024,500
 48  One Market....................   (3)    San Francisco, CA         151,265,200         34,814,400      313,329,700
 49  2010 Main Plaza...............   (3)    Irvine, CA                          0          5,197,100       46,773,700
 50  1100 Executive Tower..........   (3)    Orange, CA                          0         10,112,000       41,600,900
 51  28 State Street...............  (3)(6)  Boston, MA                          0          9,512,600       85,613,100
 52  850 Third Avenue..............   (3)    New York, NY                        0          9,605,900       86,453,200
 53  161 North Clark...............   (3)    Chicago, IL               111,883,100         15,881,700      142,936,100
 54  Wachovia Center...............   (3)    Charlotte, NC              26,307,200          5,061,000       45,548,900
 55  Central Park..................   (3)    Atlanta, GA                55,033,500          9,162,600       82,463,100
 56  One American Center...........   (3)    Austin, TX                          0                  0       70,811,500
 57  Pasadena Towers...............   (3)    Pasadena, CA               47,474,100          7,087,500       63,787,500
 58  580 California................   (3)    San Francisco, CA          29,884,400          7,489,000       67,401,300
 59  1601 Market Street............   (3)    Philadelphia, PA                    0          5,780,800       52,027,500
 60  Promenade II..................   (3)    Atlanta, GA                95,906,900         14,850,000      133,650,200
 61  Two California Plaza..........   (3)    Los Angeles, CA                     0                  0      156,197,000
 62  BP Tower......................   (3)    Cleveland, OH              84,587,300         16,450,700      148,056,200
 63  Sun Trust Center..............   (3)    Orlando, FL                         0         11,023,600       99,212,300
 64  Reston Town Center............   (3)    Reston, VA                 91,361,300         23,425,200      154,576,300
 65  49 East Thomas Road...........   (3)    Phoenix, AZ                         0             65,300          587,800
 66  Colonnade I...................   (3)    San Antonio, TX                     0          1,413,700       12,722,800
 67  One Phoenix Plaza.............   (3)    Phoenix, AZ                         0          6,191,900       55,726,900
 68  177 Broad Street..............  (3)(7)  Stamford, CT                        0          3,941,200       35,470,900
 69  Preston Commons...............   (3)    Dallas, TX                          0          5,737,200       51,589,100
 70  Oakbrook Terrace Tower........   (3)    Oakbrook Terrace, IL                0         11,950,100      107,550,900
 71  One Maritime Plaza............   (3)    San Francisco, CA                   0         11,532,700      103,793,800
 72  Smith Barney Tower............   (3)    San Diego, CA                       0          2,657,700       23,919,400
 73  201 Mission Street............   (3)    San Francisco, CA                   0          8,870,800       79,836,600
 74  30 N. LaSalle Street..........   (3)    Chicago, IL                         0         12,489,000      112,400,700
 75  LL&E Tower....................          New Orleans, LA            37,500,000(8)       6,185,800       55,672,200
 76  Texaco Center.................          New Orleans, LA            42,500,000(8)       6,686,300       60,177,000
 77  Prudential Portfolio..........   (9)    Various                             0         28,456,300      256,106,600
 78  550 South Hope Street.........          Los Angeles, CA                     0         10,017,500       90,157,600
 79  10 & 30 South Wacker..........          Chicago, IL                         0         48,502,500      436,522,400
 80  Four Falls Corporate Center...          Conshohocken, PA                    0          4,929,500       44,365,700
 81  Four and Five Valley Square...          Blue Bell, PA                       0            864,500        7,781,200
 82  Oak Hill Plaza................          King of Prussia, PA                 0          2,205,200       19,847,100
 83  One Devon Square..............          Wayne, PA                           0          1,023,500        9,211,000
 84  Three Devon Square............          Wayne, PA                           0            411,400        3,702,800
 
<CAPTION>
       COSTS CAPITALIZED
         SUBSEQUENT TO        GROSS AMOUNT CARRIED AT CLOSE
          ACQUISITION              OF PERIOD 12/31/97
     ---------------------   -------------------------------
              BUILDINGS                         BUILDINGS
                 AND                               AND                           ACCUMULATED       DATE         DATE     DEPRECIABLE
     LAND    IMPROVEMENTS         LAND         IMPROVEMENTS       TOTAL(1)       DEPRECIATION   CONSTRUCTED   ACQUIRED    LIVES(2)
     ----    ------------         ----         ------------       --------       ------------   -----------   --------   -----------
<C>  <C>    <C>              <C>              <C>              <C>               <C>            <C>           <C>        <C>
 41    0           229,900        3,049,200       27,673,000        30,722,200       (317,800)     1977       12/01/93        40
 42    0           351,200       11,839,400       98,599,100       110,438,500     (1,134,200)  1987-1990      3/10/94        40
 
 43    0           338,100        4,688,400       42,533,300        47,221,700       (486,200)     1986        5/27/94        40
 44    0         1,895,200        3,570,000       34,024,900        37,594,900       (454,700)     1981        6/24/94        40
 45    0            94,300        4,470,900       40,332,200        44,803,100       (460,400)     1979        8/31/94        40
 46    0           690,100        5,480,700       48,215,900        53,696,600       (654,600)     1988        9/29/94        40
 47    0         1,425,000       12,833,700       76,449,500        89,283,200       (948,800)     1987       10/31/94        40
 48    0        18,864,800       34,814,400      332,194,500       367,008,900     (4,391,600)     1976       11/22/94        40
 49    0           259,700        5,197,100       47,033,400        52,230,500       (559,400)     1988       12/13/94        40
 50    0           377,500       10,112,000       41,978,400        52,090,400       (503,200)     1987       12/15/94        40
 51    0        27,919,400        9,512,600      113,532,500       123,045,100       (387,300)     1968        1/23/95        40
 52    0         2,243,100        9,605,900       88,696,300        98,302,200     (1,075,900)     1960        3/20/95        40
 53    0        11,149,300       15,881,700      154,085,400       169,967,100     (1,864,800)     1992        7/26/95        40
 54    0           481,600        5,061,000       46,030,500        51,091,500       (524,900)     1972        9/01/95        40
 55    0           556,000        9,162,600       83,019,100        92,181,700       (975,500)     1986       10/17/95        40
 56    0           552,200                0       71,363,700        71,363,700       (815,200)     1984       11/01/95        40
 57    0         1,383,200        7,087,500       65,170,700        72,258,200       (768,000)  1990-1991     12/14/95        40
 58    0         1,741,600        7,489,000       69,142,900        76,631,900       (888,700)     1984       12/21/95        40
 59    0           760,500        5,780,800       52,788,000        58,568,800       (661,700)     1970        1/18/96        40
 60    0         3,482,500       14,850,000      137,132,700       151,982,700     (1,632,200)     1990        6/14/96        40
 61    0        14,041,300                0      170,238,300       170,238,300     (2,954,000)     1992        8/23/96        40
 62    0           312,300       16,450,700      148,368,500       164,819,200     (1,702,200)     1985        9/04/96        40
 63    0         1,065,600       11,023,600      100,277,900       111,301,500     (1,172,300)     1988        9/18/96        40
 64    0           428,000       23,425,200      155,004,300       178,429,500     (1,779,500)     1990       10/22/96        40
 65    0                 0           65,300          587,800           653,100         (6,600)     1974       12/11/96        40
 66    0           360,900        1,413,700       13,083,700        14,497,400       (170,200)     1983       12/04/96        40
 67    0                 0        6,191,900       55,726,900        61,918,800       (636,400)     1989       12/04/96        40
 68    0           375,200        3,941,200       35,846,100        39,787,300       (413,900)     1989        1/29/97        40
 69    0           956,100        5,737,200       52,545,200        58,282,400       (631,400)     1986        3/21/97        40
 70    0           392,200       11,950,100      107,943,100       119,893,200     (1,237,600)     1988        4/16/97        40
 71    0         1,682,200       11,532,700      105,476,000       117,008,700     (1,209,000)     1967        4/21/97        40
 72    0         1,179,100        2,657,700       25,098,500        27,756,200       (379,000)     1987        4/28/97        40
 73    0           258,000        8,870,800       80,094,600        88,965,400       (915,000)     1981        4/30/97        40
 74    0           569,600       12,489,000      112,970,300       125,459,300     (1,293,600)     1974        6/13/97        40
 75    0           127,300        6,185,800       55,799,500        61,985,300       (411,300)     1987         9/3/97        40
 76    0           393,000        6,686,300       60,570,000        67,256,300       (454,100)     1984         9/3/97        40
 77    0         5,343,900       28,456,300      261,450,500       289,906,800     (1,443,400)   Various       10/1/97        40
 78    0                 0       10,017,500       90,157,600       100,175,100       (469,400)     1991        10/6/97        40
 79    0            54,100       48,502,500      436,576,500       485,079,000     (2,277,300)     1983        10/7/97        40
 80    0           132,000        4,929,500       44,497,700        49,427,200       (238,900)     1988        10/7/97        40
 81    0            15,000          864,500        7,796,200         8,660,700        (40,500)     1988        10/7/97        40
 82    0             2,800        2,205,200       19,849,900        22,055,100       (103,300)     1982        10/7/97        40
 83    0             1,200        1,023,500        9,212,200        10,235,700        (47,900)     1984        10/7/97        40
 84    0                 0          411,400        3,702,800         4,114,200        (19,300)     1985        10/7/97        40
</TABLE>
 
                                      F-64
<PAGE>   191
<TABLE>
<CAPTION>
 
                                                                                           INITIAL COST TO COMPANY
                                                                                       -------------------------------
                                                                                                          BUILDINGS
                                                                   DECEMBER 31, 1997                         AND
              DESCRIPTION                          LOCATION          ENCUMBRANCES           LAND         IMPROVEMENTS
              -----------                          --------        -----------------        ----         ------------
<C>  <S>                             <C>     <C>                   <C>                 <C>              <C>
 85  Two Devon Square..............          Wayne, PA                           0            658,500        5,926,800
 86  Two Valley Square.............          Blue Bell, PA                       0            878,000        7,901,400
 87  Walnut Hill Plaza.............          King of Prussia, PA        14,713,700          2,046,300       18,416,800
 88  One Lafayette Centre..........          Washington, D.C.                    0          8,257,000       74,312,800
 89  One Valley Square.............          Blue Bell, PA                       0            717,600        6,457,600
 90  Three Valley Square...........          Blue Bell, PA                       0          1,012,400        9,111,600
 91  1600 Duke Street..............          Alexandria, VA                      0          1,105,300        9,948,500
 92  Fair Oaks Plaza...............          Fairfax, VA                         0          2,411,600       21,704,200
 93  Lakeside Square...............          Dallas, TX                          0          8,261,000       47,349,300
 94  LaSalle Plaza.................          Minneapolis, MN                     0          9,679,000       87,111,400
 95  1001 Fifth Avenue.............          Portland, OR               20,691,500(10)      5,381,200       48,615,200
 96  1111 Third Avenue.............          Seattle, WA                30,830,400(10)      9,895,500       89,530,100
 97  Calais Office Center..........          Anchorage, AK               8,587,000(10)              0       16,625,800
 98  First Interstate..............          Seattle, WA                83,800,700(10)     21,352,000      193,449,600
 99  Nordstrom Medical Tower.......          Seattle, WA                10,035,400(10)      1,762,500       16,016,400
100  One Bellevue Center...........          Bellevue, WA               23,691,800(10)              0       56,199,700
101  Rainer Plaza..................          Bellevue, WA               29,795,800(10)              0       79,896,000
102  Second and Seneca.............          Seattle, WA                40,865,800(10)     10,917,900       98,885,800
103  101 N. Wacker.................          Chicago, IL                         0         10,067,600       90,608,800
104  10880 Wilshire Boulevard......          Los Angeles, CA                     0                  0      149,841,200
105  10960 Wilshire Boulevard......          Los Angeles, CA                     0         16,841,300      151,573,900
106  1300 N. 17th Street...........          Rosslyn, VA                         0          9,810,600       88,295,900
107  1333 H Street.................          Washington D.C.                     0          6,715,400       60,438,200
108  150 California................   (11)   San Francisco, CA                   0         12,566,800                0
109  150 Federal Street............          Boston, MA                 56,270,200         14,131,300      127,182,200
110  1616 N. Fort Myer Drive.......          Rosslyn, VA                         0          6,960,700       62,646,400
111  175 Federal Street............          Boston, MA                 12,729,300          4,893,900       44,045,200
112  175 Wyman Street..............   (11)   Walthan, MA                         0         24,000,000                0
113  2 Oliver Street-147 Milk                Boston, MA                          0          5,017,400       45,157,000
     Street........................
114  200 West Adams................          Chicago, IL                         0         11,723,300      105,509,500
115  225 Franklin Street...........          Boston, MA                          0         34,607,900      311,470,600
116  AT&T Plaza....................          Oak Brook, IL                       0          4,834,200       43,507,900
117  Center Plaza..................          Boston, MA                 59,898,000         18,942,300      170,480,400
118  Center Pointe III.............   (11)   Fairfax, VA                         0          9,600,000                0
119  Centerpointe I and II.........          Fairfax, VA                30,146,000          8,837,800       79,540,200
120  Civic Opera House.............          Chicago, IL                31,785,400         12,771,400      114,941,900
121  Crosby Corporate Center.......          Bedford, MA                         0          5,957,800       53,620,400
122  Crosby Corporate Center II....   (11)   Bedford, MA                         0          9,384,600                0
123  EJ Randolph...................          McLean, VA                 16,057,000          3,936,500       35,429,100
124  EJ Randolph II................   (11)   McLean, Va                          0          3,324,000                0
125  John Marshall I and II........          McLean, VA                 21,182,900          5,216,400       46,947,600
126  John Marshall III.............   (11)   McLean, VA                          0          8,700,000                0
127  Lake Marriot Business Park....          Santa Clara, CA                     0          6,952,100       62,568,900
128  Lakeside Office Park..........          Atlanta, GA                         0          4,792,500       43,132,300
 
<CAPTION>
       COSTS CAPITALIZED
         SUBSEQUENT TO        GROSS AMOUNT CARRIED AT CLOSE
          ACQUISITION              OF PERIOD 12/31/97
     ---------------------   -------------------------------
              BUILDINGS                         BUILDINGS
                 AND                               AND                           ACCUMULATED       DATE         DATE     DEPRECIABLE
     LAND    IMPROVEMENTS         LAND         IMPROVEMENTS       TOTAL(1)       DEPRECIATION   CONSTRUCTED   ACQUIRED    LIVES(2)
     ----    ------------         ----         ------------       --------       ------------   -----------   --------   -----------
<C>  <C>    <C>              <C>              <C>              <C>               <C>            <C>           <C>        <C>
 85    0           104,700          658,500        6,031,500         6,690,000        (34,500)     1985        10/7/97        40
 86    0             1,200          878,000        7,902,600         8,780,600        (41,100)     1990        10/7/97        40
 87    0             2,600        2,046,300       18,419,400        20,465,700        (95,900)     1985        10/7/97        40
 88    0             1,400        8,257,000       74,314,200        82,571,200       (386,900)     1980       10/17/97        40
 89    0             1,200          717,600        6,458,800         7,176,400        (20,200)     1982       11/21/97        40
 90    0             1,400        1,012,400        9,113,000        10,125,400        (28,500)     1984       11/21/97        40
 91    0                 0        1,105,300        9,948,500        11,053,800        (31,000)     1985       11/24/97        40
 92    0                 0        2,411,600       21,704,200        24,115,800        (67,700)     1986       11/24/97        40
 93    0           587,900        8,261,000       47,937,200        56,198,200       (149,800)     1987       11/24/97        40
 94    0            32,300        9,679,000       87,143,700        96,822,700       (275,200)     1991       11/25/97        40
 95    0               700        5,381,200       48,615,900        53,997,100        (49,900)     1980       12/17/97        40
 96    0           305,700        9,895,500       89,835,800        99,731,300       (103,700)     1980       12/17/97        40
 97    0           444,300                0       17,070,100        17,070,100        (18,900)     1975       12/17/97        40
 98    0            20,400       21,352,000      193,470,000       214,822,000       (198,600)     1983       12/17/97        40
 99    0               300        1,762,500       16,016,700        17,779,200        (16,300)     1986       12/17/97        40
100    0           392,900                0       56,592,600        56,592,600        (60,900)     1983       12/17/97        40
101    0             3,200                0       79,899,200        79,899,200        (82,100)     1986       12/17/97        40
102    0           111,800       10,917,900       98,997,600       109,915,500       (101,600)     1991       12/17/97        40
103    0                 0       10,067,600       90,608,800       100,676,400        (94,400)     1980       12/19/97        40
104    0                 0                0      149,841,200       149,841,200       (156,100)     1970       12/19/97        40
105    0                 0       16,841,300      151,573,900       168,415,200       (157,900)     1971       12/19/97        40
106    0                 0        9,810,600       88,295,900        98,106,500        (92,000)     1980       12/19/97        40
107    0                 0        6,715,400       60,438,200        67,153,600        (63,000)     1982       12/19/97        40
108    0                 0       12,566,800                0        12,566,800              0                 12/19/97
109    0                 0       14,131,300      127,182,200       141,313,500       (132,500)     1988       12/19/97        40
110    0                 0        6,960,700       62,646,400        69,607,100        (65,300)     1974       12/19/97        40
111    0                 0        4,893,900       44,045,200        48,939,100        (45,900)     1977       12/19/97        40
112    0                 0       24,000,000                0        24,000,000              0                 12/19/97
113    0                 0        5,017,400       45,157,000        50,174,400        (47,000)     1988       12/19/97        40
 
114    0                 0       11,723,300      105,509,500       117,232,800       (109,900)     1985       12/19/97        40
115    0                 0       34,607,900      311,470,600       346,078,500       (324,500)     1966       12/19/97        40
116    0                 0        4,834,200       43,507,900        48,342,100        (45,300)     1984       12/19/97        40
117    0                 0       18,942,300      170,480,400       189,422,700       (177,600)     1969       12/19/97        40
118    0                 0        9,600,000                0         9,600,000              0                 12/19/97
119    0                 0        8,837,800       79,540,200        88,378,000        (82,900)  1988/1990     12/19/97        40
120    0                 0       12,771,400      114,941,900       127,713,300       (119,700)     1929       12/19/97        40
121    0                 0        5,957,800       53,620,400        59,578,200        (55,900)     1996       12/19/97        40
122    0        22,447,300        9,384,600       22,447,300        31,831,900              0                 12/19/97
123    0                 0        3,936,500       35,429,100        39,365,600        (36,900)     1983       12/19/97        40
124    0                 0        3,324,000                0         3,324,000              0                 12/19/97
125    0                 0        5,216,400       46,947,600        52,164,000        (48,900)     1981       12/19/97        40
126    0                 0        8,700,000                0         8,700,000              0                 12/19/97
127    0                 0        6,952,100       62,568,900        69,521,000        (65,200)     1981       12/19/97        40
128    0                 0        4,792,500       43,132,300        47,924,800        (44,900)     1972       12/19/97        40
</TABLE>
 
                                      F-65
<PAGE>   192
   
<TABLE>
<CAPTION>
 
                                                                                           INITIAL COST TO COMPANY
                                                                                       -------------------------------
                                                                                                          BUILDINGS
                                                                   DECEMBER 31, 1997                         AND
              DESCRIPTION                          LOCATION          ENCUMBRANCES           LAND         IMPROVEMENTS
              -----------                          --------        -----------------        ----         ------------
<C>  <S>                             <C>     <C>                   <C>                 <C>              <C>
129  Media Center..................   (11)   Burbank, CA                         0         20,000,000                0
130  New England Executive Park....          Burlington, MA                      0         13,106,000      117,953,900
131  Northridge I..................          Herndon, VA                14,558,000          3,224,900       29,024,400
132  One Canal Park................          Cambridge, MA                       0          2,006,000       18,054,000
133  Perimeter Center..............          Atlanta, GA               217,871,000         68,306,100      429,131,900
134  Presidents Plaza..............          Chicago, IL                         0         13,435,500      120,919,200
135  Riverside Center..............   (11)   Newton, MA                          0         30,000,000                0
136  Riverview I and II............          Cambridge, MA                       0          5,937,600       53,438,100
137  Russia Wharf..................          Boston, MA                          0          5,918,200       53,263,400
138  Shoreline Technology Park.....          Mountain View, CA                   0         30,194,800      178,471,200
139  South Station.................          Boston, MA                          0                  0       31,073,800
140  Sunnyvale Business Center.....          Sunnyvale, CA                       0          4,890,000       44,010,000
141  Ten Canal Park................          Cambridge, MA                       0          2,383,100       21,447,900
142  Tri-State International.......          Lincolnshire, IL                    0         10,925,300       98,327,300
143  Wellesley Office Park.........          Wellesley, MA              55,256,000         16,492,700      148,434,200
144  Westbrook Corporate Center....          Westchester, IL           111,497,800         24,896,800      224,071,100
145  Westwood Business Center......          Wellesley, MA                       0          2,719,600       24,476,300
                                                                    --------------     --------------   --------------
     Subtotal Office Properties....                                 $1,990,406,900     $1,162,720,800   $9,493,786,000
                                                                    --------------     --------------   --------------
     Parking Facilities:
  1  North Loop Transportation        
     Center........................   (3)    Chicago, IL            $   32,864,000(12) $    3,784,600   $   34,061,500
  2  Theatre District Garage.......   (3)    Chicago, IL                         0          3,372,300       30,350,700
  3  Capitol Commons Garage........  (3)(5)  Indianapolis, IN            4,400,700                  0       14,449,700
  4  Boston Harbor Garage..........   (3)    Boston, MA                 35,345,500          6,087,000       54,783,300
  5  Milwaukee Center..............   (3)    Milwaukee, WI                       0                  0        7,798,500
  6  1111 Sansom Street Garage.....   (3)    Philadelphia, PA                    0          1,476,500                0
  7  15th & Sansom Streets            
     Garage........................   (3)    Philadelphia, PA                    0            726,400        6,537,600
  8  1602-34 Chancellor Garage.....   (3)    Philadelphia, PA                    0            735,900        6,622,700
  9  1616 Sansom Street Garage.....   (3)    Philadelphia, PA                    0            432,900        3,896,200
 10  Juniper/Locust Streets           
     Garage........................   (3)    Philadelphia, PA                    0            574,400        5,169,900
 11  Adams-Wabash Garage...........          Chicago, IL                         0          2,525,000       22,725,300
 12  601 Tchoupitoulas Garage......          New Orleans, LA                     0(8)       1,180,000       10,619,800
 13  Stanwix Garage................          Pittsburgh, PA                      0          1,794,900       16,154,700
                                                                    --------------     --------------   --------------
     Subtotal Parking Facilities...                                     72,610,200         22,689,900      213,169,900
                                                                    --------------     --------------   --------------
     Management Business...........   (13)                                       0                  0                0
                                                                    --------------     --------------   --------------
     Investment in Real Estate.....                                 $2,063,017,100     $1,185,410,700   $9,706,955,900
                                                                    ==============     ==============   ==============
 
<CAPTION>
       COSTS CAPITALIZED
         SUBSEQUENT TO        GROSS AMOUNT CARRIED AT CLOSE
          ACQUISITION              OF PERIOD 12/31/97
     ---------------------   -------------------------------
              BUILDINGS                         BUILDINGS
                 AND                               AND                           ACCUMULATED       DATE         DATE     DEPRECIABLE
     LAND    IMPROVEMENTS         LAND         IMPROVEMENTS       TOTAL(1)       DEPRECIATION   CONSTRUCTED   ACQUIRED    LIVES(2)
     ----    ------------         ----         ------------       --------       ------------   -----------   --------   -----------
<S>  <C>    <C>              <C>              <C>              <C>               <C>            <C>           <C>        <C>
129    0                 0       20,000,000                0        20,000,000              0                 12/19/97
130    0                 0       13,106,000      117,953,900       131,059,900       (122,900)     1970       12/19/97        40
131    0                 0        3,224,900       29,024,400        32,249,300        (30,200)     1988       12/19/97        40
132    0                 0        2,006,000       18,054,000        20,060,000        (18,800)     1987       12/19/97        40
133    0                 0       68,306,100      429,131,900       497,438,000       (822,800)  1972/1998     12/19/97        40
134    0                 0       13,435,500      120,919,200       134,354,700       (126,000)     1980       12/19/97        40
135    0                 0       30,000,000                0        30,000,000              0                 12/19/97
136    0                 0        5,937,600       53,438,100        59,375,700        (55,700)     1985       12/19/97        40
137    0                 0        5,918,200       53,263,400        59,181,600        (55,500)     1978       12/19/97        40
138    0                 0       30,194,800      178,471,200       208,666,000       (185,900)     1985       12/19/97        40
139    0                 0                0       31,073,800        31,073,800        (32,400)     1988       12/19/97        40
140    0                 0        4,890,000       44,010,000        48,900,000        (45,800)     1990       12/19/97        40
141    0                 0        2,383,100       21,447,900        23,831,000        (22,300)     1987       12/19/97        40
142    0                 0       10,925,300       98,327,300       109,252,600       (102,400)     1986       12/19/97        40
143    0                 0       16,492,700      148,434,200       164,926,900       (154,600)     1963       12/19/97        40
144    0                 0       24,896,800      224,071,100       248,967,900       (233,400)     1985       12/19/97        40
145    0                 0        2,719,600       24,476,300        27,195,900        (25,500)     1985       12/19/97        40
      --    --------------   --------------   --------------   ---------------   ------------
      $0    $  144,072,900   $1,162,720,800   $9,637,858,900   $10,800,579,700   $(62,295,000)
      --    --------------   --------------   --------------   ---------------   ------------
  1   $0    $      450,000   $    3,784,600   $   34,511,500   $    38,296,100   $   (396,500)     1985         6/9/95        40
  2    0            56,800        3,372,300       30,407,500        33,779,800       (348,200)     1987         6/9/95        40
  3    0             9,100                0       14,458,800        14,458,800       (165,200)     1987        6/29/95        40
  4    0           277,700        6,087,000       55,061,000        61,148,000       (635,000)     1972       12/10/96        40
  5    0           219,900                0        8,018,400         8,018,400        (98,700)     1988       12/18/96        40
  6    0             6,800        1,476,500            6,800         1,483,300              0      N/A        12/27/96       N/A
  7    0            11,300          726,400        6,548,900         7,275,300        (73,400)  1950/1954     12/27/96        40
  8    0             9,200          735,900        6,631,900         7,367,800        (73,800)  1945/1955     12/27/96        40
  9    0                 0          432,900        3,896,200         4,329,100        (43,200)     1950       12/27/96        40
 10    0            11,000          574,400        5,180,900         5,755,300        (58,300)  1949/1952     12/27/96        40
 11    0            76,200        2,525,000       22,801,500        25,326,500       (212,900)     1990        8/11/97        40
 12    0                 0        1,180,000       10,619,800        11,799,800        (77,200)     1982         9/3/97        40
 13    0                 0        1,794,900       16,154,700        17,949,600        (50,400)     1969       11/25/97        40
      --    --------------   --------------   --------------   ---------------   ------------
       0         1,128,000       22,689,900      214,297,900       236,987,800     (2,232,800)
      --    --------------   --------------   --------------   ---------------   ------------
       0         3,446,600                0        3,446,600         3,446,600       (167,300)
      --    --------------   --------------   --------------   ---------------   ------------
      $0    $  148,647,500   $1,185,410,700   $9,855,603,400   $11,041,014,100   $(64,695,100)
      ==    ==============   ==============   ==============   ===============   ============
</TABLE>
    
 
- -------------------------
 (1) The aggregate cost for Federal Income Tax purposes as of December 31, 1997
     was approximately $7.5 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) The date acquired represents the date these Properties were acquired by
     Equity Office Predecessors. The acquisition of the Properties, or the
     interest therein, by the Company from Equity Office Predecessors in
     connection with the Consolidation on July 11, 1997, was accounted for using
     the purchase method in accordance with Accounting Principles Board Opinion
     No. 16. Accordingly, the assets were recorded by the Company at their fair
     values.
 
                                      F-66
<PAGE>   193
 
 (4) This Property contains 106 residential units.
 
 (5) These loans are subject to cross default and collateralization provisions.
 
 (6) This building underwent a major renovation to re-tenant the entire
     Property. The building is currently in a lease-up period and is expected to
     be fully occupied in 1998. During the renovation period, operating costs,
     real estate taxes, and interest incurred will be capitalized. As of
     December 31, 1997, approximately $21.4 million of operating costs and
     interest have been capitalized.
 
 (7) This Property contains 161 residential units.
 
 (8) These loans are subject to cross default and collateralization provisions.
 
 (9) The Prudential Portfolio consists of six Office Buildings located in
     Philadelphia, PA; Dallas, TX; and Houston, TX. These Office Buildings were
     constructed between 1969 and 1984.
 
(10) These loans are subject to cross default and collateralization provisions.
 
(11) These properties are in various development stages. During the development
     period all operating costs, including real estate taxes together with
     interest incurred during the development stages will be capitalized.
 
(12) The encumbrance on the North Loop Transportation Center is also secured by
     a first lien on the Theatre District Garage.
 
(13) This asset consists of furniture, fixtures, and equipment owned by the
     Management Business.
(14) Summary of activity of investment in real estate and accumulated
     depreciation is as follows:
 
     The changes in investment in real estate for the period from July 11, 1997
     to December 31, 1997, the period from January 1, 1997 to July 10, 1997, and
     for the years ended December 31, 1996 and 1995 are as follows:
 
<TABLE>
<CAPTION>
                                                      FOR THE PERIOD      FOR THE PERIOD
                                                     JULY 11, 1997 TO    JANUARY 1, 1997
                                                     DECEMBER 31, 1997   TO JULY 10, 1997   DECEMBER 31, 1996   DECEMBER 31, 1995
                                                     -----------------   ----------------   -----------------   -----------------
    <S>                                              <C>                 <C>                <C>                 <C>
    Balance, beginning of period....................  $             0     $3,549,707,600     $2,571,851,300      $1,931,002,400
    Acquisitions....................................   10,941,428,100        531,968,000        860,995,000         583,485,200
    Improvements....................................       99,586,000         59,511,000        129,485,300          76,985,400
    Properties disposed of..........................                0        (67,193,400)        (9,633,600)                  0
    Write down for value impairment.................                0                  0                  0         (17,512,000)
    Write-off of fully depreciated assets which are
     no longer in service...........................                0                  0         (2,990,400)         (2,109,700)
                                                      ---------------     --------------     --------------      --------------
    Balance, end of period..........................  $11,041,014,100     $4,073,993,200     $3,549,707,600      $2,571,851,300
                                                      ===============     ==============     ==============      ==============
</TABLE>
 
   The changes in accumulated depreciation for the period from July 11, 1997 to
   December 31, 1997, the period from January 1, 1997 to July 10, 1997, and for
   the years ended December 31, 1996 and 1995 are as follows:
 
<TABLE>
<CAPTION>
                                                   FOR THE PERIOD       FOR THE PERIOD
                                                  JULY 11, 1997 TO     JANUARY 1, 1997
                                                  DECEMBER 31, 1997    TO JULY 10, 1997    DECEMBER 31, 1996    DECEMBER 31, 1995
                                                  -----------------    ----------------    -----------------    -----------------
    <S>                                           <C>                  <C>                 <C>                  <C>
    Balance, beginning of period................    $          0        $(257,893,300)       $(178,448,600)       $(115,842,500)
    Depreciation................................     (64,695,100)         (57,379,300)         (82,905,300)         (64,715,800)
    Properties disposed of......................               0            8,517,200              470,200                    0
    Write-off of fully depreciated assets which
     are no longer in service...................               0                    0            2,990,400            2,109,700
                                                    ------------        -------------        -------------        -------------
    Balance, end of period......................    $(64,695,100)       $(306,755,400)       $(257,893,300)       $(178,448,600)
                                                    ============        =============        =============        =============
</TABLE>
 
                                      F-67
<PAGE>   194
 
                         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) as described in Note 1 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 basis of accounting
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 a registration statement on Form S-4 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.
 
     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 1 for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
 
                                            ERNST & YOUNG LLP
 
Chicago, Illinois
March 28, 1997
 
                                      F-68
<PAGE>   195
 
                                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-69
<PAGE>   196
 
                                177 BROAD STREET
 
               NOTES TO STATEMENT OF REVENUE AND CERTAIN EXPENSES
 
1. BUSINESS
 
     The accompanying Statement of Revenue and Certain Expenses relate 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 registration statement, 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
 
     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 a registration statement on Form S-4 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, 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-70
<PAGE>   197
 
                         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 1 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 basis of accounting
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 a registration statement on Form S-4 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.
 
     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 1 for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
 
                                            ERNST & YOUNG LLP
 
Chicago, Illinois
April 16, 1997
 
                                      F-71
<PAGE>   198
 
                                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
  Garage and 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-72
<PAGE>   199
 
                                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 419,000 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 registration statement, from an
unrelated entity.
 
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 a registration statement on Form S-4 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.
 
                                      F-73
<PAGE>   200
 
                         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 Oakbrook Terrace Tower (the Property) as described in Note 1 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 basis of accounting
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 a registration statement on Form S-4 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.
 
     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 1 for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
 
                                                     ERNST & YOUNG LLP
 
Chicago, Illinois
May 30, 1997
 
                                      F-74
<PAGE>   201
 
                             OAKBROOK TERRACE TOWER
 
                   STATEMENTS OF REVENUE AND CERTAIN EXPENSES
 
<TABLE>
<CAPTION>
                                                               YEAR ENDED      THREE MONTHS
                                                              DECEMBER 31,    ENDED MARCH 31,
                                                                  1996             1997
                                                              ------------    ---------------
                                                                                (UNAUDITED)
                                                                      (IN THOUSANDS)
<S>                                                           <C>             <C>
REVENUE
  Base rents................................................    $11,409           $3,113
  Tenant reimbursements.....................................      5,282            1,366
  Garage and parking income.................................        148               37
  Other income..............................................        193               97
                                                                -------           ------
          Total revenue.....................................     17,032            4,613
                                                                -------           ------
EXPENSES
  Property operating & maintenance..........................      4,276            1,037
  Real estate taxes.........................................      1,259              353
  Management fees...........................................        338              116
  Insurance.................................................        111               17
                                                                -------           ------
          Total expenses....................................      5,984            1,523
                                                                -------           ------
Revenue in excess of certain expenses.......................    $11,048           $3,090
                                                                =======           ======
</TABLE>
 
                            See accompanying notes.
 
                                      F-75
<PAGE>   202
 
                             OAKBROOK TERRACE 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 Oakbrook Terrace Tower building, an office building with
approximately 773,000 rentable square feet, located in Oakbrook Terrace,
Illinois (the "Property"). The Property was acquired on April 15, 1997, by
Equity Office Predecessors, as defined elsewhere in this registration statement,
from an unrelated entity.
 
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 a registration statement on Form S-4 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 period. Actual results could differ from these
estimates.
 
   Unaudited Interim Statement
 
     In the opinion of management, the interim financial statement of revenue
and certain expenses for the three months ended March 31, 1997, 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
 
     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, 1996, the Property was managed by an
affiliated party to the seller. The management agreement provided for a fee of
2.5% of gross receipts, as defined.
 
                                      F-76
<PAGE>   203
 
                         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 One Maritime Plaza (the Property) as described in Note 1 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 basis of accounting
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 a registration statement on Form S-4 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.
 
     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 1 for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
 
                                            ERNST & YOUNG LLP
 
Chicago, Illinois
June 6, 1997
 
                                      F-77
<PAGE>   204
 
                               ONE MARITIME PLAZA
 
                   STATEMENTS OF REVENUE AND CERTAIN EXPENSES
 
<TABLE>
<CAPTION>
                                                                                    THREE MONTHS
                                                                 YEAR ENDED            ENDED
                                                              DECEMBER 31, 1996    MARCH 31, 1997
                                                              -----------------    --------------
                                                                                    (UNAUDITED)
                                                                        (IN THOUSANDS)
<S>                                                           <C>                  <C>
REVENUE
  Base rents................................................       $13,410             $3,382
  Tenant reimbursements.....................................           208                125
  Interest income...........................................           249                 65
  Other income..............................................           428                125
                                                                   -------             ------
          Total revenue.....................................        14,295              3,697
                                                                   -------             ------
EXPENSES
Property operating & maintenance............................         4,326                887
  Real estate taxes.........................................           668                250
  Management fees...........................................           585                146
  Insurance.................................................           447                119
                                                                   -------             ------
          Total expenses....................................         6,026              1,402
                                                                   -------             ------
Revenue in excess of certain expenses.......................       $ 8,269             $2,295
                                                                   =======             ======
</TABLE>
 
                            See accompanying notes.
 
                                      F-78
<PAGE>   205
 
                               ONE MARITIME PLAZA
 
              NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
 
1. BUSINESS
 
     The accompanying Statements of Revenue and Certain Expenses relate to the
operations of the One Maritime Plaza building, an office building with
approximately 524,000 rentable square feet, located in San Francisco, California
(the "Property"). The Property was acquired on April 24, 1997, by Equity Office
Predecessors, as defined elsewhere in this registration statement, from an
unrelated entity.
 
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 a registration statement on Form S-4 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 period. Actual results could differ from these
estimates.
 
   Unaudited Interim Statement
 
     In the opinion of management, the interim financial statement of revenue
and certain expenses for the three months ended March 31, 1997, 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-79
<PAGE>   206
 
                         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 201 Mission Street (the Property) as described in Note 1 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 basis of accounting
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 a registration statement on Form S-4 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.
 
     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 1 for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
 
                                            ERNST & YOUNG LLP
 
Chicago, Illinois
April 30, 1997
 
                                      F-80
<PAGE>   207
 
                               201 MISSION STREET
 
                   STATEMENTS OF REVENUE AND CERTAIN EXPENSES
 
<TABLE>
<CAPTION>
                                                                 YEAR ENDED        THREE MONTHS
                                                                DECEMBER 31,      ENDED MARCH 31,
                                                                    1996               1997
                                                              -----------------   ---------------
                                                                                    (UNAUDITED)
                                                                        (IN THOUSANDS)
<S>                                                           <C>                 <C>
REVENUE
  Base rents................................................       $7,423             $2,166
  Tenant reimbursements.....................................           55                  9
  Garage and parking income.................................          366                 60
  Other income..............................................           39                 11
                                                                   ------             ------
          Total revenue.....................................        7,883              2,246
                                                                   ------             ------
EXPENSES
  Property operating & maintenance..........................        3,369                969
  Real estate taxes.........................................          959                264
  Management fees...........................................          106                 27
  Insurance.................................................          569                196
                                                                   ------             ------
          Total expenses....................................        5,003              1,456
                                                                   ------             ------
Revenue in excess of certain expenses.......................       $2,880             $  790
                                                                   ======             ======
</TABLE>
 
                            See accompanying notes.
 
                                      F-81
<PAGE>   208
 
                               201 MISSION STREET
 
              NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
 
1. BUSINESS
 
     The accompanying Statements of Revenue and Certain Expenses relate to the
operations of the 201 Mission Street building, an office building with
approximately 483,000 rentable square feet, located in San Francisco, California
(the "Property"). The Property was acquired on April 30, 1997, by Equity Office
Predecessors, as defined elsewhere in this registration statement, from an
unrelated entity.
 
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 a registration statement on Form S-4 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 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.
 
   Unaudited Interim Statement
 
     In the opinion of management, the interim financial statement of revenue
and certain expenses for the three months ended March 31, 1997, 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-82
<PAGE>   209
 
                         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 30 N. LaSalle (the Property) as described in Note 1 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 basis of accounting
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 a registration statement on Form S-4 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.
 
     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 1 for the year ended December 31,
1996, in conformity with generally accepted accounting principles.
 
                                            ERNST & YOUNG LLP
 
Chicago, Illinois
June 13, 1997
 
                                      F-83
<PAGE>   210
 
                                 30 N. LASALLE
 
                   STATEMENTS OF REVENUE AND CERTAIN EXPENSES
 
<TABLE>
<CAPTION>
                                                                              THREE MONTHS
                                                               YEAR ENDED        ENDED
                                                              DECEMBER 31,     MARCH 31,
                                                                  1996            1997
                                                              ------------    ------------
                                                                     (IN THOUSANDS)
<S>                                                           <C>             <C>
REVENUE
  Base rents................................................    $ 9,317          $1,870
  Tenant reimbursements.....................................      9,164           2,194
  Other income..............................................        237              55
                                                                -------          ------
          Total revenue.....................................     18,718           4,119
                                                                -------          ------
EXPENSES
  Property operating & maintenance..........................      4,336           1,047
  Real estate taxes.........................................      5,155           1,327
  Management fees...........................................        374              79
  Insurance.................................................        160              39
  Ground rent...............................................        165              42
                                                                -------          ------
          Total expenses....................................     10,190           2,534
                                                                -------          ------
Revenue in excess of certain expenses.......................    $ 8,528          $1,585
                                                                =======          ======
</TABLE>
 
                            See accompanying notes.
 
                                      F-84
<PAGE>   211
 
                                 30 N. LASALLE
 
              NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
 
1. BUSINESS
 
     The accompanying Statements of Revenue and Certain Expenses relate to the
operations of the 30 N. LaSalle building, an office building with approximately
926,000 rentable square feet, located in Chicago, Illinois (the "Property"). The
Property was acquired on June 13, 1997, by Equity Office Predecessors, as
defined elsewhere in this registration statement, from an unrelated entity.
 
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 a registration statement on Form S-4 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 period. Actual results could differ from these
estimates.
 
   Unaudited Interim Statement
 
     In the opinion of management, the interim financial statement of revenue
and certain expenses for the three months ended March 31, 1997, 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.
 
4. RELATED PARTY TRANSACTIONS
 
     During the year ended December 31, 1996, the Property was managed by an
affiliated party to the seller. The management agreement provided for a fee of
2% of gross receipts, as defined.
 
5. GROUND LEASE
 
     The Property is subject to a ground lease on a portion of the land under
the building which expires November 30, 2067. The ground lease provides for
escalation payments in intervals of approximately 10 years, with the next
escalation scheduled for January 1, 2000. Through 1999, the minimum annual
rental payments required under the ground lease are $165,000.
 
                                      F-85
<PAGE>   212
 
                         REPORT OF INDEPENDENT AUDITORS
 
The Board of Trustees of
Equity Office Properties Trust
 
     We have audited the accompanying combined Statement of Revenue and Certain
Expenses of the Columbus America Properties (the Properties) as described in
Note 2 for the year ended December 31, 1996. The combined Statement of Revenue
and Certain Expenses is the responsibility of the Properties' management. Our
responsibility is to express an opinion on the combined Statement of Revenue and
Certain Expenses based on our audit.
 
     We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 basis of accounting
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 combined Statement of Revenue and Certain Expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, for inclusion in a registration statement on
Form S-4 of Equity Office Properties Trust as described in Note 1, and is not
intended to be a complete presentation of the Properties' revenue and expenses.
 
     In our opinion, the combined Statement of Revenue and Certain Expenses
referred to above presents fairly, in all material respects, the combined
revenue and certain expenses of the Properties described in Note 2 for the year
ended December 31, 1996, in conformity with generally accepted accounting
principles.
 
                                            ERNST & YOUNG LLP
 
Chicago, Illinois
September 3, 1997
 
                                      F-86
<PAGE>   213
 
                          COLUMBUS AMERICA PROPERTIES
 
              COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
                             (AMOUNTS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                               YEAR ENDED     JANUARY 1, 1997
                                                              DECEMBER 31,        THROUGH
                                                                  1996         JULY 31, 1997
                                                              ------------    ---------------
                                                                                (UNAUDITED)
<S>                                                           <C>             <C>
REVENUE
  Base rents................................................    $15,620           $ 8,814
  Tenant reimbursements.....................................        654               176
  Parking income............................................      2,356             1,460
  Other income..............................................        165               111
                                                                -------           -------
          Total revenue.....................................     18,795            10,561
                                                                -------           -------
EXPENSES
  Property operating and maintenance........................      4,888             2,770
  Real estate taxes.........................................      1,318               769
  Management fee............................................        786               403
  Insurance.................................................        191               127
                                                                -------           -------
          Total expenses....................................      7,183             4,069
                                                                -------           -------
Revenue in excess of certain expenses.......................    $11,612           $ 6,492
                                                                =======           =======
</TABLE>
 
                            See accompanying notes.
 
                                      F-87
<PAGE>   214
 
                          COLUMBUS AMERICA PROPERTIES
 
          NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
   Basis of Presentation
 
     The accompanying combined 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 a registration statement on
Form S-4 of Equity Office Properties Trust. The accompanying financial
statements are not representative of the actual operations of the Properties, as
defined in Note 2, 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 Properties, 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 combined 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 the
combined revenue and expenses during the reporting periods. Actual results could
differ from these estimates.
 
   Unaudited Interim Statement
 
     In the opinion of management, the interim 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.
 
2. DESCRIPTION OF PROPERTIES
 
     The accompanying combined Statements of Revenue and Certain Expenses relate
to the combined operations of the Columbus America Properties (the
"Properties"), which are all located in New Orleans, Louisiana. The Properties
have been presented on a combined basis because the Properties are under common
ownership and management. The Properties listed below were acquired on September
3, 1997 for $140 million by Equity Office Properties Trust from an unrelated
party.
 
<TABLE>
<CAPTION>
   PROPERTY NAME                                    TYPE OF FACILITY    RENTABLE SQUARE FEET
   -------------                                    ----------------    --------------------
<S>                                                 <C>                 <C>
LL & E Tower......................................  office building           545,157
Texaco Center.....................................  office building           619,714
601 Tchoupitoulas.................................  parking facility              759(A)
</TABLE>
 
- ---------------
 
(A) Represents number of parking spaces.
 
     The accompanying combined Statements of Revenue and Certain Expenses
include the operations of the 601 Tchoupitoulas parking facility.
 
3. RENTALS
 
     LL&E Tower and Texaco Center have 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-88
<PAGE>   215
                          COLUMBUS AMERICA PROPERTIES
 
                    NOTES TO COMBINED STATEMENTS OF REVENUE
                      AND CERTAIN EXPENSES -- (CONTINUED)
 
4. RELATED PARTY TRANSACTIONS
 
     The office buildings were managed by an affiliated party to the seller. The
management agreements provided for a fee based on a percentage of gross
receipts, as defined by each of the office buildings' individual management
agreements, excluding any receipts from the parking garage.
 
     During the year ended December 31, 1996, the parking facility was also
managed by an affiliated party to the seller. The management agreement provided
for a flat fee of $12,500 per month.
 
     During the year ended December 31, 1996, LL&E Tower leased space to parties
affiliated with the seller. Rental income from those leases was approximately
$240,000 in 1996.
 
                                      F-89
<PAGE>   216
 
                         REPORT OF INDEPENDENT AUDITORS
 
The Board of Trustees of
Equity Office Properties Trust
 
     We have audited the accompanying combined Statement of Revenue and Certain
Expenses of the Prudential Properties (the Properties) as described in Note 2
for the year ended December 31, 1996. The combined Statement of Revenue and
Certain Expenses is the responsibility of the Properties' management. Our
responsibility is to express an opinion on the combined Statement of Revenue and
Certain Expenses based on our audit.
 
     We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 basis of accounting
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 combined Statement of Revenue and Certain Expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in a registration statement on
Form S-4 of Equity Office Properties Trust as described in Note 1, and is not
intended to be a complete presentation of the Properties' combined revenue and
expenses.
 
     In our opinion, the combined Statement of Revenue and Certain Expenses
referred to above presents fairly, in all material respects, the combined
revenue and certain expenses of the Properties described in Note 2 for the year
ended December 31, 1996, in conformity with generally accepted accounting
principles.
 
                                            ERNST & YOUNG LLP
 
Chicago, Illinois
September 3, 1997
 
                                      F-90
<PAGE>   217
 
                             PRUDENTIAL PROPERTIES
 
              COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
                             (AMOUNTS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                              JANUARY 1, 1997
                                                               YEAR ENDED         THROUGH
                                                              DECEMBER 31,      AUGUST 31,
                                                                  1996             1997
                                                              ------------    ---------------
                                                                                (UNAUDITED)
<S>                                                           <C>             <C>
REVENUE
  Base rents................................................    $29,743           $21,626
  Tenant reimbursements.....................................      2,367             1,645
  Parking income............................................      2,013             1,561
  Other income..............................................        529               778
                                                                -------           -------
          Total revenue.....................................     34,652            25,610
                                                                -------           -------
EXPENSES
  Property operating and maintenance........................     13,239             8,687
  Real estate taxes.........................................      4,414             3,112
  Management fees...........................................        719               514
  Insurance.................................................        446               361
                                                                -------           -------
  Total expenses............................................     18,818            12,674
                                                                -------           -------
Revenue in excess of certain expenses.......................    $15,834           $12,936
                                                                =======           =======
</TABLE>
 
                            See accompanying notes.
 
                                      F-91
<PAGE>   218
 
                             PRUDENTIAL PROPERTIES
 
          NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
   Basis of Presentation
 
     The accompanying combined 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 a registration statement on
Form S-4 of Equity Office Properties Trust. The accompanying financial
statements are not representative of the actual operations of the Properties, as
defined in Note 2, 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 Properties, 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 combined 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 the
combined revenue and expenses during the reporting periods. Actual results could
differ from these estimates.
 
   Unaudited Interim Statement
 
     In the opinion of management, the interim 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.
 
2. DESCRIPTION OF PROPERTIES
 
     The accompanying combined Statements of Revenue and Certain Expenses relate
to the combined operations of the Prudential Properties (the "Properties").
Equity Office Properties Trust expects to acquire the Properties for
approximately $289 million from an unrelated party. The Properties have been
presented on a combined basis because all of the Properties are under common
control and management. The following Properties are included in the combined
financial statements:
 
<TABLE>
<CAPTION>
                                                                            APPROXIMATE
                                                                              RENTABLE
         PROPERTY NAME                                      LOCATION       SQUARE FOOTAGE
         -------------                                  ----------------   --------------
<S>                                                     <C>                <C>
Brookhollow Central I, II and III.....................  Houston, TX            800,688
Destec Tower..........................................  Houston, TX            574,216
8080 Central..........................................  Dallas, TX             283,707
1700 Market...........................................  Philadelphia, PA       825,547
                                                                             ---------
                                                                             2,484,158
                                                                             =========
</TABLE>
 
3. RENTALS
 
     The Properties have 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
 
     The Properties were managed by an affiliated party to the seller. The
management agreements provided for fees of 1.5% to 3.0% of gross receipts, as
defined.
 
     Insurance premiums are paid to and coverage is provided by an affiliated
party to the seller.
 
                                      F-92
<PAGE>   219
 
                         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 550 South Hope Street (the Property) as described in Note 2 for the year
ended March 31, 1997. The Statement of Revenue and Certain Expenses are 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 basis of accounting
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 a registration statement on Form S-4 of
Equity Office Properties Trust as described in Note 1, 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 March 31, 1997,
in conformity with generally accepted accounting principles.
 
                                            ERNST & YOUNG LLP
 
Chicago, Illinois
September 24, 1997
 
                                      F-93
<PAGE>   220
 
                             550 SOUTH HOPE STREET
 
                   STATEMENTS OF REVENUE AND CERTAIN EXPENSES
                             (AMOUNTS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                              YEAR ENDED    APRIL 1, 1997
                                                              MARCH 31,    THROUGH JULY 31,
                                                                 1997            1997
                                                              ----------   ----------------
                                                                             (UNAUDITED)
<S>                                                           <C>          <C>
REVENUE
  Base rents................................................   $ 7,602          $2,972
  Tenant reimbursements.....................................     3,840           1,398
  Parking income............................................     1,273             423
  Other income..............................................        19               7
                                                               -------          ------
          Total revenue.....................................    12,734           4,800
                                                               =======          ======
EXPENSES
  Property operating and maintenance........................     3,992           1,302
  Real estate taxes.........................................       801             251
  Management fee............................................       140              58
  Insurance.................................................       605             152
                                                               -------          ------
          Total expenses....................................     5,538           1,763
                                                               -------          ------
Revenue in excess of certain expenses.......................   $ 7,196          $3,037
                                                               =======          ======
</TABLE>
 
                            See accompanying notes.
 
                                      F-94
<PAGE>   221
 
                             550 SOUTH HOPE STREET
 
              NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
 
1. 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 a registration statement on Form S-4 of
Equity Office Properties Trust. The accompanying statements are not
representative of the actual operations of the Property, as defined in Note 2,
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 the revenue
and expenses during the reporting periods. Actual results could differ from
these estimates.
 
   Unaudited Interim Statement
 
     In the opinion of management, the interim 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.
 
2. DESCRIPTION OF PROPERTY
 
     The accompanying Statements of Revenue and Certain Expenses relate to the
operations of 550 South Hope Street, an office building with approximately
566,434 rentable square feet, located in Los Angeles, California (the
"Property"). It is anticipated that Equity Office Properties Trust will acquire
the Property for $99.5 million from an unrelated party.
 
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-95
<PAGE>   222
 
                         REPORT OF INDEPENDENT AUDITORS
 
The Board of Trustees of
Equity Office Properties Trust
 
     We have audited the accompanying combined Statement of Revenue and Certain
Expenses of the Acorn Properties (the Properties) as described in Note 2 for the
year ended December 31, 1996. The combined Statement of Revenue and Certain
Expenses is the responsibility of the Properties' management. Our responsibility
is to express an opinion on the combined Statement of Revenue and Certain
Expenses based on our audit.
 
     We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 basis of accounting
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 combined Statement of Revenue and Certain Expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in a registration statement on
Form S-4 of Equity Office Properties Trust as described in Note 1, and is not
intended to be a complete presentation of the Properties' combined revenue and
expenses.
 
     In our opinion, the combined Statement of Revenue and Certain Expenses
referred to above presents fairly, in all material respects, the combined
revenue and certain expenses of the Properties described in Note 2 for the year
ended December 31, 1996, in conformity with generally accepted accounting
principles.
 
                                            ERNST & YOUNG LLP
 
Chicago, Illinois
September 9, 1997
 
                                      F-96
<PAGE>   223
 
                                ACORN PROPERTIES
 
              COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
                             (AMOUNTS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                               YEAR ENDED     JANUARY 1, 1997
                                                              DECEMBER 31,    THROUGH JULY 31,
                                                                  1996              1997
                                                              ------------    ----------------
                                                                                (UNAUDITED)
<S>                                                           <C>             <C>
REVENUE
  Base rents................................................    $16,999           $11,592
  Tenant reimbursements.....................................      2,055             1,327
  Other income..............................................        202               181
                                                                -------           -------
          Total revenue.....................................     19,256            13,100
                                                                -------           -------
EXPENSES
  Property operating and maintenance........................      4,526             2,665
  Real estate taxes.........................................      1,378               853
  Management fees...........................................        649               428
  Insurance.................................................        160                92
                                                                -------           -------
          Total expenses....................................      6,713             4,038
                                                                -------           -------
Revenue in excess of certain expenses.......................    $12,543           $ 9,062
                                                                =======           =======
</TABLE>
 
                            See accompanying notes.
 
                                      F-97
<PAGE>   224
 
                                ACORN PROPERTIES
 
          NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Basis of Presentation
 
     The accompanying combined 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 a registration statement on
Form S-4 of Equity Office Properties Trust. The accompanying financial
statements are not representative of the actual operations of the Properties, as
defined in Note 2, 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 Properties, 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 combined 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 the
combined revenue and expenses during the reporting periods. Actual results could
differ from these estimates.
 
  Unaudited Interim Statement
 
     In the opinion of management, the interim 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.
 
2. DESCRIPTION OF PROPERTIES
 
     The accompanying combined Statements of Revenue and Certain Expenses relate
to the combined operations of the Acorn Properties (the "Properties"). Equity
Office Properties Trust expects to acquire an 89% managing general partnership
interest in each of the partnerships that hold title to the Properties for
approximately $144.7 million, including the assumption of debt. The Acorn
Properties have been presented on a combined basis because all of the Properties
are under common control and management. The following Properties are included
in the combined financial statements:
 
<TABLE>
<CAPTION>
                                                                           APPROXIMATE
                                                                             RENTABLE
          PROPERTY NAME                          LOCATION                 SQUARE FOOTAGE
          -------------              ---------------------------------    --------------
<S>                                  <C>                                  <C>
One Valley Square................    Plymouth Meeting, PA                      70,289
Two Valley Square................    Plymouth Meeting, PA                      70,622
Three Valley Square..............    Plymouth Meeting, PA                      84,605
Four Valley Square...............    Plymouth Meeting, PA                      49,757
Five Valley Square...............    Plymouth Meeting, PA                      18,564
Oak Hill Plaza...................    King of Prussia, PA                      164,360
Walnut Hill Plaza................    King of Prussia, PA                      149,716
One Devon Square.................    Wayne, PA                                 77,267
Two Devon Square.................    Wayne, PA                                 63,226
Three Devon Square (a)...........    Wayne, PA                                  6,000
Four Falls Corporate Center......    Conshohocken, PA                         254,355
                                                                            ---------
                                                                            1,008,761
                                                                            =========
</TABLE>
 
- ---------------
 
(a) In addition, this property includes land leased to a third party.
 
                                      F-98
<PAGE>   225
                                ACORN PROPERTIES
 
                    NOTES TO COMBINED STATEMENTS OF REVENUE
                      AND CERTAIN EXPENSES -- (CONTINUED)
 
3. RENTALS
 
     The Properties have 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
 
     The Properties were managed by an affiliated party to the sellers. The
management agreements provided for a fee of 4% of gross receipts, as defined.
 
     Janitorial services were provided by an affiliated party to the sellers.
During the year ended December 31, 1996, the Properties incurred approximately
$714,000 in janitorial fees.
 
                                      F-99
<PAGE>   226
 
                         REPORT OF INDEPENDENT AUDITORS
The Board of Trustees of
Equity Office Properties Trust
 
     We have audited the accompanying combined Statement of Revenue and Certain
Expenses of 10 & 30 South Wacker Drive (the Properties) as described in Note 2
for the year ended December 31, 1996. The combined Statement of Revenue and
Certain Expenses is the responsibility of the Properties' management. Our
responsibility is to express an opinion on the combined Statement of Revenue and
Certain Expenses based on our audit.
 
     We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 basis of accounting
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 combined Statement of Revenue and Certain Expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission, for inclusion in a registration statement on
Form S-4 of Equity Office Properties Trust as described in Note 1, and is not
intended to be a complete presentation of the Properties' revenue and expenses.
 
     In our opinion, the combined Statement of Revenue and Certain Expenses
referred to above presents fairly, in all material respects, the combined
revenue and certain expenses of the Properties described in Note 2 for the year
ended December 31, 1996, in conformity with generally accepted accounting
principles.
 
                                                     ERNST & YOUNG LLP
Chicago, Illinois
September 5, 1997
 
                                      F-100
<PAGE>   227
 
                           10 & 30 SOUTH WACKER DRIVE
 
              COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
                             (AMOUNTS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                               YEAR ENDED    JANUARY 1, 1997
                                                              DECEMBER 31,   THROUGH JULY 31,
                                                                  1996             1997
                                                              ------------   ----------------
                                                                               (UNAUDITED)
<S>                                                           <C>            <C>
REVENUE
  Base rents................................................    $38,739          $23,388
  Tenant reimbursements.....................................     23,518           14,604
  Parking income............................................      1,188              786
  Other income..............................................      2,232              643
                                                                -------          -------
          Total revenue.....................................     65,677           39,421
                                                                -------          -------
EXPENSES
  Property operating and maintenance........................      9,891            5,370
  Real estate taxes.........................................     16,600            9,683
  Management fee............................................      1,233              754
  Insurance.................................................        403              160
                                                                -------          -------
          Total expenses....................................     28,127           15,967
                                                                -------          -------
Revenue in excess of certain expenses.......................    $37,550          $23,454
                                                                =======          =======
</TABLE>
 
                            See accompanying notes.
 
                                      F-101
<PAGE>   228
 
                           10 & 30 SOUTH WACKER DRIVE
 
          NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
   Basis of Presentation
 
     The accompanying combined 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 a registration statement on
Form S-4 of Equity Office Properties Trust. The accompanying combined statements
are not representative of the actual operations of the Properties, as defined in
Note 2, 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 Properties, 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 combined 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 the
combined revenue and expenses during the reporting periods. Actual results could
differ from these estimates.
 
   Unaudited Interim Statement
 
     In the opinion of management, the interim 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.
 
2. DESCRIPTION OF PROPERTIES
 
     The accompanying combined Statements of Revenue and Certain Expenses relate
to the combined operations of 10 & 30 South Wacker Drive, two office buildings
with approximately 2,016,023 million rentable square feet, located in Chicago,
Illinois (the "Properties"). The Properties have been presented on a combined
basis because the Properties were under common ownership and management. It is
anticipated that the Properties will be acquired for $481 million by Equity
Office Properties Trust from an unrelated party.
 
                                      F-102
<PAGE>   229
 
                         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 One Lafayette Centre (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 basis of accounting
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 a registration statement on Form S-4 of
Equity Office Properties Trust as described in Note 1, 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
September 5, 1997
 
                                      F-103
<PAGE>   230
 
                              ONE LAFAYETTE CENTRE
 
                   STATEMENTS OF REVENUE AND CERTAIN EXPENSES
                             (AMOUNTS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                               YEAR ENDED     JANUARY 1, 1997
                                                              DECEMBER 31,    THROUGH JULY 31,
                                                                  1996              1997
                                                              ------------    ----------------
                                                                                (UNAUDITED)
<S>                                                           <C>             <C>
REVENUE
  Base rents................................................     $8,509            $5,409
  Tenant reimbursements.....................................        855               582
  Parking income............................................        446               260
  Other income..............................................        158                46
                                                                 ------            ------
          Total revenue.....................................      9,968             6,297
                                                                 ------            ------
EXPENSES
  Property operating and maintenance........................      2,238             1,360
  Real estate taxes.........................................      1,154               625
  Management fee............................................        300               186
  Insurance.................................................         57                34
                                                                 ------            ------
          Total expenses....................................      3,749             2,205
                                                                 ------            ------
Revenue in excess of certain expenses.......................     $6,219            $4,092
                                                                 ======            ======
</TABLE>
 
                            See accompanying notes.
 
                                      F-104
<PAGE>   231
 
                              ONE LAFAYETTE CENTRE
 
              NOTES TO STATEMENTS OF REVENUE AND CERTAIN EXPENSES
 
1. 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 a registration statement on Form S-4 of
Equity Office Properties Trust. The accompanying 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 the revenue
and expenses during the reporting periods. Actual results could differ from
these estimates.
 
   Unaudited Interim Statement
 
     In the opinion of management, the interim 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.
 
2. DESCRIPTION OF PROPERTY
 
     The accompanying Statements of Revenue and Certain Expenses relate to the
operations of One Lafayette Centre, an office building with approximately
315,000 rentable square feet, located in Washington, D.C. (the "Property"). It
is expected that the Property will be acquired for $81.7 million by Equity
Office Properties Trust from an unrelated party.
 
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-105
<PAGE>   232
 
                         REPORT OF INDEPENDENT AUDITORS
 
The Board of Trustees of
Equity Office Properties Trust
 
     We have audited the accompanying combined Statement of Revenue and Certain
Expenses of the PPM Properties (the Properties) as described in Note 2 for the
year ended December 31, 1996. The combined Statement of Revenue and Certain
Expenses is the responsibility of the Properties' management. Our responsibility
is to express an opinion on the combined Statement of Revenue and Certain
Expenses based on our audit.
 
     We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the 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 basis of accounting
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 combined Statement of Revenue and Certain Expenses was
prepared for the purpose of complying with the rules and regulations of the
Securities and Exchange Commission for inclusion in a registration statement on
Form S-4 of Equity Office Properties Trust as described in Note 1, and is not
intended to be a complete presentation of the Properties' combined revenue and
expenses.
 
     In our opinion, the combined Statement of Revenue and Certain Expenses
referred to above presents fairly, in all material respects, the combined
revenue and certain expenses of the Properties described in Note 2 for the year
ended December 31, 1996, in conformity with generally accepted accounting
principles.
 
                                            ERNST & YOUNG LLP
 
Chicago, Illinois
January 22, 1997
 
                                      F-106
<PAGE>   233
 
                                 PPM PROPERTIES
 
              COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
                             (AMOUNTS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                             JANUARY 1, 1997
                                                               YEAR ENDED        THROUGH
                                                              DECEMBER 31,     AUGUST 31,
                                                                  1996            1997
                                                              ------------   ---------------
                                                                               (UNAUDITED)
<S>                                                           <C>            <C>
REVENUE
  Base rents................................................    $ 9,784          $7,038
  Tenant reimbursements.....................................        344             262
  Parking income............................................        152             119
  Other income..............................................        144              56
                                                                -------          ------
          Total revenue.....................................     10,424           7,475
                                                                -------          ------
EXPENSES
  Property operating and maintenance........................      3,062           2,122
  Real estate taxes.........................................      1,170             824
  Management fees...........................................        228             168
  Insurance.................................................         92              76
                                                                -------          ------
          Total expenses....................................      4,552           3,190
                                                                -------          ------
Revenue in excess of certain expenses.......................    $ 5,872          $4,285
                                                                =======          ======
</TABLE>
 
                            See accompanying notes.
 
                                      F-107
<PAGE>   234
 
                                 PPM PROPERTIES
 
          NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
   Basis of Presentation
 
     The accompanying combined 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 a registration statement on
Form S-4 of Equity Office Properties Trust. The accompanying financial
statements are not representative of the actual operations of the Properties 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 Properties, 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 combined 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 the
combined revenue and expenses during the reporting periods. Actual results could
differ from these estimates.
 
   Unaudited Interim Statement
 
     In the opinion of management, the interim 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.
 
2. DESCRIPTION OF PROPERTIES
 
     The accompanying combined Statements of Revenue and Certain Expenses relate
to the combined operations of the PPM Properties which are to be acquired by
Equity Office Properties Trust for approximately $92 million from an unrelated
party. The PPM Properties have been presented on a combined basis because all of
the Properties are under common control and management. The following properties
are included in the combined financial statements:
 
<TABLE>
<CAPTION>
                                                               APPROXIMATE
                                                                 RENTABLE
  PROPERTY NAME                                               SQUARE FOOTAGE
  -------------                                               --------------
<S>                                                           <C>
Lakeside Square.............................................     392,500
1600 Duke Street............................................      68,800
Fair Oaks Plaza.............................................     177,900
                                                                 -------
                                                                 639,200
                                                                 =======
</TABLE>
 
3. RENTALS
 
     The Properties have 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
 
     The Properties were managed by an affiliated party to the seller. The
management agreements provided for fees of 2.25% of gross receipts, as defined.
 
                                      F-108
<PAGE>   235
 
                         REPORT OF INDEPENDENT AUDITORS
 
The Board of Trustees of
Equity Office Properties Trust
 
We have audited the accompanying combined Statement of Revenue and Certain
Expenses of the Wright Runstad Properties (the Properties) as described in Note
2 for the year ended September 30, 1996. The combined Statement of Revenue and
Certain Expenses is the responsibility of the Properties' management. Our
responsibility is to express an opinion on the combined Statement of Revenue and
Certain Expenses based on our audit.
 
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the 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 basis of accounting 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 combined Statement of Revenue and Certain Expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission, for inclusion in a Current Report on Form 8-K of Equity
Office Properties Trust as described in Note 1 and is not intended to be a
complete presentation of the Properties' combined revenue and expenses.
 
In our opinion, the combined Statement of Revenue and Certain Expenses referred
to above presents fairly, in all material respects, the combined revenue and
certain expenses of the Properties described in Note 2 for the year ended
September 30, 1996, in conformity with generally accepted accounting principles.
 
                                                               ERNST & YOUNG LLP
 
Chicago, Illinois
September 26, 1997
 
                                      F-109
<PAGE>   236
 
                           WRIGHT RUNSTAD PROPERTIES
 
              COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
                             (AMOUNTS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                   OCTOBER 1, 1996
                                                                  YEAR ENDED           THROUGH
                                                              SEPTEMBER 30, 1996   AUGUST 31, 1997
                                                              ------------------   ---------------
                                                                                     (UNAUDITED)
<S>                                                           <C>                  <C>
REVENUE
  Base rents................................................       $57,191             $54,796
  Tenant reimbursements.....................................         3,294               3,293
  Parking income............................................         5,838               5,780
  Other income..............................................         1,052                 446
                                                                   -------             -------
  Total revenue.............................................        67,375              64,315
                                                                   -------             -------
EXPENSES
  Property operating and maintenance........................        15,427              14,890
  Real estate taxes.........................................         4,881               4,616
  Management fee............................................         1,855               1,793
  Insurance.................................................           468                 427
  Ground rent and air rights................................         1,577               1,440
                                                                   -------             -------
  Total expenses............................................        24,208              23,166
                                                                   -------             -------
Revenue in excess of certain expenses.......................       $43,167             $41,149
                                                                   =======             =======
</TABLE>
 
                            See accompanying notes.
                                      F-110
<PAGE>   237
 
                           WRIGHT RUNSTAD PROPERTIES
 
          NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES
 
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Basis of Presentation
 
     The accompanying combined 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 a Current Report on Form 8-K
of Equity Office Properties Trust. The accompanying financial statements are not
representative of the actual operations of the Wright Runstad Properties (the
"Properties") 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 Properties, 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 combined 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 the
combined revenue and expenses during the reporting periods. Actual results could
differ from these estimates.
 
  Unaudited Interim Statement
 
     In the opinion of management, the interim 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.
 
2. DESCRIPTION OF PROPERTIES
 
     The accompanying combined Statements of Revenue and Certain Expenses relate
to the combined operations of the Properties which are to be acquired by Equity
Office Properties Trust for approximately $640 million from an unrelated party.
The Properties have been presented on a combined basis because all of the
Properties are under common ownership and management. The following office
properties are included in the combined financial statements:
 
<TABLE>
<CAPTION>
                                                                      APPROXIMATE
                                                                       RENTABLE
                                                                        SQUARE
                PROPERTY NAME                        LOCATION           FOOTAGE
                -------------                  --------------------   -----------
<S>                                            <C>                    <C>
1111 Third Avenue............................  Seattle, Washington       528,282
First Interstate Center......................  Seattle, Washington       915,883
Second & Seneca Building.....................  Seattle, Washington       480,272
Nordstrom Medical Tower......................  Seattle, Washington       101,431
One Bellevue Center..........................  Bellevue, Washington      344,715
Rainier Plaza................................  Bellevue, Washington      410,855
1001 Fifth Avenue............................  Portland, Oregon          368,018
Calais Office Center.........................  Anchorage, Alaska         190,599
                                                                       ---------
                                                                       3,340,055
                                                                       =========
</TABLE>
 
                                      F-111
<PAGE>   238
                           WRIGHT RUNSTAD PROPERTIES
 
  NOTES TO COMBINED STATEMENTS OF REVENUE AND CERTAIN EXPENSES -- (CONTINUED)
 
3. RENTALS
 
     The Properties have 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
 
     The Properties were managed by an affiliated party to the seller, except
for Nordstrom Medical Tower, which is managed by a third party. The management
agreements provided for a fee of 3.0% of gross receipts and reimbursements for
on-site personnel.
 
     The Partnership owning the Properties is a member of the J. Nordstrom
Medical Tower Condominium Association (the Association), which provides
administrative services relating to building operations of the Nordstrom Medical
Tower. The Association is managed by an affiliate. The Association pays all
operating expenses associated with the building and is reimbursed annually by
condominium unit owners, including Nordstrom Medical Tower. The Properties
incurred $510,000 under this agreement during 1996.
 
     The Properties lease each of their parking garages to an affiliate of the
seller in exchange for a percentage of the parking revenue, net of expenses.
 
5. COMMITMENTS
 
     The land underlying Rainier Plaza is leased under a 55-year lease agreement
expiring in 2040, plus an option for an additional 35 years. The minimum annual
rent is $566,800 at September 30, 1996. The lease also provides for contingent
rent based upon the gross income of the property, as defined in the lease. No
contingent rentals were due for 1996.
 
     The land underlying One Bellevue Center is leased under a 70-year lease
expiring on June 30, 2052 with an option to extend for an additional 20 years.
The basic rent under the ground lease agreement is $39,055 per month at
September 30, 1996, plus all taxes, utility charges, and other assessments on
the property. In July of each year, the basic rent increases 2%. Additional rent
may be due based on adjusted gross revenue, as defined in the lease agreement.
No additional rent was due in 1996.
 
     The parking garage facilities located adjacent to the 1001 Fifth Avenue are
leased through May 31, 1998, with renewal options for ten and five years. The
lease provides for minimum payments of $175,000 per year, plus 50% of the
adjusted gross annual revenues in excess of $300,000 from the garage operations.
Rent expense under this lease was $637,000 in 1996.
 
     The land underlying the Calais I & II are leased under a ground lease,
expiring in 2029, with four ten-year options to extend. Monthly rental payments
are $8,000 per month until December 31, 1999, at which time monthly payments
will increase to approximately $9,000. Beginning in 2005, monthly payments are
subject to annual adjustments based on office rentals and changes in the
consumer price index.
 
     There is an agreement with a bank through 2037, whereby the bank agreed to
certain building restrictions that limit the height and bulk of current and
future improvements, if any, to be placed on the bank's land, which is adjacent
to 1111 Third Avenue. There are options to extend this agreement for at least an
additional 39 years. In return for these restrictions, 1111 Third Avenue is
obligated to pay the bank $75,000 per year, plus 4% of annual net proceeds from
the property (prior to debt service) in excess of $4,847,000 on an annual basis.
Total amounts paid or accrued under this agreement were $75,000 for the year
ended September 30, 1996.
 
                                      F-112
<PAGE>   239
 
   
                         BEACON PROPERTIES CORPORATION
    
   
                          CONSOLIDATED BALANCE SHEETS
    
 
   
<TABLE>
<CAPTION>
                                                                SEPTEMBER 30,    DECEMBER 31,
                                                                    1997             1996
                                                                -------------    ------------
                                                                 (UNAUDITED)
                                                                       (IN THOUSANDS)
<S>                                                             <C>              <C>
                           ASSETS
Real Estate:
Land........................................................     $  331,529       $  213,858
Buildings, improvements and equipment.......................      2,039,230        1,477,672
                                                                 ----------       ----------
                                                                  2,370,759        1,691,530
Less accumulated depreciation...............................        140,044           97,535
                                                                 ----------       ----------
                                                                  2,230,715        1,593,995
Deferred financing and leasing costs, net of accumulated
  amortization of $20,028 and $16,370.......................         19,203           17,321
Cash and cash equivalents...................................         33,405           36,086
Restricted cash.............................................          3,208            2,599
Accounts receivable.........................................         13,691           11,609
Accrued rent................................................         26,959           13,065
Prepaid expenses and other assets...........................          8,653            1,093
Mortgage and notes receivable...............................         85,196           51,491
Investments in and advance to joint ventures and
  corporations..............................................         50,416           52,153
                                                                 ----------       ----------
     Total assets...........................................     $2,471,446       $1,779,412
                                                                 ==========       ==========
            LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgage notes payable......................................     $  586,925       $  452,212
Note payable, Credit Facility...............................        249,000          153,000
Accounts payable, accrued expenses and other liabilities....         51,166           41,764
Investment in joint venture.................................         24,052           24,735
                                                                 ----------       ----------
     Total liabilities......................................        911,143          671,711
                                                                 ----------       ----------
Commitments and contingencies...............................             --               --
Minority interest in Operating Partnership..................        142,752          108,551
                                                                 ----------       ----------
Stockholders' equity:
Preferred stock, $.01 par value, authorized 25,000,000
  shares, 8,000,000 shares of 8.98% Series A Cumulative
  Redeemable Preferred Stock issued and outstanding
  (Aggregate liquidation preference of $200,000)............             80               --
Common stock, $.01 par value, authorized 100,000,000 shares,
  issued and outstanding 55,656,517 and 48,116,480 shares...            557              481
Additional paid-in capital..................................      1,442,322        1,022,110
Cumulative net income.......................................        138,168           60,047
Cumulative dividends........................................       (163,576)         (83,488)
                                                                 ----------       ----------
     Total stockholders' equity.............................      1,417,551          999,150
                                                                 ----------       ----------
     Total liabilities and stockholders' equity.............     $2,471,446       $1,779,412
                                                                 ==========       ==========
</TABLE>
    
 
   
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
    
                                      F-113
<PAGE>   240
 
   
                         BEACON PROPERTIES CORPORATION
    
   
                     CONSOLIDATED STATEMENTS OF OPERATIONS
    
 
   
<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED           NINE MONTHS ENDED
                                                  SEPTEMBER 30,               SEPTEMBER 30,
                                            -------------------------   -------------------------
                                               1997          1996          1997          1996
                                            -----------   -----------   -----------   -----------
                                            (UNAUDITED AND IN THOUSANDS, EXCEPT PER SHARE AMOUNTS
                                                           AND SHARES OUTSTANDING)
<S>                                         <C>           <C>           <C>           <C>
Revenues:
  Rental income...........................  $    83,857   $    37,257   $   218,544   $    97,308
  Management fees.........................          866           731         2,445         2,248
  Recoveries from tenants.................       11,779         4,219        29,376        11,001
  Mortgage interest income................        2,561         1,402         5,320         3,567
  Other income............................        4,233         2,993        10,364         7,585
                                            -----------   -----------   -----------   -----------
                                                103,296        46,602       266,049       121,709
                                            -----------   -----------   -----------   -----------
Expenses:
  Property expenses.......................       19,853         9,837        51,169        24,607
  Real estate taxes.......................       10,480         4,660        27,960        12,491
  General and administrative..............       10,248         4,600        27,959        11,963
  Mortgage interest expense...............       13,650         7,077        36,313        20,739
  Interest -- amortization of financing
     costs................................          395           434         1,131         1,618
  Depreciation and amortization...........       18,944         8,391        50,767        21,737
                                            -----------   -----------   -----------   -----------
                                                 73,570        34,999       195,299        93,155
                                            -----------   -----------   -----------   -----------
Income from operations....................       29,726        11,603        70,750        28,554
Equity in net income of joint ventures and
  corporations............................        1,676         1,312         4,976         3,964
                                            -----------   -----------   -----------   -----------
Income from continuing operations.........       31,402        12,915        75,726        32,518
Discontinued operations -- Construction
  Company
  Loss from operations....................         (790)         (841)       (2,263)       (1,911)
Gain on sale of property..................           --            --        16,736            --
                                            -----------   -----------   -----------   -----------
Income before minority interest...........       30,612        12,074        90,199        30,607
Minority interest in Operating
  Partnership.............................       (3,064)       (1,550)       (9,743)       (4,231)
                                            -----------   -----------   -----------   -----------
Income before extraordinary items.........       27,548        10,524        80,456        26,376
Extraordinary items, net of minority
  interest................................           --            --        (2,335)       (3,309)
                                            -----------   -----------   -----------   -----------
Net income................................       27,548        10,524        78,121        23,067
Income allocated to preferred
  shareholders............................       (4,490)           --        (5,388)           --
                                            -----------   -----------   -----------   -----------
Net income available to common
  shareholders............................  $    23,058   $    10,524   $    72,733   $    23,067
                                            ===========   ===========   ===========   ===========
Net income per common share before
  extraordinary items and after allocation
  of income to preferred shareholders.....  $      0.42   $      0.34   $      1.42   $      0.99
Extraordinary items.......................           --            --         (0.04)        (0.13)
                                            -----------   -----------   -----------   -----------
Net income per common share...............  $      0.42   $      0.34   $      1.38   $      0.86
                                            -----------   -----------   -----------   -----------
Weighted average common shares
  outstanding.............................   55,468,531    30,571,657    52,612,891    26,659,577
                                            ===========   ===========   ===========   ===========
</TABLE>
    
 
   
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
    
 
                                      F-114
<PAGE>   241
 
   
                         BEACON PROPERTIES CORPORATION
    
   
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
    
 
   
<TABLE>
<CAPTION>
                                                                    NINE MONTHS ENDED
                                                                      SEPTEMBER 30,
                                                                -------------------------
                                                                  1997            1996
                                                                ---------       ---------
                                                                     (UNAUDITED AND
                                                                      IN THOUSANDS)
<S>                                                             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income................................................    $  78,121       $  23,067
                                                                ---------       ---------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
  OPERATING ACTIVITIES:
  Increase in accrued rent..................................      (13,894)         (4,144)
  Depreciation, amortization and amortization of financing
    costs...................................................       51,898          23,355
  Equity in net income of joint ventures and corporations...       (2,713)         (2,053)
  Minority interest in Operating Partnership................        9,743           4,231
  Gain on sale of property..................................      (16,736)             --
  Extraordinary items.......................................        2,335           3,309
  Increase in accounts receivable...........................       (2,082)         (1,780)
  Increase in prepaid expenses and other assets.............       (1,754)           (415)
  Increase in accounts payable and accrued expenses.........       14,114          15,484
                                                                ---------       ---------
Total adjustments...........................................       40,911          37,987
                                                                ---------       ---------
    Net cash provided by operating activities...............      119,032          61,054
                                                                ---------       ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Property additions........................................     (574,487)       (501,765)
  Proceeds from sale of property............................       72,500              --
  Payment of deferred leasing costs.........................       (7,464)         (4,184)
  Increase in prepaid expenses and other assets.............       (5,806)         (4,000)
  Notes receivable from affiliates..........................      (33,689)        (16,712)
  Purchase of mortgage notes receivable.....................          (16)             --
  Capital distributions from joint ventures.................        3,732           4,655
  (Decrease) increase in restricted cash....................         (609)            360
                                                                ---------       ---------
    Net cash used by investing activities...................     (545,839)       (521,646)
                                                                ---------       ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common stock, net of costs......      226,586         316,543
  Proceeds from issuance of preferred stock, net of costs...      193,180              --
  Payment of deferred financing costs.......................       (1,606)         (9,267)
  Borrowings on Credit Facility.............................      468,000         140,000
  Payments on Credit Facility...............................     (372,000)       (252,500)
  Borrowings on mortgage notes..............................           --         593,000
  Payments on mortgage notes................................       (1,287)       (278,500)
  Decrease in prepaid expenses and other assets.............           --           1,728
  Distributions paid to minority interest in Operating
    Partnership.............................................       (8,659)         (5,271)
  Dividends paid to stockholders............................      (80,088)        (35,295)
                                                                ---------       ---------
    Net cash provided by financing activities...............      424,126         470,438
                                                                ---------       ---------
Net (decrease) increase in cash and cash equivalents........       (2,681)          9,846
Cash and cash equivalents, beginning of period..............       36,086           4,501
                                                                ---------       ---------
Cash and cash equivalents, end of period....................    $  33,405       $  14,347
                                                                =========       =========
SUPPLEMENTAL DISCLOSURES:
  Cash paid during the period of interest...................    $  35,212       $  18,998
                                                                =========       =========
NON CASH ACTIVITIES:
  Redemption of Operating Partnership units for common
    stock...................................................    $      --       $     486
                                                                =========       =========
  Increase in minority interest as a result of acquisition
    of properties...........................................    $  33,417       $  35,229
                                                                =========       =========
  Liabilities assumed in connection with contributions and
    acquisitions of properties..............................    $ 136,000       $  55,229
                                                                =========       =========
</TABLE>
    
 
   
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
    
                                      F-115
<PAGE>   242
 
   
                         BEACON PROPERTIES CORPORATION
    
 
   
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    
 
   
1. ORGANIZATION AND BASIS OF PRESENTATION:
    
 
   
ORGANIZATION
    
 
   
     Beacon Properties Corporation was incorporated on March 4, 1994, as a
Maryland Corporation, and commenced operations effective with the completion of
its Initial Public Offering (the "IPO") on May 26, 1994. Beacon Properties
Corporation, together with Beacon Properties, L.P. (the "Operating Partnership")
and their subsidiaries (collectively, the "Company") was formed to continue and
expand the commercial real estate business of The Beacon Group (the
"Predecessor"). The Company qualifies as a real estate investment trust under
the Internal Revenue Code of 1986, as amended.
    
 
   
     The Company specializes in property ownership, management, leasing, design
and development and currently owns or has an interest in 123 properties totaling
approximately 20.7 million square feet (the "Properties").
    
 
   
BASIS OF PRESENTATION
    
 
   
     The financial statements of the Company are consolidated and include all
the accounts of the Company, its majority owned Operating Partnership and
subsidiaries. All significant intercompany balances and transactions have been
eliminated.
    
 
   
     The accompanying financial statements are unaudited; however, they have
been prepared in accordance with generally accepted accounting principles for
interim financial information and in conjunction with the rules and regulations
of the Securities and Exchange Commission. Accordingly, they do not include all
of the disclosures required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting solely of normal recurring matters) necessary for a fair
presentation of the financial statements for these interim periods have been
included. The results for the nine months ended September 30, 1997 are not
necessarily indicative of the results to be obtained for the full fiscal year.
These financial statements should be read in conjunction with the December 31,
1996 audited financial statements and notes thereto of the Company, included in
its annual report on Form 10-K (as amended by Form 10-K/A) for the fiscal year
ended December 31, 1996. Certain reclassifications have been made to previously
reported amounts to conform with current reporting.
    
 
   
2. EQUITY INVESTMENTS IN REAL ESTATE:
    
 
   
     The Company reports its share of income and losses based on its ownership
interest in the respective equity investments. Losses in excess of investments
are not recorded where the Company has not guaranteed or does not intend to
provide any future financial support. The following summarized information has
been presented for the property joint ventures and property corporation for
which the Company has recorded its share of the earnings for the nine months
ended September 30, 1997.
    
 
                                      F-116
<PAGE>   243
   
                         BEACON PROPERTIES CORPORATION
    
 
   
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
    
 
   
<TABLE>
<CAPTION>
                                                               ONE POST      POLK &        75-101
                                                             OFFICE SQUARE   TAYLOR    FEDERAL STREET
                                                             -------------   -------   --------------
                                                                          (IN THOUSANDS)
<S>                                                          <C>             <C>       <C>
Balance sheets at September 30, 1997
Real estate, net...........................................    $ 40,433      $89,166      $156,033
Cash.......................................................       2,026          552         7,565
Other assets...............................................      10,495        2,497         2,978
                                                               --------      -------      --------
                                                               $ 52,954      $92,215      $166,576
                                                               ========      =======      ========
Mortgage notes payable.....................................    $ 91,821      $    --      $ 90,000
Other liabilities..........................................       1,484          354         2,362
Equity (deficiency)........................................     (40,351)      91,861        74,214
                                                               --------      -------      --------
                                                               $ 52,954      $92,215      $166,576
                                                               ========      =======      ========
Summary of operations for the nine months ended September
  30, 1997
  Revenues.................................................    $ 17,857      $17,348      $ 21,383
  Other income.............................................         364          591         1,062
                                                               --------      -------      --------
     Total revenues........................................      18,221       17,939        22,445
                                                               --------      -------      --------
  Operating expenses.......................................       7,302        4,700         9,333
  Mortgage interest expense................................       5,086           --         5,189
  Depreciation and amortization............................       2,691        2,573         3,630
                                                               --------      -------      --------
     Total expenses........................................      15,079        7,273        18,152
                                                               --------      -------      --------
       Net income..........................................    $  3,142      $10,666      $  4,293
                                                               ========      =======      ========
Share of properties:
Depreciation and amortization..............................    $    999      $   257      $  1,829
Interest -- amortization of financing costs................         629           --            44
</TABLE>
    
 
   
3. MORTGAGE NOTES PAYABLE:
    
 
   
     On April 30, 1997, in connection with the acquisition of Centerpointe I and
II located in Fairfax County, Virginia, the Company assumed $30 million of
mortgage debt secured by the properties. The mortgage has a remaining term of
3.9 years, bears interest at 7.32% and requires monthly installments of interest
only until December 1, 1999, and principal and interest during the remaining
term based on a 25-year amortization schedule.
    
 
   
     On May 23, 1997, in connection with the acquisition of Westbrook Corporate
Center located in suburban Chicago, the Company assumed approximately $82
million of mortgage debt and borrowed $24 million of additional mortgage debt
secured by the properties. The mortgage has a term of ten years, bears interest
at 8.00% and requires monthly installments of principal and interest based on a
26-year amortization schedule.
    
 
   
4. NOTE PAYABLE, CREDIT FACILITY:
    
 
   
     On April 8, 1997, the Company replaced its $300 million secured
floating-rate credit facility (the "Credit Facility") with an unsecured facility
and decreased the interest rate on the Credit Facility from the Eurodollar rate
plus 175 basis points (1.75%) to the Eurodollar rate plus 120 basis points
(1.20%). Additionally, on April 30, 1997, the maximum loan amount available
under the Credit Facility was increased to $350 million.
    
 
                                      F-117
<PAGE>   244
   
                         BEACON PROPERTIES CORPORATION
    
 
   
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
    
 
   
     On August 8, 1997, the Company amended the Credit Facility to provide for a
competitive bid option and a decrease in the interest rate on the Credit
Facility from the Eurodollar rate plus 120 basis points (1.20%) to the
Eurodollar rate plus 90 basis points (.90%).
    
 
   
     As a result of the new unsecured Credit Facility, the Company recorded an
extraordinary item of $2.3 million, net of minority interest, in connection with
the write-off of fees and costs to acquire the prior secured Credit Facility.
    
 
   
5. COMMITMENTS AND CONTINGENCIES:
    
 
   
     In connection with the acquisition of the Westbrook Corporate Center, the
Company has agreed to maintain non-recourse financing assumed from the sellers
for a 10 year period and not to sell or otherwise transfer any portion of the
property prior to the tenth anniversary of the closing date. If the Company
should choose not to maintain the non-recourse provisions of the existing or new
debt, or should choose to sell the property, within the 10 year period it shall
be required to make payments to the sellers.
    
 
                                      F-118
<PAGE>   245
 
                       REPORT OF INDEPENDENT ACCOUNTANTS
 
To the Board of Directors and Stockholders of
Beacon Properties Corporation:
 
     We have audited the consolidated balance sheets of Beacon Properties
Corporation as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for the years
ended December 31, 1996 and 1995 and the period May 26, 1994 to December 31,
1994. We have also audited the combined statement of operations, owners' equity
and cash flows of the Predecessor, more fully described in Note 1, for the
period January 1, 1994 to May 25, 1994. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Beacon Properties Corporation as of December 31, 1996 and 1995 and the
consolidated results of its operations and its cash flows for the years ended
December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994, and
the combined results of operations and cash flows of the Predecessor for the
period January 1, 1994 to May 25, 1994 in conformity with generally accepted
accounting principles.
 
Boston, Massachusetts                          /s/ Coopers & Lybrand L.L.P.
January 28, 1997
 
                                      F-119
<PAGE>   246
 
                         BEACON PROPERTIES CORPORATION
 
                          CONSOLIDATED BALANCE SHEETS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                     DECEMBER 31,
                                                                ----------------------
                                                                   1996         1995
                                                                ----------    --------
<S>                                                             <C>           <C>
ASSETS
Real estate:
  Land......................................................    $  213,858    $ 43,077
  Buildings, improvements and equipment.....................     1,477,672     428,065
                                                                ----------    --------
                                                                 1,691,530     471,142
  Less accumulated depreciation.............................        97,535      66,571
                                                                ----------    --------
                                                                 1,593,995     404,571
Deferred financing and leasing costs, net of accumulated
  amortization of $16,370 and $14,509.......................        17,321       9,486
Cash and cash equivalents...................................        36,086       4,501
Restricted cash.............................................         2,599       2,764
Accounts receivable.........................................        11,609       6,128
Accrued rent................................................        13,065       6,493
Prepaid expenses and other assets...........................         1,093       8,060
Mortgage notes receivable...................................        51,491      34,778
Investments in and advance to joint ventures and
  corporations..............................................        52,153      58,016
                                                                ----------    --------
     TOTAL ASSETS...........................................    $1,779,412    $534,797
                                                                ==========    ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Mortgage notes payable....................................    $  452,212    $ 70,536
  Note payable, Credit Facility.............................       153,000     130,500
  Accounts payable, accrued expenses and other
     liabilities............................................        41,764      14,022
  Investment in joint venture...............................        24,735      23,955
                                                                ----------    --------
     TOTAL LIABILITIES......................................       671,711     239,013
                                                                ----------    --------
  Commitments and contingencies.............................            --          --
  Minority interest in Operating Partnership................       108,551      36,962
                                                                ----------    --------
Stockholders' equity:
  Common stock, $.01 par value, authorized 100,000,000
     shares, issued and outstanding 48,116,480 and
     20,215,822 shares......................................           481         202
  Additional paid-in capital................................     1,022,110     267,727
  Cumulative net income.....................................        60,047      23,715
  Cumulative dividends......................................       (83,488)    (32,822)
                                                                ----------    --------
     Total stockholders' equity.............................       999,150     258,822
                                                                ----------    --------
     TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.............    $1,779,412    $534,797
                                                                ==========    ========
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                      F-120
<PAGE>   247
 
                         BEACON PROPERTIES CORPORATION
 
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                                                  PREDECESSOR
                                                                                                ---------------
                                                                            FOR THE PERIOD      FOR THE PERIOD
                                            YEAR ENDED      YEAR ENDED       MAY 26, 1994       JANUARY 1, 1994
                                           DECEMBER 31,    DECEMBER 31,           TO                  TO
                                               1996            1995        DECEMBER 31, 1994     MAY 25, 1994
                                           ------------    ------------    -----------------    ---------------
<S>                                        <C>             <C>             <C>                  <C>
Revenues:
  Rental income.........................      $147,825         $71,050           $25,144            $5,776
  Management fees.......................         3,005           2,203                --             1,521
  Recoveries from tenants...............        16,719           9,742             4,488             1,040
  Mortgage interest income..............         4,970           2,546                --                --
  Other income..........................        11,272           5,502             2,301               675
                                            ----------      ----------        ----------            ------
       Total revenues...................       183,791          91,043            31,933             9,012
                                            ----------      ----------        ----------            ------
Expenses:
  Property expenses.....................        37,211          18,090             7,034             2,086
  Real estate taxes.....................        18,124          10,217             3,325               595
  General and administrative............        19,331           9,755             3,122             1,399
  Mortgage interest expense.............        30,300          15,226             4,992             2,798
  Interest -- amortization of financing
     costs..............................         2,084           1,370               617               373
  Depreciation and amortization.........        33,184          17,428             6,924             2,385
                                            ----------      ----------        ----------            ------
       Total expenses...................       140,234          72,086            26,014             9,636
                                            ----------      ----------        ----------            ------
Income (loss) from operations...........        43,557          18,957             5,919              (624)
Equity in net income of joint ventures
  and corporations......................         4,989           3,234               929               198
                                            ----------      ----------        ----------            ------
Income (loss) from continuing
  operations............................        48,546          22,191             6,848              (426)
Discontinued operations -- Construction
  Company:
  Income (loss) from operations.........        (2,609)            (12)              477               102
  Loss on sale..........................          (249)             --                --                --
                                            ----------      ----------        ----------            ------
Income (loss) before minority
  interest..............................        45,688          22,179             7,325              (324)
Minority interest in loss of combined
  partnerships..........................            --              --                --               931
Minority interest in Operating
  Partnership...........................        (5,988)         (4,119)           (1,670)               --
                                            ----------      ----------        ----------            ------
Income before extraordinary items.......        39,700          18,060             5,655               607
Extraordinary items, net of minority
  interest..............................        (3,368)             --                --             8,898
                                            ----------      ----------        ----------            ------
Net income..............................      $ 36,332         $18,060           $ 5,655            $9,505
                                            ==========      ==========        ==========            ======
Income before extraordinary items per
  common share..........................      $   1.32         $  1.09           $   .48                --
Extraordinary items per common share....         (0.11)             --                --                --
                                            ----------      ----------        ----------            ------
Net income per common share.............      $   1.21         $  1.09           $   .48                --
                                            ==========      ==========        ==========            ======
Weighted average common shares
  outstanding...........................    29,932,327      16,525,245        11,816,380                --
                                            ==========      ==========        ==========            ======
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                      F-121
<PAGE>   248
 
                         BEACON PROPERTIES CORPORATION
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                 STOCKHOLDERS' EQUITY                             PREDECESSOR
                                     ---------------------------------------------                -----------
                                                  COMMON   ADDITIONAL                               OWNERS'
                                       SHARES     STOCK     PAID-IN     CUMULATIVE   CUMULATIVE     EQUITY
                                       ISSUED     AMOUNT    CAPITAL     NET INCOME   DIVIDENDS     (DEFICIT)
                                     ----------   ------   ----------   ----------   ----------   -----------
<S>                                  <C>          <C>      <C>          <C>          <C>          <C>
Balance at December 31, 1993.......                                                                 $(57,954)
Net income from January 1, 1994 to
  May 25, 1994.....................                                                                    9,505
Contributions and other, net of
  distributions from January 1,
  1994 to May 25, 1994.............                                                                    1,083
Issuance of stock for cash -- May
  26, 1994 -- Initial Offering.....  11,117,850    $111    $  173,341                                     --
Issuance of stock in connection
  with purchase of minority
  interests........................     698,530       7        11,868                                     --
Charge to reflect carryover of
  historical basis of accounting
  and recognition of minority
  interest in Operating Partnership
  for continuing investors.........          --      --       (77,600)                                47,366
Net income from May 26, 1994 to
  December 31, 1994................          --      --            --    $ 5,655            --
Dividends declared ($0.96 per
  share)...........................          --      --            --         --      $(11,344)           --
                                     ----------    ----    ----------    -------      --------      --------
Balance at December 31, 1994.......  11,816,380     118       107,609      5,655       (11,344)           --
Issuance of stock..................   8,341,050      84       159,236         --            --            --
Issuance of stock under dividend
  reinvestment and share purchase
  plan.............................      25,437      --           492         --            --            --
Issuance of stock by exercise of
  options..........................      12,367      --           216         --            --            --
Issuance of stock in exchange for
  Operating Partnership unit
  redemptions......................      20,588      --           174         --            --            --
Net income.........................          --      --            --     18,060            --            --
Dividends declared ($1.24 per
  share)...........................          --      --            --         --       (21,478)           --
                                     ----------    ----    ----------    -------      --------      --------
Balance at December 31, 1995.......  20,215,822     202       267,727     23,715       (32,822)           --
Issuance of stock..................  27,641,400     276       749,589         --            --            --
Issuance of stock under dividend
  reinvestment and share purchase
  plan.............................     101,431       1         2,647         --            --            --
Issuance of stock by exercise of
  options..........................      97,827       1         1,662         --            --            --
Issuance of stock in exchange for
  Operating Partnership unit
  redemptions......................      60,000       1           485         --            --            --
Net income.........................          --      --            --     36,332            --            --
Dividends declared ($1.765 per
  share)...........................          --      --            --         --       (50,666)           --
                                     ----------    ----    ----------    -------      --------      --------
Balance at December 31, 1996.......  48,116,480    $481    $1,022,110    $60,047      $(83,488)     $     --
                                     ==========    ====    ==========    =======      ========      ========
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                      F-122
<PAGE>   249
 
                         BEACON PROPERTIES CORPORATION
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
<TABLE>
<CAPTION>
                                                                                                                   PREDECESSOR
                                                                                                                 ---------------
                                                                                              FOR THE PERIOD     FOR THE PERIOD
                                                              YEAR ENDED      YEAR ENDED      MAY 26, 1994 TO    JANUARY 1, 1994
                                                             DEC. 31, 1996   DEC. 31, 1995   DECEMBER 31, 1994   TO MAY 25, 1994
                                                             -------------   -------------   -----------------   ---------------
<S>                                                          <C>             <C>             <C>                 <C>
Cash flows from operating activities:
  Net income...............................................   $    36,332      $  18,060         $   5,655           $ 9,505
                                                              -----------      ---------         ---------           -------
  Adjustments to reconcile net income to net cash provided
    by operating activities:
    Increase in accrued rent...............................        (6,572)        (3,741)             (915)           (1,181)
    Depreciation, amortization and interest -- amortization
      of financing costs...................................        35,268         18,798             7,541             2,848
    Equity in net income of joint ventures and
      corporations.........................................        (2,131)        (3,222)             (469)             (201)
    Minority interest in loss of combined partnerships.....            --             --                --            (1,519)
    Minority interest in Operating Partnership.............         5,988          4,119             1,670                --
    Extraordinary items....................................         3,368             --                --            (8,898)
    Deferred interest......................................            --             --                --               367
    Increase in accounts receivable........................        (5,481)        (1,746)           (3,385)             (376)
    (Increase) decrease in prepaid expenses and other
      assets...............................................          (333)           (82)            2,388            (1,940)
    Increase (decrease) in accounts payable, accrued
      expenses and other liabilities.......................        25,243            332              (107)            1,636
                                                              -----------      ---------         ---------           -------
        Total adjustments..................................        55,350         14,458             6,723            (9,264)
                                                              -----------      ---------         ---------           -------
        Net cash provided by operating activities..........        91,682         32,518            12,378               241
                                                              -----------      ---------         ---------           -------
Cash flows from investing activities:
  Property additions.......................................    (1,088,775)       (67,610)         (204,582)             (978)
  Payment of deferred leasing costs........................        (6,157)        (2,646)           (1,010)             (124)
  Decrease (increase) in prepaid expenses and other
    assets.................................................         5,000         (5,000)               --                --
  Purchase of minority interests...........................            --             --           (11,688)               --
  Investments in joint ventures............................            --             --           (15,802)               --
  Distributions from joint ventures........................         8,727          3,692             1,637                --
  Investments in and advance to corporations...............            --        (41,471)           (5,800)               --
  Cash from contributed assets.............................            --             --             6,978                --
  Restricted cash from contributed assets..................            --             --               420                --
  Purchase of mortgage notes receivable....................       (16,713)       (34,778)               --                --
  Decrease (increase) in restricted cash...................           165          2,063            (4,827)               --
                                                              -----------      ---------         ---------           -------
        Net cash used by investing activities..............    (1,097,753)      (145,750)         (234,674)           (1,102)
                                                              -----------      ---------         ---------           -------
Cash flows from financing activities:
  Proceeds from offerings..................................       754,778        160,028           173,452                --
  Owners' contributions....................................            --             --                --               412
  Owners' distributions....................................            --             --                --            (4,329)
  Borrowings on Credit Facility............................       468,000        124,700           130,300                --
  Borrowings on mortgage notes.............................       608,000             --                --               874
  Repayments on Credit Facility............................      (445,500)      (124,500)               --                --
  Repayments on mortgage notes.............................      (281,814)       (20,400)          (49,677)             (460)
  Advances (repayments of) amounts due to affiliates.......            --             --            (5,355)            2,800
  Payment of deferred financing costs......................        (9,811)        (2,457)           (2,852)              (13)
  Decrease (increase) in prepaid expenses and other
    assets.................................................         2,300         (2,300)               --                --
  Distributions paid to minority interests.................        (7,631)        (6,230)           (1,858)               --
  Dividends paid to stockholders...........................       (50,666)       (26,205)           (6,617)               --
                                                              -----------      ---------         ---------           -------
        Net cash provided (used) by financing activities...     1,037,656        102,636           237,393              (716)
                                                              -----------      ---------         ---------           -------
Net increase (decrease) in cash and cash equivalents.......        31,585        (10,596)           15,097            (1,577)
Cash and cash equivalents, beginning of period.............         4,501         15,097                --             6,150
                                                              -----------      ---------         ---------           -------
Cash and cash equivalents, end of period...................   $    36,086      $   4,501         $  15,097           $ 4,573
                                                              ===========      =========         =========           =======
Supplemental disclosures:
  Cash paid during the period for interest.................   $    28,777      $  14,738         $   5,278           $ 2,811
Noncash activities:
  Acquisition of interests in properties...................            --             --            22,721                --
  Increase in minority interest as a result of acquisition
    of interests in properties.............................        74,226             --             9,200                --
  Liabilities assumed in connection with contributions and
    acquisitions of properties.............................        55,529            861            93,518                --
  Dividends declared to stockholders.......................            --             --             4,727                --
  Distributions declared to minority interest..............            --             --             1,524                --
  Receivable from equity investment........................           781          1,057                --                --
  Redemption of Operating Partnership units for common
    stock..................................................           486            174                --                --
  Common stock issued in connection with purchase of
    minority interests.....................................            --             --            11,875                --
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.
 
                                      F-123
<PAGE>   250
 
                         BEACON PROPERTIES CORPORATION
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
 
1. ORGANIZATION, OFFERINGS AND ACQUISITIONS:
 
     Beacon Properties Corporation (the "Company") was incorporated on March 4,
1994 as a Maryland corporation, and commenced operations effective with the
completion of its initial offering on May 26, 1994. The Company qualifies as a
real estate investment trust under the Internal Revenue Code of 1986, as
amended. Concurrent with the initial offering, the Company contributed its
interests in two properties and the net proceeds of the offering which
approximated $173.5 million in exchange for an approximate 78% interest in
Beacon Properties, L.P., (the "Operating Partnership"), which became the
successor entity to The Beacon Group (the "Predecessor").
 
     The Company was formed to continue and expand the commercial real estate
development, construction, acquisition, leasing, design and management business
of the Predecessor. Prior to the initial offering, the Predecessor was comprised
of interests in 13 office properties and entities which provided design,
leasing, development and construction services to each of the properties and
unrelated third parties.
 
     During 1995, the Company completed three offerings totaling 8,341,050
shares of common stock. The net proceeds from these offerings totaling $159.3
million were used primarily to retire indebtedness incurred to acquire new
properties and to acquire additional properties.
 
     During 1996, the Company completed three offerings totaling 27,641,400
shares of common stock. The net proceeds from these offerings totaling $749.9
million were used primarily to acquire additional properties.
 
     The following schedule summarizes the Company's interest in the properties
as a result of its initial and subsequent offerings, and the related acquisition
of properties and partnership interests. All properties have been consolidated
by the Company and its Predecessor unless otherwise indicated in the notes:
 
<TABLE>
<CAPTION>
                                                       DATE        RENTABLE      OWNERSHIP
                                                    ACQUIRED BY     AREA IN     INTEREST AT    ACCOUNTING
                                                    THE COMPANY   SQUARE FEET    12/31/96     METHOD NOTES
                                                    -----------   -----------   -----------   ------------
<S>                                                 <C>           <C>           <C>           <C>
Properties:
Wellesley Office Park -- Buildings 1-8,
  Wellesley, MA...................................         (A)       623,000        100%          (E)
Crosby Corporate Center, Bedford, MA..............         (B)       336,000        100%
South Station, Boston, MA.........................         (B)       149,000        100%
175 Federal Street, Boston, MA....................         (B)       203,000        100%          (E)
One Post Office Square, Boston, MA................         (B)       764,000         50%          (D)
Center Plaza, Boston, MA..........................         (B)       649,000        100%
Rowes Wharf, Boston, MA...........................         (B)       344,000         45%          (F)
150 Federal Street, Boston, MA....................         (B)       530,000        100%
Polk and Taylor Buildings, Arlington, VA..........         (B)       890,000         10%          (G)
One Canal Park, Cambridge, MA.....................    6/10/94        100,000        100%
Westwood Business Centre, Westwood, MA............    6/10/94        160,000        100%
Russia Wharf, Boston, MA..........................    8/10/94        315,000        100%
Westlakes Office Park -- Buildings 1-3 and 5,
  Berwyn, PA......................................         (C)       444,000        100%
75-101 Federal Street, Boston, MA.................    9/29/95        812,000         52%          (H)
Two Oliver Street and 147 Milk Street, Boston,
  MA..............................................    10/6/95        271,000        100%
Ten Canal Park, Cambridge, MA.....................   12/21/95        110,000        100%
Perimeter Center, Atlanta, GA.....................    2/15/96      3,302,000        100%
1333 H Street, N.W., Washington, D.C..............    8/16/96        239,000        100%
AT&T Plaza, Oak Brook, IL.........................    8/16/96        225,000        100%
Tri-State International, Lincolnshire, IL.........    8/16/96        548,000        100%
John Marshall I, McLean, VA.......................     9/5/96        261,000        100%
E.J. Randolph, McLean, VA.........................     9/5/96        165,000        100%
</TABLE>
 
                                      F-124
<PAGE>   251
                         BEACON PROPERTIES CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
<TABLE>
<CAPTION>
                                                       DATE        RENTABLE      OWNERSHIP
                                                    ACQUIRED BY     AREA IN     INTEREST AT    ACCOUNTING
                                                    THE COMPANY   SQUARE FEET    12/31/96     METHOD NOTES
                                                    -----------   -----------   -----------   ------------
<S>                                                 <C>           <C>           <C>           <C>
Northridge I, Herndon, VA.........................     9/5/96        124,000        100%
1300 North 17th Street, Rosslyn, VA...............   10/18/96        373,000        100%
1616 North Fort Myer Drive, Rosslyn, VA...........   10/18/96        293,000        100%
New England Executive Park, Burlington, MA........   11/15/96        817,000        100%
The Riverview Building, Cambridge, MA.............   11/21/96        263,000        100%
10960 Wilshire Boulevard, Westwood, CA............   11/21/96        544,000        100%
Shoreline Technology Park, Mountain View, CA......   12/20/96        727,000        100%
Lake Marriott Business Park, Santa Clara, CA......   12/20/96        400,000        100%
Presidents Plaza, Chicago, IL.....................   12/27/96        791,000        100%
                                                                  ----------
                                                                  15,772,000
                                                                  ==========
Service Entities:
Beacon Construction Company, Inc..................         (B)                       99%          (I)
Beacon Property Management, L.P...................         (B)                      100%
Beacon Property Management Corporation............         (B)                       99%          (I)
Beacon Design Corporation.........................         (B)                       99%          (I)
Beacon Design, L.P................................         (B)                      100%
</TABLE>
 
- ---------------
(A) Wellesley Building 8 was acquired May 4, 1995. Interests in the remaining
    Wellesley Buildings were contributed as part of the initial public offering.
 
(B) Interests in this property or company were contributed or acquired as part
    of the initial public offering.
 
(C) Westlakes Buildings 1, 3 and 5 were acquired October 21, 1994. Westlakes
    Building 2 was acquired July 26, 1995.
 
(D) The Company is a general partner in the joint venture which owns the
    property and utilizes the equity method of accounting for its investment.
 
(E) On October 28, 1994, the Company acquired the remaining interest in the 175
    Federal Street and Wellesley 6 Joint Ventures which owned these properties.
    Prior to the acquisition of the remaining interest, the Company and its
    Predecessor used the equity method of accounting for its investments.
    
(F) The Company owns an indirect limited partner interest and utilizes the
    equity method of accounting for its investment.
 
(G) The Company owns a 1% general partner interest and a 9% limited partner
    interest and utilizes the equity method of accounting for its investment.
 
(H) The Company is a shareholder in the corporation (private REIT) which owns
    the property and utilizes the equity method of accounting for its
    investment.
 
(I) The Company used the cost method of accounting for its investments in these
    subsidiaries prior to 1995. The Company currently uses the equity method of
    accounting for its investments. (See Note 2).
 
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
 
  Business
 
     The Company is a self-managed and self-administered real estate investment
trust (a "REIT") which currently has interests in a portfolio of 104 Class A
office properties and other commercial properties containing approximately 15.8
million rentable square feet located in Boston, Atlanta, Chicago, Los Angeles,
Philadelphia, San Francisco, and Washington, D.C.
 
     The Company also owns and operates commercial real estate development,
acquisition, leasing, design and management businesses. The Company manages
approximately 2.9 million square feet of commercial and
 
                                      F-125
<PAGE>   252
                         BEACON PROPERTIES CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
office space owned by third parties in various locations, including Boston,
Waltham, and Springfield, Massachusetts and Chicago, Illinois.
 
  Principles of Consolidation
 
     The accompanying financial statements of the Company have been prepared on
a consolidated basis which include all the accounts of the Company, its majority
owned Operating Partnership and its subsidiaries. All significant intercompany
balances and transactions have been eliminated. The Company's consolidated
financial statements reflect the properties acquired at their historical basis
of accounting to the extent of the acquisition of interests from the
Predecessors' owners who continued on as investors. The remaining interests
acquired from the Predecessors' owners have been accounted for as a purchase and
the excess of the purchase price over the related historical cost basis was
allocated to real estate. The consolidated financial statements of the Company
include, along with the contributed properties of the Predecessor, significant
acquisitions of properties and ownership interests subsequent to the initial
public offering; consequently, the operating results of the Company are not
directly comparable to the Predecessor.
 
     The accompanying financial statements of the Predecessor have been
presented on a combined basis which include all of the contributed properties
and the management, leasing, and design entities.
 
  Real Estate
 
     Buildings and improvements are recorded at cost and are depreciated on the
straight-line and declining balance methods over their estimated useful lives of
nineteen to forty years and fifteen to twenty years, respectively. The cost of
buildings and improvements includes the purchase price of the property or
interests in property, legal fees, acquisition costs, interest, property taxes
and other costs incurred during the period of construction. The Company
capitalized interest costs of $1.0 million in 1996, $0.1 million in 1995, and $0
in 1994. In accordance with Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, the Company periodically reviews its properties to determine if
its carrying costs will be recovered from future operating cash flows. In cases
where the Company does not expect to recover its carrying costs, the Company
would recognize an impairment loss. No such losses have been recognized to date.
 
     Tenant improvements are depreciated over the terms of the related leases.
Furniture, fixtures and equipment are depreciated using straight-line and
declining balance methods over their expected useful lives of five to seven
years.
 
     Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations or betterments which extend the economic
useful life of the assets are capitalized.
 
  Deferred Financing and Leasing Costs
 
     Deferred financing costs include fees and costs incurred to obtain
long-term financings, and are amortized over the terms of the respective loans
on a basis which approximates the interest method. Deferred leasing costs
incurred in the successful negotiation of leases, including brokerage, legal and
other costs, have been deferred and are being amortized on a straight-line basis
over the terms of the respective leases.
 
  Cash and Cash Equivalents
 
     Cash and cash equivalents consist of highly liquid assets with original
maturities of three months or less from the date of purchase. The majority of
the Company's cash and cash equivalents are held at major commercial banks. The
Company has not experienced any losses to date on its invested cash. The
carrying value of the cash and cash equivalents approximate market.
 
                                      F-126
<PAGE>   253
                         BEACON PROPERTIES CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Restricted Cash
 
     Restricted cash consists of cash held in escrow as required by lenders to
satisfy real estate taxes and tenant improvement costs.
 
  Investments in and Advance to Joint Ventures and Corporations
 
     The Company and Predecessor use the equity method of accounting for their
earnings in property joint ventures and corporations which it does not control.
Losses in excess of investments are not recorded where the Company or the
Predecessor is a limited partner and has not guaranteed nor intends to provide
any future financial support to the respective properties.
 
     The Company utilized the cost method in 1994 for its earnings from service
corporations. In 1995, the Company adopted the accounting prescribed in Emerging
Issues Task Force Issue 95-6 "Accounting by a Real Estate Investment Trust for
an Investment in a Service Corporation" and utilized the equity method for its
investment in and earnings of service corporations. The effect of this change on
1994 results was not material and such amounts have been reclassified to conform
to the 1995 presentation.
 
  Mortgage Notes Receivable
 
     Discounts from the principal balance on mortgage notes receivable, net of
acquisition costs, are amortized as interest income over the term of the related
notes using the effective yield method, based on management's evaluation of the
current facts and circumstances and the ultimate ability to collect the
principal balance of such notes.
 
  Offering Costs
 
     Underwriting commissions and offering costs incurred in connection with the
initial and subsequent offerings have been reflected as a reduction of
additional paid-in capital.
 
  Revenue Recognition
 
     Base rental income is reported on a straight-line basis over the terms of
the respective leases. The impact of the straight-line rent adjustment increased
revenues for the Company by $6.6 million, $3.7 million and $0.9 million and
increased the Company's equity in net income of property joint ventures and
corporations by $0.1 million, $0.2 million and $0.3 million for the years ended
December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994,
respectively. Construction income of the Predecessor was recognized on the
percentage-of-completion method on the basis of costs incurred and expected to
be incurred. Management fees are recognized when they are earned.
 
  Income Taxes
 
     The Company has elected to be taxed as a REIT under the Internal Revenue
Code commencing with its taxable period ended December 31, 1994. As a result,
the Company will generally not be subject to federal income tax on its taxable
income at corporate rates to the extent it distributes annually at least 95% of
its taxable income to its shareholders and complies with certain other
requirements. Accordingly, no provision has been made for federal income taxes
in the accompanying consolidated financial statements. Certain subsidiaries are
subject to federal and state income tax on their taxable income at regular
corporate rates.
 
     The Predecessor was not a legal entity subject to income taxes. No federal
or state income taxes were applicable to the entities that managed and owned the
properties; accordingly, none have been provided in the accompanying combined
financial statements.
 
                                      F-127
<PAGE>   254
                         BEACON PROPERTIES CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  Interest Rate Protection Agreements
 
     The Company has entered into interest rate protection agreements to reduce
the impact of certain changes in interest rates on its variable rate debt. These
agreements are accounted for as a hedge. Amounts paid for the agreements are
amortized over the lives of the agreements on a basis which approximates the
interest method.
 
     Payments under interest rate swap agreements are recognized as adjustments
to interest expense when incurred. The Company's policy is to write-off
unamortized amounts paid under interest rate protection agreements, when the
related debt is paid off or there is a termination of the agreements prior to
their maturity. The Company is exposed to credit loss in the event of
nonperformance by the other parties to the interest rate protection agreements.
However, the Company does not anticipate nonperformance by the counterparties.
 
  Per Share Data
 
     The assumed exercise of outstanding share options, using the treasury stock
method, is not dilutive and, therefore, such amounts are not presented (see Note
9). The income tax status of dividends declared during the years ended December
31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994 are as
follows:
 
<TABLE>
<CAPTION>
                                                              1996    1995    1994
                                                              ----    ----    ----
<S>                                                           <C>     <C>     <C>
Ordinary income.............................................  91%     87%     66%
Return of capital...........................................   9%     13%     34%
</TABLE>
 
  Risks and Uncertainties
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities. Actual results could differ
from those estimates.
 
  Reclassifications
 
     Certain prior year balances have been reclassed to conform with current
year presentation.
 
3. ACCOUNTS RECEIVABLE:
 
<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                                -----------------
                                                                 1996       1995
                                                                -------    ------
<S>                                                             <C>        <C>
Tenants.....................................................    $ 5,072    $2,137
Other.......................................................      4,228     1,006
Affiliates..................................................      3,683     3,322
Allowance for uncollectible amounts.........................     (1,374)     (337)
                                                                -------    ------
  Total.....................................................    $11,609    $6,128
                                                                =======    ======
</TABLE>
 
4. MORTGAGE NOTES RECEIVABLE:
 
     The Company acquired a fifty percent interest in certain mortgage notes
collateralized by property owned by a joint venture in which the Company has an
indirect interest. The terms of the notes require interest-only payments at
8.71% quarterly on a principal balance of approximately $63.0 million and are
due on April 1, 1999. The term may be extended for up to three years under
certain conditions. The Company also has an option to purchase from an affiliate
other mortgages collateralized by the same property.
 
                                      F-128
<PAGE>   255
                         BEACON PROPERTIES CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
5. INVESTMENTS IN AND ADVANCE TO JOINT VENTURES AND CORPORATIONS:
 
     The following is summarized financial information for the property joint
ventures and corporation:
 
<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                                --------------------
                                                                  1996        1995
                                                                --------    --------
<S>                                                             <C>         <C>
Balance sheets:
  Real estate, net..........................................    $410,207    $419,096
  Other assets..............................................      51,669      55,714
                                                                --------    --------
     Total assets...........................................    $461,876    $474,810
                                                                ========    ========
  Mortgage notes payable....................................    $377,754    $380,827
  Loans and notes payable...................................      72,136      68,606
  Other liabilities.........................................      13,040      14,072
  Partners' and shareholders' equity (deficiency)...........      (1,054)     11,305
                                                                --------    --------
     Total liabilities and equity (deficiency)..............    $461,876    $474,810
                                                                ========    ========
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                     PREDECESSOR
                                                                                     ------------
                                                                    MAY 26, 1994     JAN. 1, 1994
                                                                         TO               TO
                                              1996        1995      DEC. 31, 1994    MAY 25, 1994
                                            --------    --------    -------------    ------------
<S>                                         <C>         <C>         <C>              <C>
Summary of operations:
  Rentals...............................    $117,283    $ 91,048      $ 59,983         $ 38,386
Other income............................       3,453       3,861         5,717            2,941
Operating expenses......................     (61,086)    (49,472)      (34,688)         (22,632)
Mortgage interest expense...............     (28,712)    (23,232)      (16,261)         (13,432)
Depreciation and amortization...........     (18,592)    (14,537)      (11,427)          (8,228)
                                            --------    --------      --------         --------
Net income (loss).......................    $ 12,346    $  7,668      $  3,324         $ (2,965)
                                            ========    ========      ========         ========
</TABLE>
 
     A reconciliation of interests in the underlying net assets to the Company's
carrying value of property investments in joint ventures and corporation is as
follows:
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                                ------------------
                                                                 1996       1995
                                                                -------    -------
<S>                                                             <C>        <C>
Partners' and shareholders' equity (deficiency), as above...    $(1,054)   $11,305
Deficits of other partners and shareholders.................     23,532     13,259
                                                                -------    -------
Company's share of equity...................................     22,478     24,564
Excess of cost of investments over the net book value of
  underlying net assets, net of amortization and accumulated
  amortization of $122 and $75, respectively................      1,310      1,357
                                                                -------    -------
Carrying value of property investments in joint ventures and
  corporation...............................................    $23,788    $25,921
                                                                =======    =======
</TABLE>
 
                                      F-129
<PAGE>   256
                         BEACON PROPERTIES CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following is summarized financial information for the service
corporations:
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                                ------------------
                                                                 1996       1995
                                                                -------    -------
<S>                                                             <C>        <C>
Balance sheets:
  Equipment, net............................................    $ 1,806    $   715
  Other assets..............................................     34,155     29,560
                                                                -------    -------
     Total assets...........................................    $35,961    $30,275
                                                                =======    =======
  Other liabilities.........................................    $37,360    $27,124
  Shareholders' equity (deficiency).........................     (1,399)     3,151
                                                                -------    -------
     Total liabilities and equity (deficiency)..............    $35,961    $30,275
                                                                =======    =======
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                MAY 26, 1994
                                                                                     TO
                                                        1996         1995       DEC. 31, 1994
                                                      ---------    ---------    -------------
<S>                                                   <C>          <C>          <C>
Summary of operations:
  Construction income.............................    $ 140,903    $ 108,913      $ 52,429
  Consulting and management fees..................        2,537        7,576         4,848
  Interest and other income.......................          266          383           184
  Construction, consulting and management fee
     costs........................................     (141,167)    (110,835)      (52,388)
  General and administrative expense..............       (5,121)      (4,880)       (3,564)
  Depreciation and amortization...................         (584)        (336)         (186)
  Minority interest in net income of joint
     venture......................................          (52)        (130)          (90)
  Interest expense to stockholder.................           --         (650)           --
                                                      ---------    ---------      --------
  Net income (loss)...............................    $  (3,218)   $      41      $  1,233
                                                      =========    =========      ========
</TABLE>
 
     A reconciliation of the underlying net assets to the Company's carrying
value of investments in and advance to service corporations is as follows:
 
<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                                --------------------
                                                                  1996        1995
                                                                --------    --------
<S>                                                             <C>         <C>
Shareholders' equity (deficiency), as above.................    $ (1,399)   $  3,151
Less equity (deficiency) of other shareholders..............         (29)         11
                                                                --------    --------
Company's share of equity (deficiency)......................      (1,370)      3,140
Advance.....................................................       5,000       5,000
                                                                --------    --------
Carrying value of investments in and advance to service
  corporations..............................................       3,630       8,140
Carrying value of property investments in joint ventures and
  corporation, as above.....................................      23,788      25,921
                                                                --------    --------
  Total.....................................................    $ 27,418    $ 34,061
                                                                ========    ========
Per consolidated balance sheet:
Investments in and advance to joint ventures and
  corporations..............................................    $ 52,153    $ 58,016
Investment in joint venture.................................     (24,735)    (23,955)
                                                                --------    --------
  Total.....................................................    $ 27,418    $ 34,061
                                                                ========    ========
</TABLE>
 
                                      F-130
<PAGE>   257
                         BEACON PROPERTIES CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
6. MORTGAGE NOTES PAYABLE:
 
     The mortgage notes payable, collateralized by the certain properties and
assignment of leases, are as follows:
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                                -------------------
                                                                  1996       1995
                                                                --------    -------
<S>                                                             <C>         <C>
Mortgage notes with fixed interest at:
8.00% maturing July 1, 1998.................................    $ 12,970    $13,236
6.67% maturing November 1, 1998.............................      56,920     57,300
7.23% maturing February 1, 2003.............................      55,000         --
7.23% maturing March 1, 2003................................      60,000         --
7.08% maturing March 31, 2006...............................     218,000         --
8.19% maturing January 1, 2007..............................      15,000         --
8.19% maturing January 1, 2007..............................      13,600         --
8.38% maturing December 1, 2008.............................      20,722         --
                                                                --------    -------
     Total mortgage notes payable...........................    $452,212    $70,536
                                                                ========    =======
</TABLE>
 
     The Company's restricted cash consists of cash required by these mortgages
to be held in escrow for capital expenditures and/or real estate taxes.
 
     Scheduled maturities of mortgage notes payable are as follows:
 
<TABLE>
<S>                                                           <C>
1997........................................................  $  2,127
1998........................................................    72,611
1999........................................................     6,602
2000........................................................     7,608
2001........................................................     8,171
Thereafter..................................................   355,093
                                                              --------
     Total..................................................  $452,212
                                                              ========
</TABLE>
 
     The Company computes the fair value of its mortgage notes payable based
upon the discounted cash flows at a discount rate that approximates the
Company's effective borrowing rate and the Company has determined that the fair
value of its mortgage notes approximates their carrying value.
 
     In March 1996, the Company repaid a debt and recorded an extraordinary item
of $1.9 million, net of minority interest, in connection with the write-off of
fees and costs to acquire the debt. The extraordinary item during the period
January 1, 1994 through May 25, 1994 represents the gains resulting from the
settlement of certain mortgage notes payable. As the prepayments were a
condition to transferring the assets to the Company, these items were recorded
by the Predecessor entity.
 
7. NOTE PAYABLE, CREDIT FACILITY:
 
     The Company has a three-year, $300 million revolving credit facility (the
"Credit Facility"). The Credit Facility matures in June 1999 and is secured by
cross-collateralized mortgages and assignment of rents on certain properties.
 
     Outstanding balances under the Credit Facility bear interest, at the
Company's option, at either (i) the higher of (x) Bank of Boston's base interest
rate and (y) one-half of one percent (1/2%) above the overnight federal funds
effective rate or (ii) the Eurodollar rate plus 175 basis points (1.75%). The
Company has an interest rate protection agreement through May 1997 with respect
to $135 million of the Credit Facility, which provides for offsetting payments
to the Company in the event that 90-day LIBOR exceeds 9.47% per annum.
 
                                      F-131
<PAGE>   258
                         BEACON PROPERTIES CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
Effective May 1997 through May 1999, the Company has an interest rate protection
agreement with respect to $137.5 million of the Credit Facility, which provides
for offsetting payments to the Company in the event that 90-day LIBOR exceeds
8.75% per annum. This interest rate protection arrangement may be applied during
any four quarters in the period from May 1997 to May 1999.
 
     The outstanding balance of the Credit Facility at December 31, 1996 was
$153.0 million. The weighted average amount outstanding during the years ended
December 31, 1996 and 1995 and the period May 26, 1994 to December 31, 1994 was
$42.3 million, $99.7 million and $50.4 million, respectively. The weighted
average interest rate on amounts outstanding during the years ended December 31,
1996 and 1995 and the period May 26, 1994 to December 31, 1994 was approximately
7.78%, 8.25% and 7.57%, respectively. The applicable interest rate under the
Credit Facility at December 31, 1996 was 8.25%.
 
     Based upon the Credit Facility's variable interest rate and the Company's
determination of the fair value of its interest rate agreement based upon the
quoted market prices of similar instruments, the Company has determined that the
fair value of these instruments approximate their carrying value.
 
     As a result of the substantial modification of the terms of the Credit
Facility in June 1996, the Company recorded an extraordinary item of $1.5
million, net of minority interest, in connection with the write-off of fees and
costs relating to the prior Credit Facility.
 
8. ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER LIABILITIES:
 
<TABLE>
<CAPTION>
                                                                   DECEMBER 31,
                                                              -----------------------
                                                               1996            1995
                                                              -------         -------
<S>                                                           <C>             <C>
Accounts payable and accrued expenses.......................  $29,904         $ 8,092
Deferred liability..........................................    4,912           1,164
Affiliates..................................................    1,258           2,952
Other liabilities...........................................      504             647
Security deposits...........................................    5,186           1,167
                                                              -------         -------
     Total..................................................  $41,764         $14,022
                                                              =======         =======
</TABLE>
 
9. STOCKHOLDERS' EQUITY:
 
  Stock Option Plans
 
     During 1994, the Company adopted the 1994 Stock Option Plan, which
initially reserved 1,102,080 shares of common stock. In May, 1996 the 1994 Stock
Option Plan was amended to reserve an additional 1,621,485 shares of common
stock. The 1994 Stock Option Plan is administered by the Compensation Committee
of the Board of Directors (the "Committee") and officers and certain other
employees of the Company are eligible to participate. Non-employee Directors of
the Company are eligible to receive stock options under the 1994 Stock Option
Plan on a limited basis.
 
     The 1994 Stock Option Plan authorizes (i) the grant of stock options that
qualify as incentive stock options under Section 422 of the Code ("ISOs"), (ii)
the grant of stock options that do not so qualify ("NQSOs"), (iii) the grant of
stock options in lieu of cash for Directors' fees and employee bonuses, (iv)
grants of shares of common stock contingent on the attainment of performance
goals or subject to other restrictions, and (v) grants of shares of common stock
in lieu of cash compensation. The exercise price of stock options will be
determined by the Committee, but may not be less than 100% of the fair market
value of the shares of Common Stock on the date of grant in the case of ISOs.
However, in the case of grants of NQSOs granted in lieu of cash for Directors'
fees and employee bonuses, the exercise price may not be less than 50% of the
fair market value of the shares of common stock on the date of grant. NQSOs
granted under the 1994 Stock Option Plan may, if approved by the Committee,
accrue annually a dividend equivalent right
 
                                      F-132
<PAGE>   259
                         BEACON PROPERTIES CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
which will entitle the option-holder to receive additional shares of common
stock upon the exercise of the option. The Company has reserved 29,425 shares of
common stock for issuance under the 1994 Stock Option Plan. Options issued vest
at such time or times as determined by the committee except for options issued
to independent directors which vest on the date of grant. All options have a
term of ten years from the grant date.
 
     In October 1996, the Company adopted the 1996 Stock Option Plan (the "1996
Plan"), which provides for the granting of options to purchase up to an
aggregate of 750,000 shares of common stock to all employees other than the
senior executive officers of the Company. The Company has reserved 168,500
shares of common stock for issuance under the 1996 Option Plan. The term of each
option is fixed by the Committee. The Committee also determines at what time or
times each option becomes vested and exercisable and, subject to the terms of
the Plan, the period of time, if any, after death, disability, or termination of
employment during which options may be exercised. The Committee may accelerate
the exercisability of any option at any time.
 
     Changes in options outstanding under the 1994 and 1996 plans during the
period were as follows:
 
<TABLE>
<CAPTION>
                                                                              OPTION
                                                                               PRICE
                                                                 NUMBER      ---------
                                                               OF SHARES     PER SHARE
                                                              UNDER OPTION    AVERAGE
                                                              ------------   ---------
<S>                                                           <C>            <C>
Granted at Initial Offering.................................     630,250      $17.00
Granted May-December 1994...................................      27,500       18.16
Canceled May-December 1994..................................     (15,750)      17.00
                                                               ---------      ------
Shares under Option at December 31, 1994....................     642,000       17.05
Exercised -- 1995...........................................     (12,367)      17.46
Granted -- 1995.............................................     414,000       20.14
Canceled -- 1995............................................      (9,662)      17.00
                                                               ---------      ------
Shares under Option at December 31, 1995....................   1,033,971       18.28
Exercised -- 1996...........................................     (97,827)      17.00
Granted -- 1996.............................................   2,236,550       28.72
Canceled -- 1996............................................      (7,248)      19.16
                                                               ---------      ------
Shares under option at December 31, 1996....................   3,165,446       25.69
                                                               =========      ======
Options available for grant at beginning of year............      55,826          --
Options available for grant at end of year..................     197,925          --
</TABLE>
 
     The Company applies Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for its plans. Financial Accounting Standards
Board Statement No. 123 "Accounting for Stock-Based Compensation" ("SFAS 123")
was issued in 1995 and, if fully adopted, changes the methods for recognition of
cost on plans similar to those of the Company. Adoption of SFAS 123 is optional;
however, had compensation cost for the Company's 1996 grants for stock-based
compensation plans been determined consistent with SFAS 123, the Company's net
income, net income applicable to common shareholders, and net income per common
share would approximate the pro forma amounts below:
 
<TABLE>
<CAPTION>
                                                               1996      1995
                                                              -------   -------
<S>                                                           <C>       <C>
Net income:
  As reported...............................................  $36,332   $18,060
  Pro forma (unaudited).....................................   35,530    18,007
Net income per common share:
  As reported...............................................     1.21      1.09
  Pro forma (unaudited).....................................     1.19      1.09
</TABLE>
 
                                      F-133
<PAGE>   260
                         BEACON PROPERTIES CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards prior to 1995,
and additional awards in future years are anticipated.
 
     The fair value of each option granted under SFAS 123, estimated on the date
of grant using the Black-Scholes option-pricing model, is $3.38 for 1996 and
$2.04 for 1995. The following table presents the annualized weighted-average
values of the significant assumptions used to estimate the fair values of the
options:
 
<TABLE>
<CAPTION>
                                                              1996    1995
                                                              ----    ----
<S>                                                           <C>     <C>
Risk-free interest rate.....................................  6.22%   5.45%
Expected life in years......................................   6.0     6.0
Expected volatility.........................................  16.6%   16.1%
Expected dividend yield.....................................   6.0%    6.0%
</TABLE>
 
     The following table summarizes information about options outstanding at
December 31, 1996:
 
<TABLE>
<CAPTION>
                          OPTIONS OUTSTANDING                                     OPTIONS EXERCISABLE
- ------------------------------------------------------------------------   ---------------------------------
                                                            WEIGHTED       WEIGHTED                 WEIGHTED
                                            NUMBER          AVERAGE        AVERAGE      NUMBER      AVERAGE
     RANGE OF                             OUTSTANDING      REMAINING       EXERCISE   EXERCISABLE   EXERCISE
  EXERCISE PRICES                         AT 12/31/96   CONTRACTUAL LIFE    PRICE     AT 12/31/96    PRICE
  ---------------                         -----------   ----------------   --------   -----------   --------
<C>                 <S>                   <C>           <C>                <C>        <C>           <C>
$12.0625 - $15.0000 ....................       2,614          9.48         $13.4150       2,576     $13.4230
 17.0000 -  17.0000 ....................     497,396          7.38          17.0000     300,998      17.0000
 17.1875 -  18.3125 ....................      22,936          7.54          18.1680      20,437      18.1580
 20.1250 -  20.1250 ....................     395,000          8.92          20.1250     136,685      20.1250
 20.3750 -  25.8750 ....................     426,000          9.28          24.9049      26,000      22.4807
 26.0000 -  26.7500 ....................      35,000          9.49          26.2142      15,000      26.0000
 29.6250 -  29.6250 ....................   1,779,500          9.85          29.6250           0       0.0000
 31.0000 -  31.0000 ....................       1,000          9.89          31.0000           0       0.0000
 31.5000 -  31.5000 ....................       1,000          9.90          31.5000           0       0.0000
 32.2500 -  32.2500 ....................       5,000          9.94          32.2500           0       0.0000
- -------------------                        ---------          ----         --------     -------     --------
 12.0625 -  32.2500 ....................   3,165,446          9.25         $25.6915     501,696     $18.4333
                                           =========          ====         ========     =======     ========
</TABLE>
 
  Stock Purchase Plan
 
     In 1995, the Company instituted a dividend reinvestment and stock purchase
plan for holders of the Company's stock. The plan permits shareholders to
automatically reinvest their cash dividends or invest limited amounts of cash
payments in newly issued shares or open market purchases of the Company's common
stock. At December 31, 1996 and 1995, there were 373,132 and 474,563 shares
reserved for issuance under the dividend reinvestment and stock purchase plan.
 
10. TRANSACTIONS WITH AFFILIATES:
 
<TABLE>
<CAPTION>
                                                                                     PREDECESSOR
                                                                                     ------------
                                                                    MAY 26, 1994     JAN. 1, 1994
                                                                         TO               TO
                                                1996      1995      DEC. 31, 1994    MAY 25, 1994
                                               ------    -------    -------------    ------------
<S>                                            <C>       <C>        <C>              <C>
Management, design and construction fees
  and interest income......................    $9,176    $ 5,640                        $1,809
Administrative salaries and expenses.......        --         --                           469
Construction costs.........................     8,352     11,108        $241                --
</TABLE>
 
     In 1995, the Company entered into an agreement to lease its corporate
offices from a joint venture in which the Company has an indirect interest. It
previously subleased corporate office space from another affiliate. Rental
expense related to these arrangements was $1.3 million, $0.3 million and $0.1
million for the
 
                                      F-134
<PAGE>   261
                         BEACON PROPERTIES CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
years ended December 31, 1996 and 1995 and the period from May 26, 1994 to
December 31, 1994, respectively.
 
     Future minimum rental payments at December 31, 1996 for the Company's
corporate offices are $1.3 million for 1997, $1.4 million for 1998 through 2001,
and $1.0 million for 2002.
 
11. MINORITY INTERESTS:
 
   Minority Interest in Operating Partnership
 
     Minority interest in the Operating Partnership relates to the portion which
is not owned by the Company and, at December 31, 1996, amounted to 11.5%.
 
     In conjunction with the formation of the Company persons contributing
interests in properties to the Operating Partnership elected to receive either
common stock of the Company or interests in the Operating Partnership ("Units").
Each Unit may be redeemed for cash equal to the fair market value of a share of
common stock at the time of redemption or, at the option of the Company, one
share of common stock. When a unitholder redeems a Unit for a share of common
stock or cash, minority interest is reduced and the Company's investment in the
Operating Partnership is increased. At December 31, 1996 and 1995, 6,273,928 and
3,788,549 units were outstanding, respectively.
 
   Minority Interest in Combined Partnerships
 
     This amount presented in the financial statements of the Predecessor
represents the losses of the properties in excess of capital of owners, who will
continue to hold their respective economic interest in the combined
partnerships, and are capable of funding their share of future capital calls.
 
12. COMMITMENTS AND CONTINGENCIES:
 
   Pension Plan
 
     The Company participates in a defined-benefit pension plan with some of its
affiliates. This plan covers substantially all full-time non-union employees.
The Company's portion of pension expense for the years ended December 31, 1996
and 1995 and the period May 26, 1994 to December 31, 1994 was $0.2 million, $0.1
million, and $0.1 million, respectively. The Predecessor's comparable allocated
portion of pension expense amounted to $0.1 million for the period January 1,
1994 to May 25, 1994.
 
   401K Plan
 
     The eligible employees of the Company participate in a contributory savings
plan with some of its affiliates. Under the plan, the Company may match
contributions made by eligible employees based on a percentage of the employee's
salary. The Company matches 25% of contributions up to 3% of such employee's
salary (up to $30,000). The matching amount may be changed from time to time by
the Board of Directors. Expenses under this Plan for 1995, 1994 and 1993 were
not material.
 
   Contingencies
 
     The Company is subject to various legal proceedings and claims that arose
in the ordinary course of business. These matters are generally covered by
insurance. Management believes that the final outcome of such matters will not
have a material adverse effect on the financial position, results of operations
or liquidity of the Company.
 
                                      F-135
<PAGE>   262
                         BEACON PROPERTIES CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
   Lease
 
     The South Station property is subject to a ground lease expiring in 2024.
The lease provides for two 15-year extension options. Under certain conditions,
the lessor reserves the right to terminate the lease at the end of the initial
term or at the end of the first extension period and pay the lessee an amount
based on a formula payment of fair value. The minimum rents in connection with
the lease are substantially based on percentage rent until 1997. The Company is
obligated to provide loans to the lessor under certain conditions subject to a
maximum of $0.9 million. As of December 31, 1996, no such loans were
outstanding.
 
   Environmental
 
     A former tenant of Crosby Corporate Center has agreed to perform the
necessary investigation and cleanup actions regarding remediation of possible
contamination, bear all costs associated with such cleanup activities and
indemnify the Company for any costs or damages it incurs in connection with such
contamination. As the owner of the property, however, the Company could be held
liable for the costs of such activities if the former tenant fails to undertake
such actions.
 
     As a lessee of certain property, the Company has received an indemnity from
the owner to the extent the Company is assessed costs relating to environmental
cleanup.
 
     Site assessments at the New England Executive Park have identified
contamination in the groundwater at a monitoring well which flows into an
aquifer, which supplies drinking water to the Town of Burlington. The Town of
Burlington has allocated funds for, and is in the process of constructing, a
groundwater treatment facility at its drinking water supply that draws from the
subject aquifer. The Company has been advised that such treatment facility has
the capacity to treat any contaminants which may be derived from the groundwater
passing beneath the New England Executive Park.
 
     Based on site assessments performed at The Riverview Building which have
identified the presence of oil that slightly exceeds the concentration that
requires reporting to the Massachusetts Department of Environmental Protection,
an environmental consultant has advised the Company that applicable regulatory
requirements can be satisfied without the need to perform any remediation at the
property.
 
     In connection with the acquisition of the John Marshall land, the sellers
have reported the findings of contamination to the Virginia Department of
Environmental Quality and have retained an environmental consultant to prepare a
remediation plan. Units valued at approximately $1.0 million were escrowed from
the purchase price to be released to the seller upon performance of remediation
pursuant to a remediation plan approved by the Company. The escrow further
provides that the Company may receive some or all of the remaining escrowed
Units upon certain conditions.
 
     The Company does not believe that any costs, if incurred, in connection
with these environmental matters would have a material adverse effect on the
financial position, results of operations, or liquidity of the Company.
 
   Other
 
     The Company guarantees the surety bonds of an affiliate in an amount up to
$5.0 million.
 
     The Company has an obligation to pay $17.0 million in connection with the
acquisition of real estate upon the achievement of conditions regarding
occupancy or rental income levels.
 
     In connection with the acquisition of the John Marshall I, E. J. Randolph
and Northridge I properties, the Company has agreed to maintain the non-recourse
financing assumed from the sellers for a five year period and not to dispose of
the property for a seven year period. If the Company should choose not to
maintain the non-recourse provisions of the existing or new debt, or sell the
properties, within these respective time periods
 
                                      F-136
<PAGE>   263
                         BEACON PROPERTIES CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
it shall be required to make payments to the sellers of approximately $6.0
million in 1997, reducing ratably to zero through 2003.
 
13. SEGMENT INFORMATION:
 
     The Predecessor operated principally in three segments: rental operations,
property management, and construction. Revenues for the management segment
include management revenues earned from the rental operations segment which are
subsequently eliminated in consolidation.
 
     Income (loss) from operations consists of total revenues less total
expenses excluding the effects of the following items: equity in net income
(loss) of joint ventures, minority interest in loss of combined partnerships and
extraordinary gain.
 
<TABLE>
<CAPTION>
                                                             JANUARY 1, 1994 - MAY 25, 1994
                                             ---------------------------------------------------------------
                                             RENTAL     MANAGEMENT    CONSTRUCTION    ELIMINATION     TOTAL
                                             -------    ----------    ------------    -----------    -------
<S>                                          <C>        <C>           <C>             <C>            <C>
Revenues.................................    $ 7,610      $1,766        $24,238          $(364)      $33,250
Income (Loss) from Operations............     (1,848)      1,260            102            (36)         (522)
Identifiable Assets......................     63,335         283         14,141           (289)       77,470
Depreciation and Amortization............      2,383           2             91             --         2,476
Capital Expenditures.....................        837          --            141             --           978
</TABLE>
 
14. FUTURE MINIMUM RENTS:
 
     Future minimum rentals to be received under noncancelable tenant leases in
effect at December 31, 1996 are as follows:
 
<TABLE>
<S>                                                             <C>
1997........................................................    $  188,032
1998........................................................       175,732
1999........................................................       170,086
2000........................................................       143,288
2001........................................................       113,718
Thereafter..................................................       370,698
                                                                ----------
  Total.....................................................    $1,161,554
                                                                ==========
</TABLE>
 
15. GEOGRAPHIC CONCENTRATION:
 
     The Company owns properties with a total cost at December 31, 1996 as
follows:
 
<TABLE>
<S>                                                             <C>
Downtown Boston.............................................    $  284,574
Suburban Boston.............................................       279,987
Suburban Atlanta............................................       343,014
Suburban Philadelphia.......................................        59,018
Suburban Virginia...........................................       178,166
Suburban Los Angeles........................................       133,307
Suburban San Francisco......................................       184,207
Suburban Chicago............................................       175,819
Downtown Washington.........................................        53,438
                                                                ----------
  Total.....................................................    $1,691,530
                                                                ==========
</TABLE>
 
                                      F-137
<PAGE>   264
                         BEACON PROPERTIES CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
16. SELECTED QUARTERLY FINANCIAL INFORMATION: (UNAUDITED)
 
     The following schedule is a summary of the quarterly results of operations
for the years ended December 31, 1996 and 1995 and the period May 26, 1994 to
December 31, 1994:
 
<TABLE>
<CAPTION>
                                                   FIRST     SECOND      THIRD     FOURTH
                                                  QUARTER    QUARTER    QUARTER    QUARTER     TOTAL
                                                  -------    -------    -------    -------    --------
                                                              YEAR ENDED DECEMBER 31, 1996
<S>                                               <C>        <C>        <C>        <C>        <C>
Revenue.......................................    $33,668    $41,438    $46,602    $62,082    $183,791
Income from continuing operations.............      6,899     10,053     11,603     15,002      43,557
Discontinued operations -- Construction
  Company:
  Loss from operations........................       (407)      (663)      (841)      (698)     (2,609)
  Loss on sale................................         --         --         --       (249)       (249)
Extraordinary items, net of minority
  interest....................................     (1,726)    (1,642)        --         --      (3,368)
Net income....................................      4,994      7,550     10,524     13,265      36,332
Net income per common share...................       0.23       0.28       0.34       0.34        1.21
</TABLE>
 
<TABLE>
<CAPTION>
                                                    FIRST     SECOND      THIRD     FOURTH
                                                   QUARTER    QUARTER    QUARTER    QUARTER     TOTAL
                                                   -------    -------    -------    -------    -------
                                                              YEAR ENDED DECEMBER 31, 1995
<S>                                                <C>        <C>        <C>        <C>        <C>
Revenue........................................    $20,801    $22,124    $23,595    $24,523    $91,043
Income from continuing operations..............      3,498      4,620      5,510      5,329     18,957
Discontinued operations -- Construction
  Company:
  Loss from operations.........................         --         --        (12)        --        (12)
Net income.....................................      3,081      4,151      5,088      5,740     18,060
Net income per common share....................       0.25       0.26       0.29       0.28       1.09
</TABLE>
 
<TABLE>
<CAPTION>
                                                             SECOND      THIRD     FOURTH
                                                             QUARTER    QUARTER    QUARTER     TOTAL
                                                             -------    -------    -------    -------
                                                                MAY 26, 1994 TO DECEMBER 31, 1994
<S>                                                          <C>        <C>        <C>        <C>
Revenue..................................................    $3,997     $11,387    $16,549    $31,933
Income from continuing operations........................       784       1,578      3,557      5,919
Discontinued operations -- Construction Company:
  Income from operations.................................        42         165        270        477
Net income...............................................       826       1,826      3,003      5,655
Net income per common share..............................      0.07        0.15       0.26       0.48
</TABLE>
 
17. PRO FORMA RESULTS: (UNAUDITED)
 
     The following unaudited pro forma operating results for the Company have
been prepared as if capital contributions and property acquisitions during 1995
and 1996 had occurred on January 1, 1995. Unaudited pro forma financial
information is presented for informational purposes only and may not be
indicative of what the actual results of operations of the Company would have
been had the events occurred as of January 1, 1995, nor does it purport to
represent the results of operations for future periods. Pro forma results have
not been presented for 1994 as the Company operations did not commence until May
26, 1994.
 
<TABLE>
<CAPTION>
                                                                    DECEMBER 31,
                                                                --------------------
                                                                  1996        1995
                                                                --------    --------
<S>                                                             <C>         <C>
Revenues....................................................    $299,147    $266,882
Income before extraordinary items...........................      74,845      69,894
Net income..................................................      71,416      69,894
Net income per common share.................................        1.48        1.45
</TABLE>
 
                                      F-138
<PAGE>   265
                         BEACON PROPERTIES CORPORATION
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
18. DISCONTINUED OPERATIONS:
 
     On December 31, 1996, certain assets of the Construction Company were sold.
These assets included fixed assets, general construction contracts in progress,
and the receivables and payables related to these contracts. All employees were
transferred to the buyer who is expected to complete all outstanding
construction work for projects not purchased as part of the sale.
 
19. SUBSEQUENT EVENTS:
 
   Declaration of Dividend
 
     On January 28, 1997, the Company declared a quarterly dividend of $0.4625
per common share, payable on February 28, 1997 to shareholders of record on
February 10, 1997.
 
                                      F-139
<PAGE>   266
 
       REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
 
To the Board of Directors and Stockholders of
Beacon Properties Corporation:
 
Our report on the consolidated financial statements of Beacon Properties
Corporation is included on page F-1 of this Form 10-K. In connection with our
audits of such financial statements, we have also audited the related financial
statement schedules listed in the Item 14(a) of this Form 10-K.
 
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
 
                                          /s/ Coopers & Lybrand L.L.P.
 
Boston, Massachusetts
January 28, 1997
 
                                      F-140
<PAGE>   267
 
                                  SCHEDULE III
 
                         BEACON PROPERTIES CORPORATION
                    REAL ESTATE AND ACCUMULATED DEPRECIATION
                               DECEMBER 31, 1996
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                   INITIAL COST
                                                                           ----------------------------
                                                                           BUILDINGS AND
DESCRIPTION                                                 ENCUMBRANCES       LAND        IMPROVEMENTS
- -----------                                                 ------------   -------------   ------------
<S>                                                         <C>            <C>             <C>
Commercial Property:
Wellesley Office Park -- Buildings 1-8 -- Wellesley, MA...    $ 55,000       $  9,110       $   75,829
Crosby Corporate Center -- Bedford, MA....................          --(1)         978           10,478
South Station -- Boston, MA...............................          --             --           21,487
175 Federal St. -- Boston, MA.............................      12,970          1,404           24,505
Center Plaza -- Boston, MA................................      60,000          7,301           65,712
150 Federal St. -- Boston, MA.............................      56,920(2)      11,265          101,280
One Canal Park -- Cambridge, MA...........................          --(1)         931            8,444
Ten Canal Park -- Cambridge, MA...........................          --(1)       1,179           10,609
Two Oliver Street -- Boston, MA...........................          --(1)       1,796           16,166
Westwood Business Centre -- Westwood, MA..................          --(1)       1,159           10,498
Russia Wharf -- Boston, MA................................          --(1)       1,442           12,974
Westlakes Office Park -- Buildings 1, 2, 3 and 5 --
  Berwyn, PA..............................................          --(1)       6,335           46,267
Perimeter Center--Atlanta, GA.............................     218,000         46,438          292,305
AT&T Plaza -- Oak Brook, IL...............................          --(1)       3,510           31,587
Tri-State International -- Lincolnshire, IL...............          --(1)       6,222           55,999
1333H Street, N.W. -- Washington, D.C.....................          --(1)       5,337           48,033
E.J. Randolph -- McLean, VA...............................      15,000          3,590           19,520
John Marshall I -- McLean, VA.............................      20,722          5,996           27,991
Northridge I -- Herndon, VA...............................      13,600          1,911           19,264
1300 North 17th Street -- Rosslyn, VA.....................          --(1)       8,007           46,758
1616 North Fort Myer Drive -- Rosslyn, VA.................          --(1)       6,156           38,651
New England Executive Park -- Burlington, MA..............          --(1)       7,067           68,259
10960 Wilshire Boulevard -- Westwood, CA..................          --         11,200          122,039
The Riverview Building -- Cambridge, MA...................          --          4,513           40,616
Shoreline Technology Park -- Mountain View, CA............          --         39,547          101,444
Lake Marriott Business Park -- Santa Clara, CA............          --         12,032           31,128
Presidents Plaza -- Chicago, IL...........................          --          7,750           69,752
                                                              --------       --------       ----------
                                                              $452,212       $212,176       $1,417,595
                                                              ========       ========       ==========
</TABLE>
 
                                      F-141
<PAGE>   268
                                  SCHEDULE III
 
                         BEACON PROPERTIES CORPORATION
             REAL ESTATE AND ACCUMULATED DEPRECIATION -- CONTINUED
                               DECEMBER 31, 1996
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                    SUBSEQUENT TO              GROSS AMOUNT AT WHICH
                                                     ACQUISITION             CARRIED AT CLOSE OF PERIOD
Cost Capitalized                                ---------------------   ------------------------------------
                                                          BUILDINGS                 BUILDINGS
                                                             AND                       AND
DESCRIPTION                                      LAND    IMPROVEMENTS     LAND     IMPROVEMENTS     TOTAL
- -----------                                     ------   ------------   --------   ------------   ----------
<S>                                             <C>      <C>            <C>        <C>            <C>
Commercial Property:
Wellesley Office Park -- Buildings 1-8 --
  Wellesley, MA...............................      --     $12,866      $  9,110    $   88,695    $   97,805
Crosby Corporate Center -- Bedford, MA........  $1,505      14,880         2,483        25,358        27,841
South Station -- Boston, MA...................      --         861            --        22,348        22,348
175 Federal St. -- Boston, MA.................      --       3,196         1,404        27,701        29,105
Center Plaza -- Boston, MA....................      --       8,810         7,301        74,522        81,823
150 Federal St. -- Boston, MA.................      --       1,326        11,265       102,606       113,871
One Canal Park -- Cambridge, MA...............      --         139           931         8,583         9,514
Ten Canal Park -- Cambridge, MA...............      --         135         1,179        10,744        11,923
Two Oliver Street -- Boston, MA...............      --       1,376         1,796        17,542        19,338
Westwood Business Centre -- Westwood, MA......      --         674         1,159        11,172        12,331
Russia Wharf -- Boston, MA....................     177       3,496         1,619        16,470        18,089
Westlakes Office Park -- Buildings 1, 2, 3 and
  5 -- Berwyn, PA.............................      --       6,416         6,335        52,683        59,018
Perimeter Center -- Atlanta, GA...............      --       4,271        46,438       296,576       343,014
AT&T Plaza -- Oak Brook, IL...................      --          18         3,510        31,605        35,115
Tri-State International -- Lincolnshire, IL...      --         950         6,222        56,949        63,171
1333H Street, N.W. -- Washington, D.C.........      --          68         5,337        48,101        53,438
E.J. Randolph -- McLean, VA...................      --          36         3,590        19,556        23,146
John Marshall I -- McLean, VA.................      --         147         5,996        28,138        34,134
Northridge I -- Herndon, VA...................      --          41         1,911        19,305        21,216
1300 North 17th Street -- Rosslyn, VA.........      --          11         8,007        46,769        54,776
1616 North Fort Myer Drive -- Rosslyn, VA.....      --          87         6,156        38,738        44,894
New England Executive Park -- Burlington,
  MA..........................................      --          64         7,067        68,323        75,390
10960 Wilshire Boulevard -- Westwood, CA......      --          68        11,200       122,107       133,307
The Riverview Building -- Cambridge, MA.......      --          54         4,513        40,670        45,183
Shoreline Technology Park -- Mountain View,
  CA..........................................      --          49        39,547       101,493       141,040
Lake Marriott Business Park -- Santa Clara,
  CA..........................................      --           7        12,032        31,135        43,167
Presidents Plaza -- Chicago, IL...............      --          31         7,750        69,783        77,533
                                                ------     -------      --------    ----------    ----------
                                                $1,682     $60,077      $213,858    $1,477,672    $1,691,530
                                                ======     =======      ========    ==========    ==========
</TABLE>
 
                                      F-142
<PAGE>   269
                                  SCHEDULE III
 
                         BEACON PROPERTIES CORPORATION
             REAL ESTATE AND ACCUMULATED DEPRECIATION -- CONTINUED
                               DECEMBER 31, 1996
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                               LIFE ON
                                                                                                WHICH
                                                                                             DEPRECIATION
                                                                                              IN LATEST
                                                                 DATE OF                        INCOME
                                               ACCUMULATED    CONSTRUCTION/       DATE        STATEMENTS
DESCRIPTION                                    DEPRECIATION    RENOVATION       ACQUIRED     IS COMPUTED
- -----------                                    ------------   -------------   ------------   ------------
<S>                                            <C>            <C>             <C>            <C>
Commercial Property:
Wellesley Office Park -- Buildings 1-8 --
  Wellesley, MA...............................   $33,913        1963-1984        1994/1995        (3)
Crosby Corporate Center -- Bedford, MA........     6,702             1981          5/26/94        (3)
South Station -- Boston, MA...................    13,434             1988          5/26/94        (3)
175 Federal St. -- Boston, MA.................     7,258             1977         10/28/94        (3)
Center Plaza -- Boston, MA....................     5,884        1966-1969         12/01/94        (3)
150 Federal St. -- Boston, MA.................     8,961             1988          5/26/94        (3)
One Canal Park -- Cambridge, MA...............       770             1987          6/10/94        (3)
Ten Canal Park -- Cambridge, MA...............       386             1987         12/20/95        (3)
Two Oliver Street -- Boston, MA...............       783        1982-1988         10/06/95        (3)
Westwood Business Centre -- Westwood, MA......     1,083             1985          6/10/94        (3)
Russia Wharf -- Boston, MA....................     1,453        1978-1982          8/10/94        (3)
Westlakes Office Park -- Buildings 1, 2, 3 and
  5 -- Berwyn, PA.............................     3,931        1988-1990     7/95 & 10/94        (3)
Perimeter Center -- Atlanta, GA...............     8,822        1970-1989          2/15/96        (3)
AT&T Plaza -- Oak Brook, IL...................       395             1984          8/16/96        (3)
Tri-State International -- Lincolnshire, IL...       710             1986          8/16/96        (3)
1333H Street, N.W. -- Washington, D.C.........       601             1984          8/16/96        (3)
E.J. Randolph -- McLean, VA...................       217             1983          9/05/96        (3)
John Marshall I -- McLean, VA.................       306             1981          9/05/96        (3)
Northridge I -- Herndon, VA...................       214             1988          9/05/96        (3)
1300 North 17th Street -- Rosslyn, VA.........       325             1980         10/18/96        (3)
1616 North Fort Myer Drive -- Rosslyn, VA.....       271             1974         10/18/96        (3)
New England Executive Park -- Burlington,
  MA..........................................       291        1970-1985         11/15/96        (3)
10960 Wilshire Boulevard -- Westwood, CA......       439        1971-1992         11/21/96        (3)
The Riverview Building -- Cambridge, MA.......       170        1985-1986         11/21/96        (3)
Shoreline Technology Park -- Mountain View,
  CA..........................................       141        1985-1991         12/20/96        (3)
Lake Marriott Business Park -- Santa Clara,
  CA..........................................        43             1981         12/20/96        (3)
Presidents Plaza -- Chicago, IL...............        32        1980-1982         12/27/96        (3)
                                                 -------
                                                 $97,535
                                                 =======
</TABLE>
 
- ---------------
(1) These properties are collateral for a Note Payable under the Credit
    Facility. The outstanding balance under the Note at December 31, 1996 is
    $153,000.
 
(2) This property is comprised of two Units. Unit A is collateral for a Note
    Payable under the Credit Facility. Unit B is collateral for a Mortgage Note
    Payable in the amount of $56,920.
 
(3) Buildings and improvements -- 19 to 40 years; Personal property -- 5 to 10
    years; tenant improvements -- over the terms of the related leases.
 
                                      F-143
<PAGE>   270
                                  SCHEDULE III
 
                         BEACON PROPERTIES CORPORATION
             REAL ESTATE AND ACCUMULATED DEPRECIATION -- CONTINUED
                               DECEMBER 31, 1996
                             (DOLLARS IN THOUSANDS)
 
     Depreciation of building and improvements and personal property is
calculated over the following estimated useful lives, using straight line and
declining balance methods:
 
     Buildings and improvements -- 19 to 40 years
 
     Tenant Improvements -- over the terms of the related leases
 
     Personal property -- 5 to 10 years
 
     The aggregate cost for federal income tax purposes was approximately
$1,390.3 million at December 31, 1996.
 
     The changes in total real estate assets for the years ended December 31,
1996 and 1995, the period May 26, 1994 to to December 31, 1994 and the period
January 1, 1994 to May 25, 1994 are as follows:
 
<TABLE>
<CAPTION>
                                                           COMPANY                    PREDECESSOR
                                           ---------------------------------------    ------------
                                                                     MAY 26, 1994     JAN. 1, 1994
                                                                          TO               TO
                                              1996         1995      DEC. 31, 1994    MAY 25, 1994
                                           ----------    --------    -------------    ------------
<S>                                        <C>           <C>         <C>              <C>
Balance, beginning of period...........    $  471,142    $400,419      $207,013*        $81,220
Acquisitions, Construction Costs and
  Improvements.........................     1,220,388      70,723       193,406             978
                                           ----------    --------      --------         -------
Balance, end of period.................    $1,691,530    $471,142      $400,419         $82,198
                                           ==========    ========      ========         =======
</TABLE>
 
- ---------------
* Represents initial acquisition cost of properties in the formation of the
  Company.
 
     The changes in accumulated depreciation for the years ended December 31,
1996 and 1995, the period May 26, 1994 to to December 31, 1994 and the period
January 1, 1994 to May 25, 1994 are as follows:
 
<TABLE>
<CAPTION>
                                                           COMPANY                    PREDECESSOR
                                           ---------------------------------------    ------------
                                                                     MAY 26, 1994     JAN. 1, 1994
                                                                          TO               TO
                                              1996         1995      DEC. 31, 1994    MAY 25, 1994
                                           ----------    --------    -------------    ------------
<S>                                        <C>           <C>         <C>              <C>
Balance, beginning of period...........    $   66,571    $ 51,115      $ 45,044**       $37,167
Depreciation for period................        30,964      15,456         6,071           2,055
                                           ----------    --------      --------         -------
Balance, end of period.................    $   97,535    $ 66,571      $ 51,115         $39,222
                                           ==========    ========      ========         =======
</TABLE>
 
- ---------------
     ** Balance reflects prior accumulated depreciation carried over due to
        accounting for formation acquisitions as poolings of interests.
 
                                      F-144
<PAGE>   271
 
                                  SCHEDULE IV
 
                         BEACON PROPERTIES CORPORATION
                         MORTGAGE LOANS ON REAL ESTATE
                               DECEMBER 31, 1996
                             (DOLLARS IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                                                                           PRINCIPAL
                                                                                                           AMOUNT OF
                                                                                                             LOANS
                                                                                                           SUBJECT TO
                                      FINAL                                    FACE         CARRYING       DELINQUENT
 COMMERCIAL PROPERTY     INTEREST    MATURITY      PERIODIC        PRIOR     AMOUNT OF     AMOUNT OF      PRINCIPAL OR
      INTEREST             RATE        DATE      PAYMENT TERM      LIENS     MORTGAGES    MORTGAGES(1)      INTEREST
 -------------------     --------    --------    -------------    -------    ---------    ------------    ------------
<S>                      <C>         <C>         <C>              <C>        <C>          <C>             <C>
Rowes Wharf Boston,
  MA.................     8.71%       4/1/99     Interest-only    $    --      63,000       $51,491            --
</TABLE>
 
- ---------------
(1) The aggregate cost of the Company's mortgage loans for federal income tax
    purposes was $51,491 at December 31, 1996.
 
     Reconciliation of Mortgage Loans on real estate for the year ended December
31:
 
<TABLE>
<CAPTION>
                                                                 1996
                                                                -------
<S>                                                             <C>
Balance at beginning of year................................    $34,778
  Additions during period:
     Acquisition of mortgage loans..........................     16,713
  Deductions during period:
     Principal collections..................................         --
                                                                -------
Balance at end of year......................................    $51,491
                                                                =======
</TABLE>
 
                                      F-145
<PAGE>   272
 
                             [EQUITY OFFICE LOGO]
<PAGE>   273
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 32.  SALES TO SPECIAL PARTIES
 
     Not applicable
 
ITEM 33.  RECENT SALES OF UNREGISTERED SECURITIES
 
     Prior to the IPO, 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 IPO, pursuant to the Contribution
Agreement, (i) each ZML Opportunity Partnership contributed to the Operating
Partnership substantially all of its assets and liabilities in exchange for an
aggregate of 122,900,572 Common Shares 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," contributed the Management Business, and EOP contributed 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 8,358,822 Units. EOP and the Operating Partnership then jointly contributed
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. In connection with its contribution of
the Management Business, EGI and EOH also contributed 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 IPO, pursuant to a merger
agreement, each ZML REIT merged with and into the Company and the Company issued
123,429,770 Common Shares to the ZML REIT shareholders. As part of the
Consolidation, each ZML Opportunity Partnership admitted the Company as its sole
managing general partner and each ZML Partner became a non-managing general
partner of its ZML Opportunity Partnership. As a result, the Company became the
1% managing general partner in each ZML Opportunity Partnership, the sole
limited partner in ZML Opportunity Partnerships III and IV, and the majority
limited partner in ZML Opportunity Partnerships I and II, owning at least 53%
and 83%, respectively, of the capital interests in those partnerships. See "The
Company -- Formation Transactions."
 
     In October 1997, the Company sold an aggregate of $274 million of
Restricted Common Shares in two separate transactions to institutional investors
and contributed the proceeds to the Company in exchange for 9.7 million Units.
 
     In February 1998, the Company sold 6,000,000 5.25% Preferred Income Equity
Redeemable Shares(SM), designated by the Company as its 5.25% Series B
Convertible, Cumulative Preferred Shares of Beneficial Interest, $.01 par value
per share, $50.00 liquidation preference per share (the "Series B Preferred
Shares"), in a private placement (the "Series B Preferred Offering"). The
Company used the net proceeds from the Series B Preferred Offering to repay
amounts outstanding under the Credit Facilities.
 
   
     In April 1998, the Company sold 1,628,009 Common Shares to Merrill Lynch,
Pierce, Fenner and Smith Incorporated in a private placement (the "UIT
Offering"). Merrill Lynch, Pierce, Fenner and Smith Incorporated deposited these
Common Shares with the trustee of the Equity Investor Fund Cohen and Steers
Realty Majors Portfolio (A Unit Investment Trust) (the "UIT") in exchange for
units in the UIT. The Company used the net proceeds from the UIT Offering to
repay amounts outstanding under the Credit Facilities.
    
 
ITEM 34.  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
 
                                      II-1
<PAGE>   274
 
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 and 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 serve 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 35.  TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED
 
     Not Applicable.
 
                                      II-2
<PAGE>   275
 
ITEM 36.  FINANCIAL STATEMENTS AND EXHIBITS
 
(A) FINANCIAL STATEMENTS, ALL OF WHICH ARE INCLUDED IN THE PROSPECTUS:
 
   
<TABLE>
<S>                                                           <C>
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
  (UNAUDITED)
EQUITY OFFICE PROPERTIES TRUST
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
  (UNAUDITED)
  Basis of Presentation.....................................
  Pro Forma Condensed Combined Balance Sheet as of March 31,
     1998...................................................
  Pro Forma Condensed Combined Statement of Operations for
     the three months ended March 31, 1998..................
  Pro Forma Condensed Combined Statement of Operations for
     the year ended December 31, 1997.......................
  Notes to the Pro Forma Condensed Combined Financial
     Statements.............................................
HISTORICAL CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
  (UNAUDITED)
  Consolidated Balance Sheets of Equity Office Properties
     Trust as of March 31, 1998 and December 31, 1997.......
  Consolidated Statement of Operations of Equity Office
     Properties Trust for the three months ended March 31,
     1998 and the Combined Statement of Operations of Equity
     Office Predecessors for the three months ended March
     31, 1997...............................................
  Consolidated Statement of Cash Flows of Equity Office
     Properties Trust for the three months ended March 31,
     1998 and the Combined Statement of Cash Flows of Equity
     Office Predecessors for the three months ended March
     31, 1997...............................................
HISTORICAL CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
  (AUDITED)
  Notes to Consolidated and Combined Financial Statements...
  Report of Independent Auditors............................
  Consolidated and Combined Balance Sheets of Equity Office
     Properties Trust and Equity Office Predecessors as of
     December 31, 1997 and 1996.............................
  Consolidated Statement of Operations of Equity Office
     Properties Trust for the period from July 11, 1997 to
     December 31, 1997, and the Combined Statements of
     Operations of Equity Office Predecessors for the period
     from January 1, 1997 to July 10, 1997 and the years
     ended December 31, 1996 and 1995.......................
  Consolidated Statement of Shareholders' Equity of Equity
     Office Properties Trust for the period from July 11,
     1997 to December 31, 1997 and the Combined Statements
     of Owners' Equity of Equity Office Predecessors for the
     period from January 1, 1997 to July 10, 1997 and the
     years ended December 31, 1996 and 1995.................
  Consolidated Statement of Cash Flows of Equity Office
     Properties Trust for the period from July 11, 1997 to
     December 31, 1997, and the Combined Statements of Cash
     Flows of Equity Office Predecessors for the period from
     January 1, 1997 to July 10, 1997 and the years ended
     December 31, 1996 and 1995.............................
  Notes to Consolidated and Combined Financial Statements...
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........
</TABLE>
    
 
                                      II-3
<PAGE>   276
   
<TABLE>
<S>                                                           <C>
OAKBROOK TERRACE TOWER
  Report of Independent Auditors............................
  Statements of Revenue and Certain Expenses for the three
     months ended March 31, 1997 and the year ended December
     31, 1996...............................................
  Notes to Statements of Revenue and Certain Expenses.......
ONE MARITIME PLAZA
  Report of Independent Auditors............................
  Statements of Revenue and Certain Expenses for the three
     months ended March 31, 1997 and the year ended December
     31, 1996...............................................
  Notes to Statements of Revenue and Certain Expenses.......
201 MISSION STREET
  Report of Independent Auditors............................
  Statements of Revenue and Certain Expenses for the three
     months ended March 31, 1997 and the year ended December
     31, 1996...............................................
  Notes to Statements of Revenue and Certain Expenses.......
30 N. LASALLE
  Report of Independent Auditors............................
  Statements of Revenue and Certain Expenses for the three
     months ended March 31, 1997 and the year ended December
     31, 1996...............................................
  Notes to Statements of Revenue and Certain Expenses.......
COLUMBUS AMERICA PROPERTIES
  Report of Independent Auditors............................
  Combined Statements of Revenue and Certain Expenses for
     the period from January 1, 1997 to July 31, 1997 and
     the year ended December 31, 1996.......................
  Notes to Combined Statements of Revenue and Certain
     Expenses...............................................
PRUDENTIAL PROPERTIES
  Report of Independent Auditors............................
  Combined Statements of Revenue and Certain Expenses for
     the period from January 1, 1997 to August 31, 1997 and
     the year ended December 31, 1996.......................
  Notes to Combined Statements of Revenue and Certain
     Expenses...............................................
550 SOUTH HOPE STREET
  Report of Independent Auditors............................
  Statements of Revenue and Certain Expenses for the period
     from April 1, 1997 to July 31, 1997 and the year ended
     March 31, 1997.........................................
  Notes to Statements of Revenue and Certain Expenses.......
ACORN PROPERTIES
  Report of Independent Auditors............................
  Combined Statements of Revenue and Certain Expenses for
     the period from January 1, 1997 to July 31, 1997 and
     the year ended December 31, 1996.......................
  Notes to Combined Statements of Revenue and Certain
     Expenses...............................................
10 & 30 SOUTH WACKER DRIVE
  Report of Independent Auditors............................
  Combined Statements of Revenue and Certain Expenses for
     the period from January 1, 1997 to July 31, 1997 and
     the year ended December 31, 1996.......................
  Notes to Combined Statements of Revenue and Certain
     Expenses...............................................
ONE LAFAYETTE CENTRE
  Report of Independent Auditors............................
  Statements of Revenue and Certain Expenses for the period
     from January 1, 1997 to July 31, 1997 and the year
     ended December 31, 1996................................
  Notes to Statements of Revenue and Certain Expenses.......
</TABLE>
    
 
                                      II-4
<PAGE>   277
   
<TABLE>
<S>                                                           <C>
PPM PROPERTIES
  Report of Independent Auditors............................
  Combined Statements of Revenue and Certain Expenses for
     the period from January 1, 1997 to August 31, 1997 and
     the year ended December 31, 1996.......................
  Notes to Combined Statements of Revenue and Certain
     Expenses...............................................
WRIGHT RUNSTAD PROPERTIES
  Report of Independent Auditors............................
  Combined Statements of Revenue and Certain Expenses for
     the period from October 1, 1996 to August 31, 1997 and
     the year ended September 30, 1996......................
  Notes to Combined Statements of Revenue and Certain
     Expenses...............................................
BEACON PROPERTIES CORPORATION
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
     Consolidated Balance Sheets as of September 30, 1997
      and December 31, 1996.................................
     Consolidated Statements of Operations for the nine
      months ended September 30, 1997 and 1996..............
     Consolidated Statements of Cash Flows for the nine
      months ended September 30, 1997 and 1996..............
     Notes to Consolidated Financial Statements.............
HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS (AUDITED)
     Report of Independent Accountants......................
     Consolidated Balance Sheets as of December 31, 1996 and
      1995..................................................
     Consolidated Statements of Operations for the years
      ended December 31, 1996 and 1995 and for the periods
      May 26, 1994 to December 31, 1994 and January 1, 1994
      to May 25, 1994.......................................
     Consolidated Statements of Stockholders' Equity for the
      period January 1, 1994 to December 31, 1996...........
     Consolidated Statements of Cash Flows for the period
      January 1, 1994 to December 31, 1996..................
     Notes to Consolidated Financial Statements.............
     Report of Independent Accountants on Financial
      Statement Schedules...................................
     Schedule III -- Real Estate and Accumulated
      Depreciation as of December 31, 1996..................
     Schedule IV -- Mortgage Loans on Real Estate as of
      December 31, 1996.....................................
 
SCHEDULES
Schedule III -- Real Estate and Accumulated Depreciation
All other schedules for which provision is made in the
  applicable accounting regulations of the Securities and
  Exchange Commission are not required under the related
  instructions or are inapplicable, and therefore have been
  omitted.
</TABLE>
    
 
(B)  EXHIBITS
 
   
<TABLE>
<C>           <S>
    1.1       Form of Underwriting Agreement
    3.1*      Amended and Restated Declaration of Trust of the Company, as
              amended
    3.2**     Articles Supplementary of the Company, dated December 15,
              1997 and filed with the Maryland State Department of
              Assessments and Taxation on December 17, 1997
    3.3**     Articles Supplementary of the Company, dated February 18,
              1998 and filed with the Maryland State Department of
              Assessments and Taxation on February 19, 1998
    3.4       Form of Articles Supplementary of the Company relating to
              the Series C Preferred Shares.
    3.5       Bylaws of the Company (Incorporated herein by reference to
              Exhibit 3.2 to the Registration Statement of the Company and
              the Operating Partnership on Form S-4 (Commission File No.
              333-40401))
</TABLE>
    
 
                                      II-5
<PAGE>   278
   
<TABLE>
<S><C>
    4.1**     Indenture, dated as of September 2, 1997, between the
              Operating Partnership and State Street Bank and Trust
              Company
    4.2**     First Supplemental Indenture, dated as of February 9, 1998,
              between the Operating Partnership and State Street Bank and
              Trust Company
    4.3**     $200,000,000 6.375% Note due 2003. A $100,000,000 6.375%
              Note due 2003, identical in all material respects other than
              principal amount to the Note filed as Exhibit 4.3, has not
              been filed.
    4.4**     $200,000,000 6.625% Note due 2005. Another $200,000,000
              6.625% Note due 2005, identical in all material respects to
              the Note filed as Exhibit 4.4, has not been filed.
    4.5**     $200,000,000 6.750% Note due 2008. A $100,000,000 6.750%
              Note due 2008, identical in all material respects other than
              principal amount to the Note filed as Exhibit 4.5, has not
              been filed.
    4.6**     $200,000,000 7.250% Note due 2018. A $50,000,000 7.250% Note
              due 2018, identical in all material respects other than
              principal amount to the Note filed as Exhibit 4.6, has not
              been filed.
    4.7**     $200,000,000 6.376% Mandatory Par Put Remarketed
              Securities(SM) due 2012. A $50,000,000 6.376% Mandatory Par
              Put Remarketed Securities(SM) due 2012, identical in all
              material respects to the note filed as Exhibit 4.7, has not
              been filed.
    4.8**     $30,000,000 7.24% Senior Note due 2004
    4.9**     $50,000,000 7.36% Senior Note due 2005
    4.10**    $50,000,000 7.44% Senior Note due 2006
    4.11**    $50,000,000 7.41% Senior Note due 2007
    4.12**    Registration Rights Agreement, dated as of February 12,
              1998, among the Operating Partnership, and (i) in the case
              of the 6.375% Notes due 2003, the 6.625% Notes due 2005 and
              the 7.250% Notes due 2018, Merrill Lynch, Pierce, Fenner &
              Smith Incorporated ("Merrill Lynch"), Lehman Brothers Inc.
              ("Lehman"), J.P. Morgan Securities Inc. ("J.P. Morgan"),
              Salomon Brothers Inc ("Salomon") and UBS Securities LLC,
              (ii) in the case of the 6.750% Notes due 2008, Merrill
              Lynch, Lehman, J.P. Morgan and BancAmerica Robertson
              Stephens and (iii) in the case of the 6.376% Mandatory Par
              Put Remarketed Securities(SM) due February 15, 2012, Merrill
              Lynch
    4.13**    Registration Rights Agreement, dated as of February 3, 1998,
              between the Company and Lehman
    5.1       Opinion of Hogan & Hartson L.L.P. regarding the legality of
              the securities being registered.
    8.1       Opinion of Hogan & Hartson L.L.P. regarding certain tax
              matters.
   10.1**     Agreement of Limited Partnership of the Operating
              Partnership, as amended
   10.2**     Registration Rights Agreement, dated as of July 11, 1997,
              among the Company and the persons named therein
   10.3**     Noncompetition Agreement between the Company and Samuel Zell
   10.4**     Contribution Agreement, dated as of April 30, 1997, among
              the Operating Partnership and the persons named therein
   10.5**     Merger Agreement, dated as of April 30, 1997, among the
              Company and the persons named therein
   10.6**     Each member of the Company's Board of Trustees and each
              Executive Officer of the Company has entered into an
              Indemnification Agreement with the Company. These
              Indemnification Agreements are identical in all material
              respects. The schedule below sets forth the terms of each
              Indemnification Agreement not filed which differ from the
              copy of the example Indemnification Agreement (between the
              Company and Samuel Zell, dated as of October 9, 1996), which
              is filed as Exhibit 10.6 hereto:
</TABLE>
    
 
                                      II-6
<PAGE>   279
 
   
<TABLE>
<CAPTION>
                                          NAME                              DATED AS OF
                                          ----                              -----------
<C>           <S>                                                           <C>
              Timothy H. Callahan.........................................      10/9/96
              Richard D. Kincaid..........................................      3/14/97
              Sheli Z. Rosenberg..........................................      3/12/97
              Thomas E. Dobrowski.........................................      7/11/97
              James D. Harper, Jr.........................................      7/11/97
              Peter Linneman..............................................      7/11/97
              Jerry M. Reinsdorf..........................................      7/11/97
              William W. Goodyear.........................................      7/11/97
              David K. McKown.............................................      7/11/97
              H. Jon Runstad..............................................     12/18/97
              Edwin N. Sidman.............................................       3/1/98
              Michael A. Steele...........................................      10/9/96
              Stanley M. Stevens..........................................      10/9/96
              Jeffrey L. Johnson..........................................      3/14/97
              J. A. de Bock...............................................      5/15/98
   10.7**     Agreement and Plan of Merger, dated September 15, 1997, as
              amended, among the Company, the Operating Partnership,
              Beacon and Beacon Partnership (incorporated herein by
              reference to Exhibit 2.1 to the Company's Current Report on
              Form 8-K dated September 15, 1997)
   12.1       Statement of Computation of Ratios
   21.1*      List of Subsidiaries of the Company
   23.1       Consent of Hogan & Hartson L.L.P. (included as part of
              Exhibit 5.1)
   23.2       Consent of Hogan & Hartson L.L.P. (included as part of
              Exhibit 8.1)
   23.3       Consent of Ernst & Young L.L.P.
   23.4       Consent of Coopers & Lybrand LLP
   24.1+      Power of Attorney (included in signature page of prior
              filing)
</TABLE>
    
 
- -------------------------
  * Incorporated herein by reference to the same-numbered exhibit to the
    Company's Registration Statement on Form S-11 (Commission File No.
    333-26629).
 
 ** Incorporated herein by reference to the same numbered exhibit to the
    Company's Annual Report on Form 10-K, as amended, for the fiscal year ended
    December 31, 1997.
 
   
  + Previously filed.
    
 
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.
 
          (3) 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,
 
                                      II-7
<PAGE>   280
 
     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 or 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-8
<PAGE>   281
 
                                   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 29th day of May, 1998.
    
 
                                          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 29th day of May, 1998.
    
 
   
<TABLE>
<CAPTION>
                  SIGNATURE                                                  TITLE
                  ---------                                                  -----
<S><C>
           /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
 
                                                         Chairman of the Board of Trustees
- ---------------------------------------------
                 Samuel Zell
 
                      *                                  Trustee
- ---------------------------------------------
             Sheli Z. Rosenberg
 
                      *                                  Trustee
- ---------------------------------------------
             Thomas E. Dobrowski
 
                      *                                  Trustee
- ---------------------------------------------
            James D. Harper, Jr.
 
                      *                                  Trustee
- ---------------------------------------------
               Peter Linneman
 
                      *                                  Trustee
- ---------------------------------------------
             Jerry M. Reinsdorf
 
                      *                                  Trustee
- ---------------------------------------------
             William M. Goodyear
 
                      *                                  Trustee
- ---------------------------------------------
               David K. McKown
</TABLE>
    
 
                                      II-9
<PAGE>   282
 
   
<TABLE>
<CAPTION>
                  SIGNATURE                                                  TITLE
                  ---------                                                  -----
<C>                                                      <S>
 
                      *                                  Trustee
- ---------------------------------------------
               H. Jon Runstad
 
                      *                                  Trustee
- ---------------------------------------------
               Edwin N. Sidman
 
- ---------------------------------------------
              D. J. A. de Bock
</TABLE>
    
 
   
* Pursuant to Power of Attorney.
    
 
   
By:    /s/ TIMOTHY H. CALLAHAN
    
 
    --------------------------------
   
        Timothy H. Callahan
    
   
          Attorney-in-fact
    
 
                                      II-10
<PAGE>   283
 
                                 EXHIBIT INDEX
 
   
<TABLE>
<CAPTION>
EXHIBIT NO.                                                                       PAGE NO.
<S><C>
    1.1             Form of Underwriting Agreement
    3.1*            Amended and Restated Declaration of Trust of the Company, as
                       amended
    3.2**           Articles Supplementary of the Company, dated December 15,
                       1997 and filed with the Maryland State Department of
                       Assessments and Taxation on December 17, 1997
    3.3**           Articles Supplementary of the Company, dated February 18,
                       1998 and filed with the Maryland State Department of
                       Assessments and Taxation on February 19, 1998
    3.4             Form of Articles Supplementary of the Company relating to
                       the Series C Preferred Shares.
    3.5             Bylaws of the Company (Incorporated herein by reference to
                       Exhibit 3.2 to the Registration Statement of the Company
                       and the Operating Partnership on Form S-4 (Commission
                       File No. 333-40401))
    4.1**           Indenture, dated as of September 2, 1997, between the
                       Operating Partnership and State Street Bank and Trust
                       Company
    4.2**           First Supplemental Indenture, dated as of February 9, 1998,
                       between the Operating Partnership and State Street Bank
                       and Trust Company
    4.3**           $200,000,000 6.375% Note due 2003. A $100,000,000 6.375%
                       Note due 2003, identical in all material respects other
                       than principal amount to the Note filed as Exhibit 4.3,
                       has not been filed.
    4.4**           $200,000,000 6.625% Note due 2005. Another $200,000,000
                       6.625% Note due 2005, identical in all material respects
                       to the Note filed as Exhibit 4.4, has not been filed.
    4.5**           $200,000,000 6.750% Note due 2008. A $100,000,000 6.750%
                       Note due 2008, identical in all material respects other
                       than principal amount to the Note filed as Exhibit 4.5,
                       has not been filed.
    4.6**           $200,000,000 7.250% Note due 2018. A $50,000,000 7.250% Note
                       due 2018, identical in all material respects other than
                       principal amount to the Note filed as Exhibit 4.6, has
                       not been filed.
    4.7**           $200,000,000 6.376% Mandatory Par Put Remarketed
                       Securities(SM) due 2012. A $50,000,000 6.376% Mandatory
                       Par Put Remarketed Securities(SM) due 2012, identical in
                       all material respects to the note filed as Exhibit 4.7,
                       has not been filed.
    4.8**           $30,000,000 7.24% Senior Note due 2004
    4.9**           $50,000,000 7.36% Senior Note due 2005
    4.10**          $50,000,000 7.44% Senior Note due 2006
    4.11**          $50,000,000 7.41% Senior Note due 2007
    4.12**          Registration Rights Agreement, dated as of February 12,
                       1998, among the Operating Partnership, and (i) in the
                       case of the 6.375% Notes due 2003, the 6.625% Notes due
                       2005 and the 7.250% Notes due 2018, Merrill Lynch,
                       Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
                       Lehman Brothers Inc. ("Lehman"), J.P. Morgan Securities
                       Inc. ("J.P. Morgan"), Salomon Brothers Inc ("Salomon")
                       and UBS Securities LLC, (ii) in the case of the 6.750%
                       Notes due 2008, Merrill Lynch, Lehman, J.P. Morgan and
                       BancAmerica Robertson Stephens and (iii) in the case of
                       the 6.376% Mandatory Par Put Remarketed Securities(SM)
                       due February 15, 2012, Merrill Lynch
    4.13**          Registration Rights Agreement, dated as of February 3, 1998,
                       between the Company and Lehman
    5.1             Opinion of Hogan & Hartson L.L.P. regarding the legality of
                       the securities being registered.
</TABLE>
    
 
                                      II-11
<PAGE>   284
 
   
<TABLE>
<CAPTION>
EXHIBIT NO.                                                                       PAGE NO.
<C>                 <S>                                                           <C>
    8.1             Opinion of Hogan & Hartson L.L.P. regarding certain tax
                       matters.
   10.1**           Agreement of Limited Partnership of the Operating
                       Partnership, as amended
   10.2**           Registration Rights Agreement, dated as of July 11, 1997,
                       among the Company and the persons named therein
   10.3**           Noncompetition Agreement between the Company and Samuel Zell
   10.4**           Contribution Agreement, dated as of April 30, 1997, among
                       the Operating Partnership and the persons named therein
   10.5**           Merger Agreement, dated as of April 30, 1997, among the
                       Company and the persons named therein
   10.6**           Each member of the Company's Board of Trustees and each
                       Executive Officer of the Company has entered into an
                       Indemnification Agreement with the Company. These
                       Indemnification Agreements are identical in all material
                       respects. The schedule below sets forth the terms of each
                       Indemnification Agreement not filed which differ from the
                       copy of the example Indemnification Agreement (between
                       the Company and Samuel Zell, dated as of October 9,
                       1996), which is filed as Exhibit 10.6 hereto:
</TABLE>
    
 
   
<TABLE>
<CAPTION>
                                          NAME                              DATED AS OF
                                          ----                              -----------
<C>           <S>                                                           <C>
              Timothy H. Callahan.........................................      10/9/96
              Richard D. Kincaid..........................................      3/14/97
              Sheli Z. Rosenberg..........................................      3/12/97
              Thomas E. Dobrowski.........................................      7/11/97
              James D. Harper, Jr.........................................      7/11/97
              Peter Linneman..............................................      7/11/97
              Jerry M. Reinsdorf..........................................      7/11/97
              William W. Goodyear.........................................      7/11/97
              David K. McKown.............................................      7/11/97
              H. Jon Runstad..............................................     12/18/97
              Edwin N. Sidman.............................................       3/1/98
              Michael A. Steele...........................................      10/9/96
              Stanley M. Stevens..........................................      10/9/96
              Jeffrey L. Johnson..........................................      3/14/97
              J. A. de Bock...............................................      5/15/98
   10.7**     Agreement and Plan of Merger, dated September 15, 1997, as
              amended, among the Company, the Operating Partnership,
              Beacon and Beacon Partnership (incorporated herein by
              reference to Exhibit 2.1 to the Company's Current Report on
              Form 8-K dated September 15, 1997)
   12.1       Statement of Computation of Ratios
   21.1*      List of Subsidiaries of the Company
   23.1       Consent of Hogan & Hartson L.L.P. (included as part of
              Exhibit 5.1)
   23.2       Consent of Hogan & Hartson L.L.P. (included as part of
              Exhibit 8.1)
   23.3       Consent of Ernst & Young L.L.P.
   23.4       Consent of Coopers & Lybrand LLP
   24.1+      Power of Attorney (included in signature page of prior
              filing)
</TABLE>
    
 
- -------------------------
  * Incorporated herein by reference to the same-numbered exhibit to the
    Company's Registration Statement on Form S-11 (Commission File No.
    333-26629).
 
 ** Incorporated herein by reference to the same numbered exhibit to the
    Company's Annual Report on Form 10-K, as amended, for the fiscal year ended
    December 31, 1997.
 
   
  + Previously filed
    
 
                                      II-12

<PAGE>   1
                                                                Exhibit 1.1



                       EQUITY OFFICE PROPERTIES TRUST
                  (A MARYLAND REAL ESTATE INVESTMENT TRUST)

      __________ ____% SERIES C CUMULATIVE REDEEMABLE PREFERRED SHARES
    (PAR VALUE $0.01 PER SHARE) (LIQUIDATION PREFERENCE $25.00 PER SHARE)





                           UNDERWRITING AGREEMENT





_______________, 1998
<PAGE>   2





                              _____________, 1998



Morgan Stanley & Co.
  Incorporated
Merrill Lynch, Pierce, Fenner & Smith
 Incorporated
PaineWebber Incorporated
Prudential Securities Incorporated
Salomon Brothers Inc
c/o Morgan Stanley & Co. Incorporated
    1585 Broadway
    New York, New York  10036

Dear Sirs and Mesdames:


        Equity Office Properties Trust, a Maryland real estate investment trust
(the "Company"), proposes to issue and sell to the several Underwriters named
in Schedule I hereto (the "Underwriters") ______________ ____% Series C
Cumulative Redeemable Preferred Shares, par value $0.01 per share, liquidation
preference $25.00 per share (the "Firm Shares"). The Company also proposes to
issue and sell to the several Underwriters not more than an additional
______________  ____% Series C Cumulative Redeemable Preferred Shares, par
value $0.01 per share, liquidation preference $25.00 per share (the "Additional
Shares") if and to the extent that you, as Managers of the offering, shall have
determined to exercise, on behalf of the Underwriters, the right to purchase
such Additional Shares granted to the Underwriters in Section 2 hereof.  The
Firm Shares and the Additional Shares are hereinafter collectively referred to
as the "Shares".

   
        The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-11 (No. 333-51597), including
a prospectus, relating to the Shares.  Such registration statement (as
amended, if applicable), in the form in which it became effective, including 
the information (if any) deemed to be part of the registration statement at the
time of effectiveness pursuant to Rule 430A under the Securities Act of 1933,
as amended (the "Securities Act"), is hereinafter referred to as the
"Registration Statement"; the prospectus in the form first delivered for use in
confirming sales of Shares is hereinafter referred to as the "Prospectus".  If
the Company has filed an abbreviated registration statement to register
additional ___% Series C Cumulative Redeemable Preferred Shares pursuant to
Rule 462(b) under the Securities Act (the "Rule 462 Registration Statement"),
then any reference herein to the term "Registration Statement" shall be deemed
to include such Rule 462 Registration Statement. 
    




                                      1
<PAGE>   3
         The Company is the managing general partner of EOP Operating Limited
Partnership, a Delaware limited partnership (the "Operating Partnership").  The
Company owns all of its assets and conducts substantially all of its business
through the Operating Partnership and its subsidiaries.

              1.  Representations and Warranties of the Company and the
Operating Partnership.  The Company and the Operating Partnership represent and
warrant to the Underwriters, as of the date hereof, as of the Closing Date (as
defined below), and as of the Option Closing Date (as defined below) (each, a
"Representation Date"), as follows:
        
   
              (a)      Compliance with Registration Requirements.  At the time
         the Registration Statement became effective and at each Representation
         Date, the Registration Statement (and any amendment thereto) complied,
         complies and will comply in all material respects with the
         requirements of the Securities Act and did not, does not and will not
         contain an untrue statement of a material fact or omit to state a
         material fact required to be stated therein or necessary to make the
         statements therein not misleading, and the Prospectus (and any
         amendment or supplement thereto), at each Representation Date,         
         complies and will comply in all material respects with the
         requirements of the Securities Act does not and will not include an
         untrue statement of a material fact or omit to state a material fact
         necessary in order to make the statements therein, in the light of the
         circumstances under which they were made, not misleading; provided,
         however, that the representations and warranties in this subsection
         shall not apply to statements in or omissions from the Registration
         Statement or the Prospectus made in reliance upon and in conformity
         with information furnished to the Company in writing by any
         Underwriter through Morgan Stanley & Co. Incorporated expressly for
         use in the Registration Statement or the Prospectus.
    
        
              Each of the preliminary prospectus and the prospectus filed as
         part of the Registration Statement as originally filed or as part of
         any amendment thereto, or filed pursuant to Rule 424 under the
         Securities Act, complied when so filed in all material respects with
         the Securities Act and each preliminary prospectus and the prospectus
         delivered to the Underwriters for use in connection with the offering
         of the Shares was identical to the electronically transmitted copies
         thereof filed with the Commission pursuant EDGAR, except to the extent
         permitted by Regulation S-T.
        
              (b)      No Stop Order or Proceedings.  No stop order suspending
         the effectiveness of the Registration Statement or any part thereof
         has been issued and no proceeding for that purpose has been instituted
         or, to the knowledge of the Company, is contemplated by the Commission
         or by the state securities authority of any jurisdiction.  No order
         preventing or suspending the use of the Prospectus has been issued and
         no proceeding for that purpose has been instituted or, to the
         knowledge of the Company, is contemplated by the Commission or by the
         state securities authority of any jurisdiction.
        




                                       2


<PAGE>   4
              (c)      Independent Accountants.  Each of Ernst & Young LLP and
         Coopers & Lybrand L.L.P., the accounting firms that certified the
         financial statements and supporting schedules included in the
         Prospectus, is an independent public accountant as required by the
         Securities Act and the applicable rules and regulations thereunder (the
         "Securities Act Regulations").

              (d)      Financial Statements.  The financial statements
         (including the notes thereto) included in the Registration Statement
         and the Prospectus present fairly the financial position of the
         respective entity or entities presented therein at the respective dates
         indicated and the results of their operations for the respective
         periods specified, and except as otherwise stated therein, said
         financial statements have been prepared in conformity with generally
         accepted accounting principles ("GAAP") applied on a consistent basis.
         The supporting schedules included in the Registration Statement and the
         Prospectus present fairly the information required to be stated
         therein.  The financial information and data included in the
         Registration Statement and the Prospectus present fairly the
         information included therein and have been prepared on a basis
         consistent with that of the books and records of the respective
         entities presented therein. The Statements of Revenues and Certain
         Operating Expenses included in the Registration Statement and the
         Prospectus for certain of the Properties (as defined below) present
         fairly the information included therein and have been prepared on a
         basis consistent with that of the books and records of the respective
         entities presented therein.  Pro forma financial information included
         in the Registration Statement and the Prospectus has been prepared in
         accordance with the applicable requirements of Rules 11-01 and 11-02 of
         Regulation S-X under the Securities Act, and the necessary pro forma
         adjustments have been properly applied to the historical amounts in the
         compilation of such information, and, in the opinion of the Company,
         the assumptions used in the preparation thereof are reasonable and the
         adjustments used therein are appropriate to give effect to the
         transactions and circumstances referred to therein.

              (e)      No Material Adverse Change.  Since the respective dates
         as of which information is given in the Registration Statement and the
         Prospectus, except as otherwise stated therein, (A) there has been no
         material adverse change in the condition, financial or otherwise, or in
         the earnings, assets, or business affairs of the Company and its
         subsidiaries considered as one enterprise, whether or not arising in
         the ordinary course of business (a "Material Adverse Change"), (B) no
         casualty loss or condemnation or other adverse event with respect to
         any Property has occurred that would result in a Material Adverse
         Effect (as defined below), (C) there have been no transactions or
         acquisitions entered into by the Company or any of its subsidiaries,
         other than those arising in the ordinary course of business, which are
         material with respect to the Company and its subsidiaries considered as
         one enterprise, (D) except as described in the Registration Statement
         and the Prospectus and except for regular quarterly distributions of
         the Company (and corresponding distributions of the Operating
         Partnership), there has been no distribution of any kind declared, paid
         or made by the Company or the Operating Partnership with respect to its
         partnership





                                       3
<PAGE>   5





         interests, and (E) there has been no material change in the partnership
         interests of the Operating Partnership or any material increase in the
         indebtedness of the Company.

              (f)      Good Standing of the Company.  The Company has been duly
         formed and is validly existing as a real estate investment trust in
         good standing under the Maryland General Corporation Law (the "MGCL")
         with trust power and authority to own, lease and operate any real
         property or improvements thereon owned or leased by the Company or its
         subsidiaries (each, a "Property" and, collectively, the "Properties"),
         to conduct the business in which it is engaged or proposes to engage as
         described in the Registration Statement and the Prospectus and to enter
         into and perform its obligations under or contemplated under this
         Agreement.  The Company is duly qualified or registered as a foreign
         real estate investment trust and is in good standing in each
         jurisdiction in which such qualification or registration is required,
         whether by reason of the ownership or leasing of property or the
         conduct of business, except where the failure to so qualify, register
         or be in good standing would not result in a material adverse effect on
         the condition, financial or otherwise, or the earnings, assets,
         business affairs or business prospects of the Company and its
         subsidiaries considered as one enterprise (a "Material Adverse
         Effect").

              (g)      Good Standing of the Subsidiaries. Each of the
         "significant subsidiaries" of the Company listed on Schedule II to this
         Agreement (collectively, the "Significant Subsidiaries") has been duly
         organized and is validly existing as a partnership, corporation,
         limited liability company or real estate investment trust in good
         standing under the laws of its respective jurisdiction of organization,
         with all power and authority to own, lease and operate its Properties,
         and to conduct the business in which it is engaged or proposes to
         engage as described in the  Registration Statement and the Prospectus.
         Each Significant Subsidiary is duly qualified or registered as a
         foreign partnership, corporation, limited liability company, or real
         estate investment trust, and is in good standing in each jurisdiction
         in which the business conducted by such subsidiary is required and
         permitted, whether by reason of the ownership or leasing of property or
         the conduct of business, except where the failure, singly or in the
         aggregate, to so qualify would not result in a Material Adverse Effect.
         Each of the partnership or operating agreements of the Significant
         Subsidiaries is in full force and effect.

              (h)      Capitalization of Company.  The capitalization of the
         Company is as set forth in the Registration Statement and the
         Prospectus as of the date referenced therein.  All of the Company's
         common and preferred shares of beneficial interest outstanding at the
         date hereof were duly authorized for issuance by the Company and are
         validly issued and fully paid.  None of such shares of beneficial
         interest were issued in violation of preemptive or other similar rights
         of any security holder of the Company.  Such outstanding shares of
         beneficial interest were offered and sold in compliance with all
         applicable laws (including, without limitation, federal and state
         securities laws).





                                       4
<PAGE>   6

              (i)      Authorization of the Shares.  The Shares have been duly
         authorized and classified for issuance and sale to the Underwriters
         pursuant to this Agreement. At or prior to the Closing Date, the
         Company will have executed and filed Articles Supplementary ("Articles
         Supplementary") to its Amendment and Restatement of Declaration of
         Trust ("Declaration of Trust") establishing the terms of the Shares
         with the State Department of Assessments and Taxation of Maryland (the
         "SDAT") and, when the Shares are duly paid for and certificates
         therefor are duly countersigned and delivered as provided herein, the
         Shares will be validly issued, fully paid and nonassessable.  The
         issuance of the Shares is not subject to preemptive or similar rights.
         The Shares conform and will in all material respects to the Articles
         Supplementary and the description thereof contained in the Registration
         Statement and the Prospectus.

              (j)      Absence of Defaults.  Neither the Company nor any
         Significant Subsidiary is in violation of its declaration of trust,
         charter, by-laws, limited liability company agreement, certificate of
         limited partnership or partnership agreement, as the case may be, and
         neither the Company nor any of its subsidiaries is in default in the
         performance or observance of any obligation, agreement, covenant or
         condition contained in any contract, indenture, mortgage, loan
         agreement, note, lease or other instrument to which such entity is a
         party or by which such entity may be bound, or to which any of the
         property or assets of such entity is subject, except where a default
         thereunder would not result in a Material Adverse Effect.

              (k)      Absence of Conflicts.  The execution and delivery of this
         Agreement, the performance of the obligations set forth herein, and the
         consummation of the transactions contemplated hereby or in the
         Prospectus, including the issuance and sale of the Shares to the
         Underwriters, by the Company will not result in the creation of any
         lien, charge or encumbrance upon the Properties or conflict with or
         constitute a breach or violation by the Company or any of its
         subsidiaries, or default under, (A) any material contract, indenture,
         mortgage, loan agreement, note, lease, joint venture or partnership
         agreement or other instrument or agreement to which such entity is a
         party or by which they, any of them, any of their respective assets or
         any Property may be bound or subject; (B) the declaration of trust,
         charter, by-laws, certificate of limited partnership, partnership
         agreement, or limited liability company agreement, as the case may be,
         of such entity; or (C) any applicable law, rule, order, administrative
         regulation or administrative or court decree, except in the cases of
         clauses (A) and (C) for such liens, charges, encumbrances, conflicts,
         breaches, violations or defaults as would not result in a Material
         Adverse Effect.

              (l)      Authorization of Agreement.  The Company has the
         requisite power and authority under its organizational documents to
         enter into this Agreement, and this Agreement has been duly authorized,
         executed and delivered by the Company.

              (m)      Absence of Proceedings.  There is no action, suit or
         proceeding before or brought by any court or governmental agency or
         body, domestic or foreign, now





                                       5
<PAGE>   7
         pending, or, to the knowledge of the Company, threatened against or
         affecting the Company, any Significant Subsidiary, any Property or any
         officer or trustee of the Company that, if determined adversely to the
         Company, any Significant Subsidiary, any Property or any such officer
         or trustee, might (A) result in any Material Adverse Effect or (B)
         materially and adversely affect the consummation of the transactions
         contemplated by this Agreement. There are no legal or governmental
         proceedings pending or, to the knowledge of the Company, threatened to
         which the Company or any of its subsidiaries is a party or to which any
         of their respective assets, properties or operations is the subject
         that are required to be described in the Registration Statement and the
         Prospectus that are not so described.  The aggregate of all pending
         legal or governmental proceedings to which the Company or any
         subsidiary of the Company is a party or of which any of their
         respective assets, properties or operations is the subject which are
         not described in the Registration Statement and the Prospectus,
         including ordinary routine litigation incidental to the business, could
         not reasonably be expected to result in a Material Adverse Effect.

              (n)      Investment Company Act.  Neither the Company nor any
         Significant Subsidiary is, or as of the Closing Date or the Option
         Closing Date will be, required to be registered under the Investment
         Company Act of 1940, as amended (the "1940 Act").

              (o)      Possession of Intellectual Property. The Company and its
         subsidiaries own or possess, or can acquire on reasonable terms, the
         trademarks, service marks, trade names, or other intellectual property
         (collectively, "Intellectual Property") necessary to carry on the
         business now operated by them, and no such entity has received any
         notice or is otherwise aware of any infringement of or conflict with
         asserted rights of others with respect to any Intellectual Property or
         of any facts or circumstances which would render Intellectual Property
         invalid or inadequate to protect the interest of such entities therein,
         and which infringement or conflict (if the subject of any unfavorable
         decision, ruling or finding) or invalidity or inadequacy, singly or in
         the aggregate, would result in a Material Adverse Effect.

              (p)      Absence of Further Requirements. All authorizations,
         approvals and consents of any court or governmental authority or agency
         that are necessary in connection with the offering, issuance or sale of
         the Shares hereunder or the consummation of the other transactions
         contemplated by this Agreement, except such as may be required under
         the securities, blue sky or real estate syndication laws of various
         states in connection with such offer, issuance and sale.

              (q)      Possession of Licenses and Permits. The Company and its
         subsidiaries possess such permits, licenses, approvals consents and
         other authorizations (collectively, "Governmental Licenses") issued by
         the appropriate federal, state, or local regulatory agencies or bodies
         necessary to conduct the business now conducted by them, or proposed to
         be conducted by them, as described in the Registration Statement and
         the Prospectus, except where the failure to possess any such





                                       6
<PAGE>   8

         Governmental Licenses would not have a Material Adverse Effect.  The
         Company and its subsidiaries are in compliance with the terms and
         conditions of all such Governmental Licenses, except where the failure
         so to comply would not, singly or in the aggregate, result in a
         Material Adverse Effect.  All of the Governmental Licenses are valid
         and in full force and effect, except where the invalidity of such
         Governmental Licenses or the failure of such Governmental Licenses to
         be in full force and effect would not result in a Material Adverse
         Effect. Neither the Company nor any of its subsidiaries has received
         any notice of proceedings relating to the revocation or modification of
         any such Governmental Licenses which, singly or in the aggregate, if
         the subject of an unfavorable decision, ruling or finding, would result
         in a Material Adverse Effect.

              (r)      Absence of Labor Dispute.  No labor dispute with the
         employees of the Company or any of its subsidiaries exists or, to the
         knowledge of the Company, is imminent, which may reasonably be expected
         to result in a Material Adverse Effect.

   
              (s)      Title to Property.  (A) With respect to the Properties in
         which the Operating Partnership owns, directly or indirectly, all of
         the ownership interests therein, the Operating Partnership or its
         subsidiaries have good and marketable fee simple title to the land
         underlying such Properties (or, to the extent described in the
         Registration Statement and the Prospectus, a valid leasehold estate in
         such land) and (except for the Property known as "500 Orange") good and
         marketable title to the improvements thereon and all other assets that
         are required for the effective operation of such Properties in the
         manner in which they currently are operated, subject, however, to
         existing mortgages on such Properties, to utility easements serving
         such Properties, to liens of ad valorem taxes not due and payable as of
         the Closing Date (or which are being contested pursuant to applicable
         law), to zoning and similar governmental land use matters affecting
         such Properties that are consistent with the current uses of such
         Properties, to matters of title not adversely affecting marketability
         of title to such Properties, other statutory liens not due and payable
         as of the Closing Date, title matters that may be material in
         character, amount or extent but which do not materially detract from
         the value, or interfere with the use of, the Properties or otherwise
         materially impair the business operations being conducted or proposed
         to be conducted thereon, tenant leases, service marks and trade names
         used in connection with such Properties, ground leases and ownership by
         others of certain items of equipment and other items of personal
         property that are not material to the conduct of business operations at
         such Properties; (B) with respect to the Properties in which the
         Operating Partnership owns, directly or indirectly, less than all of
         the ownership interest (the "Joint Venture Properties"), the Company or
         its subsidiaries have good and marketable title to such ownership
         interests and the respective entities owning the Joint Venture
         Properties have good and marketable title to such interests in the
         Joint Venture Properties and good and marketable title to the
         improvements thereon and all other assets that are required for the
         effective operation of such Properties in the manner in which they
         currently are operated, subject to the exceptions set forth in clause
         (A) above; (C) the ground leases under which the applicable
         subsidiaries of the
    




                                       7
<PAGE>   9

         Operating Partnership lease the land on which certain Properties are
         located are in full force and effect, and each of such subsidiaries is
         not in default in respect of any of the terms or provisions of such
         leases and neither the Company nor any such subsidiary has received
         notice of the assertion of any claim by anyone adverse to such
         subsidiaries' rights as lessees under such leases, or affecting or
         questioning such subsidiaries' right to the continued possession or use
         of the Property under such leases or of a default under such leases;
         (D) all liens, charges, encumbrances, claims, or restrictions on or
         affecting any of the Properties and the assets of the Company or any of
         its subsidiaries are disclosed in the Registration Statement and the
         Prospectus, subject to the exceptions set forth in clause (A) above;
         (E) neither any subsidiary of the Company nor any tenant of any of the
         Properties is in default under any of the leases pursuant to which the
         Operating Partnership or any of its subsidiaries, as lessor, leases its
         Property (and the Company does not know of any event which, but for the
         passage of time or the giving of notice, or both, would constitute a
         default under any of such leases) other than such defaults and
         unmatured events of default that would not result in a Material Adverse
         Effect; (F) except for such rights of first refusal as may be contained
         in the agreements related to the Joint Venture Properties, no person
         has an option or right of first refusal to purchase all or part of any
         Property or any interest therein; (G) each of the Properties complies
         with all applicable codes, laws and regulations (including, without
         limitation, building and zoning codes, laws and regulations and laws
         relating to access to the Properties), except if and to the extent
         disclosed in the Registration Statement and the Prospectus and except
         for such failures to comply that would not individually or in the
         aggregate result in a Material Adverse Effect; (H) there is in full
         force and effect insurance coverage for the assets of the Properties
         that are commercially reasonable for such types of assets, and neither
         the Company nor any of its subsidiaries has received from any insurance
         company notice of any material defects or deficiencies affecting the
         insurability of any such assets (including the Properties); and (I)
         neither the Company nor any of its subsidiaries has any knowledge of
         any pending or threatened condemnation proceedings, zoning change, or
         other similar proceeding or action that will in any manner affect the
         size of, use of, improvements on, construction on or access to the
         Properties, except such proceedings or actions as are disclosed in the
         Registration Statement and the Prospectus or that would not have a
         Material Adverse Effect.

              (t)      Environmental Laws.  Except as disclosed in the
         Registration Statement and the Prospectus or as would not have a
         Material Adverse Effect, (A) each Property, including, without
         limitation, the Environment (as defined below) associated with such
         Property, is free of any Hazardous Substance (as defined below) in
         violation of any Environmental Law (as defined below) applicable to
         such Property, except for Hazardous Substances that would not result in
         a Material Adverse Effect; (B) neither the Company nor any of its
         subsidiaries has during the period of its ownership caused or suffered
         to occur any Release (as defined below) of any Hazardous Substance into
         the Environment on, in, under or from any Property in violation of any
         Environmental Law applicable to such Property, and no condition exists
         on, in, under or, to the knowledge of the Company or any of its
         subsidiaries, adjacent to, any Property that





                                       8
<PAGE>   10

         could result in the incurrence of material liabilities or any material
         violations of any Environmental Law applicable to such Property, or
         give rise to the imposition of any Lien (as defined below) under any
         Environmental Law; (C) neither the Company nor any of its subsidiaries
         is engaged in or intends to engage in any manufacturing at the
         Properties that (1) requires the use, handling, transportation,
         storage, treatment or disposal of any Hazardous Substance (other than
         cleaning solvents and similar materials and other than insecticides and
         herbicides that are used in the ordinary course of operating the
         Properties and in compliance with all applicable Environmental Laws) or
         (2) requires permits or is otherwise regulated pursuant to any
         Environmental Law; (D) neither the Company nor any of its subsidiaries
         has received any notice of a claim under or pursuant to any
         Environmental Law applicable to a Property or under common law
         pertaining to Hazardous Substances on or originating from any Property;
         (E) neither the Company nor any of its subsidiaries has received any
         notice from any Governmental Authority (as defined below) claiming any
         violation of any Environmental Law that is uncured or unremediated as
         of the date hereof; (F) no Property is included or, to the knowledge of
         the Company or any of its subsidiaries, proposed for inclusion on the
         National Priorities List issued pursuant to CERCLA (as defined below)
         by the United States Environmental Protection Agency (the "EPA") or on
         the Comprehensive Environmental Response, Compensation, and Liability
         Information System database maintained by the EPA, and has not
         otherwise been identified by the EPA as a potential CERCLA removal,
         remedial or response site or included or, to the knowledge of the
         Company or any of its subsidiaries, proposed for inclusion on, any
         similar list of potentially contaminated sites pursuant to any other
         applicable Environmental Law nor has the Company or any of its
         subsidiaries received any written notice from the EPA or any other
         Governmental Authority proposing the inclusion of any Property on such
         list; and (G) there are no underground storage tanks located on or in
         any Property which have not been disclosed to the Underwriters.

              As used herein, the term "Hazardous Substance" shall include,
         without limitation, any hazardous substance, hazardous waste, toxic or
         dangerous substance, pollutant, solid waste or similarly designated
         materials, including without limitation, oil, petroleum or any
         petroleum-derived substance or waste, asbestos or asbestos-containing
         materials, PCBs, pesticides, explosives, radioactive materials,
         dioxins, urea formaldehyde insulation or any constituent of any such
         substance, pollutant or waste, including any such substance, pollutant
         or waste identified or regulated under any Environmental Law
         (including, without limitation, materials listed in the United States
         Department of Transportation Optional Hazardous Material Table, 49
         C.F.R. Section 172.101, as heretofore amended, or in the EPA's List of
         Hazardous Substances and Reportable Quantities, 40 C.F.R.  Part 302, as
         heretofore amended); "Environment" shall mean any surface water,
         drinking water, ground water, land surface, subsurface strata, river
         sediment, buildings, structures, and ambient workplace and indoor air;
         "Environmental Law" shall mean the Comprehensive Environmental
         Response, Compensation and Liability Act of 1980, as amended (42 U.S.C.
         Section 9601, et seq.) ("CERCLA"), the Resource Conservation and
         Recovery Act of 1976, as amended (42 U.S.C. Section 6901, et seq.),
         the Clean Air Act, as amended (42 U.S.C. Section 7401, et





                                       9
<PAGE>   11

         seq.), the Clean Water Act, as amended (33 U.S.C. Section 1251, et
         seq.), the Toxic Substances Control Act, as amended (15 U.S.C. Section
         2601, et seq.), the Occupational Safety and Health Act of 1970, as
         amended (29 U.S.C. Section 651, et seq.), the Hazardous Materials
         Transportation Act, as amended (49 U.S.C. Section 1801, et seq.), and
         all other federal, state and local laws, ordinances, regulations,
         rules, orders, decisions and permits relating to the protection of the
         environment or of human health from environmental effects;
         "Governmental Authority" shall mean any federal, state or local
         governmental office, agency or authority having the duty or authority
         to promulgate, implement or enforce any Environmental Law; "Lien" shall
         mean, with respect to any Property, any mortgage, deed of trust,
         pledge, security interest, lien, encumbrance, penalty, fine, charge,
         assessment, judgment or other liability in, on or affecting such
         Property; and "Release" shall mean any spilling, leaking, pumping,
         pouring, emitting, emptying, discharging, injecting, escaping,
         leaching, dumping, emanating or disposing of any Hazardous Substance
         into the Environment, including, without limitation, the abandonment or
         discard of barrels, containers, tanks (including, without limitation,
         underground storage tanks) or other receptacles containing or
         previously containing any Hazardous Substance or any release, emission,
         discharge or similar term, as those terms are defined or used in any
         Environmental Law.

              (u)      Tax Compliance.  Each of the Company and its subsidiaries
         has filed all federal, state, and local income tax returns which have
         been required to be filed and has paid all taxes required to be paid
         and any other assessment, fine or penalty levied against it, to the
         extent that any of the foregoing is due and payable, except, in all
         cases, for any such tax, assessment, fine or penalty that is being
         contested in good faith, and except in any case in which the failure to
         so file or pay would not have a Material Adverse Effect.

              (v)      Taxation as an REIT.  The Company has operated since its
         initial public offering and intends to continue to operate in such a
         manner as to qualify to be taxed as a "real estate investment trust"
         under the Internal Revenue Code of 1986, as amended (the "Code").

              (w)      No Price Manipulation.  Neither the Company nor any of
         its Significant Subsidiaries, nor any of their trustees, directors,
         officers or controlling persons, has taken or will take, directly or
         indirectly, any action designed to cause or result under the Securities
         Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise in,
         or which has constituted or which reasonably might be expected to
         constitute, the unlawful stabilization or manipulation of the price of
         any security of the Company to facilitate the sale or resale of the
         Shares.

              (x)      Plan Assets.  The assets of the Company and
         its subsidiaries do not constitute "plan assets" under the Employee
         Retirement Income Security Act of 1974, as amended, including the
         regulations and published interpretations thereof.





                                       10
<PAGE>   12

              (y)      Cross Defaults.  The mortgages and deeds of trust
         encumbering the properties and assets described in general in the
         Registration Statement and the Prospectus are not convertible and are
         not cross-defaulted or cross-collateralized to any property not owned
         by the Company or any of its subsidiaries, and, except as disclosed in
         the Registration Statement and the Prospectus, neither the Company nor
         any of its subsidiaries holds participating interests in such mortgages
         and deeds of trust.

              (z)      The Company has complied with all provisions of Section
         517.075, Florida Statutes relating to doing business with the
         Government of Cuba or with any person or affiliate located in Cuba.

         2.      Agreements to Sell and Purchase.  The Company hereby agrees to
sell to the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares set forth in Schedule I hereto
opposite its name at $______ a share (the "Purchase Price") plus accumulated
dividends, if any, to the Closing Date.

         On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to ___________
Additional Shares at the Purchase Price plus accumulated dividends, if any, to
the Closing Date.  If you, on behalf of the Underwriters, elect to exercise such
option, you shall so notify the Company in writing not later than 30 days after
the date of this Agreement, which notice shall specify the number of Additional
Shares to be purchased by the Underwriters and the date on which such shares are
to be purchased.  Such date may be the same as the Closing Date but not earlier
than the Closing Date nor later than ten business days after the date of such
notice.  Additional Shares may be purchased as provided in Section 4 hereof
solely for the purpose of covering over-allotments made in connection with the
offering of the Firm Shares.  If any Additional Shares are to be purchased, each
Underwriter agrees, severally and not jointly, to purchase the number of
Additional Shares (subject to such adjustments to eliminate fractional shares as
you may determine) that bears the same proportion to the total number of
Additional Shares to be purchased as the number of Firm Shares set forth in
Schedule I hereto opposite the name of such Underwriter bears to the total
number of Firm Shares.

   
         The Company hereby agrees that, during the period beginning on the date
hereof and continuing to and including 30 days from the date hereof, it will
not, without prior written consent of Morgan Stanley & Co.  Incorporated, (i)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend or otherwise transfer or dispose of, directly or indirectly, any
Shares, any other equity securities of the Company which are substantially
similar to the Shares (other than any securities of the Company which are
convertible into common shares of beneficial interest of the Company) or any
securities convertible into or exercisable or exchangeable for Shares or any 
other equity securities of the Company which are substantially
    




                                       11
<PAGE>   13

similar to the Shares (other than any securities of the Company which are
convertible into common shares of beneficial interest of the Company) or (ii)
enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of any Shares, any other
equity securities of the Company which are substantially similar to the Shares
(other than any securities of the Company which are convertible into common
shares of beneficial interest of the Company), whether any such transaction
described in clause (i) or (ii) above is to be settled by delivery of Shares or
such other securities, in cash or otherwise.  The restrictions described in the
previous sentence do not apply to the sale of Shares to the Underwriters.

         3.      Terms of Public Offering.  The Company is advised by you that
the Underwriters propose to make a public offering of their respective portions
of the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable.  The Company is further
advised by you that the Shares are to be offered to the public initially at
$________ per share (the "Public Offering Price") plus accumulated dividends, if
any, to the Closing Date and to certain dealers selected by you at a price that
represents a concession not in excess of $________ per share under the Public
Offering Price, and that any Underwriter may allow, and such dealers may
reallow, a concession, not in excess of $_________ per share, to any Underwriter
or to certain other dealers.

         4.      Payment and Delivery.  Payment for the Firm Shares shall be
made to the Company in Federal or other funds immediately available in New York
City against delivery of such Firm Shares for the respective accounts of the
several Underwriters at 10:00 a.m., New York City time, on ____________, 1998,
or at such other time on the same or such other date, not later than
___________, 19__,(1) as shall be designated in writing by you.  The time and
date of such payment are hereinafter referred to as the "Closing Date".

         Payment for any Additional Shares shall be made by to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on the date specified in the
notice described in Section 2 or on such other date, in any event not later than
_____________, 19__,(2) as shall be designated in writing by you.  The time and
date of such payment are hereinafter referred to as the "Option Closing Date".

         Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the





_______________


(1)  Insert date 5 business days after date inserted in accordance with note
     6 above. 

(2)  Insert date 10 business days after the expiration of the green shoe
     option.

                                       12
<PAGE>   14

transfer of the Shares to the Underwriters duly paid, against payment of the
Purchase Price therefor.

   
         5.      Conditions to the Underwriters' Obligations. The obligations of
the Company to sell the Firm Shares to the Underwriters and the several
obligations of the Underwriters to purchase and pay for the Firm Shares on the
Closing Date are subject to the condition that the Registration Statement shall
have been declared effective on or prior to the date hereof, and no stop order
suspending the effectiveness of the Registration Statement or any part thereof
has been issued and no proceeding for that purpose has been instituted or, to
the knowledge of the Company, is contemplated by the Commission or by the state
securities authority of any jurisdiction.
    
         The several obligations of the Underwriters are subject to the
following further conditions:

             (a)   Subsequent to the execution and delivery of this Agreement
         and prior to the Closing Date:

                   (i)       there shall not have occurred any downgrading, nor
              shall any notice have been given of any intended or potential
              downgrading or of any review for a possible change that does not
              indicate the direction of the possible change, in the rating
              accorded any of the Company's securities by any "nationally
              recognized statistical rating organization," as such term is
              defined for purposes of Rule 436(g)(2) under the Securities Act;
              and
   
                   (ii)      there shall not have occurred any change, or any
              development involving a prospective change, in the condition,
              financial or otherwise, or in the earnings, assets or business
              affairs of the Company and its subsidiaries considered as one
              enterprise from that set forth in the Prospectus (exclusive of any
              amendments or supplements thereto subsequent to the date of this
              Agreement) that makes it, in your judgment, impracticable to
              market the Shares on the terms and in the manner contemplated in
              the Prospectus.
    
              (b)      The Underwriters shall have received on the Closing Date
         a certificate, dated the Closing Date and signed by an executive
         officer of the Company, to the effect set forth in Section 5(a)(i)
         above and to the effect that the representations and warranties of the
         Company contained in this Agreement are true and correct as of the
         Closing Date and that the Company has complied with all of the
         agreements and satisfied all of the conditions on its part to be
         performed or satisfied hereunder on or before the Closing Date.

              The officer signing and delivering such certificate may rely upon
         the best of his or her knowledge as to proceedings threatened.





                                       13
<PAGE>   15

              (c)      The Underwriters shall have received on the Closing Date
         an opinion of Hogan & Hartson L.L.P., outside counsel for the Company,
         dated the Closing Date, in form and substance satisfactory to you, to
         the effect that is set forth in Exhibit A hereto.

         The opinion of Hogan & Hartson L.L.P. described in Section 5(c) above
shall be rendered to the Underwriters at the request of the Company and shall so
state therein.

   
              (d)      The Underwriters shall have received on the Closing Date
         an opinion of Brown & Wood LLP, counsel for the Underwriters, dated the
         Closing Date, covering the matters referred to in items (1) (first
         sentence only), (3), (4), (7), (8) and (11) (insofar as it relates to
         the description of the Shares) of Exhibit A hereto and a statement
         similar to the statement referred to in clause (i) and (ii) of the last
         paragraph of Exhibit A hereto.
    
              (e)      The Underwriters shall have received, on each of the date
         hereof and on the Closing Date, a letter dated the date hereof or the
         Closing Date, as the case may be, in form and substance satisfactory to
         the Underwriters, from Ernst & Young LLP and Coopers & Lybrand L.L.P.,
         independent public accountants, containing statements and information
         of the type ordinarily included in accountants' "comfort letters" to
         underwriters with respect to the financial statements and certain
         financial information contained in the Registration Statement and the
         Prospectus; provided that the letter delivered on the Closing Date
         shall use a "cut-off date" not earlier than the date hereof.

         The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization and issuance of the Additional
Shares and other matters related to the issuance of the Additional Shares.

         6.   Covenants of the Company and the Operating Partnership.  Each
of the Company and the Operating Partnership covenants with each Underwriter as
follows:

              (a)      Compliance with Securities Regulations and Commission
Requests.  The Company will use its best efforts to cause the Registration
Statement to become effective as promptly as possible and will notify the
Underwriters immediately, and confirm the notice in writing, of (i) the
effectiveness of the Registration Statement and any amendment thereto (including
any post-effective amendment), (ii) the receipt of any comments from the
Commission, (iii) any request by the Commission for any amendment to the
Registration Statement or any amendment or supplement to the Prospectus or for
additional information, and (iv) the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose. The Company will make every
reasonable effort to prevent the issuance of any such stop order and, if any
stop order is issued, to obtain the lifting thereof at the earliest possible
moment.





                                       14
<PAGE>   16
              (b)      Filing of Amendments.  The Company will give each
Underwriter notice of its intention to file or prepare any amendment to the
Registration Statement (including any post-effective amendment) or any amendment
or supplement to the Prospectus, will furnish the Underwriters with copies of
any such amendment or supplement a reasonable amount of time prior to such
proposed filing or use, as the case may be, and will not file any such amendment
or supplement or use any such prospectus to which the Underwriters or counsel
for the Underwriters shall reasonably object.

              (c)      Delivery of Registration Statements. The Company will
deliver to each Underwriter, as soon as available, one signed copy of the
Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith or incorporated by reference therein) and
will also deliver to the Underwriters as many conformed copies of the
Registration Statement as originally filed and of each amendment thereto
(excluding exhibits) as the Underwriters may reasonably request.

              (d)      Delivery of Prospectus.  The Company will deliver to each
Underwriter, from time to time during the period when the Prospectus is required
to be delivered under the Securities Act or the Exchange Act, such number of
copies of the Prospectus (as amended or supplemented) as such Underwriter may
reasonably request.

              (e)      Continued Compliance with Securities Laws.  If any event
shall occur or condition exist as a result of which it is necessary, in the
opinion of counsel for the Underwriters, to amend or supplement the Prospectus
in order to make the Prospectus not include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing at the time it is delivered
to a purchaser, not misleading, or in order to otherwise comply with the
applicable law, the Company will forthwith prepare an amendment of or supplement
to the Prospectus (in form and substance reasonably satisfactory to counsel for
the Underwriters) so that the Prospectus will not include an untrue statement of
a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances existing at the time it is
delivered to a purchaser, not misleading, or so that the Prospectus will comply
with applicable laws.

              (f)      Blue Sky Qualifications.  The Company will use its best
efforts, in cooperation with the Underwriters, to qualify the Shares for
offering and sale under the applicable securities laws and real estate
syndication laws of such states and other jurisdictions of the United States as
the Underwriters may designate; provided, however, that the Company shall not be
obligated to (i) file any general consent to service of process, (ii) qualify as
a foreign corporation in any jurisdiction in which it is not so qualified or
(iii) take any action that would subject it to income taxation in any such
jurisdiction.  In each jurisdiction in which the Shares have been so qualified,
the Company will file such statements and reports as may be required by the laws
of such jurisdiction to continue such qualification in effect for a period of
not less than one year from the effective date of the Registration Statement.





                                       15
<PAGE>   17
              (g)      Earnings Statement.  The Company will make generally
available to its security holders as soon as practicable, but not later than 90
days after the close of the period covered thereby, an earnings statement (in
form complying with the provisions of Rule 158 of the Securities Act) covering a
12-month period beginning not later than the first day of the Company's fiscal
quarter next following the "effective date" (as defined in such Rule 158) of the
Registration Statement.

              (h)      Use of Proceeds.  The Company will use the net proceeds
received by it from the sale of the Shares in the manner specified in the
Prospectus under the caption "Use of Proceeds."

              (i)      Listing.  The Company will use its best efforts to effect
the listing of the Shares on the New York Stock Exchange, Inc. (the "NYSE").

              (j)      Amendments to Prospectus.  If, at the time that the
Registration Statement becomes effective, any information shall have been
omitted therefrom in reliance upon Rule 430A under the Securities Act, then
immediately following the execution of this  Agreement, the Company will prepare
and file or transmit for filing with the Commission, in accordance with such
Rule 430A and Rule 424(b) under the Securities Act, copies of the amended
Prospectus, or, if required by such Rule 430A, a post-effective amendment to the
Registration Statement (including the amended Prospectus), containing all
information so omitted.

              (k)      Price Stabilization or Manipulation. Except for the
authorization of actions permitted to be taken by the Underwriters as
contemplated herein or in the Prospectus, neither the Company nor the Operating
Partnership will (i) take, directly or indirectly, any action designed to cause
or to result in, or that might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Shares, (ii) sell, bid for or purchase the
Shares or pay any person any compensation for soliciting purchases of the Shares
or (iii) pay or agree to pay to any person any compensation for soliciting
another to purchase any other securities of the Company.

              (l)      Reports to Representatives.  During the period from the
Closing Date until five years after the Closing Date, the Company will deliver
to the Underwriters, (i) promptly upon their becoming available, copies of all
current, regular and periodic reports of the Company mailed to its shareholders
or filed with any securities exchange or with the Commission or any governmental
authority succeeding to any of the Commission's functions, and (ii) such other
information concerning the Company or any of its subsidiaries may reasonably
request.

              (m)      Accuracy of Representations.  Prior to the Closing Date,
the Company and the Operating Partnership will notify the Underwriters in
writing immediately if any event occurs that renders any of the representations
and warranties of the Company and the Operating Partnership contained herein
inaccurate or incomplete in any respect.





                                       16
<PAGE>   18
              (n)      Expenses.  Whether or not the transactions contemplated
in this Agreement are consummated or this Agreement is terminated, the Company
will pay or cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including:  (i) the fees, disbursements and
expenses of the Company's counsel and the Company's accountants in connection
with the registration and delivery of the Shares under the Securities Act and
all other fees or expenses in connection with the preparation and filing of the
Registration Statement, any preliminary prospectus, the Prospectus and
amendments and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof to the
Underwriters and dealers, in the quantities hereinabove specified, (ii) all
costs and expenses related to the transfer and delivery of the Shares to the
Underwriters, including any transfer or other taxes payable thereon, (iii) the
cost of printing or producing any Blue Sky or Legal Investment memorandum in
connection with the offer and sale of the Shares under state securities laws and
all expenses in connection with the qualification of the Shares for offer and
sale under state securities laws as provided in Section 6(f) hereof, including
filing fees and the reasonable fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky or Legal Investment memorandum, (iv) all filing fees and the reasonable
fees and disbursements of counsel to the Underwriters incurred in connection
with the review and qualification of the offering of the Shares by the National
Association of Securities Dealers, Inc., if required, (v) all fees and expenses
in connection with the preparation and filing of the registration statement on
Form 8-A relating to the Shares and all costs and expenses incident to listing
the Shares on the NYSE, (vi) the cost of printing certificates representing the
Shares, (vii) the costs and charges of any transfer agent, registrar or
depositary, (viii) the costs and expenses of the Company relating to investor
presentations on any "road show" undertaken in connection with the marketing of
the offering of the Shares, including, without limitation, expenses associated
with the production of road show slides and graphics, fees and expenses of any
consultants engaged in connection with the road show presentations with the
prior approval of the Company, travel and lodging expenses of the
representatives and officers of the Company and any such consultants, and the
cost of any aircraft chartered in connection with the road show, and (ix) all
other costs and expenses incident to the performance of the obligations of the
Company hereunder for which provision is not otherwise made in this Section.  It
is understood, however, that except as provided in this Section, Section 7
entitled "Indemnity and Contribution", and the last paragraph of Section 9
below, the Underwriters will pay all of their costs and expenses, including fees
and disbursements of their counsel, stock transfer taxes payable on resale of
any of the Shares by them and any advertising expenses connected with any offers
they may make.

         7.      Indemnity and Contribution.  (a)  The Company agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any amendment thereof, any preliminary prospectus or the Prospectus
(as amended or supplemented if the Company shall





                                       17
<PAGE>   19
have furnished any amendments or supplements thereto), or caused by any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission based
upon information relating to any Underwriter furnished to the Company in writing
by such Underwriter through Morgan Stanley & Co. Incorporated expressly for use
therein.

         (b)     Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Company
to such Underwriter, but only with reference to information relating to such
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.

         (c)     In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to Section 7(a) or 7(b), such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them.  It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for (a) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all such indemnified parties and that all
such fees and expenses shall be reimbursed as they are incurred.  Such firm
shall be designated in writing by Morgan Stanley & Co. Incorporated, in the case
of parties indemnified pursuant to Section 7(a), and by the Company, in the case
of parties indemnified pursuant to Section 7(b).  The indemnifying party shall
not be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such





                                       18
                                        
<PAGE>   20
settlement is entered into more than 30 days after receipt by such indemnifying
party of the aforesaid request and (ii) such indemnifying party shall not have
reimbursed the indemnified party in accordance with such request prior to the
date of such settlement.  No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.

         (d)     To the extent the indemnification provided for in Section 7(a)
or 7(b) is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Shares or (ii) if the allocation provided by
clause 7(d)(i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
7(d)(i) above but also the relative fault of the Company on the one hand and of
the Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations.  The relative benefits received
by the Company on the one hand and the Underwriters on the other hand in
connection with the offering of the Shares shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Shares
(before deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus, bear to the aggregate Public
Offering Price of the Shares.  The relative fault of the Company on the one hand
and the Underwriters on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.  The Underwriters' respective obligations to
contribute pursuant to this Section 7 are several in proportion to the
respective number of Shares they have purchased hereunder, and not joint.

         (e)     The Company and the Underwriters agree that it would not be
just or equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in Section 7(d).  The amount paid or
payable by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.  Notwithstanding the
provisions of this Section 7, no Underwriter shall be





                                       19
<PAGE>   21
required to contribute any amount in excess of the amount by which the total
price at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages that such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.  No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.  The remedies provided for in this Section 7 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.

         (f)     The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter or by or on behalf of the Company, its officers or directors or
any person controlling the Company and (iii) acceptance of and payment for any
of the Shares.

         8.      Termination.  This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
NYSE, the American Stock Exchange, the National Association of Securities
Dealers, Inc., the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (ii) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market, (iii) a general moratorium on commercial banking activities in New York
shall have been declared by either Federal or New York State authorities or (iv)
there shall have occurred any outbreak or escalation of hostilities or any
change in financial markets or any calamity or crisis that, in your judgment, is
material and adverse and (b) in the case of any of the events specified in
clauses 8(a)(i) through 8(a)(iv), such event, singly or together with any other
such event, makes it, in your judgment, impracticable to market the Shares on
the terms and in the manner contemplated in the Prospectus.

         9.      Effectiveness; Defaulting Underwriters.  This Agreement shall
become effective upon the execution and delivery hereof by the parties hereto.

         If, on the Closing Date or the Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase Shares that
it has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule I bears to the aggregate number of
Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Shares which such defaulting Underwriter or





                                       20
<PAGE>   22
Underwriters agreed but failed or refused to purchase on such date; provided
that in no event shall the number of Shares that any Underwriter has agreed to
purchase pursuant to this Agreement be increased pursuant to this Section 9 by
an amount in excess of one-ninth of such number of Shares without the written
consent of such Underwriter.  If, on the Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Firm Shares and the aggregate
number of Firm Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Firm Shares to be purchased, and
arrangements satisfactory to you and the Company for the purchase of such Firm
Shares are not made within 36 hours after such default, this Agreement shall
terminate without liability on the part of any non-defaulting Underwriter or the
Company.  In any such case, either you or the Company shall have the right to
postpone the Closing Date, but in no event for longer than seven days, in order
that the required changes, if any, in the Registration Statement and in the
Prospectus or in any other documents or arrangements may be effected.  If, on
the Option Closing Date, any Underwriter or Underwriters shall fail or refuse to
purchase Additional Shares and the aggregate number of Additional Shares with
respect to which such default occurs is more than one-tenth of the aggregate
number of Additional Shares to be purchased, the non-defaulting Underwriters
shall have the option to (i) terminate their obligation hereunder to purchase
Additional Shares or (ii) purchase not less than the number of Additional Shares
that such non-defaulting Underwriters would have been obligated to purchase in
the absence of such default.  Any action taken under this paragraph shall not
relieve any defaulting Underwriter from liability in respect of any default of
such Underwriter under this Agreement.

         If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.

         10.     Counterparts.  This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

         11.     Applicable Law.  This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.





                                       21
<PAGE>   23





         12.     Headings.  The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.

                                    EQUITY OFFICE PROPERTIES TRUST        
                                                                          
                                                                          
                                                                          
                                    By:___________________________________
                                       Name:                              
                                       Title:                             
                                                                          
                                    EOP OPERATING LIMITED PARTNERSHIP     
                                                                          
                                    By:  EQUITY OFFICE PROPERTIES TRUST   
                                           As its Managing General Partner
                                                                          
                                                                          
                                                                          
                                    By:__________________________________ 
                                       Name:                              
                                       Title:                             
                                                                          
                                                                          
Accepted as of the date hereof        
                                      
Morgan Stanley & Co.                  
  Incorporated                        
Merrill Lynch, Pierce, Fenner & Smith 
  Incorporated                        
PaineWebber Incorporated              
Prudential Securities Incorporated    
Salomon Brothers Inc                  
                                      
Acting severally on behalf            
  of themselves and the               
  several Underwriters named          
  in Schedule I hereto.               
                                      
By: Morgan Stanley & Co. Incorporated 
                                      
                                      
By:_________________________________  
   Name:                             
   Title:                            





                                       22
<PAGE>   24





                                                                      SCHEDULE I




                                                                   Number of
                                                                 Firm Shares
                                                                       To Be
              Underwriter                                          Purchased
              -----------                                          ---------  
   
Morgan Stanley & Co. Incorporated
Merrill Lynch, Pierce, Fenner & Smith Incorporated
PaineWebber Incorporated
Prudential Securities Incorporated
Salomon Brothers Inc
    

                                                                   ---------  

                            Total  . . . . . . . . . . . . . . . . =========





                                      23
<PAGE>   25

                                                                     SCHEDULE II



                           Significant Subsidiaries
                                      
                      EOP Operating Limited Partnership





                                      24
<PAGE>   26

                                                                      Exhibit A 



              (1)      The Company is a real estate investment trust duly formed
         and existing under and by virtue of the laws of the State of Maryland
         and, as of ______________, is in good standing with the Maryland SDAT.
         The Company has the power and authority under the Maryland REIT Law and
         the Company's Declaration of Trust and the Bylaws to own, lease and
         operate its properties and conduct its business as described in the
         Registration Statement and the Prospectus.
   
              (2)      The authorized, issued and outstanding capital shares of
         the Company, as of March 31, 1998, is set forth under the caption
         "Capitalization" in the Registration Statement and the Prospectus.  All
         shares of beneficial interest of the Company shown as issued and
         outstanding under said caption are duly authorized and, assuming the
         receipt of consideration therefor as provided in resolutions of the
         Company's Board of Trustees authorizing issuances thereof, are validly
         issued, fully paid and nonassessable. To our knowledge, the Company has
         not issued any outstanding securities convertible into or exchangeable
         for, or outstanding options, warrants or other rights to purchase or
         subscribe for, any shares of beneficial interest of the Company, except
         as described in the Registration Statement and the Prospectus.  No
         holder of outstanding shares of beneficial interest of the Company has
         any preemptive right under the Maryland REIT Law or the Declaration of 
         Trust or the Bylaws of the Company or, to our knowledge, any 
         contractual right to subscribe for any of such shares.

              (3)      The Shares have been duly authorized by the Company for
         issuance and sale pursuant to the Purchase Agreement.  When issued and
         sold to the Underwriters in accordance with the provisions of the
         Purchase Agreement, the Shares will be validly issued, fully paid and
         nonassessable under the Maryland REIT Law.  The form of share
         certificate evidencing the Shares complies with the applicable
         requirements of the Maryland REIT Law.  The terms of the Shares conform
         in all material respects to the description thereof set forth under
         "Series C Preferred Shares" in the Registration Statement and the
         Prospectus.  The issuance of the Shares is not subject to any
         preemptive rights under the Maryland REIT Law or the Declaration of 
         Trust or the Bylaws of the Company or, to our knowledge, any 
         contractual right to subscribe for any Shares.
    
              (4)      The Purchase Agreement has been duly authorized, executed
         and delivered by the Company and the Operating Partnership, and the





                                      

                                     A-1
<PAGE>   27
   

         Company has the power and authority under the Maryland REIT Law
         and the Operating Partnership has the power and authority under the
         Delaware Revised Uniform Limited Partnership to perform their
         respective obligations thereunder.

              (5)      The execution and delivery of the Purchase Agreement and
         the performance as of the date hereof by the Company and the Operating
         Partnership of their respective obligations thereunder and the
         consummation as of the date hereof of the transactions contemplated
         thereby do not result in a violation of (i) in the case of the Company,
         the Maryland REIT Law or its Declaration of Trust or Bylaws or (ii) in
         the case of the Operating Partnership, the Delaware Revised Uniform 
         Limited Partnership, as amended, or its Agreement of Limited 
         Partnership, as amended.

              (6)      The Articles Supplementary relating to the Shares have
         been filed for record with the Maryland SDAT pursuant to the Maryland
         REIT Law, and the number of and the title, par value, liquidation
         preference, ranking, distribution rate, distribution payment dates,
         redemption provisions and other terms of the Shares have been set forth
         therein.

              (7)      The Registration Statement has been declared effective by
         the Commission and, to our knowledge, no stop order suspending the 
         effectiveness of the Registration Statement or any part thereof has 
         been issued or proceedings therefor instituted or threatened.

              (8)      As of their respective effective or issue dates, the
         Registration Statement (and any amendment thereto) and the Prospectus
         (and any amendment or supplement thereto) (other than the financial
         statements and schedules and other financial and statistical data
         included therein or omitted therefrom) complied as to form in all
         material respects with the Securities Act and the Securities Act
         Regulations.

              (9)      Neither the Company nor the Operating Partnership is, or
         upon consummation of the transactions contemplated by the Purchase
         Agreement will be, an "investment company", as defined in the
         Investment Company Act of 1940, as amended.

              (10)     All filings with, or authorizations, approvals, consents,
         licenses, orders, registrations, qualifications or decrees of, any
         court or governmental authority or agency that are necessary in
         connection with the offering, issuance or sale of the Shares under this
         Agreement or the performance by the Company and the Operating
         Partnership of their respective obligations under the Purchase 
         Agreement have been
    



                                      A-2
<PAGE>   28

         obtained, except such as may be required under state securities or real
         estate syndication laws.
   
              (11)     The statements in the Prospectus under the captions
         "Series C Preferred Shares", "ERISA Considerations" and
         "Underwriters", insofar as such statements constitute summaries of the
         legal matters, documents or proceedings referred to therein, fairly
         present the information called for with respect to such legal matters,
         documents and proceedings and fairly summarize the matters referred to
         therein.

              (12)     The discussion in the Prospectus under the caption
         "Federal Income Tax Consequences," to the extent that it covers matters
         of law or legal conclusions, is a correct summary of the matters
         discussed therein as of the date hereof.

              In giving its opinion, such counsel shall additionally state
         that no facts have come to their attention which cause such counsel to
         believe that (i) neither the Registration Statement nor any amendments
         thereto, as of their respective effective dates or as of the date of
         the Purchase Agreement, contained an untrue statement of a material
         fact or omitted to state a material fact required to be stated therein
         or necessary to make the statements therein not misleading, (ii)
         neither the Prospectus nor any amendments or supplements thereto, as
         of their respective issue dates or as of the Closing Date, included or
         includes an untrue statement of a material fact or omitted or omits to
         state a material fact necessary in order to make the statements
         therein, in the light of the circumstances under which they were made,
         not misleading, (iii) there are any legal or governmental proceedings
         pending or threatened against the Company that are required to be
         disclosed in the Registration Statement and the Prospectus, other 
         than those disclosed therein, or (iv) there are any contracts or 
         documents of a character required to be described in the Registration 
         Statement and the Prospectus that are not described or referred to the
         rein; provided that in making the foregoing statements (which shall 
         not constitute an opinion) such counsel need not express any views as
         to the financial statements and supporting schedules and other
         financial and statistical information and data included in or omitted
         from the Registration Statement or the Prospectus.  In making the
         foregoing statement, such counsel may state that such statement is
         based upon such counsel's participation in conferences with officers
         and other representatives of the Company, representatives of the
         independent public accountants for the Company and with you and your
         representatives during the course of the preparation of the
         Registration Statement and the Prospectus.
    




                                      A-3

<PAGE>   1
                                                                     EXHIBIT 3.4

                         EQUITY OFFICE PROPERTIES TRUST

                             ARTICLES SUPPLEMENTARY

                     ESTABLISHING AND FIXING THE RIGHTS AND
                   PREFERENCES OF A SERIES OF PREFERRED SHARES



    Equity Office Properties Trust, a Maryland real estate investment trust
(the "Trust"), certifies to the State Department of Assessments and Taxation of
Maryland that:

    FIRST: Under a power contained in Article VI of the Trust's Articles of
Amendment and Restatement of Declaration of Trust (the "Declaration of Trust")
the Board of Trustees (the "Board"), by resolution duly adopted on
_______________ __, 1998, classified and designated __________________ Preferred
Shares (as defined in the Declaration of Trust) as __% Series C Cumulative
Redeemable Preferred Shares, with the preferences, conversion and other rights,
voting powers, restrictions, limitations as to distributions, qualifications and
terms and conditions of redemption of shares as follows:

(1) Designation and Number. A series of Preferred Shares, designated the "___%
Series C Cumulative Redeemable Preferred Shares" (the "Series C Preferred
Shares"), is hereby established. The number of Series C Preferred Shares shall
be _____________.

(2) Rank. The Series C Preferred Shares will, with respect to distribution
rights and rights upon liquidation, dissolution or winding up of the Trust, rank
(a) senior to all classes or series of Common Shares (as defined in the
Declaration of Trust), and to all equity securities the terms of which provide
that such equity securities shall rank junior to such Series C Preferred Shares;
(b) on a parity with all equity securities issued by the Trust, including the
Series A Cumulative Preferred Shares and the Series B Convertible, Cumulative
Preferred Shares classified and designated pursuant to resolutions adopted by
the Board on November 13, 1997 and February 13, 1998, respectively, other than
those referred to in clauses (a) and (c); and (c) junior to all equity
securities issued by the Trust which rank senior to the Series C Preferred
Shares in accordance with Section 6(d). The term "equity securities" shall not
include convertible debt securities.

(3) Distributions.

    (a) Holders of Series C Preferred Shares shall be entitled to receive,
when and as authorized by the Board, out of funds legally available for the
payment of distributions, cumulative preferential cash distributions at the rate
of _____% of the $25.00 liquidation preference per annum (equivalent to a fixed
annual amount of $______ per share). Such distributions shall accumulate on a
daily basis and be cumulative from the date of original issuance and shall be
payable quarterly in equal 


<PAGE>   2

amounts in arrears on the ___ day of March, June, September and December of each
year or, if not a business day, the next succeeding business day, commencing
September __, 1998 (each a "Distribution Payment Date"). Any distribution
payable on the Series C Preferred Shares for any partial distribution period
shall be prorated and computed on the basis of a 360-day year consisting of
twelve 30-day months. Distributions shall be payable to holders of record as
they appear in the share records of the Trust at the close of business on the
applicable record date, which shall be the ______ day of the calendar month in
which the applicable Distribution Payment Date falls or such other date
designated by the Board for the payment of distributions that is not more than
30 nor less than 10 days prior to such Distribution Payment Date (each, a
"Distribution Record Date").

    (b) No distribution on the Series C Preferred Shares shall be authorized by
the Board or paid or set apart for payment by the Trust at such time as the
terms and provisions of any agreement of the Trust, including any agreement
relating to its indebtedness, prohibits such declaration, payment or setting
apart for payment or provides that such declaration, payment or setting apart
for payment would constitute a breach thereof, or a default thereunder, or if
such declaration or payment shall be restricted or prohibited by law.

    (c) Notwithstanding anything to the contrary contained herein, distributions
on the Series C Preferred Shares shall accumulate whether or not the terms and
provisions of any agreement of the Trust at any time prohibit the current
payment of distributions, whether or not the Trust has earnings, whether or not
there are funds legally available for the payment of such distributions and
whether or not such distributions are declared. Accumulated but unpaid
distributions on the Series C Preferred Shares will accumulate as of the
Distribution Payment Date on which they first become payable or on the date of
redemption, as the case may be.

    (d) If any Series C Preferred Shares are outstanding, no full distributions
will be declared or paid or set apart for payment on any equity securities of
the Trust of any other class or series ranking, as to distributions or upon
liquidation of the Trust, on a parity with or junior to the Series C Preferred
Shares unless full cumulative distributions have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for such payment on the Series C Preferred Shares for all past
distribution periods and the then current distribution period. When
distributions are not paid in full (or a sum sufficient for such full payment is
not so set apart) upon the Series C Preferred Shares and any other equity
securities ranking on a parity as to distributions with the Series C Preferred
Shares, all distributions declared upon the Series C Preferred Shares and any
other equity securities ranking on a parity as to distributions with the Series
C Preferred Shares shall be declared pro rata so that the amount of
distributions declared per Series C Preferred Share and each such other equity
securities shall in all cases bear to each other the same ratio that accumulated
distributions per share on the Series C Preferred Shares and such other series
of Preferred Shares (which shall not include any accumulation in respect of
unpaid distributions for prior distribution periods if 


                                       2
<PAGE>   3

such equity securities do not have a cumulative distribution) bear to each 
other. No interest, or sum of money in lieu of interest, shall be payable in 
respect of any distribution payment or payments on Series C Preferred Shares 
which may be in arrears.

    (e) Except as provided in the immediately preceding paragraph, unless full
cumulative distributions on the Series C Preferred Shares have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof is set apart for payment for all past distribution periods and
the then current distribution period, no distributions (other than in Common
Shares or other equity securities of the Trust ranking junior to the Series C
Preferred Shares as to distributions and upon liquidation) shall be declared or
paid or set aside for payment nor shall any other distribution be declared or
made upon the Common Shares or any other equity securities of the Trust ranking
junior to or on a parity with the Series C Preferred Shares as to distributions
or upon liquidation, nor shall any Common Shares or any other equity securities
of the Trust ranking junior to or on a parity with the Series C Preferred Shares
as to distributions or upon liquidation be redeemed, purchased or otherwise
acquired for any consideration (or any monies be paid to or made available for a
sinking fund for the redemption of any such equity securities) by the Trust
(except by conversion into or exchange for other equity securities of the Trust
ranking junior to the Series C Preferred Shares as to distributions and upon
liquidation).

    (f) Holders of Series C Preferred Shares shall not be entitled to any
distribution, whether payable in cash, property or shares, in excess of full
cumulative distributions on the Series C Preferred Shares as described above.
Any distribution payment made on the Series C Preferred Shares shall first be
credited against the earliest accrued but unpaid distribution due with respect
to such shares which remains payable.

(4) Liquidation Preference.

    (a) In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Trust (referred to herein sometimes as a "liquidation"), the
holders of Series C Preferred Shares then outstanding shall be entitled to
receive out of the assets of the Trust available for distribution to
shareholders (after payment or provision for payment of all debts and other
liabilities of the Trust) a liquidation preference in cash of $25.00 per share,
plus an amount equal to all accumulated and unpaid distributions to the date of
payment, before any distribution of assets is made to holders of Common Shares
or any other equity securities of the Trust that rank junior to the Series C
Preferred Shares as to liquidation rights.

    (b) If, upon any such voluntary or involuntary liquidation, dissolution
or winding up of the Trust, the assets of the Trust are insufficient to make
full payment to holders of Series C Preferred Shares and the corresponding
amounts payable on all shares of other classes or series of equity securities of
the Trust ranking on a parity with the Series C Preferred Shares as to
liquidation rights, then the holders of the 



                                       3
<PAGE>   4

Series C Preferred Shares and all other such classes or series of equity 
securities shall share ratably in any such distribution of assets in proportion 
to the full liquidating distributions to which they would otherwise be 
respectively entitled.

    (c) Written notice of any such liquidation, dissolution or winding up of the
Trust, stating the payment date or dates when, and the place or places where,
the amounts distributable in such circumstances shall be payable, shall be given
by first class mail, postage pre-paid, not less than 30 nor more than 60 days
prior to the payment date stated therein, to each record holder of the Series C
Preferred Shares at the respective addresses of such holders as the same shall
appear on the share transfer records of the Trust.

    (d) After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Series C Preferred Shares will have no
right or claim to any of the remaining assets of the Trust.

    (e) None of a consolidation or merger of the Trust with or into another
entity, a merger of another entity with or into the Trust, a statutory share
exchange by the Trust or a sale, lease, transfer or conveyance of all or
substantially all of the Trust's property or business shall be considered a
liquidation, dissolution or winding up of the Trust.

(5) Redemption.

    (a) The Series C Preferred Shares are not redeemable prior to June __, 2003.
To ensure that the Trust remains a qualified real estate investment trust
("REIT") for federal income tax purposes, however, the Series C Preferred Shares
shall be subject to the provisions of Article VII of the Declaration of Trust
pursuant to which Series C Preferred Shares owned by a shareholder in excess of
the Ownership Limit (as defined in Article VII of the Declaration of Trust)
shall automatically be transferred to a Charitable Trust (as defined in Article
VII of the Declaration of Trust) and the Trust shall have the right to purchase
such shares, as provided in Article VII of the Declaration of Trust. On and
after June __, 2003, the Trust, at its option, upon giving notice as provided
below, may redeem the Series C Preferred Shares, in whole or from time to time
in part, for cash, at a redemption price of $25.00 per share, plus all
accumulated and unpaid distributions on such Series C Preferred Shares to the
date of such redemption (the "Redemption Right").

    (b) The redemption price of the Series C Preferred Shares (other than
the portion thereof consisting of accumulated and unpaid distributions ) is
payable solely out of the sale proceeds of other equity securities of the Trust,
and from no other source. For purposes of the preceding sentence, "equity
securities" means any equity securities (including Common Shares and Preferred
Shares (as defined in the Declaration of Trust)), depositary shares, interests,
participations or other ownership interests (however designated) and any rights
(other than debt securities convertible into or exchangeable for equity
securities) or options to purchase any of the foregoing.


                                       4
<PAGE>   5

    (c) If fewer than all of the outstanding Series C Preferred Shares are to be
redeemed or exchanged pursuant to the Redemption Right, the shares to be
redeemed shall be selected pro rata (as nearly as practicable without creating
fractional shares) or by lot or in such other equitable method prescribed by the
Board. If such redemption is to be by lot and, as a result of such redemption,
any holder of Series C Preferred Shares would become a holder of a number of
Series C Preferred Shares in excess of the Ownership Limit because such holder's
Series C Preferred Shares were not redeemed, or were only redeemed in part,
then, except as otherwise provided in the Declaration of Trust, the Trust will
redeem the requisite number of Series C Preferred Shares of such holder such
that no holder will hold in excess of the Ownership Limit subsequent to such
redemption.

    (d) Notwithstanding anything to the contrary contained herein, unless full
cumulative distributions on all Series C Preferred Shares shall have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past distribution periods and the
then current distribution period, no Series C Preferred Shares shall be redeemed
unless all outstanding Series C Preferred Shares are simultaneously redeemed or
exchanged; provided, however, that the foregoing shall not prevent the purchase
by the Trust of Series C Preferred Shares pursuant to Article VII of the
Declaration of Trust or otherwise in order to ensure that the Trust remains
qualified as a REIT for Federal income tax purposes or the purchase or
acquisition of Series C Preferred Shares pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding Series C Preferred
Shares. In addition, unless full cumulative distributions on all outstanding
Series C Preferred Shares have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for payment
for all past distributions periods and the then current distribution period, the
Trust shall not purchase or otherwise acquire directly or indirectly any Series
C Preferred Shares or any equity securities of the Trust ranking junior to or on
a parity with the Series C Preferred Shares as to distributions or upon
liquidation (except by conversion into or exchange for equity securities of the
Trust ranking junior to the Series C Preferred Shares as to distributions and
upon liquidation).

    (e) Immediately prior to any redemption of Series C Preferred Shares, the
Trust shall pay, in cash, any accumulated and unpaid distributions through the
redemption date, unless a redemption date falls after a Distribution Record Date
and prior to the corresponding Distribution Payment Date, in which case each
holder of Series C Preferred Shares at the close of business on such
Distribution Record Date shall be entitled to the distribution payable on such
shares on the corresponding Distribution Payment Date notwithstanding the
redemption of such shares before Distribution Payment Date. Except as provided
above, the Trust will make no payment or allowance for unpaid distributions,
whether or not in arrears, on Series C Preferred Shares for which a notice of
redemption has been given.

    (f) The following provisions set forth the procedures for Redemption.


                                      5
<PAGE>   6

         (i) Notice of redemption will be given by publication in a newspaper of
general circulation in the City of New York, such publication to be made once a
week for two successive weeks commencing not less than 30 nor more than 60 days
prior to the redemption date. A similar notice will be mailed by the Trust,
postage prepaid, no less than 30 nor more than 60 days prior to the redemption
date, addressed to the respective holders of record of the Series C Preferred
Shares to be redeemed at their respective addresses as they appear on the share
transfer records of the Trust. No failure to give such notice or any defect
thereto or in the mailing thereof shall affect the validity of the proceedings
for the redemption of any Series C Preferred Shares except as to the holder to
whom notice was defective or not given.

         (ii) In addition to any information required by law or by the
applicable rules of any exchange upon which the Series C Preferred Shares may be
listed or admitted to trading, such notice shall state: (A) the redemption date;
(B) the redemption price; (C) the number of Series C Preferred Shares to be
redeemed; (D) the place or places where the Series C Preferred Shares are to be
surrendered for payment of the redemption price; and (E) that distributions on
the Series C Preferred Shares to be redeemed will cease to accumulate on such
redemption date. If less than all of the Series C Preferred Shares held by any
holder are to be redeemed, the notice mailed to such holder shall also specify
the number of Series C Preferred Shares held by such holder to be redeemed.

         (iii) On or after the redemption date, each holder of Series C
Preferred Shares to be redeemed shall present and surrender the certificates
representing his Series C Preferred Shares to the Trust at the place designated
in the notice of redemption and thereupon the redemption price of such shares
(including all accumulated and unpaid distributions up to the redemption date)
shall be paid to or on the order of the person whose name appears on such
certificate representing Series C Preferred Shares as the owner thereof and each
surrendered certificate shall be canceled. If fewer than all the shares
represented by any such certificate representing Series C Preferred Shares are
to be redeemed, a new certificate shall be issued representing the unredeemed
shares.

         (iv) From and after the redemption date (unless the Trust defaults in
payment of the redemption price), all distributions on the Series C Preferred
Shares designated for redemption in such notice shall cease to accumulate and
all rights of the holders thereof, except the right to receive the redemption
price thereof (including all accumulated and unpaid distributions up to the
redemption date), shall cease and terminate and such shares shall not thereafter
be transferred (except with the consent of the Trust) on the Trust's share
transfer records, and such shares shall not be deemed to be outstanding for any
purpose whatsoever. At its election, the Trust, prior to a redemption date, may
irrevocably deposit the redemption price (including accumulated and unpaid
distributions to the redemption date) of the Series C Preferred Shares so called
for redemption in trust for the holders thereof with a bank or trust company, in
which case the redemption notice to holders of the Series C Preferred Shares to
be redeemed shall (A) state the date of such deposit, (B) specify the office of
such bank or 


                                       6
<PAGE>   7

trust company as the place of payment of the redemption price and (C) require 
such holders to surrender the certificates representing such shares at such 
place on or about the date fixed in such redemption notice (which may not 
be later than the redemption date) against payment of the redemption price
(including all accumulated and unpaid distributions to the redemption date). Any
monies so deposited which remain unclaimed by the holders of the Series C
Preferred Shares at the end of two years after the redemption date shall be
returned by such bank or trust company to the Trust.

    (g) Status of Redeemed Shares. Any Series C Preferred Shares that shall at
any time have been redeemed shall, after such redemption, have the status of
authorized but unissued Preferred Shares, without designation as to series until
such shares are once more designated as part of a particular series by the
Board.

(6) Voting Rights.

    (a) Holders of the Series C Preferred Shares will not have any voting
rights, except as set forth below or as otherwise from time to time required by
law.

    (b) Whenever distributions on any Series C Preferred Shares shall be in
arrears for six or more quarterly periods (whether or not consecutive) (a
"Preferred Distribution Default"), the holders of such Series C Preferred Shares
(voting as a single class with all other equity securities ranking on a parity
with the Series C Preferred Shares as to distributions or upon voluntary or
involuntary liquidation, dissolution or winding up of the Trust ("Parity
Preferred Shares") upon which like voting rights have been conferred and are
exercisable) will be entitled to vote for the election of a total of two
additional trustees of the Trust (the "Preferred Share Trustees") at a special
meeting called by the holders of at least 20% of the outstanding Series C
Preferred Shares or the holders of shares of any other series of Parity
Preferred Shares so in arrears (unless such request is received less than 90
days before the date fixed for the next annual or special meeting of
shareholders) or, if the request for a special meeting is received by the Trust
less than 90 days before the date fixed for the next annual or special meeting
of shareholders, at the next annual meeting of shareholders, and at each
subsequent annual meeting until all distributions accumulated on the Series C
Preferred Shares for the past distribution periods and the distribution for the
then current distribution period shall have been fully paid or declared and a
sum sufficient for the payment thereof set aside for payment in full.

    (c) If and when all accumulated distributions and the distribution for the
then current distribution period on the Series C Preferred Shares shall have
been paid in full or set aside for payment in full, the holders of Series C
Preferred Shares shall be divested of the voting rights set forth in Section
6(b) hereof (subject to revesting in the event of each and every Preferred
Distribution Default) and, if all accumulated distributions and the distribution
for the current distribution period have been paid in full or declared by the
Board and set aside for payment in full on all other series of Parity Preferred
Shares upon which like voting rights have been conferred and are exercisable,
the term of office of each Preferred Share Trustee so elected shall terminate.
Any Preferred Share Trustee may be removed at any time with or without 


                                       7
<PAGE>   8

cause by the vote of, and shall not be removed otherwise than by the vote
of, the holders of a majority of the outstanding Series C Preferred Shares when
they have the voting rights set forth in Section 6(b) hereof and all other
series of Parity Preferred Shares upon which like voting rights have been
conferred and are exercisable (voting as a single class). So long as a Preferred
Distribution Default shall continue, any vacancy in the office of a Preferred
Share Trustee may be filled by written consent of the Preferred Share Trustee
remaining in office, or if none remains in office, by a vote of the holders of a
majority of the outstanding Series C Preferred Shares when they have the voting
rights set forth in Section 6(b) and all other series of Parity Preferred Shares
upon which like voting rights have been conferred and are exercisable(voting as
a single class). The Preferred Share Trustees shall each be entitled to one vote
per trustee on any matter.

    (d) So long as any Series C Preferred Shares remain outstanding, the Trust
shall not, without the affirmative vote of the holders of at least two-thirds of
the Series C Preferred Shares outstanding at the time, given in person or by
proxy, either in writing or at a meeting (such series voting separately as a
class), (i) authorize or create, or increase the authorized or issued amount of,
any class or series of shares of beneficial interest ranking senior to the
Series C Preferred Shares with respect to payment of distributions or the
distribution of assets upon voluntary or involuntary liquidation, dissolution or
winding up of the Trust or reclassify any authorized shares of beneficial
interest of the Trust into any such shares, or create, authorize or issue any
obligations or security convertible into or evidencing the right to purchase any
such shares; or (ii) amend, alter or repeal the provisions of the Declaration of
Trust (including these Articles Supplementary), whether by merger or
consolidation (in either case, an "Event") or otherwise, so as to materially and
adversely affect any right, preference, privilege or voting power of the Series
C Preferred Shares or the holders thereof; provided, however, that with respect
to the occurrence of any Event set forth in (ii) above, so long as Series C
Preferred Shares remain outstanding with the terms thereof materially unchanged,
taking into account that upon the occurrence of an Event, the Trust may not be
the surviving entity and such surviving entity may thereafter be the issuer of
the Series C Preferred Shares, the occurrence of any such Event shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting powers of the holders of the Series C Preferred Shares; and provided
further that (x) any increase in the amount of the authorized Preferred Shares
or the creation or issuance of any other class or series of Preferred Shares, or
(y) any increase in the amount of authorized Series C Preferred Shares or any
other class or series of Preferred Shares, in each case ranking on a parity with
or junior to the Series C Preferred Shares with respect to payment of
distributions or the distribution of assets upon voluntary or involuntary
liquidation, dissolution or winding up of the Trust, shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
powers.

    (e) The foregoing voting provisions shall not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding Series C Preferred Shares shall have been
redeemed or called 


                                       8
<PAGE>   9

for redemption upon proper notice and sufficient funds shall have been deposited
in trust to effect such redemption.

(7) Conversion. The Series C Preferred Shares are not convertible into or
exchangeable for any other property or securities of the Trust.

(8) Application of Article VII. The Series C Preferred Shares are subject to the
provisions of Article VII of the Declaration of Trust.

    SECOND: The Series C Preferred Shares have been classified and designated by
the Board under the authority contained in the Declaration of Trust.

    THIRD: These Articles Supplementary have been approved by the Board in the
manner and by the vote required by law.

    FOURTH: These Articles Supplementary shall be effective at the time the
State Department of Assessments and Taxation of Maryland accepts these Articles
Supplementary for record.

    FIFTH: The undersigned President of the Trust acknowledges these Articles
Supplementary to be the act of the Trust and, as to all matters or facts
required to be verified under oath, the undersigned President acknowledges that
to the best of his knowledge, information and belief, these matters and facts
are true in all material respects and that this statement is made under the
penalties for perjury.

    IN WITNESS WHEREOF, the Trust has caused these Articles Supplementary to be
executed under seal in its name and on its behalf by its President and attested
to by its Secretary on this ___ th day of _________, 1998.



                                        EQUITY OFFICE PROPERTIES TRUST



                                        By:
                                           -------------------------------------
                                           Timothy H. Callahan
                                           President and Chief Executive Officer

[SEAL]

ATTEST:



- ------------------------------------
Stanley M. Stevens, Secretary




<PAGE>   1
                                                                     EXHIBIT 5.1


                     [LETTERHEAD OF HOGAN & HARTSON L.L.P.]



                                  May 29, 1998



Equity Office Properties Trust
Two North Riverside Plaza
Suite 2200
Chicago, Illinois  60606

Dear Ladies and Gentlemen:

                  We are acting as counsel to Equity Office Properties Trust, a
Maryland real estate investment trust (the "Company"), in connection with its
registration statement on Form S-11 (Reg. No. 333-51597), as amended (the
"Registration Statement"), filed with the Securities and Exchange Commission
relating to the proposed public offering of 10,000,000 Series C Cumulative
Redeemable Preferred Shares of Beneficial Interest ($.01 par value per share)
(liquidation preference $25.00 per share), all of which shares (the "Shares")
are to be issued by the Company as set forth in the preliminary prospectus dated
May 29, 1998 (the "Preliminary Prospectus") which forms a part of the
Registration Statement. This opinion letter is furnished to you at your request
to enable you to fulfill the requirements of Item 601(b)(5) of Regulation S-K,
17 C.F.R. Section 229.601(b)(5), in connection with the Registration Statement.

                  For purposes of the opinions expressed in this letter, we have
examined copies of the following documents:

                  1.   An executed copy of the Registration Statement.

                  2.   The Preliminary Prospectus.

<PAGE>   2
EOP Operating Limited Partnership
May 28, 1998
Page 2


                  3.   The Company's Articles of Amendment and Restatement of
                       Declaration of Trust (the "Declaration"), as certified by
                       the Maryland State Department of Assessments and Taxation
                       (the "Maryland SDAT") on April 22, 1998, and by the
                       Secretary of the Company on the date hereof, as then
                       being complete, accurate and in effect.

                  4.   The proposed form of Articles Supplementary to the
                       Declaration.

                  5.   The Bylaws of the Company, as certified by the Secretary
                       of the Company on the date hereof as then being complete,
                       accurate and in effect.

                  6.   Certain resolutions of the Board of Trustees of the
                       Company adopted on April 27, 1998, as certified by the
                       Secretary of the Company on the date hereof as then being
                       complete, accurate and in effect, relating to, among
                       other things, the authorization of the Underwriting
                       Agreement (as defined below), and arrangements in
                       connection therewith, and the issuance and sale of the
                       Shares on the terms set forth therein.

                  7.   The proposed form of Underwriting Agreement among the
                       Company and the several Underwriters to be named therein,
                       as filed as Exhibit 1.1 to the Registration Statement
                       (the "Underwriting Agreement").

                  In our examination of the aforesaid documents, we have assumed
the genuineness of all signatures, the legal capacity of natural persons, the
authenticity, accuracy and completeness of all documents submitted to us, and
the conformity with the original documents of all documents submitted to us as
certified, telecopied, photostatic, or reproduced copies. This opinion letter is
given, and all statements herein are made, in the context of the foregoing.

                  This opinion letter is based as to matters of law solely on
Title 8 of the Corporations and Associations Article of the Annotated Code of
Maryland and Maryland contract law. We express no opinion herein as to any other
laws, statutes, ordinances, rules or regulations.


<PAGE>   3
EOP Operating Limited Partnership
May 28, 1998
Page 3


                  Based upon, subject to and limited by the foregoing, we are of
the opinion that, following (a) final action by the Pricing Committee of the
Board of Directors of the Company (the "Pricing Committee") approving the price
of the Shares, (b) execution and delivery by the Company of the Underwriting
Agreement, (c) effectiveness of the Registration Statement, (d) issuance of the
Shares pursuant to the terms of the Underwriting Agreement and (e) receipt by
the Company of the consideration for the Shares specified in the resolutions of
the Pricing Committee, the Shares will be validly issued, fully paid and
non-assessable.

                  We assume no obligation to advise you of any changes in the
foregoing subsequent to the delivery of this opinion letter. This opinion letter
has been prepared solely for your use in connection with the filing of the
Registration Statement on the date of this opinion letter and should not be
quoted in whole or in part or otherwise be referred to, nor filed with or
furnished to any governmental agency or other person or entity, without the
prior written consent of this firm.

                  We hereby consent to the filing of this opinion letter as
Exhibit 5.1 to the Registration Statement and to the reference to this firm
under the caption "Legal Matters" in the prospectus constituting a part of the
Registration Statement. In giving this consent, we do not thereby admit that we
are an "expert" within the meaning of the Securities Act of 1933, as amended.

                                                 Very truly yours,



                                                 HOGAN & HARTSON L.L.P.


<PAGE>   1
                                                                     EXHIBIT 8.1

                                  May 29, 1998



Equity Office Properties Trust
Two North Riverside Plaza
Chicago, Illinois  60606


Ladies and Gentlemen:

         We have acted as special tax counsel to Equity Office Properties Trust
(the "Company"), a Maryland real estate investment trust, in connection with the
registration and offering of 10,000,000 Series C Preferred shares of beneficial
interest, $.01 par value, ("Series C Preferred Shares") of the Company, with an
aggregate public offering price of up to $250,000,000 (the "Offering") as more
fully described in the Company's Registration Statement on Form S-11 filed with
the Securities and Exchange Commission on or about the date hereof, (the
"Registration Statement," which includes the "Prospectus"). In connection with
the Offering, we have been asked to provide you with an opinion regarding
certain federal income tax matters related to the Company. Unless otherwise
defined herein or the context hereof otherwise requires, each term used herein
with initial capitalized letters has the meaning given to such term in the
Prospectus.


BASES FOR OPINIONS

         The opinions set forth in this letter are based on relevant current
provisions of the Internal Revenue Code of 1986, as amended (the "Code"),
Treasury Regulations thereunder (including proposed and temporary Treasury
Regulations), and interpretations of the foregoing as expressed in court
decisions, legislative history, and administrative determinations of the
Internal Revenue Service (the "IRS") (including its practices and policies in
issuing private letter rulings, which are not binding on the IRS, except with
respect to a taxpayer that receives such a ruling), all as of the date hereof.
These provisions and interpretations are subject to changes, which may or may
not be retroactive in effect, that might result in material modifications of our
opinions. Our opinion does not foreclose the possibility of a contrary
determination by the IRS or a court of competent jurisdiction, or of a contrary
position by the IRS or the Treasury Department in

<PAGE>   2
Equity Office Properties Trust
May 29, 1998
Page 2


regulations or rulings issued in the future. In this regard, although we believe
that our opinions set forth herein will be sustained if challenged, an opinion
of counsel with respect to an issue is not binding on the IRS or the courts, and
is not a guarantee that the IRS will not assert a contrary position with respect
to such issue or that a court will not sustain such a position asserted by the
IRS.

         In rendering the following opinions, we have examined such statutes,
regulations, records, certificates and other documents as we have considered
necessary or appropriate as a basis for such opinions, including the following:
(1) the Prospectus; (2) the Amended and Restated Agreement of Limited
Partnership of the Operating Partnership, dated as of July 3, 1997, as amended
to the date hereof; (3) the Articles of Amendment and Restatement of Declaration
of Trust of the Company dated as of July 8, 1997, as amended to the date hereof
(the "Declaration of Trust") and, with respect to each series of Preferred
Shares of the Company, the Articles Supplementary establishing and fixing the
rights and preferences of such series of preferred shares; (4) the agreements of
limited partnership, as amended to the date hereof, of each of the Opportunity
Partnerships; (5) the form of partnership agreement or limited liability company
operating agreement, as applicable, used by Operating Partnership and/or the
Opportunity Partnerships to organize and operate the partnerships and limited
liability companies in which one or more of the Opportunity Partnerships owns an
interest (collectively, the "Partnership Subsidiaries"); (6) the articles of
organization and stock ownership records of each corporation in which one or
more of the Operating Partnership or the Opportunity Partnerships owns stock,
directly or indirectly, including BeaMetFed, Inc., Equity Office Properties
Management Corp., EOP Office Company, Beacon Management Company, Beacon Design
Company and Beacon Construction Company (collectively, the "Corporate
Entities"); (7) stock ownership information for Tenant Services Corp.; and (8)
other necessary documents as we have deemed necessary in order to render the
opinions set forth in this letter. The opinions set forth in this letter also
are premised on certain written representations of (i) each of the ZML REITs and
each of the Opportunity Partnerships contained in a letter to us dated July 7,
1997, which letter was reconfirmed to us by the Company, as the successor to the
ZML REITs, as of the date hereof, regarding the assets, operations and
activities of each of the ZML REITs prior to July 11, 1997 and (ii) the Company
and the Operating Partnership contained in a letter to us dated as of the date
hereof, regarding the assets, operations and activities of the Company and the
Operating Partnership in the past and as to the contemplated assets, operations
and activities of the Company in the future (collectively, the "Management
Representation Letters").


<PAGE>   3
Equity Office Properties Trust
May 29, 1998
Page 3



         For purposes of rendering our opinion, we have not made an independent
investigation or audit of the facts set forth in any of the above-referenced
documents, including the Management Representation Letters. We consequently have
relied upon representations in the Management Representation Letters that the
information presented in such documents or otherwise furnished to us is accurate
and complete in all material respects. We are not, however, aware of any
material facts or circumstances contrary to, or inconsistent with, the
representations we have relied upon as described herein or other assumptions set
forth herein.

         Moreover, we have assumed that, insofar as relevant to the opinions set
forth herein, (1) each of the Company, the Operating Partnership, the
Opportunity Partnerships, the Partnership Subsidiaries, and the Corporate
Entities in which an Opportunity Partnership owns an interest has been and will
be operated in the manner described in the Prospectus and in the relevant
partnership agreement, articles (or certificate) of incorporation, declaration
of trust or other organizational documents; (2) as represented by the Company,
there are no agreements or understandings between (a) the Company or the
Operating Partnership and (b) either (i) Equity Office Holdings L.L.C., the
entity that owns 100% of the voting stock of Equity Office Properties Management
Corp. and EOP Office Company, or with such corporations themselves, that are
inconsistent, or will be inconsistent, with Equity Office Holdings L.L.C. being
considered to be both the record and beneficial owner of 100% of the outstanding
voting stock of Equity Office Properties Management Corp. and EOP Office
Company, or (ii) Equity Office Properties Management Corp., the entity that owns
100% of the voting stock of Beacon Management Company, Beacon Design Company,
and Beacon Construction Company, or with such corporations themselves that are
inconsistent or will be inconsistent, with Equity Office Properties Management
Corp. being considered to be both the record and beneficial owner of 100% of the
outstanding voting stock of each of Beacon Management Company, Beacon Design
Company, and Beacon Construction Company; (3) as represented by the Company, the
Company will take measures to ensure that any services provided to tenants of
the Properties by Tenant Services Corp. will be considered "usually or
customarily rendered" and any other services provided to the tenants of the
Properties will be either "usually or customarily rendered" or provided by an
entity that qualifies as an "independent contractor" as defined in Section 856
of the Code and the Treasury Regulations thereunder; and (4) the Company is a
validly organized and duly incorporated real estate investment trust under the
laws of the State of Maryland, each of the Corporate Entities is a validly
organized and duly incorporated corporation under

<PAGE>   4
Equity Office Properties Trust
May 29, 1998
Page 4




the laws of the state in which it is purported to be organized, Operating
Partnership is a duly organized and validly existing limited partnership under
the laws of the State of Delaware, each of the Opportunity Partnerships is a
duly organized and validly existing limited partnership under the laws of the
State of Illinois, and each of the Partnership Subsidiaries is a duly organized
and validly existing partnership or limited liability company, as the case may
be, under the applicable laws of the state in which it is purported to be
organized.

         In our review, we have assumed that all of the representations and
statements set forth in the documents that we reviewed (including the Management
Representation Letters) are true and correct, and all of the obligations imposed
by any such documents on the parties thereto, including obligations imposed
under the Declaration of Trust, have been and will continue to be performed or
satisfied in accordance with their terms. We also have assumed the genuineness
of all signatures, the proper execution of all documents, the authenticity of
all documents submitted to us as originals, the conformity to originals of
documents submitted to us as copies, and the authenticity of the originals from
which any copies were made.



OPINIONS

         Based upon, subject to, and limited by the assumptions and
qualifications set forth herein, we are of the opinion that:

         1. the Company is organized, as of the date hereof, in conformity with
the requirements for qualification and taxation as a real estate investment
trust ("REIT") under the Code, and the Company's proposed method of operation
(as described in the Prospectus and the Management Representation Letters) will
enable the Company to continue to meet the requirements for qualification and
taxation as a REIT for the taxable year ending December 31, 1998, and for
subsequent taxable years; and

         2. the discussion in the Prospectus under the caption "Federal Income
Tax Consequences," to the extent that it discusses matters of law or legal
conclusions or purports to describe certain provisions of the federal tax laws,
is a correct summary of the matters discussed therein as of the date thereof.



<PAGE>   5
Equity Office Properties Trust
May 29, 1998
Page 5




         We assume no obligation to advise you of any changes in our opinion or
of any new developments in the application or interpretation of the federal
income tax laws subsequent to date of this letter. The Company's qualification
and taxation as a REIT depend upon both (i) the satisfaction in the past by
Beacon and the ZML REITs of the requirements for qualification and taxation as a
REIT; (ii) the Company's ability to meet on a continuing basis, through actual
annual operating and other results, the various requirements under the Code, as
described in the Prospectus with regard to, among other things, the sources of
its gross income, the composition of its assets, the level of its distributions
to shareholders, and the diversity of its stock ownership; and (iii) the
satisfaction, at all time since the Company has owned an interest in BeaMetFed,
Inc. and on a continuing basis, by BeaMetFed, Inc. of the requirements for
qualification and taxation as a REIT. Hogan & Hartson L.L.P. will not review the
Company's compliance with these requirements on a continuing basis. Accordingly,
no assurance can be given that the actual results of the Company's operations,
the sources of its income, the nature of its assets, the level of its
distributions to shareholders and the diversity of its share ownership for any
given taxable year will satisfy the requirements under the Code for
qualification and taxation as a REIT.

         In rendering the opinions herein, Hogan & Hartson L.L.P. has relied
upon representations of the Company and the Operating Partnership with respect
to REIT qualification matters, including those set forth in the Management
Representation Letters. In addition, Hogan & Hartson L.L.P. has relied upon the
representations of the Company and the Operating Partnership regarding the
qualification of BeaMetFed, Inc. as a REIT.



<PAGE>   6
Equity Office Properties Trust
May 29, 1998
Page 6




         This letter has been prepared solely for your use in connection with
the filing of the Registration Statement and the Offering and should not be
quoted in whole or in part or otherwise referred to, or be filed with or
furnished to any governmental agency or other person, without the prior written
consent of this firm. We hereby consent to the filing of this opinion letter as
Exhibit 8.1 to the Registration Statement and to the reference to Hogan &
Hartson L.L.P. under the captions "Risk Factors -- Our Success As a REIT is
Dependent On Compliance With Federal Income Tax Requirements," "Federal Income
Tax Consequences" and "Legal Matters" in the Prospectus. In giving this consent,
we do not thereby admit that we are an "expert" within the meaning of the
Securities Act of 1933, as amended.



                                                        Very truly yours,





                                                        Hogan & Hartson L.L.P.



<PAGE>   1
                                                                    EXHIBIT 12.1
   

                      EQUITY OFFICE PROPERTIES TRUST  AND
                           EQUITY OFFICE PREDECESSORS
                   STATEMENTS REGARDING COMPUTATION OF RATIOS
                              (DOLLARS IN 000'S)

    

   
<TABLE>
<CAPTION>                                                                  
                                                                              Equity Office                         Equity Office
                                                           Equity Office      Predecessors      Equity Office        Predecessors
                                                         Properties Trust   Combined Historical Properties Trust Combined Historical
                                                           for the three      for the three      for the period     for the period 
                                                           months ended       months ended     from July 11, 1997  from Jan 1, 1997
                                                          March 31, 1998      March 31, 1997    to  Dec. 31, 1997  to July 10, 1997
                                                         ----------------   ----------------   -----------------   -----------------
<S>                                                           <C>              <C>               <C>               <C>          
Net income before preferred dividends, minority interests-     $ 87,427         $ 36,235          $ 94,962          $ 49,173
Operating Partnership, gains from sales of property,                                                                         
provision for value impairment and extraordinary items                                                                      
                                                                           
                                                                           
Plus Fixed Charges:                                                                                                         
Interest expense                                                 69,884           36,355            76,675            80,481
Interest expense from unconsolidated subsidiaries                 1,907                -                 -                 -      
Loan amortization cost                                            1,871              709             4,179             2,771
Taxes                                                               557              278                 -                 -
                                                               --------         --------          --------         ---------
                                                                                                                            
Earnings                                                       $161,646         $ 73,577          $175,816          $132,425
                                                               ========         ========          ========         =========
Fixed Charges:                                                                                                              
                                                                                                                            
Interest expense                                               $ 69,884         $ 36,355          $ 76,675          $ 80,481
Interest expense from unconsolidated subs                         1,907                -                 -                 -   
Capitalized interest                                              3,452            1,622             1,890             3,669
Loan amortization cost                                            1,871              709             4,179             2,771
Preferred dividends                                               6,271                -               649                 -
                                                               --------         --------          --------         ---------
Total Fixed Charges                                            $ 83,385         $ 38,686          $ 83,393          $ 86,921
                                                               ========         ========          ========         =========
Ratio of Fixed Charges to Earnings                                 1.94             1.90              2.11              1.52
                                                               ========         ========          ========         =========
                                                                           
                                                                           
                                                                           

<CAPTION>
                                                                             Equity Office Predecessors
                                                                                 Combined Historical
                                                                               Years Ended December 31,
                                                                 1996        1995         1994       1993        1992
                                                                --------------------------------------------------------
<S>                                                            <C>          <C>        <C>         <C>         <C>
Net income before preferred dividends, minority interests-      $ 68,087     $ 23,436   $ 14,857    $  8,471    $ 6,330
Operating Partnership, gains from sales of property,       
provision for value impairment and extraordinary items    


Plus Fixed Charges:                                       
Interest expense                                                 119,595      100,566     59,316      36,755     25,775
Interest expense from unconsolidated subsidiaries                      -            -          -           -          -
Loan amortization cost                                             4,275        2,025      1,568         636        500
Taxes                                                                  -            -          -           -          -
                                                                --------     --------   --------    --------    -------
Earnings                                                        $191,957     $126,027   $ 75,741    $ 45,862    $32,605
                                                                ========     ========   ========    ========    =======
Fixed Charges:                                            
                                                          
Interest expense                                                $119,595     $100,566   $ 59,316    $ 36,755    $25,775
Interest expense from unconsolidated subs                              -            -          -           -          -
Capitalized interest                                               4,640        1,682          -           -          -
Loan amortization cost                                             4,275        2,025      1,568         636        500
Preferred dividends                                                    -            -          -           -          -
                                                                --------     --------   --------    --------    -------
Total Fixed Charges                                             $128,510     $104,273   $ 60,884    $ 37,391    $26,275
                                                                ========     ========   ========    ========    =======
Ratio of Fixed Charges to Earnings                                  1.49         1.21       1.24        1.23       1.24
                                                                ========     ========   ========    ========    =======
</TABLE>
    




<PAGE>   1
                                                                    EXHIBIT 23.3

                       Consent of Independent Auditors


We consent to the reference to our firm under the captions "Experts", "Summary
Selected Financial Information" and "Selected Financial Information" and to the
use of our reports indicated below in this registration statement on Form S-11 
of Equity Office Properties Trust.


<TABLE>
<CAPTION>

                                                               DATE OF AUDITORS'
             FINANCIAL STATEMENTS                                    REPORT
- --------------------------------------------------------------------------------
<S>                                                         <C>
Consolidated financial statements and financial statement     February 23, 1998,
schedule III, Real Estate and Accumulated Depreciation, of  except for Note 25, as
Equity Office Properties Trust as of December 31, 1997 and   to which the date is 
for the period from July 11, 1997 to December 31, 1997, and     March 18, 1998
the combined financial statements of the Equity Office 
Predecessors as of December 31, 1996 and for the period 
from January 1, 1997 to July 10, 1997 and for the years 
ended December 31, 1996 and 1995

Statement of Revenue and Certain Expenses of 177 Broad          March 28, 1997
Street for the year ended December 31, 1996

Statement of Revenue and Certain Expenses of Preston            April 16, 1997
Commons for the year ended December 31, 1996

Statement of Revenue and Certain Expenses of Oakbrook           May 30, 1997
Terrace Tower for the year ended December 31, 1996

Statement of Revenue and Certain Expenses of One Maritime       June 6, 1997
Plaza for the year ended December 31, 1996

Statement of Revenue and Certain Expenses of 201 Mission        April 30, 1997
Street for the year ended December 31, 1996

Statement of Revenue and Certain Expenses of 30 N. LaSalle      June 13, 1997
for the year ended December 31, 1996

Combined Statement of Revenue and Certain Expenses of the     September 3, 1997
Columbus America Properties for the year ended December
31, 1996


</TABLE>

<PAGE>   2


                                                               DATE OF AUDITORS'
             FINANCIAL STATEMENTS                                    REPORT
- --------------------------------------------------------------------------------

Combined Statement of Revenue and Certain Expenses of the    September 3, 1997
Prudential Properties for the year ended December 31, 1996

Combined Statement of Revenue and Certain Expenses of       September 24, 1997
550 South Hope Street for the year ended March 31, 1997

Combined Statement of Revenue and Certain Expenses of the    September 9, 1997
Acorn Properties for the year ended December 31, 1996

Combined Statement of Revenue and Certain Expenses of 10     September 5, 1997
& 30 South Wacker Drive for the year ended December 31, 
1996

Statement of Revenue and Certain Expenses of One Lafayette   September 5, 1997
Centre for the year ended December 31, 1996

Combined Statement of Revenue and Certain Expenses of the     January 22, 1997
PPM Properties for the year ended December 31, 1996

Combined Statement of Revenue and Certain Expenses of the    September 26, 1997
Wright Runstad Properties for the year ended September 30, 
1996





   

                                                   /s/ ERNST & YOUNG LLP

                                                   Ernst & Young LLP        
    



Chicago, Illinois
May 28, 1998

<PAGE>   1
                                                                    EXHIBIT 23.4

                      CONSENT OF INDEPENDENT ACCOUNTANTS

   
We consent to the inclusion in this Registration Statement on Form S-11 of our
report dated January 28, 1997, on our audits of the consolidated balance sheets
of Beacon Properties Corporation (the "Company") as of December 31, 1996 and
1995, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years ended December 31, 1996 and 1995 and for
the period May 26, 1994 to December 31, 1994, the combined statements of
operations, owners' equity and cash flows of The Beacon Group, predecessor to
the Company, for the period January 1, 1994 to May 25, 1994, and the related
financial statement schedules of the Operating Partnership as of December 31, 
1996.

We also consent to the reference to our Firm under the caption "Experts".
    


                                                /s/ COOPERS & LYBRAND L.L.P.
                                                ----------------------------

Boston, Massachusetts
   
May 28, 1998
    



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